Tuesday, 21 March 2017

TUESDAY, 21 MARCH 2017

TUESDAY, 21 MARCH 2017

Mr Speaker took the Chair at 2 p.m.

Prayers.

Oral Questions

Questions to Ministers

Overseas Investment—Overseas Ownership of New Zealand Properties

1. Rt Hon WINSTON PETERS (Leader—NZ First) to the Prime Minister: Has he required all his Ministers to be properly briefed on issues within their portfolios; if not, why not?

Rt Hon BILL ENGLISH (Prime Minister): Yes, but they should always be willing to listen and take on more information and more advice.

Rt Hon Winston Peters: When his Minister for Land Information was asked, on Sunday’s Q+A, “Can New Zealanders find out exactly how much New Zealand land is owned by a foreign buyer?”, why did he reply: “The answer is yes.”?

Rt Hon BILL ENGLISH: I am sure he was referring to the fact that you can see the applications that have gone through the Overseas Investment Act and what happens to those applications.

Rt Hon Winston Peters: How is that possible, and what is his Government hiding, when journalists and local residents trying to find the conditions put on overseas buyers of New Zealand land get refusals from the Overseas Investment Office on spurious grounds such as “substantial collation” or privacy?

Rt Hon BILL ENGLISH: I am advised that it is a pretty complex picture and, just by way of example, the most recent figures about the amount of land bought by foreigners are inflated very significantly by one large forestry block, where the owners restructured their company. Because our foreign ownership rules are so tight, that block of forest got counted twice, adding something like 300,000 hectares to the apparent amount of land that was bought.

Rt Hon Winston Peters: Can he confirm that the 465,863 hectares transferred into foreign ownership in 2016 equals 3.24 percent of New Zealand’s total farmland—sold off offshore by the National Government in just 1 year?

Rt Hon BILL ENGLISH: No, I do not confirm that. In fact, I can confirm that around a tenth of that area was actually bought by overseas owners. As I just explained to the member, the 465,000 figure is inflated, at the very least, by 300,000 hectares that is attributable to one forest, which was already in foreign ownership. The company restructured in a way that meant that 150,000 hectares was then counted twice, because our foreign ownership rules are so tight that when a small change of shareholding occurs in existing owners it is counted as a new foreign owner transaction. So the member’s number is actually the gross number, and it is over 10 times the net change. [Interruption]

Mr SPEAKER: Order! [Interruption] Order! If I could have less interjection from my immediate right, I would be grateful.

Rt Hon Winston Peters: If the rules are, to quote him, “so tight”, can he confirm that since his Government came to power in 2008 it has approved the sale of a massive 1.5 million hectares of land—

Hon Member: What?

Rt Hon Winston Peters: —1.5 million hectares of land—into foreign ownership?

Rt Hon BILL ENGLISH: Can I bring a bit of sunshine into the member’s life. As we have pointed out, just this year, although there have been transactions recorded of 465,000 hectares, 300,000 of that was simply one transaction counted twice that was already owned offshore, and actually the net amount this year was only 40,000 hectares, which is on par with what it has been over recent years.

Rt Hon Winston Peters: I seek leave to table a Land Information New Zealand letter to a journalist on the question of denial of information, dated 7 February 2017, and, second, a Parliamentary Library request for research showing that the transfer of land by this Government last year alone was, compared with our farmland, 3.24 percent.

Mr SPEAKER: Leave is sought to table two things there. One is a letter from Land Information New Zealand and the other is a Parliamentary Library research paper detailing some overseas ownership transactions. Is there any objection to either of those pieces of information being tabled? There is not. They can be tabled.

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

Prime Minister—Water, Housing, Superannuation, and Multinational Tax Avoidance

2. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement “we’re not here to shy away from the hard issues”, which was tweeted from his account and then deleted?

Rt Hon BILL ENGLISH (Prime Minister): Yes, I stand by the full statement, which was originally made when I announced funding for 1,100 additional police staff earlier this year. At that time I said: “This significant taxpayer investment comes with a range of challenging performance targets for police. They include higher attendance at home burglaries, seizing more assets from organised crime, reducing deaths from family violence, and reducing reoffending by Māori. Meeting these targets will not be easy, but we are not here to shy away from the hard issues.”

Andrew Little: Why does he refuse to take real action now on water, on housing, on superannuation, and on multinational tax avoidance, and instead repeatedly promise changes well into the future that he knows he can never be held accountable for?

Rt Hon BILL ENGLISH: That is an interesting question, because we have just made an announcement about national superannuation. The member is asking us to take real action now, rather than the announcement, which I presume means another flip-flop and that he will be going back to the policy that Labour agreed with before it disagreed with it.

Andrew Little: Putting aside the Government’s own flip-flops, why will he not take any meaningful action on water quality or pricing before the election, instead leaving it to future Governments to deal with the issue?

Rt Hon BILL ENGLISH: As the member will be aware, the Government publicised a framework that, for the first time, measures the quality of our fresh water across New Zealand, which has not been done consistently at all before, sets some targets, and makes sure that we are all accountable for improving the quality of our fresh water. That is real action, and right now it is driving real investment across our farming industry in reducing its impact on fresh water, and there is also the Government freshwater fund of $100 million, which is being spent.

Andrew Little: Why has he spent 8 years refusing to fix the housing crisis with a Government-led building programme and a ban on foreign speculators, instead leaving it to the next Government to clean up that mess?

Rt Hon BILL ENGLISH: There has been a whole range of action on housing, from special housing areas through to introducing the brightline test, the National Policy Statement on Urban Development, and, most recently, the $1 billion Housing Infrastructure Fund, currently under negotiation with councils, and that comes on top of HomeStart, which is designed to help 90,000 young Kiwis into their first home.

Andrew Little: Why has he sat on his hands on the multinational tax avoidance issue year after year given that he was first advised about it in 2012, while other countries have cracked down on it, and with his revenue Minister now admitting the issue will be left to the next Government?

Rt Hon BILL ENGLISH: I know the Government is making a lot of policy announcements, and it is hard for a policy-free party such as the Labour Party to keep up with what we are doing. Just a couple of weeks ago, the Minister of Revenue issued the next round of measures to deal with multinational taxation, which come on top of some of the toughest rules in the developed world in dealing with multinational taxation.

Andrew Little: Why will he not restart contributions to the New Zealand Superannuation Fund now to help meet the future cost of superannuation, and why is he instead leaving the issue for a future Government in 2037 to deal with?

Rt Hon BILL ENGLISH: The Government made an announcement a few weeks ago about raising the age of national superannuation, broadly supported by the New Zealand public. Additional contributions to the superannuation fund will not make a big difference to that but what would help New Zealanders is if the Labour Party returned to its original policy to raise the age rather than pretending there is no ageing population, which everyone knows.

Andrew Little: Why is it that with water, housing, superannuation, and tax avoidance his answer is always to make a promise but leave actually doing anything about it to the next Government, and just when are we going to see real leadership from him?

Rt Hon BILL ENGLISH: In each case, as the member has now discovered from asking the questions, we have made announcements, including on the superannuation age, on multinational tax, and on the billion-dollar Housing Infrastructure Fund. Even if the member is not that supportive of all the policy measures the Government is taking, we would be interested to know whether he has any policy on any of those things at all.

Economy—Growth, Confidence, GDP per Capita, Services Sector, and Commentary

3. SCOTT SIMPSON (National—Coromandel) to the Minister of Finance: What recent reports has he received on growth and confidence in the New Zealand economy?

Hon STEVEN JOYCE (Minister of Finance): A number of recent economic indicators show that New Zealand’s 6 years of almost continuous economic growth is likely to continue. Last Friday the BNZ-Business New Zealand Performance of Manufacturing Index was released. The Performance of Manufacturing Index (PMI) reached 55.2 in February, which is three points higher than in January and the highest level of expansion since September last year. In fact, New Zealand’s manufacturing sector has been in expansion almost constantly since October 2012, demonstrating the increasing diversification of our economy and the Government’s balanced approach to ensuring New Zealand’s future prosperity.

Scott Simpson: What do current levels of confidence in our economy indicate to the Government about the economy’s likely growth prospects?

Hon STEVEN JOYCE: Also last Friday we saw the latest ANZ-Roy Morgan Consumer Confidence data for February. This result was another strong 125.2—well above the long-term average of 118. The ANZ noted that its model combining business and consumer confidence indicators pointed to GDP growth of higher than 4 percent. Now, I think that is too optimistic, but it does reinforce the view that the New Zealand economy continues to perform well relative to other countries and is delivering security and confidence to hard-working Kiwis.

Grant Robertson: In light of that answer, is ANZ senior economist Philip Bawkin correct that, year on year, GDP per capita growth of 0.6 percent is less than half the annual average for per capita growth since 1993?

Hon STEVEN JOYCE: I stand corrected, but my understanding is that Statistics New Zealand posted a figure of 0.9 percent for the year, which is not stellar but also significant, and it continues to grow.

Grant Robertson: Less than half the average.

Hon STEVEN JOYCE: Well, the member is well known for his trainspotting of picking a particular statistic, but if he actually looks across the GDP growth, he will see that New Zealand is one of the strongest performers in the developed world.

Scott Simpson: How is growth in the services sector continuing to support New Zealand’s economy?

Hon STEVEN JOYCE: The index of services confidence released yesterday showed a slight dip for the month of February, but it was still the second-highest level of expansion since November 2015. In particular, employment rose by 0.9 to a measure of 54.6, which means it has now entered its fifth-year straight of expansion. The data released in the last few days across manufacturing services and consumer confidence—and also GDP growth last week—indicate the ongoing success of the Government’s long-term programme for economic growth.

Scott Simpson: What reaction has the Minister received from commentators looking ahead at New Zealand’s economy through 2017?

Hon STEVEN JOYCE: The consensus amongst economic commentators is for continued economic growth through this year and also into 2018. The ANZ observed that consumer confidence is solid across all regions—Auckland being the most optimistic, followed by the South Island outside of Canterbury. Westpac noted in its consumer confidence commentary that confidence in the household sector remains at healthy levels. The Government remains on track to deliver a Budget in May that will balance economic growth over the medium to longer term while also addressing the longer-term environmental and social challenges.

Tax System—Tax Avoidance

4. GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he stand by all his statements?

Hon STEVEN JOYCE (Minister of Finance): Yes, especially the statements from last week, which the member will be familiar with: “The member has to be careful with his trainspotting of quarterly figures.”, and also that he needs “new talking points, because the New Zealand economy is one of the fastest-growing economies in the developed world …”.

Grant Robertson: On the subject of his statements last week—that it was important to ensure that all companies in New Zealand were paying their fair share of tax—does he think that Apple paying virtually no company tax in New Zealand for 10 years is Apple paying its fair share of tax?

Hon STEVEN JOYCE: You would have to be careful about commenting on individual taxpayers, but we have a comprehensive programme of ensuring that international, multinational companies pay their fair share of tax. But also, we have to do it in such a way that it is balanced, because we have to understand that New Zealand companies that operate overseas are likely to experience the same rules that international companies experience here. So we have to be careful, to make sure that the international rules balance the requirement for taxing in-country versus taxing also in the source country where the companies live.

Grant Robertson: Why did his Government not undertake an inquiry into multinational tax avoidance when it was recommended to them in 2012, again in 2014, and again in 2016?

Hon STEVEN JOYCE: The member might be hiding under a rock, but, actually, there is a comprehensive series of initiatives on multinational taxation, which the Minister of Revenue has released—in fact, a whole range of activity that is going on and is being consulted on at the moment, pending being put through legislation alongside the OECD. So the member might like to pretend, from his talking points, that nothing is happening, but obviously quite a lot is happening.

Grant Robertson: Why is an investigation into multinational tax avoidance happening now, in 2017, when his Government rejected advice to do it in 2012, 2014, and 2016—[Interruption] No, no. Answer me; do not talk to them.

Hon STEVEN JOYCE: Well, school teacher Grant has appeared. Actually, it started under the previous Minister of Revenue, Michael Woodhouse, last year, and now it is in the hands of the current Minister of Revenue. Again, I invite the member to go back and look at the IRD website, at all the work that has been done, and then come back and ask us some serious questions.

Grant Robertson: Will he commit to implementing change to ensure that multinational companies pay their fair share of tax before the election in September?

Hon STEVEN JOYCE: Obviously, we have got to advance it through the law book—and subject to the legislative requirements. Certainly, this Government is keen to introduce things as quickly as it can, alongside the OECD, and we are committed to it. In terms of the actual date, I will come back to the member, but perhaps the Labour Party would like to help us pass through our legislative programme in a whole range of areas, including, for example, the reforms to the Resource Management Act.

Family Violence—Summit

5. JOANNE HAYES (National) to the Minister of Justice: What recent announcements has the Government made about family violence?

Hon AMY ADAMS (Minister of Justice): Following on from last week’s introduction of the Family and Whānau Violence Legislation Bill, today Minister Tolley and I announced that the Government intends to hold a family violence summit in June. We have always been clear that family violence is not something that the Government can solve on its own. Getting people together to reflect on the changes that have been made so far, and that are continuing to be made, is important. We need to challenge people across society to think about how we can act differently and the part we all have to play, because making real, lasting change requires all of our communities to work together, and the summit will be an important part of this.

Joanne Hayes: How will the family violence summit help to inform the work of the ministerial group on family and sexual violence?

Hon AMY ADAMS: The summit provides an opportunity for us to reflect with the sector on the work to date and to help shape the work programme going forward. For example, one thing that the legislation introduced last week focuses on is creating early intervention points before violence escalates. The summit gives us the opportunity to discuss with the sector how we can best make use of these earlier intervention points and how a social investment perspective could help determine our responses.

Water Supplies—Bottling and Use by Corporate Entities

6. METIRIA TUREI (Co-Leader—Green) to the Minister for the Environment: Tū ai a ai i runga i te mana o āna kōrero i whakapūrongotia rā, he “whakaparahako”, he mahi “heahea rawa atu” te whakamahi, te kawe wai rānei a ngā kamupene pire wai?

[Translation: Does he stand by his reported statements that charging companies who use or take water would be “ridiculous” and “farcical”?]

Hon Dr NICK SMITH (Minister for the Environment): No. Those comments were made in respect of the proposal to ban water exports—not charging.

Metiria Turei: Does he think that the Prime Minister, Bill English, is “ridiculous” and “farcical” for seeking advice on the charging of water bottling?

Hon Dr NICK SMITH: Not at all. Last Tuesday on the bridge I said that the Government was happy to have a discussion around charging but not on bottled water in isolation, because it makes a very small fraction of the amount of water take.

Metiria Turei: So then he disagrees with the Prime Minister, who has asked for advice on the charging of water bottling?

Hon Dr NICK SMITH: Not at all. I have said I am happy to have a discussion both around the issues of allocation and charging. In fact, we set up a technical advisory group and work programme last June to do just that. What we want to do though is ensure that we are being fair and considered and consider all water users.

Metiria Turei: Why would New Zealanders even trust him to even consider a recommendation to price the commercial use of water when just last week he described that process as ridiculous and farcical? Why would they trust you?

Hon Dr NICK SMITH: I have the quote, exactly, in front of me. It was: did I support a ban on exporting water? And I said “I think it’s a bit farcical in the sense that it’s such a small amount of water.” I am open-minded about a charge but it would need to be done in a careful way to ensure that all water users are treated equitably.

Metiria Turei: Does he agree with the OECD, which has said today that New Zealand has some of the lowest environmental levies in the world, or does he think that the OECD’s key recommendation to protect water is ridiculous and farcical?

Hon Dr NICK SMITH: The OECD actually commended the Government on the progress that has been made on environmental charges. It is our Government that introduced a waste levy in 2009, it is our Government that introduced a price on carbon in July 2010, and the Minister for Climate Change Issues is progressively lifting those. We just need to be careful on the issue of water, around charging, because the sorts of proposals that I have seen from the Opposition would bankrupt New Zealand’s most important industries.

Metiria Turei: Is the Minister comfortable with new bottling ventures, like the plan to sell pristine water from Mount Aspiring National Park, piped directly on to ships offshore, going ahead?

Hon Dr NICK SMITH: That particular proposal was consented way back in the 1990s, and it comes as no surprise that it has not been taken up. I do note that if you look at the number of consents approved for bottling and export, less than 1 percent of those that are consented are actually being used. All that has occurred on the West Coast is a renewal of that consent about a year ago, with the support and approval of the local iwi, the local council, and the Department of Conservation.

Marama Fox: Does the Minister still agree that nobody owns the water when farmers are able to sell their water allocation as an asset to improve the value of their farm, or independently of a farm sale?

Hon Dr NICK SMITH: It is the longstanding position of consecutive Governments that the water is a public resource that is not owned by any one group. There have always been charges for water services—for instance, if a council provides storage, treatment, or piping, or if irrigation companies are providing services associated with the water.

Metiria Turei: Is the reason the Prime Minister took this problem off him, and offloaded it instead on to officials for after the election, that the Government is not going to do anything and does not want to pay the electoral price for the commercial use of water?

Hon Dr NICK SMITH: It is quite the opposite. The Government set up a work programme, approved by Cabinet last May, that specifically set up an expert technical advisory group on both the pricing and on the allocation of water, quite specifically in the terms of reference. We just simply say that having a very narrow discussion around water bottling is actually not where the main game is if New Zealand is going to improve its freshwater management.

Marama Fox: Does the Minister then agree that water given freely to corporates is a form of corporate welfare?

Hon Dr NICK SMITH: There are about 20,000 water permits across New Zealand. A large number of those are held by New Zealand companies, by individuals, and by others, and they are crucial to the core horticultural, agricultural—many of our industries. It has been a longstanding practice that water is not charged for the natural resource.

Hon Te Ururoa Flavell: I raise a point of order, Mr Speaker. Tēnā koe, Mr Speaker. I did not want to interrupt the member as she asked her question, but just for the record, the Māori—the fourth word in that question is spelt wrong; it should be “ia” as opposed to “ai”, just for the record.

Mr SPEAKER: I thank the member for his assistance.

Ministers—Cabinet Manual

7. Rt Hon WINSTON PETERS (Leader—NZ First) to the Prime Minister: Has he required all his Ministers to read the Cabinet Manual; if not, why not?

Rt Hon BILL ENGLISH (Prime Minister): I expect Ministers to be familiar with the Cabinet Manual, even if they cannot recite it word for word.

Rt Hon Winston Peters: Can he confirm that Minister McCully had full Cabinet approval when he co-sponsored United Nations Security Council Resolution 2334 denouncing Israel?

Rt Hon BILL ENGLISH: As I have said previously, he did not require a specific Cabinet approval for policy that was longstanding New Zealand Government policy.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. I asked for confirmation of Cabinet approval, and that answer says he did not require it. I still have not had the answer as to whether he did—whether he required it or not—

Mr SPEAKER: No, no—[Interruption] Order! On this occasion, the question has been addressed with the answer that was given.

Rt Hon Winston Peters: No, no—can I ask you for a point of clarification? Does that mean that he got approval or he did not?

Mr SPEAKER: Order! The Prime Minister addressed the question by saying approval was not required. The way forward now is with further supplementary questions. If the member does not wish to, I am happy to move immediately to the next question.

Rt Hon Winston Peters: Could the Prime Minister confirm that Mr McCully got approval on that resolution, and did the Minister for Arts, Culture and Heritage, the Hon Maggie Barry, nominate Dame Jenny Shipley to chair the committee for the James Cook 250th commemoration in accordance with Cabinet and State services guidelines?

Mr SPEAKER: There are two supplementary questions there. The right honourable Prime Minister can address one of them or both.

Rt Hon BILL ENGLISH: The connection between the two seems to me to be tenuous at best, but I am happy to go and check up on the matters related to the Hon Maggie Barry’s nomination of Jenny Shipley.

Rt Hon Winston Peters: Why did this Minister, Maggie Barry, not advise the Cabinet appointments and honours committee that 6 months before the nomination of Jenny Shipley going before the committee, she had already—in writing—promised Dame Jenny Shipley the job?

Rt Hon BILL ENGLISH: As the member may be aware, Mrs Shipley was an experienced member of Parliament, who would know as well as anyone else that no appointment is confirmed until or unless the Cabinet appointments and honours committee confirms it, and then Cabinet confirms it.

Rt Hon Winston Peters: Is the Prime Minister also unaware that there is a declaration to be made about such a conflict of interest, and what is the propriety of this Minister, Maggie Barry, and the Minister of State Services, Paula Bennett, giving—and I quote them—“exceptional increase” above the daily maximum for this role?

Rt Hon BILL ENGLISH: I would be surprised if Mrs Shipley has raised this with the member to speak on her behalf, so I am not sure just whose cause he is advocating here. But I am quite happy to check whether all procedures were correctly followed.

Rt Hon Winston Peters: I seek leave to table seven sets of documents, and I am happy to outline what they are—it is the evidence.

Mr SPEAKER: We will have just a brief description of the seven.

Rt Hon Winston Peters: Very brief. The first is a letter and job description, dated 13 May 2016, where Maggie Barry makes the offer. The second shows emails between Dame Jenny and the CEO of the Ministry for Culture and Heritage, dated 26 May 2016, confirming that the role is subject to the Cabinet appointments and honours committee and would require a declaration from that Minister. The third is a memo to the Minister for Arts, Culture and Heritage, dated 10 November, outlining the appointment process for the “independent chair”, including Dame Jenny, who was listed at the top, not alphabetically—

Mr SPEAKER: Order! I just want very brief descriptions.

Rt Hon Winston Peters: Fourth is a memo from Minister Barry, dated 24 November 2016, to that committee stating specifically that no conflicts of interest on that appointment existed.

Mr SPEAKER: Order! Move on very quickly.

Rt Hon Winston Peters: Fifth—it gets worse—is from 5 December 2016 and 6 December 2016, between that Minister, in contact with Dame Jenny, and involving Paula Bennett, asking for the per diem to be changed. Sixth is a document dated 7 December from Minister Barry to Paula Bennett, lobbying for, as I say, the exceptional per diem and outlining the gruelling indicative workload she would be forced to endure—

Mr SPEAKER: Order! Move to the last one, quickly.

Rt Hon Winston Peters: No. 7—last but not least—[Interruption]

Mr SPEAKER: Order! Order! I do need some assistance from my right-hand side. Points of order should be heard in silence. Can we have the seventh document, please?

Rt Hon Winston Peters: Thank you, Mr Speaker. They do not like it, I know. The seventh and final document is from Minister Bennett to Minister Barry, dated 9 December 2016, backing both the exceptional fee and for this fee to be paid on an annual basis, like a salary. [Interruption]

Mr SPEAKER: Order! Leave is sought to table those seven documents, which have been very adequately described. I do not intend to summarise them again for the benefit of the House. Is there any objection to all of those seven documents being tabled? There is not; they can be tabled.

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

David Seymour: How does any of that conduct compare with being sacked from Cabinet three times by three different Prime Ministers?

Mr SPEAKER: Order! There is no ministerial responsibility.

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

Mr SPEAKER: Order! [Interruption] Order! No, I will call the member when I am ready.

Rt Hon Winston Peters: Mr Speaker—

Mr SPEAKER: Order! I will call the member when I have silence on my right-hand side. Point of order—the Rt Hon Winston Peters.

Rt Hon Winston Peters: Not only is that statement utterly false, but, worse still, we are not going to take it from a cuckolded puppet.

Mr SPEAKER: The member will resume his seat. That is not a point of order. If he wants to take the matter further, he is welcome to do it. [Interruption] Order! I will hear—it had better be a point of order—from David Seymour.

David Seymour: I take offence at being referred to as a cuck by someone who smoked for 60 years.

Mr SPEAKER: I am not going to move on that.

Code of Conduct for Teaching—Progress and Education Sector Participation

8. MAUREEN PUGH (National) to the Minister of Education: What progress has been made on the development of a code of conduct for the teaching profession?

Hon HEKIA PARATA (Minister of Education): Tēnā koe, Mr Speaker. I am advised that the aptly named Education Council of Aotearoa New Zealand has worked very closely with teachers, education leaders, and peak bodies to develop a draft code of professional responsibility and standards for the teaching profession. The draft code was launched for consultation by the Education Council on 10 March, and it will help to inspire confidence and a high level of trust in the teaching profession by those who are at the very centre of learning: children, and their whānau. It will also help to ensure that the profession is honoured as one of high quality and integrity. The draft code, underpinned by standards, will also provide employers with a strengthened disciplinary framework to better ascertain what types of behaviour would be determined a breach.

Maureen Pugh: What role has the education sector played in the development of this draft code of conduct?

Hon HEKIA PARATA: It bears repeating that the Education Council has involved the education sector extensively in the development of the draft code of professional responsibility. Teachers, education leaders, and peak bodies have participated in surveys, workshops, focus groups, and meetings, and their views have been instrumental in the development of the draft code and accompanying professional standards. I would like to acknowledge the very hard work of the Education Council and thank all those who have been involved so far for their dedication and commitment to such an important framework. I am advised that the draft code is out for public consultation until 21 April, and I would encourage everyone to provide their feedback to the Education Council.

Housing, Rental—Affordability, Security, Residential Tenancies Act, and Letting Fees

9. PHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and Construction: Does he believe the rental market is affordable and secure enough for New Zealand families; if so, why?

Hon Dr NICK SMITH (Minister for Building and Construction): The quality of rentals has markedly improved with this Government’s aggressive home insulation programme that has seen 300,000 homes retrofitted and our new law that requires the remaining 180,000 homes to be insulated by 2019. In respect of rents, they have gone up by an average of 3.4 percent since 2008, as compared with an average increase of 5.2 percent for the previous 8 years. The rental market is most affordable and secure where we have aggressively increased supply in places like Christchurch, where rents have dropped by 10 percent in the last 2 years.

Phil Twyford: When rents are up nearly 40 percent since his Government took office, and when rents are rising twice as fast as incomes in Auckland, is that a reasonable level of increase, or is it yet another symptom of his out-of-control housing market?

Hon Dr NICK SMITH: I note that both nationally and in Auckland the rate of rent increases under this Government has been significantly and markedly less than what it was under the previous Government, when it did nothing.

Phil Twyford: Does he think that it is a “problem of success” when working families like Invercargill woman Lisa Calder end up living in a house bus because the uncertainty in the rental market makes living in a bus a more stable option?

Hon Dr NICK SMITH: As a constituency MP of 25 years, there have always been difficult situations where people’s housing has been inadequate. The answer is that increasing supply and the sorts of comprehensive reforms of the likes of the Resource Management Act, which his party has refused to support, will actually make the material difference, long term, for families like those he speaks of.

Phil Twyford: Why has he not updated the Residential Tenancies Act to give renters more security of tenure after 8 years in Government, given that more than half the population are renters and the average tenancy is less than a year?

Hon Dr NICK SMITH: The member’s facts are, firstly, incorrect; 64 percent of New Zealand homes are owner-occupied. Secondly, in respect of the issue of the Residential Tenancies Act, I am actually very proud of the record this Government has with requiring smoke alarms, requiring insulation, and the new compliance and enforcement unit that is ensuring that our tenants do have access to good-quality homes.

Phil Twyford: Does he think it is fair to renters that they have to pay letting fees of up to the equivalent of 2 weeks’ rent at the very time they have to find 2 weeks’ rent in advance and up to 4 weeks’ bond; if not, what is he going to do about it?

Hon Dr NICK SMITH: I note the issue around letting fees is the same law that was actually in the Residential Tenancies Act that was passed by the Labour Party. The key issue, if we are serious about helping the level of housing costs, whether it be for first-home buyers or whether it be for renters, is actually to enable more houses to be built. This Government is making great progress with a large-scale building boom and 30,000 homes being built. I just wish members opposite would support key reforms, like to the Resource Management Act, that would actually make a difference.

Air Services—Trading Partners

10. Dr SHANE RETI (National—Whangarei) to the Minister of Transport: What steps has the Government taken on strengthening New Zealand’s air services with trading partners?

Hon SIMON BRIDGES (Minister of Transport): Last week I announced that New Zealand will benefit from a number of new air services agreements with, for example, Kenya, Botswana, the Dominican Republic, and Guyana, and an amended agreement with Italy. Other successful negotiations to expand and enhance air services opportunities were conducted with Belize, Nicaragua, and Spain. We have also signed an air services agreement with Colombia, providing opportunities for code-sharing between each nation’s airlines. New Zealand’s approach to liberalising air services has allowed for an open, competitive market, facilitating increased air traffic, lower airfares, and stronger international trade links.

Dr Shane Reti: What economic benefits will the new air services agreements bring to New Zealand?

Hon SIMON BRIDGES: Of course, as an island nation, New Zealand relies heavily on its international air links. These new agreements will further enhance New Zealand’s international air connectivity between Africa, Asia, Europe, and the Americas. International visitor arrivals set a new record in 2016, with 3.5 million for the year. This figure was up 12 percent on 2015. Worldwide, New Zealand has air services agreements with 61 countries and territories, and 20 are awaiting signature. I am excited that the new air services agreements will boost tourism, create new trade opportunities, and strengthen the existing strong personal ties between New Zealand and the rest of the world.

Water Supplies—Bottling and Use by Corporate Entities

11. Hon DAVID PARKER (Labour) to the Minister for the Environment: Does he stand by his many statements last week that it’s not worth looking at a royalty on water used for bottling?

Hon Dr NICK SMITH (Minister for the Environment): I stand by my actual statement: you cannot look at charging for bottled water in isolation. My plea is that a discussion on water pricing be done in a thoughtful and careful way, because bottled water is such a small fraction.

Hon David Parker: How does he reconcile his statements last week with Bill English now asking an advisory group about charging a royalty on water used for bottling?

Hon Dr NICK SMITH: I just quote from the statement that I made last Tuesday on the bridge: “We have got an important piece of work being done by the technical advisory group on the options for both the allocation and charging for water, and if we are going to have a conversation about it, we need to do it thoroughly, carefully, and make sure we are fair to all users.”

Hon David Parker: Why did the Prime Minister, Bill English, say yesterday that Ministers were writing to a technical advisory group to investigate a price on water, but only for the bottled water industry; and why did he say the opposite in the answer to Metiria Turei’s question earlier today?

Hon Dr NICK SMITH: Last May, Cabinet agreed to the setting up of the technical advisory group and the work programme, and all I did yesterday was to write, with Minister Guy, to the technical advisory group and make sure its deliberations include the issue of bottled water.

Hon David Parker: I raise a point of order, Mr Speaker. The point of that question was, I thought, pretty clear. It was to try to tease out this issue—that the Minister is saying “You can only look at all water.” whereas the Prime Minister was saying “only bottled water”.

Mr SPEAKER: The only way forward is that I invite the member to repeat his question, as asked.

Hon David Parker: Thank you, Mr Speaker. Why did the Prime Minister say to reporters yesterday that Ministers were writing to a technical advisory group to investigate a price on water, but only for the bottled water industry; and how does he reconcile that with the opposite answer that he gave to Metiria Turei earlier?

Hon Dr NICK SMITH: Very easily. If you read the transcript of what the Prime Minister said, he acknowledged that there was an important piece of work being done on water allocation and pricing and that that piece of work should include the issue of bottled water.

Hon David Parker: Does a company that bottles water and offers it for sale own the water it is selling; if not, who does the Minister imagine owns that water?

Hon Dr NICK SMITH: I suspect it is not much different to the company that takes water and makes it into beer, the company that makes it into soft drink, or the council that puts water into its town water supply and charges users for that water. The water, clearly, becomes owned once extra additions are made to it, in terms of putting it in either a bottle or a pipe.

Hon David Parker: Is he concerned that Bill English’s decision to delay receiving advice on a royalty on water use for bottling until after the election will be seen as a lack of the political leadership that New Zealanders rightly expect of their Prime Minister?

Hon Dr NICK SMITH: Quite the opposite. The timetable for the technical advisory group working on allocation and water pricing was decided in May last year, for it to report late this year or early next year.

Hon David Parker: To what extent does he attribute the collapse in public support for him and his Government over fresh water to the fact that after 8 years in office, most of our rivers outside national parks are more polluted, not less, and his latest flip-flop on the royalty on bottled water is so patently just another delaying tactic?

Hon Dr NICK SMITH: I would refer the member to the OECD report out today that actually commends this Government for the amount of progress that it has made with the national policy statement, with the national regulations for metering, and with the fact that there are now 20 catchments across New Zealand where there are caps on nitrogen—when we actually came into Government, there was none.

Hon David Parker: I seek leave to table that OECD report, which, in fact, says that river—

Mr SPEAKER: Order! [Interruption] Order! The member will resume his seat. That OECD report is available to anybody who wants it. [Interruption] Order!

Offshore Oil and Gas Rigs—Decommissioning Cost

12. GARETH HUGHES (Green) to the Minister of Energy and Resources: Firstly, happy 32nd wedding anniversary today. Can she confirm that the Crown is liable for 42 to 48 percent of the cost of decommissioning offshore oil and gas rigs through tax and royalty rebates and, if so, what is the estimated cost to the Crown arising from rigs that will potentially be decommissioned?

Hon JUDITH COLLINS (Minister of Energy and Resources): I have to say I cannot claim full credit for 32 years of marriage; I did share that with my husband—thank you so much, though. I can confirm that the Crown will typically rebate between 42 to 48 percent of decommissioning costs to petroleum producers, and the Ministry of Business, Innovation and Employment has estimated the total cost to the Crown for all fields is between $800 million and $855 million over the next 25 or so years, and that is compared with the $3.2 billion in royalties and levies that petroleum producers have paid to the Crown in the last 9 years—a figure that does not even take into account the up to $400 million paid in tax each year.

Gareth Hughes: Is it fair that New Zealand has the fourth-lowest tax plus royalty rate in the world but subsidises almost half the cost of decommissioning oil rigs, which we just heard could be up to $885 million?

Hon JUDITH COLLINS: I would disagree with the member there, because the information I have is that the royalties are actually at a particular level to take into account decommissioning costs in the future, and when you consider that since 2008 the Crown has received $3.2 billion in royalties and levies, plus tax, plus wages, plus a contribution of $2.5 billion every year to GDP, plus the employment of 4,600 people directly and close to 12,000 people indirectly in very highly skilled, highly paid jobs—I think we are doing pretty well.

Gareth Hughes: Given that her colleagues have repeatedly claimed to be leading the international movement to phase out fossil fuel subsidies, how does it look that she is allowing taxpayers to shoulder almost half the cost of decommissioning oil rigs—up to $885 million?

Hon JUDITH COLLINS: I think the member has not listened quite carefully enough to one of my answers there—that is that, actually, the royalties include the cost of decommissioning. So you could say that what we are doing in the royalty payments and levies is we are getting them to pay up front for the cost of the decommissioning.

Gareth Hughes: Given that the Minister will announce the next oil and gas exploration block offer tomorrow at the petroleum conference in New Plymouth, will she consider amending the regulations so that New Zealanders do not have to pay, or miss out on revenue, up to $885 million to clean up after the oil industry has made its profit?

Hon JUDITH COLLINS: What we could do, of course, if that member has his way, is miss out on the $3.2 billion in royalties and levies, plus the $400 million in tax paid each year, plus all of the wages and everything else that comes from the industry if we closed down the industry that has been part of New Zealand since about the 1860s and which is a huge contributor to our economic worth. I would remind that member that even at the worst times of the oil crisis in the last year, this has been the biggest export item to Australia, in terms of wealth, for the last 20 years. It is a huge part of our economy and needs to be encouraged in an environmentally safe way.

Gareth Hughes: I raise a point of order, Mr Speaker. The question was not about Green Party policy. It was about whether she would consider amending regulations—

Mr SPEAKER: Order! No. If the member is arguing that the question has not been addressed, then I think on this occasion it has been addressed, clearly not to the member’s satisfaction.

Urgent Debates Declined

Water Exports and Ownership—Prime Minister’s Decision

Mr SPEAKER: I have received a letter from Metiria Turei seeking to debate under Standing Order 389 the Prime Minister’s decision to refer the issue of water exports and ownership of water to the technical advisory group within the Ministry for the Environment. This is a particular case of recent occurrence involving ministerial responsibility. The issue of water usage and ownership is an important one for New Zealand, but the test for whether a particular case requires the immediate attention of the House is also a high one. It requires the matter to be of such urgency that it justifies the House spending a substantial part of the sitting debating it. In this case, a technical advisory group has been asked to consider an important issue. No further action has been announced. I am not convinced that the matter has such an element of urgency that it must take precedence over other business of the House. The application is therefore declined.

Bills

Intelligence and Security Bill

Third Reading

Hon CHRISTOPHER FINLAYSON (Attorney-General) on behalf of the Minister for National Security and Intelligence: I move, That the Intelligence and Security Bill be now read a third time. This bill is the most significant reform of the legislation governing the intelligence agencies and their oversight, in our country’s history. At the centre of the reform is replacing four Acts with one comprehensive piece of legislation, which sets out more clearly than ever before the functions and the powers of the agencies, along with their oversight regime.

The bill is a response to the report of the first independent review of intelligence and security that was carried out by Dame Patsy Reddy and Sir Michael Cullen. I think that report was an exemplary piece of work, and I want to thank those two distinguished New Zealanders for their contribution. They laid a solid foundation for this reform, and the bill implements the vast majority of their recommendations.

I acknowledge the thorough work of the Foreign Affairs, Defence and Trade Committee, chaired initially by the now Hon Mark Mitchell and subsequently by Todd Muller. I thought the committee’s work was outstanding. We asked the committee to consider some very complex areas of the bill, including the approach to the definition of national security, which in turn plays a critical role in determining when the agencies can obtain a warrant to target New Zealanders. The committee did an excellent job on this matter and a wide range of other issues, such as narrowing the warranting regime and further strengthening the oversight of the bill.

I want also to acknowledge the many organisations and individuals who made submissions to the committee. In particular I want to thank the Privacy Commissioner and the Inspector-General of Intelligence and Security, both of whom made useful submissions to the committee and continued to work with officials throughout the process on a number of improvements to the bill.

Can I acknowledge the Bankers’ Association, Spark New Zealand, Vodafone New Zealand, and 2degrees. Their submissions and feedback resulted in changes to the bill relating to the disclosure of business records information. These changes mean greater transparency and oversight of the agencies’ access to this type of information. Other submitters, such as the Legislation Design and Advisory Committee’s external subcommittee, the New Zealand Law Society, InternetNZ, the Human Rights Commission, and the New Zealand Council of Trade Unions all made very useful submissions addressing a number of points in detail.

The current Commissioner of Security Warrants, Sir Bruce Robertson, also provided evidence to the select committee, and I thought that was particularly useful in terms of the warranting process and it informs some of the changes the committee recommended to warrant application provisions.

Can I particularly thank the officials who have worked on this bill—in particular, the national security policy team at the Department of the Prime Minister and Cabinet. That team has worked tirelessly. They have done a tremendous job, every step of the way. I also acknowledge the work of the Parliamentary Counsel Office. I am always saying we have some of the finest drafters in the world, and they have proved me right, once again, with this effort.

Finally, I want to acknowledge the members of this House who, I believe, have engaged constructively on this legislation, and that was evidenced by last week’s Committee of the whole House debate. As we said at the beginning of this reform, broad political support for the bill was crucial, given the national security implications. I am pleased this has been achieved, and I really do thank and commend all members who have engaged with the issues and the debate so productively.

One of the unfortunate aspects of politics in many countries these days is that politicians seem to yell at one another. Positions are taken and defended with great ferocity. Lines are never crossed. Compromise is a dirty word. [Interruption] Oh, they are yelling at me. Compromise is a dirty word. That is why I am so pleased that we, as New Zealand parliamentarians, avoided that dead-end with this bill. Of course there were important questions that were raised. Of course there were important points of principle that were taken. But I think the debate and the engagement was very constructive indeed.

The provisions relating to the Intelligence and Security Committee, which were robustly debated last week, were a good illustration of this. I emphasise what I said last week. Clause 193 of the bill contains the mandatory periodic review of the intelligence and security agencies and their legislation every 5 or so years, and this will provide us with an opportunity to ensure all provisions are working the way Parliament intended. If some members are disappointed with, for example, the size of the Intelligence and Security Committee, that is an issue that can be revisited at some later stage.

I particularly want to thank and acknowledge David Shearer, when he was a member of the Foreign Affairs, Defence and Trade Committee, for what I thought was a really helpful contribution. I want to thank my opposite number, the Hon David Parker, for his searching questions, for his ability to deal with some of these extremely difficult issues, and he did so always from a very principled basis. I want to thank Denis O’Rourke from the New Zealand First Party for the way he worked on this legislation in the select committee. During my meetings with him he was always so very productive and helpful.

I want to acknowledge Dr Kennedy Graham from the Green Party, who had a different view of matters but was very constructive, and with whom I always get on very well. I acknowledge his different world view, or the different world view of his party, but it was never acrimonious. It was always principled. Finally, I want to acknowledge the leaders of United Future, the ACT Party, and the Māori Party, who have given me considerable assistance and guidance throughout this exercise.

In closing can I say this. It is almost trite to say that with great power comes great responsibility. Our intelligence agencies have extensive powers, but they also have very serious responsibilities. They now have an explicit, coherent legal framework within which to operate and last year, through the Budget, received a significant funding boost to ensure that they have the necessary resources to remain effective in a rapidly evolving security environment. They have a crucial role to play in protecting our fellow citizens from modern-day evils like terrorism and cyber crime. I expect them to operate to the high standards that Parliament requires of them. I think I can say on behalf of all of us that there will be no excuses for failure or mediocre performance. I commend the bill to the House.

ANDREW LITTLE (Leader of the Opposition): I rise to support the bill at its third reading and to acknowledge the work of the Minister, Christopher Finlayson, who has just spoken, for doing the spadework and also the effort that he has put in, in dealing with other parties, listening to their concerns openly and genuinely, and seeking to resolve the outstanding matters that each of the parties had brought to him. Like him, I want to acknowledge the foundation work that was done by Dame Patsy Reddy and Sir Michael Cullen, two eminent New Zealanders, as he described them, for doing an excellent report that laid the basis for the legislation. I think it was of great assistance to all MPs who have been working on the legislation and, indeed, to those who worked on it during the select committee process.

I also agree with the Minister—the Attorney-General, as well—that we are fortunate that at least here in this Parliament, there are matters upon which we can unite as members of this Parliament. It is important that national security is one of those. The Minister speaks, of course, as one who would never even think of passing off acerbic remarks about parliamentary colleagues.

Grant Robertson: It’s never happened!

ANDREW LITTLE: I cannot recall a time in which that might have happened, but it is right. Like him, I observed the debate in the Committee of the whole House last week and saw the quality of the debate. I have to say, too, that for a Minister sitting in the chair, unlike so many other occasions when Ministers contribute very little during that process, he was an active participant in it. He actively engaged in the debate, put up reasonable, sound, and often robust defences, but otherwise engaged with the debate that members were genuinely bringing on this very important piece of legislation.

As I said before, I think it is important that on matters of national security—and therefore the legislation covering those agencies that we charge with the responsibility of maintaining national security—there is, as best as possible, at least a unanimity of purpose and agreement about what the powers should be and that they are going to be resourced appropriately and effectively. I am happy to see this legislation in the form that it has now come back from the Committee of the whole House. I think it achieves the objective that was set by him as Minister, but he has sought agreement from other parties to align with.

We knew from the outset—from the Cullen-Reddy report and from the early draft of the legislation—that there were going to be more intrusive powers, especially for the GCSB, to cover off what had been seen as an omission from past legislation. But, equally, it was evident from the first draft of the bill—and I think the Minister had been very receptive in seeing these beefed up—and that is the safeguards that are provided citizens, at least of New Zealand, with regard to the exercise of those powers. Whether it is in relation to the new form of intelligence warrants and the way they are issued or whether it is access to personal information held by Government departments or, indeed, any agencies, private or public, it is clear to see that there are now safeguards in this legislation that were not present in previous legislation.

There were a small number of issues that I thought, and Labour thought, were outstanding as the first draft of the legislation came to the House. The first was a definition of national security. It is interesting to see that the bill in the form that it is now back in the House does not define national security, but it does refer to it. In that context, particularly clause 55A makes it clear what the bill, its powers, and the agencies are targeting when it comes to matters of national security. It is targeting issues of terrorism, forms of extremism, and threats to our economic security as well. I think that the way the bill is drafted, it leaves scope for interpretation but, equally, the context in which those words appear make it clear exactly what the purpose of the exercise of any powers under the bill is meant to be for. I think that will be an appropriate way for the agencies to conduct themselves and for those who are issuing warrants to be clear about the purpose of the work that they are doing.

A second issue that was of concern was the powers of access by the agencies to other information held by Government departments, in particular, but actually now under the bill as it stands, they are the holders of information about individuals who might be the target of investigations by the agencies. I think every New Zealander—every citizen—is entitled to be concerned about where the information that they provide agencies goes, how it is used, and who has access to it. I think the bill strikes a very fair balance in terms of allowing the security and intelligence agencies to request information—equally for Government departments to disclose information at their own initiative—provided there is a reasonable ground to believe that doing so is in the interests of national security and the objectives that each of the security agencies has.

The other issue that I had in relation to the bill when it first entered Parliament was the oversight by the Intelligence and Security Committee. I think one of the developments in the 2014 legislation was the quality of oversight given to the Inspector-General of Intelligence and Security. Certainly, the incumbent inspector-general, Cheryl Gwyn, has proven herself to be genuinely independent of the executive and of Government and has exercised her powers in a robust way, and in a way that is not necessarily flattering to Government but that is informative to the people of New Zealand, and that is what we expect from that office.

That is a vital piece of that oversight that we have of these agencies and of our intelligence and security architecture. It is encouraging to see also that the role of that office is respected and is added to in this bill so that there is a very close level of communication required between our security agencies and the inspector-general’s office. That is a good thing—that is to be encouraged, and I welcome it.

For the Intelligence and Security Committee itself, it is the political oversight of the agencies and it plays a vital role. No one has suggested that in the nature of our Parliament and our adaptation of the Westminster system the Government of the day should not have the majority on that committee—and I certainly accept that. But it is important in an MMP environment and in a Parliament that has multiple parties and multiple voices that, at least on the Opposition side, parties of some significance and substance that are represented in Parliament should be represented on that committee. There is greater scope and greater potential for that to happen under the bill as it appears in the House right now, so I welcome that. I personally thought that the committee should be bigger so that there was greater scope for better proportionality of representation of Opposition parties—

Hon David Parker: As was the select committee.

ANDREW LITTLE: —and indeed, the select committee supported that too, but that has not found its way into the bill following the Committee of the whole House process.

Nevertheless, the provision for the size of the committee and the appointment of the members to it at least allows a better chance now of better representation than was there before. So to that extent it is an improvement. I think the Minister is right. It is an issue now that we can schedule for further consideration in the next 5-year review of the legislation and the agency.

I just want to conclude again—echoing the comments of the Minister—by thanking not only the Foreign Affairs, Defence and Trade Committee but all MPs who participated in the debate and the scrutiny of the bill during the Committee of the whole House process. I think it was one of the better discussions that the Committee of the whole House has had over a piece of legislation, and I think the House can be satisfied that it has discharged its responsibilities to all citizens of New Zealand when faced with legislation that gives the State broad and sweeping powers, but also to ensure there are good checks and balances. The House did that, the legislation reflects that, and it has our support.

Hon MARK MITCHELL (Minister for Land Information): It is a pleasure to take a third call on the Intelligence and Security Bill. I was not sure whether I would get a call on the third reading so I made my acknowledgments during the second reading, but I would just like to very quickly acknowledge the Minister—our Attorney-General—who did set the tone very early on in terms of how the work would progress on this bill. Can I also just very quickly acknowledge our officials who supported the Committee.

We did narrow the warranting regime on the bill and we did strengthen the provisions of the bill, which I felt was very, very important. There was, of course, a real balancing between achieving greater transparency and checks and balances in relation to the legislation, whilst at the same time allowing the security agencies to do their very important work, and that is to actually protect our country and to be guardians of our national security. So I am very proud to see this legislation pass in this House, to have been involved in that process, and I am very happy to support the bill. Thank you.

Hon DAVID PARKER (Labour): Can I begin by thanking the Attorney-General for the process that he has run. I think it concerns a lot of people in Western democracies that we see faith in democratic institutions eroding, in part because we have got a very polarised form of politics developing in many parts of the Western world. We have seen it most obviously in the last year in the likes of the United Kingdom around Brexit and in the United Kingdom leading to the election of Trump.

Tim Macindoe: The United States.

Hon DAVID PARKER: Yes, sorry, the United States—of course—in respect of President Trump. We are also seeing it in Australia, where the polarisation of its politics, particularly on the right wing over there, is quite concerning. [Interruption] Oh, it is. You have got Pauline Hanson; you have got people, after 46-degrees-Celsius summers, denying that they have got a problem with climate change; and suggestions that one of the wealthiest countries in the world cannot clean up its power systems. So we have actually got this threat to the public confidence in democratic institutions when the criticisms from politicians get over the top. The media, of course, likes a good controversial story, and so it amplifies the disagreements. People who do not follow these issues closely end up thinking: “Well, jeez, this system is broken. I don’t really have much faith in my democracy.”

As a parliamentarian, I think democracy is incredibly important. I think that the old saying that the only thing worse than a democracy is the alternative is a back-handed compliment to democracy and is about how wonderful democracy is.

Now, at times like this, democracy is called upon to sort through some very difficult issues. On the one hand, everyone in this party acknowledges that the New Zealand Security Intelligence Service (SIS) and the Government Communications and Security Bureau (GCSB) are here to stay and that we need them. I think the Greens are slightly more ambiguous about that, and would perhaps like to see those organisations’ remits narrowed a little, but even the Greens acknowledge that the GCSB, particularly around cyber-security, is necessary, and it sees a role for the SIS. If we all accept that there is a need for those agencies, then the next question is how you properly regulate them, given that they have got these powers that they exercise mainly in secret that include powers of search and surveillance, mainly on people from overseas but also, in limited circumstances, upon New Zealanders.

It is the task of this Parliament to get this balance right between the powers that those agencies need for the protection of New Zealand and New Zealanders and the oversight that is needed to make sure that they do not abuse those powers. I think we have pulled it off in this piece of legislation and I think we have done it in a manner that shows that—you know, although our system lacks some of the checks and balances that you find in jurisdictions where there is a division of powers between a president and the parliament, or between more than one House of Parliament even, if you do not have a president. In our unicameral system, although we do have a lot of power vested in our smaller number of institutions, we also seem to operate in a way that gets these things right over time. I think that is a wonderful testament to our country—that here we are, this little country at the bottom of the South Pacific that has got this wonderful history of getting this balance right, and, therefore, sustaining our democracy in a way that very few countries in the world have.

I say this when I am out speaking to school groups; I say that there are virtually no other countries, or very few other countries, in the world that have got the length of unbroken democracy that we have got. There is no one in South America, no one in the whole of Africa, no one in Asia, virtually no one in Europe—because, of course, they have been disrupted by world wars—and you are left with a few countries like Switzerland, which did not give the vote to women until the 1970s, as it happens, and Great Britain, Australia, Canada, New Zealand, for example. We really have been the carriers, I think, of really good examples of democracy in action, and this is one of them.

So that is the positive. What led to this was actually we got closer to the brink of poor practice than we should have in this country. We had a number of things that had gone wrong. I am going to list them again, partly because I named the wrong agency last time. Of course, I think the worst example was Warren Tucker, then head of the SIS—and I apologise for besmirching the GCSB when I spoke about this in an earlier reading. He enabled a political attack against Phil Goff during an election. He gave, effectively, a misleading release of information to Whale Oil, which we know at the time was acting in league with the Prime Minister’s department. By that I do not mean the Department of the Prime Minister and Cabinet (DPMC). When I said that in an earlier contribution, some people said I was criticising the DPMC. I was not. I was talking about the Prime Minister’s own internal office.

Anyway, there was collusion with Whale Oil, and the SIS knew that this position had been misrepresented, but did not correct the record, and therefore there was a political attack, which was brought by the then Prime Minister, John Key, against Phil Goff, and Warren Tucker did not correct the record. It only came to the light of day some years later when the Inspector-General of Intelligence and Security, Cheryl Gwyn, showed what had happened. I think that came up, in a time sense, after the Nicky Hager book had been published. So that is the first and probably most egregious example.

The other example was the Dotcom raids and the litigation that followed, which showed that the GCSB misunderstood its legal powers. Not only did it get it wrong but apart from getting it wrong there was also ambiguity about some of its other powers, and that needed to be sorted out. We passed some interim legislation in this House, and that interim legislation caused protest meetings up and down the country because people said that it was expanding the powers of the GCSB to spy upon New Zealanders. That was denied by the Government until right at the third reading, when the Prime Minister, under pressure from civil society and also from the Opposition, was forced to concede that, actually, as drafted, it did allow quite broad spying on New Zealanders. He said that he would not operationalise those powers, which of course meant that although they were permitted at law, he said: “Trust me, I’m not going to use them.” Well, that is less than desirable. You should have those powers properly constrained in legislation.

The third example is in the UK—and I have previously spoken about this—where for many years neither the Parliament nor the security oversight committee there knew that data was being collected from the telecommunications companies, which included locational information about where people were actually physically situated including in respect of UK residents, and given to the security agencies; no warrants, no oversight. The only person who knew it was a Minister in the Government, and again that had been hidden from the Parliament and from the oversight committee for years, and that was wrong too.

We have a piece of legislation that I think is fit for purpose. It gets the balance right. There are many people to thank. I want to add my thanks to the staff from DPMC. I have been around this place for 15 years now. I have never seen a better process. The only process that is comparable was also a very good group of officials, including from the Prime Minister’s department, in respect of omissions pricing—another very complex piece of work. I was really proud to be part of that, and to see how good our Public Service can be.

It was only possible because we have a Minister who is on the top of his game. The Prime Minister saw that there had been some mistakes made here and so rightly delegated this to the Attorney-General, and he is a man who knows that when you are given authority from Parliament to go forth and do something a bit like what the Cullen-Reddy report says, you are actually not slavishly bound by the first draft of the bill. Less competent Ministers—and we see them in Parliament—do not feel that they have the authority or the room to move, and they are less reasonable in their response.

Because of the Minister’s confidence and his desire to reach out across Parliament for, I suspect, the same reasons that I have talked about, in terms of the importance of democratic integrity around these important settings, he was determined to let the Foreign Affairs, Defence and Trade Committee do its work. The chair of the select committee at the time, who saw it just about all the way through, the Hon Mark Mitchell, did a good job, and we had great submissions from the Privacy Commissioner, from the Law Society, from civil liberty groups, from the unions, from the Inspector-General of Intelligence and Security, Cheryl Gwyn—who I think is an absolutely star public servant; I suspect one of the best in the world, actually—as well as many other individuals, and I probably missed out some of the people, like Sir Bruce Robertson, who came to us.

The other select committee members, who have already been named and I will not go through them all—I thought everyone contributed very, very well and as a consequence we knocked out purpose-based warrants. We got the definitions around “Type 1 intelligence warrants”, with the higher-level “national security” term left undefined, but there are real limits to how far you can go in respect of economic matters and really focusing in on things like terrorism and espionage.

I think we now have amongst the best oversight legislation in the world. We have got transparency with all of the things that have to be behind the scenes and able to be inspected by the inspector-general that were not until this period necessarily available to her, and, as a consequence, this bill has my unconditional support. I look forward to it being passed into law.

TODD MULLER (National—Bay of Plenty): In many ways, I do not need to add a lot. When you begin a third reading of a bill as substantive as this, and hear the experience and perspective that we have heard this afternoon shared by the Attorney-General; the Leader of the Opposition; my colleague, the former chair of the Foreign Affairs, Defence and Trade Committee, Mark Mitchell; and now the very considered perspective by the Hon David Parker—as somebody relatively new here, coming towards the end my first term, all I can add to it is that I have found it a process that has been extraordinarily rewarding.

From the calibre of the bill that we first received; from the extraordinary advice and intellectual heft brought by the officials; from the collaborative model that the former chairman ran and Minister Finlayson’s ability to work with all parties to get an enduring piece of legislation that, as you can hear by the voices of this Chamber, we are all proud of; and from the way the Minister stood, time and time again, to answer the various technical, precise questions of emphasis and judgment that all members brought to the Committee of the whole House stage, we have now landed a final bill that we are all but unanimous in support of, with the exception of the Greens—but even their exception is from a point of a reasoned view, which the Attorney-General has already acknowledged.

For me, one of the highlights of the last few months, as we have stepped through that, is how we landed a clear, effective warranting regime. I think the triple-lock mechanism is really innovative, and I think where we landed in respect of national security and those closed lists of harm is impressive—in particular, where we have pushed for the appropriate balance between protection of our civil liberties and protection of this country from harm in a highly volatile world. This bill is fit for purpose—if I can echo the Hon David Parker—and I have every confidence that this legislation, both in process and content, has set the bar for enduring legislation in this House. I thoroughly support it in its third reading. Thank you.

Dr KENNEDY GRAHAM (Green): We have come a long way in the saga of the Intelligence and Security Bill that is before us in this final reading. The Committee of the whole House did a fine job last week in scrutinising the draft legislation with its quite complex redraft of sections and its compelling political judgments that surrounded some of the issues involved. The Foreign Affairs, Defence and Trade Committee had also done a good job in debating and discussing the draft in its different stages. The officials, all corners—the Government departments, the drafting office, the agencies themselves—excelled themselves in servicing the committee and the Parliament as a whole.

It may sound from this panegyric as if the Green Party were about to embrace the legislation with a blessing and vote it all the way through—

Hon Christopher Finlayson: It’s not too late.

Dr KENNEDY GRAHAM: —but, of course, as has been pointed out from the beginning, and explained all the way through, this is not the case—despite the last minute plea from the Attorney-General, which we do appreciate and are tempted by, but no.

We opposed the bill from the beginning, and we continue to oppose it today. We shall be voting against it, but that will not be from a dissatisfaction with the parliamentary procedure observed or the democratic process that the bill has taken, all the way through to this third reading. If one were disposed to agree with the philosophical basis of the bill, one could only admire the finished product and support it. Our opposition rests on a disagreement over the basis on which the bill rests, as we have pointed out. A disagreement that the world of the 21st century, admittedly a tough and dangerous place, will be made less so by making our national intelligence agencies more effective and efficient on the basis of the prevailing world view, as articulated by Government leaders.

We do not accept that a discernible but modest increase in the threat assessment level of one of the nine harms to national security identified in the draft warrants the sledgehammer that is encased in the velvet glove that is this bill. We do not accept that a more efficient and effective version of Five Eyes is desirable when the leading agency is tormented by the banality, the oddity, and the crudity of the present US administration. We do not accept that the so-called random profiling of New Zealand citizens of Middle Eastern origin has tilted so markedly against Syrians, Tunisians, and Egyptians with New Zealand citizenship since the legislation arising from the Countering Foreign Terrorist Fighters Legislation Bill came into force in this country, as we warned would happen back in December 2015. This is not the time to be tightening the cultural screws against one’s own citizens. It is the time for a more expansive, more understanding, more compassionate, and more universal world outlook. We do not detect that in the bill.

So those are our criticisms, but, to return to the positive, we appreciate the manner in which this debate has been held around the bill and the diligent, competent, and respectful way in which the Attorney-General has ushered the bill through its various stages. In particular, we appreciate the increasing recognition, articulated by the Minister and, equally importantly, by senior Labour colleagues, of the merit of expanding the Intelligence and Security Committee to reflect the proportional representation of modern New Zealand parliaments. The amendment to the bill to reflect this, just last week in the final stages of the Committee, was, we believe, one of the better examples of democracy in action.

So it is with the same measure of respect to all our colleagues in this House that we cast our vote alone against this bill. We thank the Attorney-General, the Government, and all other parties for their input into the democratic process. May our children live in a safer and more enlightened world than we do.

DENIS O’ROURKE (NZ First): I want to begin by agreeing with the Attorney-General that it was very important, with this particular piece of legislation, that there be broad parliamentary support for it and, indeed, broad public support for it. In fact, you could barely think of another piece of legislation in which a cross-party process and the generation of a high level of public support was more important. In that context, when New Zealand First began to first look this legislation, we set ourselves four main targets. One was to ensure that the protection of civil liberties, personal freedoms—in particular, privacy—would happen, but also that we would get a means by which threats to New Zealand’s safety and security, including our essential interests, would be recognised.

To that end, we always recognised the need for effective intelligence, and, in limited circumstances, we accepted there would be a need to conduct surveillance over New Zealand citizens and permanent residents, as well as others. But all of that had to be subject to three main provisos. They were, first of all, that there had to be a robust process for authorisations for warrants to conduct those activities. Secondly, we had to be sure that the law itself was clear, was certain, was understandable, and would be effective. Thirdly, we thought it was very important that there be a very effective and comprehensive system for review and oversight of the activities of those organisations.

We are, as a result of a very good process, now satisfied that this legislation does achieve all those things. We know that the previous legislation was grossly inadequate—it did not achieve hardly any of those things that I have mentioned—and the only good thing that came out of the previous bit of legislation in the last term of Parliament was that an undertaking was given that there would be a comprehensive review. That culminated in the Cullen-Reddy report, which I thought was extremely good. There has also been very good public consultation and a very collaborative process, as others have mentioned. So this bill is a very good outcome to produce a comprehensive code to govern security and intelligence activities in New Zealand. In a very real sense, therefore, this is Parliament’s bill, and, in a very real sense, it is the community’s bill, not just a Government bill. That is very important, because as a result of that we will get the public trust that all of us seek.

I want to talk a little bit more about trust, because I think that is going to underpin the operation of the bill in the future. When agencies such as the SIS and the GCSB are given special powers to do things that would otherwise be unlawful, it is very important that they should be able to develop trust, because trust is not given—not like the special powers, which are given. Trust has to be earned. It is, therefore, now over to those organisations to demonstrate that they are worthy of that.

This bill, as good as it is, can go only so far by providing good processes for authorisations and good systems for oversight and review. In the end there must be trust deserved by the responsible Ministers, by the commissioners dealing with warrants, and by the inspector-general. Most importantly of all, it is very important that the GCSB and the SIS, through their conduct, develop public trust as well. They must show their commitment to obedience of the law, and always keep in mind the purposes of this law—to protect privacy as well as to protect New Zealand from harm.

The purposes of the bill are, therefore, very important. I was really pleased that no attempt at a close definition of the term “national security” was attempted. I thought that was a pretty pointless exercise, because we have got, instead, some very comprehensive clauses in the bill, which are better to rely upon. Those clauses, in particular, are clauses 55A and 55B: 55A relating to New Zealand citizens or permanent residents; and 55B relating to others. Those clauses define the circumstances in which an intelligence warrant can be issued.

In addition, there is a closed list of harms provided, which would be applicable when such warrants were being applied for. I think it is important to read those out once again, because it gives people a clear understanding of what it is that we are trying to achieve. Those harms include terrorism and violent extremism—all too prevalent in the world today—espionage or other foreign intelligence agency activity, and sabotage, which is always possible in any country. They include the proliferation of weapons of mass destruction, and serious crime—a major issue for New Zealand, as it is in so many other countries.

Those harms also include interference with information or information infrastructure—again, an extremely important harm that could be done to New Zealand—threats to the operations of the Government of New Zealand, and threats to the sovereignty of New Zealand, including the protection of its borders and the right of this country to manage its own natural resources. There is more, but those, I think, are the most important harms to which this country could be subject.

The basis of the trust of which I spoke is an assessment of the necessity for both type 1 and type 2 warrants. It has to be demonstrated that the warrant applied for is necessary for all those purposes and against all of those harms that I have mentioned. That assessment must, in the case of type 1 warrants, satisfy both the responsible Minister and a Commissioner of Intelligence Warrants, and for others, just a commissioner alone.

New Zealand First believes that as a result of the processes that we have had in the development of this legislation we have achieved that all-important balance of the need to protect personal privacy on the one hand, and to deliver an effective and more than adequate system to protect New Zealand’s security on the other hand. As I have said, I think that balance in this legislation has been very effectively achieved. We in New Zealand First also believe that given those processes for authorisations and the systems for oversight, we now have an excellent legal framework to achieve the objectives that I mentioned first in this speech.

So now, provided we get effective leadership in the SIS and GCSB in particular, I think that New Zealanders ought to have full trust in the legislation and in the agencies—that we will have a system to protect their individual interests but also a system and legislation that will protect New Zealand from those harms that I mentioned earlier in my speech. Given that trust, I am sure that New Zealand can—as David Parker said—boast that it will have the best security and intelligence system, and the best-balanced one, in the world.

I in particular have a great deal of trust and confidence in it. I do not accept what the Greens have said about this. I do not think their approach has been—while sincere—very practical. I do not think their alternative approach is one that would deliver a satisfactory level of security for New Zealanders, which I believe almost all New Zealanders actually want. I rest that on what I say—that in addition to the legislation we do need trust, and I think this legislation will generate that trust. That trust has to be earned, but I am confident that we will get it and that New Zealanders will see that that is the case.

In that context New Zealand First is very happy with this bill. We were very happy with the process that has led to us getting to this stage, and we will have no hesitation whatsoever in voting for it.

JAMI-LEE ROSS (National—Botany): Thank you for the opportunity, Mr Deputy Speaker. My colleague—the senior whip—has asked me to speak very briefly, so I will heed his wishes, as a good MP should. I just want to say that there is very little that I could find in Mr O’Rourke’s speech that I could actually disagree with, because I think this bill is a testament to the way in which Parliament should work more often, and also a testament to the way in which select committees can examine legislation and can work together as a committee to find ways in which we can work with officials and other members across the Chamber to fine-tune—what Mr O’Rourke described as an excellent legal framework—a piece of legislation so it is fit for purpose and works well.

I also respect that Dr Graham does have a viewpoint around these matters that differs significantly from a number of us in the Chamber, but I think we must also acknowledge the way in which the Green Party also worked well on the Foreign Affairs, Defence and Trade Committee consideration of this bill—we just landed in very different places.

But in terms of confidence, and in terms of ensuring that New Zealanders can better understand the world in which we live, I think this bill brings together pieces of legislation and brings together a framework under which some important Government agencies can work, in a way that New Zealanders can better understand and better have confidence in. The security and intelligence agencies in New Zealand play an important role, but there must be good oversight. We heard many of the aspects under our legislation around oversight, which, I have to say, gives me a lot of confidence. I have to say that I am looking forward to seeing those agencies and the Minister and the many other oversight institutions in place, such as the Commissioner of Intelligence Warrants and the select committee, working very well to ensure New Zealanders can also enjoy that same confidence. I commend this bill to the House.

Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to make a speech in this third reading debate and to echo my colleagues’ support for the bill. This is a very important bill, and I want to echo my colleagues’ commendation of the approach of the Attorney-General and Minister in charge of the NZ Security Intelligence Service, the Hon Chris Finlayson. He has been open in his consultation and he has been determined to forge a multipartisan consensus as far as possible—it is not quite complete—in this House. That is entirely appropriate in legislation of this nature, which must stand the test of time and must, by definition—as it requires and empowers the intrusive role of the State—have support broadly around this House, and it does.

This bill seeks to achieve two things. It seeks to modernise and make more effective the legislative framework that empowers the operations of our security services and, in particular, the GCSB—the Government Communications Security Bureau; the computer spies, as it were. Secondly, it seeks to reinforce and rebuild public confidence by ensuring that there is a strong and watertight set of protections around privacy, around human rights, around the rule of law, and around the constitutionality of the exercise of those powers. Although I was not present on the Foreign Affairs, Defence and Trade Committee for all of the bill’s consideration, for that which I have seen I want to add my thanks to that of my colleagues for the officials, who worked so diligently and robustly on the bill. I think it largely achieves those things.

Let me note, on the effectiveness side, several matters that the bill sets precedents on, which I described in the second reading as crossings of Rubicons. The first is that, historically, New Zealand law has always kept separate the domestic and human intelligence role of the Security Intelligence Service from the very largely international and cyber role of the Government Communications Security Bureau. This bill brings both together for the first time in a single coherent legislative framework, as was recommended in the Reddy-Cullen review. That is something that, provided the protections are robust, we feel is appropriate. It will make the agencies more able to work sensibly together.

Secondly, the bill codifies for the first time a broader set of ways in which the security agencies might work directly with our police and with other relevant Government agencies like Customs or Immigration. That is also appropriate, because the right hand must know what the left hand is doing and there must be codification of what is permissible and not permissible in terms of those agencies’ interactions. But it is vital, as we saw from the much-contested fiasco around the early interdiction of Kim Dotcom, that the mechanisms for that interaction are robust, that they are clear, that they are within the rule of law, and that they are strictly monitored—and the bill provides for that.

A third and very important Rubicon that is crossed here for the first time is that there is an explicit ability for the New Zealand GCSB to carry out an intercept without a warrant on a New Zealand citizen. That is something that was technically possible under the previous law changes, but for which the former Prime Minister, Mr Key, gave a blanket assurance that no action would be taken—that it would not be used. It was something contained in the information infrastructure provisions. Well, in this bill that ability is written in explicitly for the first time. It is absolutely appropriate, therefore, that that happens only with sufficient protections. It can happen only if there is no other way, in respect of a great harm—and the types of harms, like a terrorist attack, are listed explicitly—and if the normal processes could not be achieved because there would not be time to get a warrant. And, if the special, urgent, or very urgent processes are used, then they must be notified to and checked by the Inspector-General of Intelligence and Security, who has the ability to nullify the action and nullify any information gained. If it is not a properly sanctioned operation, then those protections exist.

I would say this to Minister Finlayson: that was not necessarily an easy position for this side of the House to come to. We were necessarily reassured by the protections in the bill and we will want the cooperation of the Government, which I am sure you would want to see, to see that it is effectively and thoroughly monitored going forward.

There are a number of matters in the bill that the select committee made further amendments on, and I just want to touch on a couple of those, as I have a little time. The details of the two-part test for the issues of type 1 intelligence warrants I have touched on, but it is going to be very clear that the authorising Minister and the Commissioner of Intelligence Warrants must be satisfied that a proposed otherwise unlawful activity by an agency—an intercept, for example—would be necessary to contribute to the protection of national security, as defined in the bill. Secondly, the agency’s action would be necessary to identify, enable the assessment of, or protect against one or more of a limited and specific set of harms, like a proximate threat of sabotage or a terrorist incident. These are not general, sweeping powers to the extent that it is a blanket, catch-all authorisation.

There was significant debate in the Committee of the whole House stage and in the select committee about which Minister should be the one to issue those warrants alongside the Commissioner of Intelligence Warrants. There was a debate as to whether it should be the Attorney-General, who holds a special and independent role as a law officer, or whether it should be the operational Minister of intelligence and security. Currently the Hon Chris Finlayson wears both hats, but it is unlikely that that will necessarily remain in future—for example, after 23 September, who knows? But we must allow in the law for all sorts of possibilities. Mr Finlayson told the House that as a law officer, he felt that it was more important that the Attorney-General stood back from the day-to-day operations and that, operationally, it is better for the Minister directly involved to be the one issuing the warrants.

Our side of the House was persuaded by that, on balance, but it is an on-balance call and is one that will require ongoing monitoring, because the risk that we are all aware of is that the Minister concerned becomes operationally too close to his or her department and lacks—or could lack in future; not currently—the objectivity of judgment to draw a line at exactly the right place where an intercept would not be justified because there were other lawful means, for example, of preventing the harm. I do want to note that that is a debate that has been had. We have reached a point of balance that allows the operational Minister to be one of the signatories, but that will continue to be monitored.

There is a lot of debate about third-party intercepts. I am pleased to see that this bill makes explicit that it is not possible for our intelligence agencies to request or receive blanket surveillance on New Zealand citizens from a third party as a way of contravening or getting around prescriptions that would otherwise be in the New Zealand domestic law. That is welcome because, of course, many of today’s IT infrastructure providers are global in nature and located in the home jurisdiction of friendly countries, which may well be partners of our agencies.

I want to stress the importance of those agencies always and without fail operating within the law as put in the bill and as stressed by both the inspector-general and the Ministers. Public confidence is slowly built and can be destroyed with a single incident. My colleagues have mentioned the Warren Tucker - Phil Goff interchange. That was a low point. I am happy to say that the current director of the SIS enjoys the confidence of the Labour Opposition, and we would not expect to see that recur.

We think this bill is a step forward in terms of enshrining the protections that New Zealanders hold dear. We will be vigilant. We will monitor this most important piece of legislation. I want to join with my colleagues in extending commendation across the House to all members of the select committee, to the officials, and to the Ministers who have worked so hard to bring this bill to the House. Thus we support it in its passage.

Dr SHANE RETI (National—Whangarei): It is a pleasure to rise briefly on the third reading of the Intelligence and Security Bill and to commend the collaborative approach across the House that brings the bill here today. This was reminiscent of the foreign fighters legislation, which was similarly guided by best intent in balancing our security interests with privacy and human rights concerns.

Strong oversight frameworks have been developed and described, and what is not so described but is inherent is the trust we have in the personal integrity of each of our intelligence and security personnel. This integrity and a strong framework will, I believe, protect our interests, and I commend this bill to the House.

GRANT ROBERTSON (Labour—Wellington Central): I rise, as other speakers in the Labour Party have done, to support the Intelligence and Security Bill on its third reading. I want to do as others have also and express my thanks to the Minister who has shepherded the bill—although it is not in his name—the Attorney-General, Chris Finlayson, who is clearly showing off his holiday snaps as we speak. Mr Finlayson has done an excellent job in shepherding this legislation through. All of us on this side of the House over the years have grown to respect the Attorney-General for his sharp legal mind and kind words that he has expressed on many occasions to the Opposition.

It is true to say that the work he has done on this bill has been exactly what I would hope Ministers would do on every piece of legislation: engaging with all political parties in Parliament—and, indeed, with members of the public—around the justification for the bill; listening to concerns and suggestions, adopting some of them, and being prepared to negotiate those through; and then, when the bill returned to the House, actively engaging in the committee of the whole House stage in what I think was actually a debate, which is precisely what we should do more often on pieces of legislation. I join with the Minister in thanking other colleagues in the House who participated in that, and, in particular, Kennedy Graham, who gave an alternative view but from a very reasoned perspective, and I think that was important for the quality of the debate.

I also want to acknowledge the officials who have worked extremely hard on this legislation. This is a big moment because this has been a big piece of work, but more than that I think it is—and the officials could never say this—bringing some order to what has been, frankly, disorder when it comes to the way that security agencies have operated in New Zealand. The officials deserve an enormous amount of credit for the work that they have done in putting this together.

How we came to this legislation is important. We came to this legislation, in part, as a result of a number of incidents that lowered the confidence of New Zealanders in their security and intelligence agencies. That confidence is essential, because the powers that we give, as this Parliament, to the security agencies are vast. If anyone wants to look at the bill—in particular, I was looking at clause 65, where you read the “Powers of New Zealand Security Intelligence Service acting under intelligence warrant”—those are intrusive and invasive powers. They are powers that I as a parliamentarian reluctantly grant to agencies of the State because they are such intrusive powers. But we must grant them because we live in a world where we need to ensure that we protect the security of New Zealanders and of our country. So, in granting those powers, we have to set up a balance in our legislation—a balance between protecting the security of New Zealanders and protecting their privacy and their basic rights. I do believe the legislation does a good job of that balance.

But the confidence that New Zealanders have had in the agencies has diminished. The Warren Tucker - Phil Goff incident has been mentioned, and there was the situation around the Kim Dotcom raid and all that followed from that. There was the situation around the appointment of Ian Fletcher outside of normal processes to run the GSCB, and the news that the GCSB had, in fact, been illegally spying on various New Zealanders over various periods of time. All of these contributed to New Zealanders losing some of their faith and trust in these agencies—agencies in which we had entrusted such intrusive powers. It was incumbent on not only the Government but also this Parliament to rebuild that trust and confidence, and my view is this legislation goes a very long way towards that, and that is why I am prepared to support it today.

In particular, whilst granting those very intrusive powers, what this legislation does is it puts in place a series of checks and balances—one of which, from the 2013 legislation, I think I can acknowledge I was wrong about, and that was the role of the inspector-general. I do want to put on record, as I have earlier in this debate, that I do think the beefed-up powers of the inspector-general and the appointment of a deputy have actually made that office much stronger and a much better part of it. But we needed to do much more after the 2013 legislation. In particular—and other colleagues have spoken about this—we now have a much stronger process around warrants. The triple-lock process for the granting of warrants gives the confidence to me and, I think, to this House, that where warrants are going to be put in place we have not only the Minister but also the Chief Commissioner of Intelligence Warrants, and then the inspector-general as the third lock on those warrants—that is important.

As an aside—and this is no reflection on the Attorney-General whatsoever—it is my view that the powers that we are granting to these agencies are such that I would rather the Minister in charge was the Prime Minister. I think that it is actually akin to some of the decisions that we make in this House around sending people to war and putting people into danger. I actually believe that this should be the role of the Prime Minister. I think the Attorney-General has fulfilled the role admirably in the time that he has held it, but for New Zealanders to maintain the level of trust and confidence we want from them in these agencies, my preference would be that the Prime Minister is that Minister. As a result, I am very supportive of the changes that were made to clauses 53(2)(a) and 52(3) that actually take the Attorney-General out and put in the Minister responsible, because I believe one day that will no longer be the Attorney-General of any administration, but will actually be the Prime Minister.

The definition of “national security” is absolutely critical in here, and, in my view, clause 55 of the bill is indeed probably the most important clause that we are passing today. We are now making absolutely clear the specific situations in which the powers of the security intelligence service are to be given warrants for the protection of national security. We are specific about terrorism, about espionage, about sabotage, about the proliferation of weapons of mass destruction, and, indeed, about serious crime, which we redefined during the Committee stage in a way that, again, I think gives more confidence to New Zealanders that we are being absolutely clear that when such warrants are being granted they are being granted for the right reasons. Many of us have had fears in other parts of our lives—going back to the 1970s for some members of the House and for others going into the 1990s—about the way that these powers are going to be used, but those powers are now proscribed in such a way here that I believe we now understand what national security is and the limitations upon that.

The only other area I really want to spend any time on is around the question of oversight. I have already mentioned the importance of the role of the inspector-general and how well I think that is working, and there are one or two tweaks around that in this piece of legislation. The bit that I still feel that we have missed a trick on here is around the role of the parliamentary committee that has oversight. I think in time—and the Minister has made the reference several times to the review process—we will, as a Parliament, decide to strengthen that. I would encourage the Minister—and, indeed, hopefully we will be in a position to do this after 23 September—to look around the world at the other ways that oversight is undertaken.

The Australians, in their work, ensure that they have non-Ministers involved. We will do that here, but we need, as an MMP Parliament, to be aware of the voices in this Parliament. As I said in the Committee stage, as long as people on the committee are prepared to obey by the rules and to undertake to keep the secret information secret, I do not think that we should have any fear whatsoever of people who have a different view of the scope of how security agencies work being on those committees. In other parts of the world—if we go into Scandinavia and into Norway—they have, in fact, non-politicians who are part of the oversight regime. Obviously, we could not have non-politicians on a parliamentary committee, but we could build into our processes some kind of public oversight that would, again, help to strengthen New Zealanders’ confidence in these agencies.

Today I am happy to support this bill because we are giving the powers that are needed to the security agencies with the balance of the confidence that we have oversight regimes that will not be misused. New Zealanders can only have that confidence if they believe that the oversight mechanisms involve them and involve their elected politicians. Our oversight of the security and intelligence agencies does not stop today. The price of freedom, as they say, is eternal vigilance. We have to ensure that we continuously and constantly monitor this legislation, and allow New Zealanders to believe that their security intelligence agencies are working in their interest and will be monitored closely. That is our obligation.

SCOTT SIMPSON (National—Coromandel): It is a pleasure to be the final speaker in this third reading debate, in what has been quite a historic and a momentous debate, I think, in terms of this Parliament’s legislative agenda. I have sat and listened very carefully to the intelligent, courteous, and thoughtful contributions from across the House on this important legislation. It is a good bill. It is a bill that I think exemplifies the way our Parliament should work, and it is an example of our Parliament working at its best. It is my very great pleasure to commend this bill to the House.

A party vote was called for on the question, That the Intelligence and Security Bill be now read a third time.

Ayes 106

New Zealand National 59; New Zealand Labour 32; New Zealand First 11; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 14

Green Party 14.

Bill read a third time.

Bills

Regulatory Systems (Building and Housing) Amendment Bill

In Committee

The CHAIRPERSON (Hon Trevor Mallard): Members, the House is in Committee on the Regulatory Systems (Building and Housing) Amendment Bill, the Regulatory Systems (Commercial Matters) Amendment Bill, and the Regulatory Systems (Workplace Relations) Amendment Bill. I will remind people that, despite the titles on the various parts here, these are some relatively tight debates.

Part 1 Building Act 2004

PHIL TWYFORD (Labour—Te Atatū): We look forward to a full and vigorous debate on the Regulatory Systems (Building and Housing) Amendment Bill. It is good to see Minister Mitchell in the chair, and I am sure he is ready to take lots of questions, because there are a lot of questions to be asked about this bill. It might seem a relatively innocuous bill, going by the title, but there are many aspects of this bill that are worth teasing out.

Just for the benefit of people listening, the bill is an omnibus bill. It is one of a package of three, and we are dealing first with the building and housing amendment bill. The purpose of this bill, the first of the three amendment bills, is basically to clarify and update a number of provisions in the law—in this case, the Building Act. It is designed to give effect to the purpose of the Act and its provisions, to eliminate gaps and errors, duplication, inconsistencies, and so on, and to do a little bit of kind of updating and fine-tuning. The other objective that is listed in the bill’s explanatory note is about removing unnecessary compliance costs and the costs of doing business. As people who have been observing this legislation for some time now will know, that has actually been a critical factor underlying successive reviews of the Building Act.

I want to talk about some of the items in Part 1 of the bill. There are not a huge number of provisions in Part 1, but I think there are some points that are worth touching on in Part 1 in relation to some of the points that were raised by submitters. Let us have a look at clause 4 of the bill, which amends section 12 of the Building Act to cross-reference a specific clause in schedule 1. This is just a sort of a minor clarification, you would have to say, but a submitter by the name of Iain, who was quite prolific in making submissions to the Local Government and Environment Committee on this—

Hon Member: Oh dear!

PHIL TWYFORD: I do not think it was Iain Lees-Galloway—

Iain Lees-Galloway: No, he spells his “Iain” right, though.

PHIL TWYFORD: But “Iain” is spelt the same way. He asked why, in section 12(2)(c), schedule 1 is being replaced with clause 2 of schedule 1. The officials explained that, basically, section 12 describes the role of building consent authorities and local councils, and it is basically just fixing an incorrect cross-reference. So this is one of a number of fairly minor cross-references.

Iain also asked the select committee—in fact, he suggested that the current wording in clause 2 of schedule 1 be changed from “is likely” to “must” comply, but the officials said that that actually would have been outside policy. It would have amounted to a substantive change to the clause, and they rejected that.

Section 96(1)(d) of the Act also gets a bit of attention in Part 1 of the bill—clause 5. It specifies a certain circumstance when a territorial building consent authority may issue a certificate of acceptance for residential building work that has already been done. The reason that that section is being repealed by this part is that it applies to applications for a certificate of acceptance that were made prior to 31 March 2010, and any applications like that were generally required to be granted or refused in 20 working days. So that is pretty simple, and I do not think anybody would object to that.

Another question that was raised in the committee about this part was how this is likely to affect homeowners, and that is a pretty good question. I think it is fair to say that homeowners are the people who have borne the brunt of all of the kinds of inadequacies in our regulatory system for residential building, and I think any electorate MP will have had people coming to their office who have been on the wrong end of a building job or a renovation that has gone wrong. This part—it is fair, I think to ask that question about—[Bell rung] Mr Chairman.

The CHAIRPERSON (Hon Trevor Mallard): The member has started very well, but let us see whether he can keep going.

PHIL TWYFORD: I take that as a great vote of confidence, Mr Chairman. So the question is how does the repeal of this section actually affect homeowners, and the officials’ response to that at the committee was that it is unlikely to have any impact on homeowners for the reasons that were outlined in relation to clause 5. In the unlikely event that any unresolved applications are still in the system, there is an out clause, and homeowners can apply to the Ministry of Business, Innovation and Employment for a determination. So there was no change recommended on that particular discussion point.

There are a few more points. It was proposed by a submitter that the current wording in clause 2 of schedule 1, in the Act, should be changed, from “is likely” to “must” comply. Again, the officials recommended to the committee that, actually, that change not be made, because it would introduce an element of compulsion that was not anticipated by the policy.

Interestingly, Transpower had a couple of things to say about Part 1, and came along to the committee. It proposed putting a new requirement into either the Building Act or the building code for building consent applications to state whether or not a particular part of the code applies to the building work concerned, and the committee rejected that as basically being out of scope. It would have required a whole new round of analysis and consultation, and that was rejected, along with another kind of parallel issue relating to elements of the building code.

So those are just some opening remarks on Part 1. There is a whole lot that can be said about this bill, and everybody in the House knows that about the state of the building and construction industry, and the constant, ongoing need to improve the regulatory framework to put consumers in a much stronger position. These are all vital matters, and we are going to be asking questions in the course of this debate on a whole range of issues about, really, whether or not the changes in this bill will make a significant difference to the Government’s ability to deliver better outcomes for consumers.

The CHAIRPERSON (Hon Trevor Mallard): No you won’t—no you won’t.

PHIL TWYFORD: I mean to say, Mr Chairman, that—in closing—there are a whole lot of things in the building and construction area that need to be done. Mandatory warranties for homeowners are something that should be right up on the Minister’s agenda and there are some things in this bill that—

The CHAIRPERSON (Hon Trevor Mallard): I am going to interrupt the member now and say that this is a very narrow bill. It has been accepted at the second reading, and although the member spent about 4 minutes of his first speech talking very much about the details of the bill, he has since then strayed away, and what is not in the bill is certainly not appropriate discussion for the Committee of the whole House.

PHIL TWYFORD: Thank you.

IAIN LEES-GALLOWAY (Labour—Palmerston North): As my colleague Phil Twyford said, there were a number of submissions made by a person by the name of Iain—no relation—although, he does spell it with the Scottish version, which is good to see. One recommendation that that submitter made—which Phil Twyford touched on very briefly—that I would like to look into a little bit more deeply is clause 4, which proposes an amendment to section 12. The proposed amendment is to change the wording to clause 2 of schedule 1 of the Building Act. So clause 4 would “In section 12(2)(c), replace ‘Schedule 1’ with ‘clause 2 of Schedule 1’.” of the Building Act.

This recommendation to change from “is likely to comply” to “must comply”, as the official said, amounted to a substantive change in policy. I would appreciate it, actually, if the Minister in the chair, Mark Mitchell, could tell us why this is a substantial change of policy, because what clause 2 of schedule 1 of the Building Act refers to is “Territorial and regional authority discretionary exemptions”. It says that “Any building work in respect of which the territorial authority or regional authority considers that a building consent is not necessary for the purposes of this Act because the authority considers that—(a) the completed building work is likely to comply with the building code;”.

The submitter recommended amending clause 4 of the Regulatory Systems (Building and Housing) Amendment Bill to ensure that that clause 2(a) of schedule 1 goes from “is likely to comply” with the Building Act to “must comply” with the Building Act. I would be interested to know from the Minister, or from any member who was on the Local Government and Environment Committee, why it is deemed satisfactory that building work for which a consent is not deemed necessary must only be “likely to comply” with the Building Act, rather than being “required to comply” with the Building Act, and whatever criteria is used to determine whether or not the worker is likely to comply with the Building Act, just how much of a shift is that to require it—sorry, I have been saying “the Building Act”—to comply with the building code.

Just how much of a shift, how much of a policy change, is it to go from being likely to comply with the building code to being required to comply with the building code? It seems to me, as someone who was not on the select committee, that if a territorial or regional authority is able to waive the requirement for a building consent, then that authority must be extremely satisfied that the work that is going unconsented, or that does not require a consent, is going to comply with the building code.

In the event that it is found that the work does not comply with the building code, what then is the recourse for someone who wishes to challenge that? What is the measure by which we can determine whether or not it was likely to comply with the building code in the first place? Surely it is much cleaner if the work is required to comply with the building code, as was suggested by that submitter at the select committee.

In addition, clause 2(b) of schedule 1 allows that “if the completed building work does not comply with the building code, it is unlikely to endanger people or any building, whether on the same land or on other property.” So we have got a situation where it is possible for a building to be unconsented, despite the fact that it does not comply with the building code, so long as it does not endanger people. Well, again, how do you determine whether or not a building is going to endanger people, or another building, whether it is on the same land or other property? And, again, just how much of a policy shift would it have been had the committee accepted the recommendation by the submitter to go from using the words “is likely to comply” to “must comply”? So I would appreciate the Minister’s answers on those questions.

The CHAIRPERSON (Hon Trevor Mallard): I am going to call the Hon David Parker but, before I do so, I do want to reiterate the warning that I made earlier on the question of relevance and to make it very clear that things that are not in the bill in the Committee stage cannot be relevant. The last member gave us 4½ minutes on something that was not in the bill, and if a closure had been moved I would have been tempted to accept it.

Hon DAVID PARKER (Labour): I want to talk to clause 5(2) in Part 1, which amends section 96 of the Building Act 2004 by repealing subsection (1)(d). I have the Building Act in front of me and I want to ask the Minister in the chair, Nick Smith, to clarify why it is that we are repealing section 96(1)(d).

Section 96 of the Building Act, which this bill repeals subsection (1)(d) of, deals with the situations where a territorial authority can grant, on application, a certificate of acceptance for building work already done. This is not the situation where someone has applied for and got a building permit and is then seeking a compliance certificate for the work that has been done in compliance with that building permit; this is dealing with situations where building work has already been done, but it probably has not gone through proper consenting processes. Section 96(1)(a) describes where this normally happens. It says: “A territorial authority may, on application, issue a certificate of acceptance for building work already done—(a) if—(i) the work was done by the owner or any predecessor in title of the owner; and (ii) a building consent was required for the work but not obtained;”—so that is pretty clear; you can see why that is necessary there. Then it has an “or” and it has some other examples in paragraphs (b) and (c), which are not being dealt with here.

Then in section 96(1)(d), the provision that is being repealed, it currently says that: “A territorial authority may, on application, issue a certificate of acceptance for building work already done—(d) if—(i) the work affects premises to which section 362A applies;”—and I am not going to go into that—“(ii) a building consent for the work was obtained before 31 March 2005; and (iii) the territorial authority is unable or refuses to issue a code compliance certificate for the work; and (iv) the application for the certificate of acceptance was made before 31 March 2010.” Presumably that arm of section 96(1)(d) was of relevance and actually dealt with problems that some people had that would not be able to be cured but for section 96(1)(d). I want to know why, if it was useful back then, we can be assured that it is no longer needed now.

I am going to give you an example of how long these things kick in. When I am in Auckland—surprising though it might seem to people—I look out the back window and it looks like I am looking at the Southern Alps. There is a huge shroud in white of a sort of three- or four-storey, peaked building, one street across on Sackville Street, called Summerfield Villas. Summerfield Villas were built many moons ago by Mainzeal construction. They have been repaired three times. They are currently being repaired for the third time and this shroud has been over them for about a year whilst many hundreds of thousands—I suspect millions—of dollars has been spent on the refurbishment of those premises. Those premises were built long before I was on the scene up there. I suspect they were built more than 10 years ago.

We know that Mainzeal construction is no longer, so you cannot force Mainzeal construction to fix these things up and meet the Building Act requirements in respect of those Summerfield Villas on the corner, because it no longer exists. It has been put into liquidation. There was some controversy, under Dame Jenny Shipley, as to whether it was trading at a loss. But it just shows how long it is that these things can be problematic for the owners of those buildings—the unfortunate owners of these leaky buildings—mainly in Auckland.

I want to have an assurance that this deletion now of section 96(1)(d) is not going to deprive owners of a route to get a certificate of acceptance for building work that has already been done. Presumably that paragraph (d), which I have read out, was necessary in respect of people who had this work done and applied for this work before 2010. But I suspect there are plenty of people out there who are still waiting for decisions from the council that relate back to 2010.

We know that some of the applications that people have made in the likes of Christchurch to resolve insurance claims from more than 6 years ago have not been resolved. I would not be surprised if there are people who have been waiting for more than 6 years to resolve their problems relating to buildings or problems relating to an overdue certificate of acceptance for building work that has already been done, even though that work was that old.

CLARE CURRAN (Labour—Dunedin South): In the Committee stage of the Regulatory Systems (Building and Housing) Amendment Bill, which is one of the three bills that we are discussing in the Committee of the whole House this afternoon—the commentary on the bill says that it “specifically aims to improve effectiveness and efficiency in the areas of building and housing.” Certainly, Part 1 of this bill is very short and, essentially, addresses some technical changes—some very technical amendments.

If you turn to the departmental report on this, though, with regard to the submissions on this part of the bill—and I think my colleague Phil Twyford referred to some submissions by an individual called Iain—there were also two specific submissions from Transpower. I have a question for the Minister in the chair specifically on this, and I hope that he will be able to answer it. Both of Transpower’s submissions were reasonably similar. It requested that this part of the bill have an insertion of a new requirement, into either the Building Act or the building code, for building consent applicants to state whether or not NZECP 34 applies to the building work concerned. It also asked for a new requirement, again in either the Building Act or the building code, requiring building consent applicants who have provided a certification that the building meets the requirements of NZECP 34 to provide certification by a suitably qualified person that the completed building does comply with that particular NZECP 34. Officials disagreed on both counts. They said it was not within the scope of the bill.

What is NZECP 34? It is the New Zealand Electrical Code of Practice for electrical safe distances, which sounds like a pretty important document. [Interruption] Because I looked it up, Mr Twyford. It covers safety issues, in so far as they relate to safe distances to overhead electric lines, telecommunication lines, lines equipment and fittings, and personnel working on or near to such lines equipment. The code sets out the minimum requirements. I am not going to go through all of the minimum requirements—

Hon Michael Woodhouse: Thank goodness!

CLARE CURRAN: Well—

Hon Member: Maybe she will.

CLARE CURRAN: Perhaps I will, then, Mr Woodhouse, because actually—and I hope that members in the Committee, particularly the Minister in the chair, will take this quite seriously. My question is: why was this not taken seriously? Why is it out of scope? If this code, NZECP 34, is out of scope, then where does it apply if it is not in the Building Act or in this particular piece of legislation? It sets out the minimum requirements for excavation or construction near overhead electric line supports, limits for construction near conductors, limits for the installation of conductors near existing buildings and similar structures—I could go on.

The question is: why is it out of scope? Does it apply in the Building Act or elsewhere in legislation where we know that there has to be some kind of certification by building consent applicants—that they are actually getting a suitably qualified person so that new buildings are complying with electrical work and the work that needs to be done around them? That is while they get their building consents, and then once the work has actually been completed.

I think this is quite critical. I know this is a brief part—this part of the bill—but I think it is a pretty critical question. Is this something that has been left out? Has it been left out for a reason? What further analysis and consultation with stakeholders is required, as the officials said? Is that further consultation and analysis actually being done, or has it been done?

BARBARA KURIGER (Third Whip—National): I move, That the question be now put.

The CHAIRPERSON (Hon Trevor Mallard): I think, unfortunately, there have probably been a couple of relevant speeches since. Would anyone else like a call?

MEKA WHAITIRI (Labour—Ikaroa-Rāwhiti): Tēnā koe, Mr Chair. I heard your cautionary point, because this Part 1 is a very short part, of seven clauses, of the Regulatory Systems (Building and Housing) Amendment Bill. My question is the same as that of my colleague Clare Curran, but I would just like to bring to the Committee’s attention the Ministry of Business, Innovation and Employment’s own purpose for the regulatory systems bills. Basically, it says that the purpose of these regulatory systems bills is to “(a) maintain and improve the effectiveness and efficiency of the regulatory systems” and “(b) can include policy changes that involve continuous improvement to, repairs and maintenance of, regulatory systems, but not significant policy changes”.

I too wanted to raise the issue of Transpower, and I hear your cautionary note that things that are out of scope are not to be discussed. But when I read these purposes, which have been designed by the Ministry of Business, Innovation and Employment, then I too would argue that Transpower’s submission around high wires actually meets this test, in terms of what my colleague Clare Curran has indicated, through her diligent work on New Zealand Electrical Code of Practice 34. I do not want to repeat what has been said, but when I read the ministry’s purposes for these regulatory systems, it clearly, for me, says that the submission from Transpower—which is one of our largest, if not the largest, utility companies—to the Local Government and Environment Committee meets the standard. But, again, perhaps the Minister can enlighten the Committee as to why the officials felt that it did not meet that test. Thank you.

Part 1 agreed to.

Part 2 Unit Titles Act 2010

PHIL TWYFORD (Labour—Te Atatū): I want to talk about some issues in relation to the Unit Titles Act, which is the subject of Part 2. There were some really interesting debates at the Local Government and Environment Committee about the Tenancy Tribunal and whether or not the tribunal is the appropriate device for resolving conflicts under the Unit Titles Act. It is true, I think, that although we are seeing a big increase in the building of multi-dwelling buildings—apartment buildings and flats—the Unit Titles Act has been under quite a lot of pressure because of increased demand and perceived inadequacies in that Act to do with governance and the regulation of bodies corporate. We are going to be touching on a number of those issues as they pertain to Part 2 of the bill.

The issue of the Tenancy Tribunal and its role is very relevant here. There was quite a lot of discussion at the select committee about whether or not the current provision of a four-step dispute resolution system under the Unit Titles Act, basically, consisting of self-resolution and mediation provided by the Ministry of Business, Innovation and Employment (MBIE), and also adjudication at the tribunal itself, and, ultimately, access to the courts—about how well that is working and whether it needs review and possible change.

Under the current system, the tribunal has jurisdiction to hear and determine disputes between the owners and former owners of units, a future development unit owner, a body corporate itself, the administrator of the body corporate, a registered valuer, an occupier of one of the units, a contractor who is providing services to the residents, original owners, a lessor, and even the chief executive of MBIE. The tribunal has quite an array of powers to order resolution of disputes, to order parties to do anything, to remedy breaches, and so on.

But there are currently limitations under the Unit Titles Act. The tribunal cannot order a body or a person to pay any more than $50,000, so that is a pretty significant limit. It is unable to hear a dispute in relation to insurance money or anything to do with land titles. Really, the committee was considering, in relation to Part 2, the best approach to deal with dispute resolution in this sense. The officials came back with a number of proposals and, effectively, I think, kicked for touch on most of the matters of substance, and really pointed to the wider review of the Unit Titles Act that is being done.

There was a question that was also discussed in relation to filing fees, which are basically set down under the regulations that come out of the Unit Titles Act. But basically the officials advised the committee that it does not consider that establishing any kind of alternative regime is worthwhile or proportionate to the perceived problems in relation to the current policy settings in the Unit Titles Act. There is a proposal to lower the fee settings of the tribunal and introduce a reduced fee for mediation, but, essentially, the officials advised that the $50,000 threshold should basically be considered as part of the wider review of the Unit Titles Act. That will include things like requirements for properly funded repair and maintenance plans for bodies corporate and various other governance regulations to do with bodies corporate.

That is just by way of an opening contribution. There is plenty more to say about Part 2. We will be coming back with a number of contributions.

FLETCHER TABUTEAU (NZ First): I just want to take a short call and ask questions of the Minister, with particular reference to clause 20 in Part 2 dealing with reassessing of ownership and utility interests in unit plans. One submission from the New Zealand Law Society, for example, submitted that this clause is inconsistent with other similar provisions. To the credit of the select committee, that submission was noted and those changes subsequently amended.

But there is a question I would just put to the Minister for consideration. The Government currently has the Ministry of Business, Innovation and Employment (MBIE) working on a wider review of the Unit Titles Act. We are making amendments here, and some of them are quite detailed. I will not necessarily go into the breadth and depth of those changes but they are there, as everyone will rise to address them in later submissions, I presume. I want to bring to the Minister’s attention the fact that MBIE intends to propose new regulations to address time frames and notices for extended extraordinary general meetings, for example. I just put it to him that there might be some inconsistencies with what is being laid out in clauses 20, 32, 33, and 48.

Again, like I say, this is just a short call asking for some reassurance and guidance on the potential clashes there. That is all I had to ask with regard to this part of the legislation.

IAIN LEES-GALLOWAY (Labour—Palmerston North): Part 2 of the Regulatory Systems (Building and Housing) Amendment Bill makes a number of changes to the Unit Titles Act. In many cases, they are more than simply cross-referencing changes, which we have seen a lot of in this legislation. In many cases, they are quite substantive changes.

I particularly want to look at clause 16, which amends section 38 of the Unit Titles Act. This relates to ownership interest. Just reading the original wording of section 38, which is being amended here, clause 16 replaces section 38(1) and (2). It relates to a unit plan being deposited under sections 17(1), 21(1), and 24(2)(a). None of those cross-references are changed as a result of the amendments made in this legislation, but it does change the wording of section 38. Under the current wording, before a unit plan is deposited under those sections: “(a) every principal unit and every accessory unit must be assigned an ownership interest; and (b) every proposed principal unit and every proposed accessory unit must be assigned a proposed ownership interest.” That is being amended under this legislation, so before a unit plan is deposited under those sections, the registered proprietor or owner, as the case may be, must assign: “(a) an ownership interest to every principal unit and every accessory unit; and (b) a proposed ownership interest to every proposed principal unit and every proposed accessory unit.”

Superficially, that appears to be a fairly minor change—to require the registered proprietor or owner to assign the ownership interest, rather than saying that the ownership interest must be assigned. It is shifting the language to more active language, saying the proprietor or owner “must assign” rather than “it must be assigned”. Again, as a layperson, I am trying to figure out whether this is now placing a responsibility on the proprietor or owner that did not exist, or clarifying that there is a responsibility on the proprietor or owner that did not previously exist, or whether it is reducing the number of people who are able to assign that ownership—exactly what is the improvement to the functioning of the legislation that is achieved by shifting that language? It is not entirely clear what benefit has been gained by making that change.

The second change that is made by clause 16 is in relation to section 38(2) of the principal Act. That relates to the ownership interest or proposed interest and how that is fixed. In section 38(2) of the Unit Titles Act 2010, it is currently fixed “by a registered valuer on the basis of the relative value of the unit in relation to each of the other units and shown on any documentation required to be lodged with the unit plan: (b) in the case of a stage unit plan or complete unit plan deposited under section 24(2), the ownership interest is that fixed by a registered valuer on the basis of the relative value of the unit in relation to each of the other units and shown on any documentation required to be lodged with the proposed unit development plan.”

Now, the wording in this bill changes that to: “(2) The ownership interest or proposed ownership interest assigned to a unit is that assessed by a registered valuer on the basis of the value of the unit relative to each other unit and shown on the documentation required to be lodged—(a) with the unit plan … or (b) with the proposed unit development plan (in the case of a stage unit plan or complete unit plan deposited under section 24(2)).”

POTO WILLIAMS (Labour—Christchurch East): I just want to refer to the amendment to section 15 of the Unit Titles Act in clause 14 “Section 15 amended (Relationship with Public Works Act 1981)”, specifically the replacement of section 15(3) of the Act in clause 14(2) that states, in new section 15(3)(a), “an estate or interest in land in a unit title development is acquired under the Public Works Act”, because there is a question that I want answered, I guess, in relation to the requirement in the original section 15(3) of the Unit Titles Act 2010 for “a new unit plan, or an amendment to a unit plan, to be deposited.”, or, in the original section 15(4), “If the body corporate requests in writing, the authority undertaking the public work must, at its own expense, prepare the new unit plan or amendment …”.

I want to ask how this would impact in the case that occurred in Christchurch where property was compulsorily acquired, in a sense, because of rezoning due to the earthquake, and how, for example, it would impact the ability for a body corporate to actually put in place a new unit plan—because the interest in that property is now at some debate. As happened in Christchurch, you may have rezoning or property damage to a particular extent or another assessed by engineers, and you could have a multi-unit property with many different owners and with each property having a different designation in terms of whether it was going to be repaired and to what standard, or rebuilt to a particular code or standard. The application of the building code depended on whether the property was able to have its repairs consented or not, whether the building consent process applied.

I would like to know from the Minister in the chair, the Hon Mark Mitchell, when you are in a situation where you have these extraordinary situations apply—you have unit dwellings for which different codes may then apply—how you would then under the Public Works Act make a differentiation between how one particular unit is treated versus another particular unit, and where does the responsibility for the development of that unit plan then sit. Is it with the owners, is it with the body corporate, or is it with the authority that made the determination on that particular dwelling or those dwellings? It is something that would be very pertinent to those people in Christchurch, particularly the many property owners who are in multi-unit dwellings for whom we are still waiting for some resolution. There are many arguments yet to be had because of the different ownership models and the different insurance requirements on each of those individual units. I would welcome the opportunity to hear the Minister clarify that particular point. Thank you.

CLARE CURRAN (Labour—Dunedin South): My comments on Part 2 relate to clause 25, with regard to the changes around easements, and with regard to the submission that was given by Watercare Services. Clause 25(1) makes the change of replacing section 62(1) with: “The body corporate may, after a special resolution to do so, grant an easement or enter into a covenant over the whole or any part of the common property.” Just to put this into some context around the body corporate and the size of the sector that we are dealing with, I note that the residential apartment sector is growing, it is growing quite fast, and it is obviously going to continue to grow. It is now worth something like $40 billion in New Zealand. These improvements that are being suggested in this bill are welcome, but it seems as though—and this is another submission that I am going to be talking about that is making a sensible suggestion, but which seems to be described as being out of scope, and it sort of begs the question as to what is the point of this legislation if it is not dealing with some of the issues that are really quite pressing right now.

The bill extends the power of a body corporate in respect of easements and covenants over the common property. In particular, the body corporate is given power “after a special resolution to do so, [to] grant an easement or enter into a covenant over the whole or any part of the common property.” So, at the present time the owner of a unit, with the consent of the body corporate, may grant an easement or enter into a covenant over their own unit, but is limited to easements and covenants for the benefit of other land. They can grant an easement over their unit, but it cannot be extended out. So what this clause means is that it can happen after a special resolution.

Watercare Services, in its submission on the bill, supported the bill and, in particular, the changes made in respect of easements and covenants—clauses 25 and 26—which “will enable [it] to acquire sufficient rights … for construction, operation and maintenance of its water and wastewater pipelines.” So, when you think about it, that is quite important—Watercare Services being able to make changes without going through a huge rigmarole is actually quite important. It also asked for an additional change to ensure that when a unit plan is cancelled, any easements in gross granted over units—these are the wider easements and covenants over one unit—are not also cancelled.

I think that is actually quite a reasonable request, and I ask the Minister in the chair, the Hon Michael Woodhouse, to give a response as to why the officials said that it was out of scope. What the officials said was that “The additional change proposed is not within the scope of this Bill and should not be included. It is not minor and technical in nature but a larger policy change. This change would fall more within the scope of the wider review.”, and the officials invited Watercare Services to make a submission on the wider review. I am not sure why it is such a big deal to include that in the bill, and why it is considered to be so fundamental and a policy issue. Does it come down to some sort of property rights issue that we are not aware of? Can I ask the Minister to give some explanation to the Committee as to why that particular request by Watercare Services is out of scope?

MEKA WHAITIRI (Labour—Ikaroa-Rāwhiti): Tēnā koe, Mr Chair. I am happy to take another call on Part 2, “Unit Titles Act 2010”. Just to take us back in terms of what we are discussing in Part 2 of this bill, it is an attempt to reduce the unnecessary compliance burdens and clarify a number of provisions. I just thought it might be easy to indicate or go over the provisions that this particular part, Part 2 of this bill, is trying to do in terms of unit plans, body corporate operational rules, reassessment of ownership and utility interests, registration of easements and covenants, leases and licences of common property, and extraordinary general meetings.

I want to just raise clauses 17 and 18 and specifically refer to the New Zealand Law Society’s submission, where it indicates that utility interests do not work for many bodies corporate. In its submission it told the Local Government and Environment Committee that it supports the changes in clauses 17 and 18 as an attempt to, I guess, remove any ambiguity or misunderstanding of what is meant by that—by giving terminology and methodology of creating and explaining what utility interests are. However, in its submission to the select committee it also raised that one of the issues with this is that by creating this interest or clarity, there is also a risk in terms of making the Act less flexible. So it did indicate that it had an issue with that as well.

It definitely recommended that we do a total rethink on the forthcoming review, and said by way of the wording that it provided to the select committee, in terms of clause 17, the words “unless section 39(2A) applies” should be added to the end of the proposed new section 39(2), and the words “that different utility interest” should be added to the beginning of new section 39(2A)(b). In terms of clause 18, again the attempt is to make it much clearer in terms of what we mean by utility interests. The Law Society’s advice was “the words ‘as a place of residence or business or otherwise’ can be removed: they are both redundant, and inconsistent with the proposed new section 7(1) (clause 12).”

The officials’ response to those suggestions by the New Zealand Law Society, particularly in terms of clause 17—they pointed out that they believed that the existing clause was already clear. I note in the Ministry of Business, Innovation and Employment report to the select committee that in terms of the second point, in terms of the words already in the—they have written “chapeau”, but I think they mean “chapter”. So in terms of the suggestion from the Law Society in relation to clause 17 to make it really clear what we mean by “utility interests”, it is interesting, and maybe the Minister can shed some light on why they felt that the existing terminology and the words in that clause were adequate to meet the concerns that the Law Society raised.

In clause 18, again, officials believed that the word is consistent with the other sections of the Unit Titles Act. Therefore, there was a recommendation of no changes to the drafting.

I am just really interested in the Minister in the chair—whether he could please take a call and explain to the Committee why the suggestions of the New Zealand Law Society to make it really ultra-clear on utility interests have not been taken up, and shed some light on that. Thank you.

Hon MICHAEL WOODHOUSE (Minister of Immigration): I just want to take a very brief call to address the questions raised by Ms Curran and others about, effectively, that which is not in the scope of the bill and the questions that have been raised both to officials and to the Committee of the whole House about why that might be the case. I intend, if it is helpful and efficient, just to make some general comments about the regulatory systems bills—plural—the omnibus bills that we will be considering over the next period of time.

It is simply this: the short answer is that the point of this legislation is to make technical amendments and to clarify provisions as we will get to in terms of, for example, the Employment Relations Act; not to make substantive policy changes or to amend the balance of the rights and obligations that parties have under this legislation. It is bit more than a statutes amendment bill, but to go any further than that would require a much broader submissions process by the stakeholders who would be affected by that.

So they are fair questions. It is a scope question that I believe the committee—that particular committee, the Local Government and Environment Committee, and the Transport and Industrial Relations Committee, in the areas that are within my responsibility—has considered, but these are relatively minor and technical amendments.

STUART NASH (Labour—Napier): I would like to talk about clauses 32 and 33. This is about who may call general meetings for bodies corporate. First of all—in this bill, initially—these were set down in the bill itself, but the Local Government and Environment Committee received a recommendation that this is best done through regulation. So the clause has been taken out of the bill and put into regulations. I am a little bit baffled as to why this would be done, because if I look at the original wording that was in clause 32, inserting new section 89A of the bill, it makes it very clear. I understand what regulations do and I understand the value of regulations, but sometimes I think that it is just easy to actually have it in the bill itself, unless you are thinking there is going to be a lot of change.

I would like to ask the Minister in the chair, the Hon Michael Woodhouse—there are a number of terms and requirements for calling an extraordinary general meeting, but the interesting thing is that it says a request by “unit owners of not less than 25% of principal units.” Twenty-five percent is hardly a majority. In fact, it is not even close to a majority at all, and I cannot think of any other decision that would be made with only 25 percent. This could get to a situation where—well, people know that if an apartment block, for example, is in different unit titles, then there has to be a body corporate. If there is an apartment block of four units, then, in fact, one person could call an extraordinary meeting—

Peeni Henare: It’s called a failed democracy.

STUART NASH: Yes. One person could call an extraordinary meeting and could actually arrange it where they could sort of queer the pitch in a way that allowed them to push their views through without having a majority at all.

The interesting thing about this, if we go on to clause 34, is that what happens is that the body corporate operational rules are binding on basically everyone. So they are binding on the body corporate, they are binding on the owners of principal units, they are binding on any person who occupies a principal unit, and they are also binding on any mortgagee who is in possession of a principal unit—so, basically, an owner, a renter, a flatter, etc. So I can just see a way here where if a unit holder or a couple of unit holders, or certainly fewer than 50 percent of unit holders, wanted to be mischievous because they wanted to get something through the body corporate that they knew would be binding on 100 percent of the owners or the occupiers of these unit titles, they actually could. I wonder why this does not say “not less than 50.1 percent”, for example, which I would have thought would put checks and balances in place that made sure that a non-democratic process could not, in fact, force an outcome on every single owner.

I suppose what you could get in the worst-case scenario is you could get 25 percent organising this year, so what you would end up with is an extraordinary meeting here and then it gets pushed through and then it comes to here and it gets pushed through, and it could get very, very messy indeed. This is why Winston Churchill, for example, said that democracy is the worst form of government except every other.

But I do acknowledge that there may be a very good reason why this 25 percent is codified in legislation, and I am suggesting that it is possibly based on experience, because I have no doubt the officials said, or the lawyers said, or the Property Council said: “Hey, look. In most of the situations all we need is 25 percent, because that is a significant portion. It is not a majority but it is a significant proportion, and we believe that if 25 percent of a concern that is salient enough to actually call an extraordinary meeting”—

Hon Member: There could be reasons.

STUART NASH: Yes, and, of course, it has to be acknowledged. So the chairperson has to go out and, of course, notify all the unit owners that an extraordinary meeting is taking place, but 25 percent is enough to trigger an extraordinary meeting because this is just what history tells us needs to be done. I could be wrong, because just reading the bill like this, it is a little bit concerning, I must admit.

It also says, in clause 33(3): “An extraordinary general meeting of a body corporate may be called at any other time by the chairperson or the body corporate committee”—and this is where I am a little concerned that it is in regulations and not in the Act—“in accordance with the regulations.” If I was a body corporate member and I wanted to know what was going on, I would go and look at the piece of legislation that governed it, then I would have to go and find the regulations. It just would have been tidier if it had been all encompassed within the bill. Again, I know the committee got advice on that—

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

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

Ayes 77

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

Noes 43

New Zealand Labour 32; New Zealand First 11.

Motion agreed to.

Part 2 agreed to.

Schedule agreed to.

Clauses 1 and 2

PHIL TWYFORD (Labour—Te Atatū): It has been an interesting debate on this Regulatory Systems (Building and Housing) Amendment Bill. I think some good questions have arisen in the course of the debate. We have spent some time talking about the changes to the Building Act, which are largely technical clarification issues—fixing some cross-referencing errors—but, really, the meat and potatoes in this bill are all to do with the Unit Titles Act. It is a little strange to be debating some relatively minor and technical issues when there is such a big review going on of the Unit Titles Act, and some glaring problems that need to be dealt with by that review. Nevertheless, there are some important issues in this.

I heard my colleague Clare Curran talking about clauses 25, 26, and 27, which contain matters that the Law Society had quite a lot to say about at the Local Government and Environment Committee, particularly in relation to the addition of sections about dealing with the reference to easements and covenants. We heard from Ms Curran the views of the Law Society on that, and, in particular, about the idea that common property should not be affected by the redrawing of boundaries, and so on.

Those are the kinds of issues that we dealt with in the course of the discussion. There were a number of others that were dealt with. We also talked quite a lot in the course of the debate about dispute resolution for bodies corporate and whether or not the Tenancy Tribunal is fit for purpose. The committee spent some time discussing whether or not the Tenancy Tribunal and the various restrictions on the tribunal’s ability to award damages in relation to the Unit Titles Act—disputes that have come to the tribunal under the Unit Titles Act. As we know, most of those issues are going to be dealt with by the wider review.

I think, probably, that is all I will say in wrapping up, other than to say that Labour is supporting this. We are willing to go along with the various technical adjustments and clarifications that make up this Regulatory Systems (Building and Housing) Amendment Bill.

STUART NASH (Labour—Napier): I just want to talk about the commencement date on this and just ask the Minister in the chair, Michael Woodhouse, some questions. The Minister, when he stood up a couple of calls ago, said this is not quite an omnibus bill; it is little more than that. I think it is significantly more than that. It really does affect unit title holders—apartment owners. That, as we know, is becoming the predominant form of housing, because they are a little bit cheaper than buying your grassy knoll in Remuera. But I am wondering—

Hon Member: Grassy knoll?

STUART NASH: Ha, ha! This Act comes into force immediately after the expiry of the 2-month period that starts on the date of Royal assent. This is, I am assuming, going to get Royal assent before the election. This is going to get pushed through. It is this hard-working Minister who has taken on this portfolio and wants to see some action after doing nothing in tax. But what I do wonder is whether you considered, Minister, just pushing this out a little bit. The reason I say that is we all know that there are a number of apartments being built all around the country—and not just in the Christchurch rebuild but all around Auckland and everywhere—because the returns are high, the demand is substantial, and the prices are relatively low. So I wonder whether the Minister thought about delaying this for a couple of years, because people will have already made decisions based on the current law.

I know that there has been consultation on this, and I know that Phil Twyford has done a hell of a lot of work around this area of housing and construction, but my concern about this sort of bill is that there will be unintended consequences, and I wonder what the unintended consequences will be for people who have put down their deposits and looked at their unit titles, etc., etc., and found: “Oh, goodness me! Hold a sec—the real estate agent didn’t tell me that this changes when a new law comes into force.” In fact, I am assuming the real estate agents would have had to inform them, because it would have been illegal not to. But was there any thought of any unintended consequences, or any thought of delaying this by 2 years with the ability to signal this was coming on so that anyone buying into a unit title now would have time to digest what was happening, and anyone who was looking to buy into a unit title could actually assess and understand the new law before they paid the deposit over or before they actually occupied it? There are a whole lot of rules about unit titles, there are a whole lot of rules about bodies corporate, and there are a whole lot of rules about a whole lot of different things in here that will affect, I think, the predominant form of new housing going forward.

So that is all I have really got to say. It is not a big one; it is just a question. But this is very definitely more than an omnibus bill, and to pass it off as such, I think, does a little bit of a disservice to people in the building and housing sector. It also does a bit of a disservice to those who are interested in the sector, because just to say “Don’t worry about this, there’s nothing to see here, it’s only a small bill. You don’t have to worry, it’s not going to change the way you do things terribly much.”, well, I do not think that is right. I think we should actually treat the people who are buying into these schemes, who are developing these schemes and who are part of them, with a little bit more respect than just saying “Don’t worry, nothing to see here, move on—it’s an omnibus bill.”, because it is substantially more than that.

But, as mentioned, just to reiterate the one question: did the Minister actually think of doing some sort of retrospectivity—which we have seen a lot recently in tax legislation—or of delaying it by a year or two, which, again, we see in things like tax legislation? Thank you very much.

CLARE CURRAN (Labour—Dunedin South): Speaking to clauses 1 and 2 of this particular bill, the Regulatory Systems (Building and Housing) Amendment Bill, which is part of the three omnibus bills being debated in the House, I can inform my colleague Stuart Nash, who just spoke, that the reason this bill is going forward and needs to be passed as quickly as possible is that the next bill that we are going to be debating contains a clause that requires it to be passed by 31 March—which is actually the end of next week—because of the provisions in it for retentions, in the case of businesses going down the drain in the construction industry. I digress, but there is a time factor involved in this piece of legislation. It is an important time factor, and that is why we are hurrying it through—or why the Government is wanting to hurry it through.

I also want to thank Minister Michael Woodhouse for getting up and speaking to my concerns around clause 25 and for his remarks around it being an omnibus bill that has a little bit more in it than a statutes amendment bill but does not address issues of substantive policy. Can I just make the comment, then, that—and I return to the issue around the easements and covenants—the amendment in clause 25 enables an infrastructure company to acquire sufficient rights over unit title developments for construction, operation, and maintenance of its water and wastewater pipelines. That does not sound to me like just an insignificant amendment in an omnibus bill. It actually sounds quite significant. It is an enabling clause. It allows for an acquisition. But what it does not provide for, and this is the converse to it, is that it limits the security of tenure normally enjoyed under an easement, and so it limits Watercare Services’ ability to adequately protect its pipelines—and not just Watercare Services, obviously, but other infrastructure companies that are undertaking work.

It deals with the acquisition of easements, but those easements, as was pointed out in the submissions on this, do not last for ever, because apartments, terraced houses, and other complexes might be demolished, destroyed, or might just reach the end of their useful life, and, in those situations, the unit title plan is likely to be cancelled, which reverts the land to freehold or leasehold ownership. This, therefore, raises issues about easements for the likes of infrastructure companies that have water pipes. I guess it could also apply to other infrastructure companies such as Chorus and other fibre delivery outfits that have installed some sort of infrastructure throughout land when a unit title is cancelled and they no longer have rights.

If this bill provides for the acquisition of easements to enable those rights while the building is in use, why then did it not deal with the other side of the equation, which is what happens when the unit title is cancelled? And why does that become an issue of substance and policy that is out of scope when the one that is in scope seems to carry as much weight? It seems to me that this bill does include issues of substance. It might not include enough issues of substance—clearly, by what I am just saying, and I know that my other colleagues have mentioned others. I do not think you could describe this as an omnibus bill that is not really dealing with issues that matter, and I find this inconsistent and concerning.

MEKA WHAITIRI (Labour—Ikaroa-Rāwhiti): I am happy to take a call again, on clauses 1 and 2. Clause 1 says “This Act is the Regulatory Systems (Building and Housing) Amendment Act 2016.” When I draw the Committee’s attention to, again, the Ministry of Business, Innovation and Employment’s own advice to the Local Government and Environment Committee, it talks, again, about the purpose of the regulatory systems and gives three reasons why we have them, with one being to maintain and improve the effectiveness and efficiency of the regulatory systems. So when I go back to look at clause 1, “This Act is the Regulatory Systems (Building and Housing) Amendment Act 2016.”, and I look at the officials’ purpose for regulatory system bills, my question is: has what we are debating here met the test of both maintaining and improving the efficiency and effectiveness of the regulatory systems; if so, how? That is the question I want to pose.

It talks also about how the purpose of these bills is around including policy change. I do note the Minister in the chair, Michael Woodhouse, talked about how this was not so much a significant policy change but of a more minor and technical nature, but, again, the reason why and the purpose of why we are making the changes or addressing the amendments is so that we can assure the House and New Zealand that we are continually improving our repairs and maintenance of the regulatory system. So my question, again, to the Minister, is: how do we know we have met that test?

When I look at clause 2 and it talks about how “This Act comes into force immediately after the expiry of the 2-month period that starts on the date of Royal assent.”, I want to refer to a colleague’s point around the targeted review. I guess the question that I would pose to the Minister is, if we look at the purpose behind the targeted review, it does say it is about improving disclosure in dispute resolution regimes—it is about strengthening body corporate governance. The review is also going to address encouraging best practice for body corporate managers. It is going to take long-term maintenance planning and funding, and also look at the thresholds of mandatory requirements. Again, my question is: through that targeted review, what happens to the piece of legislation we are debating here in the Committee stage—in terms of clauses 1 and 2—which the review may throw up as requiring some amendments to the legislation?

I would just be interested to hear from the Minister—if the targeted review throws up an anomaly through this bill, I would be interested to know from the Minister what process he would recommend so that those anomalies or concerns that are picked up through that targeted review will be addressed in this bill. I am very keen to hear, because it is kind of back to front—we are passing this particular regulatory bill and we are undertaking a targeted review. Again, I am just really, really keen to hear how we would take the comments that people have applied to the review, and, if it requires some legislative amendments, how the Minister proposes to address that. So that is a question I would really like to ask the Minister in the chair, if he could shed some light on that. Kia ora.

Clause 1 agreed to.

Clause 2 agreed to.

Bill to be reported without amendment presently.

Bills

Regulatory Systems (Commercial Matters) Amendment Bill

In Committee

Part 1 Commerce and consumer affairs

CLARE CURRAN (Labour—Dunedin South): This bill, the Regulatory Systems (Commercial Matters) Amendment Bill, was considered at the Commerce Committee. There were, I think, a total of 13 written submissions, and submissions that supported the bill with particular interest in amendments to the Companies Act, the Financial Markets Conduct Act 2013, and the Construction Contracts Act 2002.

Just a couple of opening remarks with regard to this bill: this is the bill that puts, I suppose, the time limit on the need for this bill to pass this week because it contains a clause that brings into play the retention framework for companies in the construction industry that go bust. Therefore, it is pretty important that it passes, but it is quite a considerable piece of legislation. It has got a number of parts, and the part that we are dealing with, the “Commerce and consumer affairs” part, contains a number of provisions.

In the original submissions on the bill, there were a number of submissions by the New Zealand Financial Markets Association, which, I think, to their credit, officials went away and had another think about. They came back to the select committee with a further five additional changes to the netting provisions in the Companies Act, which were, essentially, clarifying the—well, the Financial Markets Association recommended five additional changes, and officials did not recommend making those changes at this stage, but they thought it was important enough to come back with another departmental report. They went away and undertook further consultation with some key stakeholders, and there were, as they said, mixed views on whether those changes were needed and their potential impact. So they could not advise the committee that those proposals were appropriate for inclusion in the bill, but they thought that there was merit in further work to better assess whether there was a problem to actually further address.

So, ultimately, I think that the select committee did a lot of important work on this bill, and when we get to Part 4 of the bill, we will be able to go through the amendments to the Construction Contracts Act, which is, I think, where a lot of the interest will lie. But, ultimately, it is about maintaining the effectiveness and efficiency of the regulatory systems and about clarifying and updating the statutory provisions in each Act. There are a number of Acts—in fact, there is quite a long list of Acts that are being amended here—and I think there will be a lot to discuss as we go further on in this bill.

STUART NASH (Labour—Napier): We have seen a lot of legislation pass through this House since the global financial crisis that is designed to prevent money laundering or nefarious behaviour in financial dealings. We have all supported this and we have all applauded it, but when I look at a couple of clauses here, I wonder whether, in fact, this is not a backward step.

Let me give you one example: Part 1, clause 4(2A), regarding the annual return. What this used to say was that the old requirement of signing off an annual return—this is an amendment to the Building Societies Act 1965. In the past, what used to have to happen was the annual return had to be signed off by two directors and the manager or secretary of the society. So there were three people: two of them in governance positions and one in an operation role—it makes sense. What we are doing now with this piece of legislation is deleting the need to have two in a governance position and one in an operational position, and changing it by saying it must be signed off by the manager or secretary—that makes sense because it is still in the operational role—and a second person who is a director, a qualified accountant, or a lawyer.

The concern I have about this is that, first of all, we are removing one layer, or one extra barrier, against nefarious activity—or fraud, for want of a better term, I suppose. The second thing is: OK, you could actually have the manager married to a director of a society. I would say that would not be unusual and certainly would not be impossible. So the thing we have got to do when we are looking at these sorts of pieces of legislation that are designed to make the job of the Ministry of Business, Employment and Innovation easier and more efficient is to ensure that we do not take away fundamental safeguards that protect the investment of the person involved with this. To say this can be signed by a qualified statutory accountant or a lawyer means that this could, in fact, be signed by the person in charge of the cheque book—the manager or the secretary—and someone who has no direct association with the building society itself, as long as they are a qualified lawyer or an accountant. I think that that actually removes one of the safeguards that protected members of a building society.

The thing I would say is that the previous condition was not onerous—to ensure that at least two directors signed off on the annual report. I have no idea why that condition was removed, when I think it provided a really important safeguard, and, after all, what both parties have been attempting to do since 2008—in fact, all of Parliament has worked very closely together to ensure that safeguards are put in place to protect investors and asset holders. So that concerns me a little bit; there is no doubt about that.

The other clause I would like to talk about is clause 16, and this is about annual meetings of shareholders. This is an amendment to the Companies Act. I am going to quote clause 16(5). It is an insertion that says: “… it is not necessary for the board of a company to call, or for a company to hold, an annual meeting of shareholders under this section if—(a) there is nothing required to be done at that meeting; and (b) the board has resolved that it is in the interests of the company to rely on this subsection [when there are issues] …”. That is, the board can determine that there is “nothing to see here”, that it is time to move on, and that they do not need an annual general meeting. Again, I think that that removes a certain safeguard. It is not difficult to hold an annual general meeting if all it means is that people gather around a board table for an hour and say “Hey, look. This is the statement of accounts. This is what we are doing. There is nothing out of the ordinary here. There’s nothing to see. Move on—we’ve done that.” Of course, it has to say in the constitution that the company does not require a meeting to be called or held, but, again, what I think this potentially does is it moves power from shareholders onto a board that has an interest in protecting their own rights over those of shareholders.

You could argue, quite successfully, probably, that a shareholder would not have invested in a company if, in fact, the constitution said there will not be an annual general meeting. That was a sticking point, but I just have concerns—[Bell rung]

The CHAIRPERSON (Lindsay Tisch): Stuart Nash.

STUART NASH: Thank you, Mr Chairman, and I will not take the 5 minutes. What I was saying was that what we cannot do is take the power away from those who have no governance say but simply a financial interest, and put it all in the hands of those who actually do have a self-interest in a company or a body corporate or a building society, because that removes, I think, an important safeguard. As mentioned, it does say here that if a constitution does not require an annual general meeting, then you do not have to have one, and a shareholder can make a decision based on whether he or she believes that that is an adequate safeguard or not. But also in this, you could have a situation where a shareholder has invested in this, without this clause and the board makes a decision to change that. You do not have to do that at the meeting, you do not have to hold a special meeting to change the constitution, and before you know it, another important safeguard has gone.

I am not saying this does not streamline the process, because I suspect it does streamline the process, and I am not saying that what I talked about in clause 4 does not streamline the process, because I am certain that removing one layer of accountability, of course, does streamline the process. I suppose my point overall is that we have got to be really careful in that balance of streamlining the process and holding to account those who have positions of responsibility. We really strengthened this, and what I really would be loath to see is that because we say “Well, that was a long time ago. We are out of that. We can trust people now.” we actually weaken the accountability of those who have responsibility. We just have to be really careful that we are not doing that. Thank you.

DAVID SEYMOUR (Leader—ACT): I rise on a specific matter, as we should in this Committee stage—that is, Supplementary Order Paper 276, an amendment I have on the Table in my name. It is an amendment to an Act that is not otherwise amended in this Regulatory Systems (Commercial Matters) Amendment Bill—the Credit Contracts and Consumer Finance Act. If you will just indulge me, I will give a little bit of background as to how this particular amendment came to be before the House. We have a number of growing companies in the peer-to-peer lending space. They include Citizens Brokerage Ltd, Lending Crowd, LendMe, PledgeMe, Southern Cross partners, Harmoney—all of which seek to connect lenders and borrowers through a peer-to-peer platform online.

This is quite an exciting development. Around the world, companies such as RateSetter and Lending Crowd are doing billions of dollars in loans in a growing industry that is allowing borrowers to access cheaper capital and lenders to get better rates of return than they might otherwise. The interesting thing is that at this stage the industry is quite Balkanised around the world, and that is because there are different financial market regulations in different parts of the world, and that results in different indigenous competitors dominating their home markets. It is not so different from the scenario we had with other types of peer-to-peer trading, such as we see with eBay and TradeMe. Inevitably, there will be global consolidation of peer-to-peer finance. However, in the short to medium term there is the opportunity for a home-grown competitor to establish itself in the New Zealand market. The example that is most famous in New Zealand is actually TradeMe.

So the question that the New Zealand First members might like to ask themselves, first and foremost, is: do they want an indigenous home-grown New Zealand company to eventually dominate the peer-to-peer lending market in New Zealand, or would they prefer that we eventually become colonised by a company that has grown offshore and does business in the New Zealand market? That is, at a very high level, what is at stake here for members.

That gets you down to the technicalities and the difficulties that such companies are facing. One company in particular, Harmoney, which is probably the largest at present—although I would not be quoted on that—finds itself in an unenviable position due to provisions in the Credit Contracts and Consumer Finance Act 2003, a bill that was written long before peer-to-peer lending on the internet might have been anticipated. The simple problem is that they find themselves unable to charge any kind of credit fee to a borrower, other than the reasonable costs of arranging a loan. The problem with that is that if you are in the peer-to-peer lending business, your goal is to get transaction costs down to zero. In other words, you cannot collect revenue for the thing that you do, which is arranging or facilitating peer-to-peer loans. Because you are not engaged in lending any moneys of your own, you do not have anything else on which to make money. You cannot make a return on capital, because you do not have any; you are just a facilitator.

So that leaves these companies, such as Harmoney and PledgeMe, in a position where they have no way of funding their core business. It actually is impossible for this industry to exist under current legislation. To date, they have tried several workarounds. They have tried charging fees only to the lender, which is not forbidden under the Credit Contracts and Consumer Finance Act, but that of course leaves them in an uncompetitive position, because unlike any other deposit taker, you have to put all of the fees on to the lender; the borrower cannot pay any. This has left these organisations uncompetitive, or less competitive than they would have been if only they had been able to spread the costs symmetrically across lenders and borrowers and recoup their revenue that way.

One way of remedying the problem that has been floated by people in the sector is to return to an annual percentage rate. Returning to an annual percentage rate would mean that you would have transparency for the consumer, and it would allow consumers to take an apple-to-apple comparison of the total cost of capital as well as the cost of fees in one annualised rate. However, that is far too bold an initiative to introduce across the financial sector in the Committee stage of a regulatory systems bill. The purpose of a regulatory systems bill is to allow for changes to be made to our regulatory system that are small and technical in nature and that may not have been foreseen in previous times when the laws we are amending were passed by this House.

Turning to my Supplementary Order Paper—and I thank you, Mr Chair, for your indulgence in letting me set out that background—what my Supplementary Order Paper would do is very simple: it changes the “Interpretation” section of the Credit Contracts and Consumer Finance Act 2003 and, in particular, it adds the following words to a list of four definitions of what a credit fee can be: “fees and charges payable to a person who is licensed to provide a peer-to-peer lending service (within the meaning set out in regulation 185 of the Financial Markets Conduct Regulations 2014) for or in connection with facilitating and establishing the credit contract through the peer-to-peer lending service, and who has no beneficial interest in the credit contract”. In other words, this is an exceedingly narrow amendment. It applies only to those organisations that are registered as peer-to-peer lenders by the Financial Markets Authority Act under the Financial Markets Conduct Act 2013, and it allows them to collect revenue on moneys only when they have no interest in the actual capital being loaned and borrowed.

This is an amendment that makes an incredibly minor technical change to add something to a 2003 Act that was allowed by a 2013 Act. The Financial Markets Conduct Act allowed peer-to-peer lending. It explicitly provides for peer-to-peer lenders to be registered. However, this particular amendment will make up for the fact that in 2003 peer-to-peer lending on the internet was not anticipated. This is something we can fix right now to have a better regulatory environment than the Australians, who are currently about to eat our lunch in terms of basing peer-to-peer lenders there rather than here.

This amendment is so narrow and so simple and so welcomed by the industry it affects. There are no good reasons that this Committee should not pass it. It is a pity that the Government has indicated to me that it will not support it—and by the Government, I mean the National Party. However, every other party at this point, with the exception of United Future, has said either that they will support it or that they are considering supporting it. There exists in this Committee the numbers to pass this amendment and ensure that we will have a better regulatory environment to build world-beating, peer-to-peer lending companies and financial technology right here in New Zealand, if only members around this side of the Chamber can see that this is sufficiently narrow in scope to fit into a regulatory systems bill, that the benefits are suitable, and that they will enable the type of industry that so many in this House always say they wish to flourish. I hope that I will be given further opportunities to answer any questions that members around the Committee may have about this particular amendment. Thank you.

CHRIS HIPKINS (Labour—Rimutaka): I am very pleased to take my first call on the Regulatory Systems (Commercial Matters) Amendment Bill—

Sue Moroney: One of many.

CHRIS HIPKINS: —the first of many—and we are on Part 1. I want to express a little concern, first of all, that within Part 1 we are amending 12 different Acts. Just in terms of drafting—it is a little hobby horse that I have—I hate it when we have these omnibus bills that are all drafted in a single Part that amends multiple different Acts. I think they would get better scrutiny, and more concise scrutiny, if the debate followed a slightly more structured form—so if we went through each of the parts, you know, one at a time, or with each of the enactments being amended one at a time, which is not allowed for in the way that this is drafted.

But I also suspect that I have spotted a typo, and I would like to get some assurance from the Minister in charge, because it is a typo that potentially changes the meaning of a clause within this bill. It is in new section 147A, inserted by clause 100, which deals with credit unions and the Friendly Societies and Credit Unions Act. The purpose of this subpart is to allow those societies to meet electronically—so rather than having to have a general meeting in which there is a vote, they can do it through online voting, and that is a very sensible change. But the rest of the provisions apply only—as I read them—to credit unions, rather than to friendly societies.

If you look at new section 147A, “Meetings may be held using audio, audio and visual, or electronic communication”, in clause 100, the wording of this clause is: “The rules of a registered society or branch or of a credit union may [etc., etc.].” I suspect—and I may be wrong—that there is an extra “or” in there, and that is actually quite important, because it potentially extends the scope of this particular provision beyond what it was intended to cover. My reading of it was that it was supposed to cover only credit unions and not any registered society or branch. If it was covering any registered society or branch, the application is potentially significantly wider than one might anticipate. So I guess my question to the Minister in the chair is whether that is an extra “or” that was not intended, in which case, presumably, it is a reasonably easy thing to fix.

The second part that I wanted to ask a question on is the changes to the New Zealand Superannuation and Retirement Income Act of 2001. This bill inserts new functions for the Retirement Commissioner that I suspect will be most welcome because, certainly, the role of the Retirement Commissioner has expanded from when that office was first established. The Retirement Commissioner is now taking on a wider role around encouraging New Zealanders to be good with money—basically, to save, to think of the future, to pay back debt, and so on—and these are things that were not explicit within the mandate of the Retirement Commissioner.

So if we go back to the provisions that we are amending here around what the functions of the commissioner were, it was pretty narrowly confined specifically to superannuation and to reporting, particularly to the Government, on the sustainability of superannuation. I can see the Minister in the chair, Nikki Kaye, has got a speech that she just cannot wait to get stuck into around superannuation, because some of the questions that I am about to ask will, I am sure, give her plenty of material to work with.

Under new section 83(db), in clause 116(1), one of the new functions that the Retirement Commissioner is going to be given is “to advise on financial capability issues, when requested to do so by the Minister:”, but it does not specify whose financial capability issues the Retirement Commissioner is to report on. So is it the financial capability issues of members of the public, or is it the financial capability issues of the Minister and the Government, for example? One of the questions, for example, could be: does the Government have the financial capability to meet its commitments under the New Zealand Superannuation and Retirement Income Act of 2001, or is it that they are being asked to advise the Minister on the financial capability of members of the public when it comes to, say, supporting their own retirement and their own savings for retirement? So, really, my question there is: when the clause refers to financial capability issues but is not specific about whose financial capability issues are to be reported on, how is that section to be interpreted?

Also, new section 83(da), in clause 116(1), inserts new functions for the Retirement Commissioner “to promote education, and publish information, about financial matters to assist individuals to make financial decisions confidently and informedly:”. One of the very successful programmes that the Retirement Commissioner has been running in recent years is the Sorted.org.nz website, which provides a whole range of tools that people can use to assess all sorts of matters relating to their personal finances—whether it is the length of time it is going to take them to repay their mortgage and how they might save that by shortening the period of time, and so on. They do that outside, effectively, the scope that they have within the existing functions in the original Act, so updating the Act to reflect that will be very good.

One of the things that I would like to see the Retirement Commissioner doing a lot more of, and I hope the insertion of this provision will allow them to do so, is a lot more work in schools, because one of the things that has been raised with me regularly as the Labour Party education spokesperson—and I am sure it has been raised with members all around the House—is financial literacy in schools and the desire of members of the public to see a much greater focus on financial literacy in schools. It seems to me that we cannot expect every school and every teacher to account for every possible thing that we would want children to learn, but the Retirement Commissioner could certainly play a role here in supplying to schools the resources that might be able to assist them to ensure that young New Zealanders have a much greater degree of financial literacy than they do now. So my question, I guess, to the Minister is: is that the type of activity that the Retirement Commissioner might be expected to pick up under these new provisions that are being inserted by this bill?

I guess there are three questions—to summarise—because the nature of this debate is that we are sort of chopping and changing around different provisions within Part 1. But my three questions are: is the “or” intended, or is it an errant “or” in new section 147A: in clause 100? The second question is, when it comes to new section 83(db), in clause 116, whose financial capability issues can the Retirement Commissioner report upon—is that simply anybody? Then, when it comes to new section 83(da), in clause 116(1), would things like financial literacy within schools be encapsulated within that broader remit for the Retirement Commissioner? I think that is something that would be very welcome.

Hon NIKKI KAYE (Minister for Youth): I plan to take just a brief call to answer some of the questions raised by the member Chris Hipkins. The first question that was raised was around new section 147A, in clause 100, and I just want to confirm with the member that it is not a drafting error. “Society” refers to a friendly society, “branch” refers to a branch of a friendly society, and “credit union” applies to a credit union.

The second general statement that I would make—I am not going to go into the detail of the other two questions—around the Commission for Financial Capability and the role of the Retirement Commissioner is that my understanding is that they do currently have a role in terms of helping with programmes around financial literacy in schools. We as a Government have also put $2.5 million into youth enterprise, specifically helping in communities where there is not parent support or teachers available and where they have not had Young Enterprise Trust programmes focusing around financial literacy and young enterprise. It is a very, very successful programme, and it is a very, very successful investment. So I think that is just my contribution.

STUART NASH (Labour—Napier): I am going to talk about a couple of clauses that are completely unrelated, but I would say that my experience of the Young Enterprise Trust is that it is a fantastic scheme, but it is not compulsory, and it tends—it tends—to be in those schools of a high decile where the teachers and the parents are really engaged in this sort of thing. My personal view is, actually, probably the same as Mr Hipkins’. We need financial literacy to be an integral part of the curriculum if we are to have these young guys who know the difference between 10 percent per week and 10 percent per annum when they are trying to buy a car at the age of 16. The lack of financial literacy is absolutely terrible in this country, and we have got to change it. You know, it is a terrible thing to say, thinking about the global financial crisis, but when you have the DIY attitude that we have got and a lack of financial literacy, you are going to get people who believe that Colin Meads knows all about investments because he was a great rugby player.

The CHAIRPERSON (Lindsay Tisch): Focus back on the bill.

STUART NASH: We have got to change it. What I would like to talk about is—

Kris Faafoi: It’s a good point, though.

STUART NASH: —thank you—clause 124, and these are amendments to the Companies Act. This is interesting, because I am not too sure how this works. So what this is about—

David Seymour: Familiar feeling.

STUART NASH: Well, thank you very much. I should know how this works, should I not? But what this is about is the reimbursement of expenses that are incurred in connection with a takeover of a company. So what the rules in this Act say is, despite anything in the target company—so you have got two companies. You have got one that wants to take over—company A wants to take over, and company B is being taken over. What this says in new section 48, in clause 124, is that despite anything in the constitution of a company being taken over, if this company is being taken over, then the company being taken over must reimburse the director of that company any expenses he or she incurs in this whole process. As a number of us will be well aware, when a company is being taken over, then the directors are really required to step up and do a hell of a lot more work than they would in the normal course of events.

The other point that is interesting is that any expenses incurred in this whole process by the company that is being taken over must be reimbursed by the company that is seeking to take over that company. This goes to a panel if there is any dispute about this, but I suppose my question is: if the takeover is not successful, are those costs still to be incurred? What can happen is that this can go to a special panel that will assess the amount that a target company has to pay to one of its directors, but it will also assess a fair amount that the company seeking to take over has to pay to the target company. And if that is not agreed upon or if they cannot find common ground or if there is, in fact, dispute about this, then, in fact, it can go to the High Court. The High Court has the sole jurisdiction, as I understand it, so what we are talking about here is that the panel is a panel of mediation. It is not arbitration, but it does bring up some interesting dilemmas.

You know, what we can find in a number of these companies is that the directors are highly competent, highly engaged, and highly paid individuals, and if they are going from, for example, their standard director’s fees of, let us say, $100,000 a year for, let us say, 10 hours’ work or for 15 hours’ work, they could, in fact, incur significant costs—

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

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

STUART NASH: At the point that I was stopped, I was talking about amendments to the—

Hon Ruth Dyson: Quite rudely interrupted, actually.

STUART NASH: —yeah, rudely—Takeovers Act 1993. But before I go any further, if people think there is a slight red hue on the lens of the TV, there is not. The Parliamentary Rugby Team has been out training and I exerted myself a little bit too hard. So if I am looking a bit red, that is the reason—genuine. I know the Chair was a valued member of the Parliamentary Rugby Team.

I was talking about the changes to the Takeovers Act 1993. It needed to be amended, but the points that I am making, and I will make them again because it has been an hour and a half, are talking about the reimbursing of directors. What this clause talks about is that if one company is taking over another company, then the director of the company that is being taken over has to have his or her costs reimbursed by that company. So that has to happen. The other thing that has to happen by law in here is the company that is being taken over has to have its costs reimbursed by the company that is taking it over. It does not matter whether the takeover is successful or not; those costs still have to be reimbursed, and they can be considerable at times.

Let me give you an example. As we know, a lot of companies have a professional board of directors staffed by men and women who are professional directors, who pull down often $200,000 or $300,000. When a company is being taken over, there is a significant amount of work for these directors to do to meet the terms of their contract. So what this is saying, and I get it, is that if a director is responsible for a significant increase in work due to his company, her company, or the company that they are on the board of, then they must be reimbursed. The other thing that must happen is the costs incurred by the company being taken over must be reimbursed by the company taking it over.

It does not matter what is in the constitution of the company being taken over; this is still a requirement under the Takeovers Act. As mentioned, how this works is that if there is any dispute, it goes to a panel. The panel will make a determination. That is only mediation—it is not arbitration—which means it is a non-binding agreement, because from there, if there is any dispute at this point, then it can go to court for the court to determine. Just to give the Committee an idea of how much money we are talking about, this new section 53 in the Takeovers Act says “…court means—(a) the District Court,”—so this has to go to the District Court—“if the amount to be reimbursed is no more than $350,000;”, and that has been increased from $200,000, “or (b) the High Court, if the amount to be reimbursed is more than $350,000.” If it is $350,000 or less, you can go to the District Court. You can go to the High Court if it is $350,000 or more.

But I suppose what I am outlining here is that the legislation has actually recognised the fact that $200,000, in terms of reimbursement, is just not realistic in this day and age—$350,000 is much more in keeping with 2017 rates of pay for directors and costs incurred. But we are talking a significant amount, $350,000. It may sound a lot, but, again, if your company is being taken over, there is a substantial amount of work that might have to be done in this, and that money must be paid by the company taking you over. So it can be a substantial amount of money, of that there is no doubt. But you have also got to remember that when this goes to a court, if it either goes to the District Court or the High Court, there are significant costs involved in this as well. So it will go to only those jurisdictions, the District Court or the High Court, if there is a dispute around how much money must be paid by the company taking over the other company.

On top of that, the company doing the taking over could, I would suggest, end up incurring double those costs again if it is a litigious situation or it gets quite acrimonious. So we are talking about a substantial sum of money. If it is Spark or a big company, this is just part and parcel of what they do.

Clare Curran: Get with the picture there.

STUART NASH: But if it is a smaller company, then the costs can be quite considerable. I know Clare Curran says she gets the picture, and I am pleased she is back so I can move on from this, but I suppose what I am saying is we are talking about an omnibus bill here. There are many pieces of legislation that this bill actually updates, and we just need to be aware of this, as no doubt a whole lot of company lawyers are but also the professional directors on companies when they are making decisions around governance as well as operations. Thank you very much.

CLARE CURRAN (Labour—Dunedin South): Can I turn my attention to clause 21, in Part 1 of this bill, the Regulatory Systems (Commercial Matters) Amendment Bill, which was before the Commerce Committee. There were good discussions and quite a lot of debate around various parts, this one being one of them. Clause 21 actually relates to audit requirements, and it is an amendment to the Companies Act. It affects section 206 of the Companies Act 1993. It goes to the question of allowing large overseas companies with small New Zealand businesses or group businesses not to be subject—not to be subject—to an audit requirement if there is no audit requirement in the home country.

In the commentary on the bill, it says that this is because “this would have two benefits: removing excessive compliance costs, and promoting entity neutrality.” I just want to touch on this because it did actually evoke quite a discussion at the select committee, and I have a question for the Minister and I hope that the Minister is able to answer it at some point during the debate on this. The question is, ultimately: what analysis lies behind this part of the bill, this amendment to the Companies Act, in terms of the number of companies that this affects and the size of those companies? When I say “size”, I am talking about the size of those home companies where they reside, so that we have an idea of the scale of this and what it actually relate to.

We had a second departmental report to the Commerce Committee at the end of January this year, which addressed this particular clause in the bill. It was in response to questions from the committee on this, because the committee sought information about why officials had recommended that the Companies Act 1993 should be amended so that large overseas companies with small New Zealand branches would not be subject to an audit requirement if there was no audit requirement in the home country. It relates to a submission on the bill, from Staples Rodway, which is an accounting firm—actually, it is an Auckland-based accounting firm, because I have got it right in front of me. They spelt out a situation where excessive compliance issues could arise in which the only business presence an overseas company has in New Zealand, and they used the example of an airline, say—they use the example of a sales office in Auckland. Their submission included the example of a Japanese company paying ¥20 million to ¥30 million—the equivalent is $250,000 to $370,000—to have the company’s financial statements audited as a consequence of having a small New Zealand branch.

On the face of it, that sounded quite reasonable in terms of: if you have got a small branch in New Zealand, of a big entity, then should you have to be paying large amounts of money to tick the box to have an audit done? I do not think anybody is trying to impose, through this legislation or even in the discussions behind this legislation, any more compliance requirements on business. The issue that I have, though, is about what that leaves behind. Where is the accountability? Where is the assurance that there is tax being paid and that there is compliance with New Zealand’s law in all of those other ways?

We did have that discussion at the select committee, and I am not resiling from that. I know that questions were asked around this. I do recall the figure of $30 million being used as the cut-off point for the size of the company. I see one of the officials shaking his head. What would be good is if the Minister could clarify for the Committee what the definition of a small New Zealand branch of a company is —I could not find it in my papers tonight when I was rifling through them—and what the criteria and the analysis that lie behind that are. Do we know how many of these are operating in New Zealand?

I think I used the example in the select committee—I realise this is probably not applicable—of a kind of Compass Group situation. For those of you in the Chamber—and you all should know what Compass Group is—it is the organisation that is currently providing hospital food and Meals on Wheels, particularly in my area of the Southern District Health Board. It is a multinational company. It is based in the UK, but it is very good at, shall we say, tax fluidity in the way that it manages its tax requirements. Questions have been raised about that before.

We are concerned, I guess, about this particular clause in the bill, as to what potential impact the requirement not to have an audit has on compliance with New Zealand’s laws, rules, and regulations? I think that is a fair enough question to ask. It received quite a lot of debate in the select committee, and I think the officials were moved to give us a special report on that in their second departmental report.

It also related to entity neutrality. They told us that there is a difference in the treatment of large overseas companies depending on whether they are small New Zealand businesses, a branch of the overseas company, or a New Zealand - registered subsidiary of the overseas company. So does that mean that the New Zealand - registered subsidiary of the overseas company does have to provide an audit, but the branch of an overseas company does not? This disparity may encourage overseas companies to establish a New Zealand subsidiary or to restructure their New Zealand business by converting a branch into a company.

I am all for incentives, but if it means that there are fewer “eyes on”—given the issues around the Panama Papers and shelf companies and the ways that New Zealand can be used for purposes that are not necessarily in our best interests—I think there are some questions to be answered around this part of the bill. I hope the Minister will take a call.

RINO TIRIKATENE (Labour—Te Tai Tonga): I am pleased to take a call in the Committee stage of the Regulatory Systems (Commercial Matters) Amendment Bill. We are on Part 1?

Hon Ruth Dyson: We are.

RINO TIRIKATENE: We are on Part 1—great. I can understand the intent behind the enactment of a lot of amendments to a whole lot of commercial legislation. Certainly, there is a voluminous amount of legislation that applies to companies—commercial entities transacting business.

But what I want to focus on is that I understand the purpose of the bill is to reduce the chance of regulatory failure and unintended consequences that harm the well-being of New Zealanders. Just from looking at the provisions in Part 1, particularly under the Companies Act, I would have thought that a lot of the provisions in the Companies Act—a company has a constitution whereby, basically, it can make its own rules to get around some of the positive obligations that are imposed under the Companies Act. There is an option there that a company’s constitution can modify them, and shareholders within their own business, who run their own business, can make their own rules. It suits them. I would have thought that the Companies Act—I know it has been going for well over 20 years now, nearly 25 years; I think it came into effect in 1993. Companies have, obviously, been used to putting in place constitutions, making their own arrangements, and working around the statutory provisions. This is basic stuff. Any basic constitutional lawyer will print off a standard constitution.

So, just from looking at some of these provisions, it seems that there are positive obligations that used to be imposed on companies that are now being taken away. I am just thinking: where is the balance? For 25 years, I guess, or close to 25 years, companies have been operating—no problem—with many of these provisions. Now, all in the name of expediency, certain of these provisions have been taken away, watered down within Part 1, with various reporting obligations or the holding of meetings and the like.

But we must always keep the interests of the shareholders in mind. Many shareholders in companies can be overlooked, particularly small shareholders, when you are looking at major companies or companies that are closely held, but there are some minority interests. Just looking at the provisions, I think we need to be very careful that in the haste to make everything quicker, more efficient, we do not overlook some fundamental rights that shareholders have within a company. I wanted to make that point. I hope that the Minister has given this a thorough check—that OK, if we are going to do away with certain obligations or duties that have been imposed on directors or companies, it is not at the expense of shareholders and their interests, particularly the minority shareholders, and that there can be a pressure imposed by major shareholders or by other interests, at the expense of the minor shareholders. So I just wanted to draw attention to that.

The other matter that I wanted to raise, when I was just having a cursory glance at the obligations around removing an overseas company, is this: as I understand it, an overseas company is exactly that—an overseas company that operates in New Zealand, conducts business in New Zealand, but not as a New Zealand - based subsidiary. They just register themselves as an overseas business or an overseas company so it is a lot simpler for them to just set up shop and conduct business in New Zealand.

With regard to an overseas company, I am just looking through the provisions of the section about the registrar being satisfied that an overseas business is no longer operating in New Zealand. I would ask the Minister in the chair, the Hon Amy Adams, whether she could elaborate a bit further as to what would give the registrar sufficient grounds, I guess, to remove that overseas company from the register. Is it the fact that they do not reply to any mail? Is it the fact that they do not have a telephone or up-to-date address? Given the fact that a lot of entities in New Zealand just operate under the radar, I guess, what grounds would the registrar require to indeed go ahead and remove that company from the register?

The other point that I wanted to make in relation to overseas companies is the removal of the requirement for the registrar to provide public notice that the registrar intends to remove that company from the register. I would imagine that even if the registrar has formed that opinion, that “This business ceases to exist as far as I am aware; therefore, I am just going to go ahead and remove it. I am so satisfied that I do not need to give notice.”, I still think there needs to be some safeguards in place and there needs to be some public notice in place, because, for all we know, that business could still be operating. It may not be a bona fide business, but it could be operating in New Zealand. Therefore, the public of New Zealand may still be doing business with that overseas company and the registrar may not know about it.

That is why, I guess, there has been a longstanding provision that there is a requirement to give public notice. All that would require is just a notice in the newspaper, or however they do it these days, just to say “I intend to remove XYZ Overseas Company Ltd from the register on such and such a date.”, I would imagine. I would say that that safeguard needs to be put in place purely to protect the public—to protect mums and dads or whoever may be transacting business. This business may be absolutely insolvent. They may be crooks. They may not actually be conducting legal business in New Zealand but they could be duping a lot of the public of New Zealand.

Those are the two points I would like to make to the Minister. How robust are the systems and the procedures that the registrar has to go through to convince himself or herself that this overseas company is no longer operating in New Zealand? And, secondly, why remove the requirement for public notice, because an overseas company may still be transacting business, and therefore it may just require an extra little procedural matter for the registrar to work through to provide that public notice, because, you never know, there may be members of the public out there who are indeed doing business with that company?

That all comes back to the fundamental purpose of this bill. The fundamental purpose of the bill is to reduce unintended consequences that harm the well-being of New Zealanders. Those are two examples whereby we must consider the well-being of New Zealanders. We must consider the well-being of not just the big boys, not just the big companies in town, not just the big overseas guys who can afford the big flash accountants and lawyers, but also the little guy—the little shareholder, the little person who holds a smaller interest. They need to be looked after as well. I just wanted to raise those particular matters because I think they are pertinent to the intent of the bill and we want to make sure that we get the balance right. I just wanted to raise those points for the Minister’s consideration.

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

The CHAIRPERSON (Hon Chester Borrows): Mr Coates has been seeking a call for some time. I call Barry Coates.

BARRY COATES (Green): I rise to speak to Part 1 of the Regulatory Systems (Commercial Matters) Amendment Bill. I was pleased to be part of the Commerce Committee, which considered this bill. My thanks go to the chair and members of the committee for good discussions. I think we made some improvements to the bill. I wish to comment on those and to raise a couple of questions. Firstly, the bill covers 16 different Acts, so it obviously has a wide scope. I am not going to comment on all the provisions that relate to those.

I would note, by way of starting, that the Green Party is a strong supporter of legislation that is about smart regulation. We want regulation for compliance that is relevant, fit for purpose, effective, and, particularly, not onerous. We believe that this bill has some welcome changes that will remove compliance obligations on small companies. From that perspective, we are broadly supportive. We particularly support the levies under the Commerce Act.

Under the Companies Act, there are a number of provisions that I want to just briefly comment on. The “Annual meetings of shareholders” provision seems to us to help with compliance on that, where companies would choose to truncate their annual meetings for good reason. Under clause 21, there has already been commentary on the audit requirements. We think it is sound that the branches of large overseas companies would be aligned with the treatment of subsidiaries for equal treatment. We would have a question on that, though. If there were concerns raised about branches of overseas companies, for example with regard to transfer pricing provisions, whether or not audit requirements could then be required by, for example, the Inland Revenue Department. The question to the Minister in the chair, Amy Adams, is about how that would work and whether such a requirement for audits for small companies would override the provisions of clause 21 in the bill. It seems to us that to treat small branches of overseas companies equivalently with subsidiaries is a sound way forward, but we do not want to see that becoming a way to lessen the accountability of overseas companies with regard to New Zealand’s tax provisions in particular.

There was a lot of discussion in the select committee on netting in clauses 27 and 28. After some discussion, we came to agreement on netting. I see that clause 2 of the bill allows for swift passage of the netting provisions, which, as we understand, are required, basically, to help New Zealand conform to the provisions internationally that relate to reforms of derivative trading. I would like to pose a question to the Minister around netting and whether or not the netting provisions in the bill will reflect international best practice or whether further subsequent changes will be required.

A particular concern about clauses 92 to 94 related to financial services providers. Previously, the Minister talked about the register of financial services providers as ensuring the integrity of providers. I understand that there have been a number of complaints against financial services companies on the register. My understanding is that some time ago there were 340 complaints from 83 different countries relating to financial services providers on the New Zealand register. My question to the Minister with regard to these provisions, which, I gather, include deregistering a provider if they are not a member of a dispute settlement scheme—my concern is that that change does not go nearly far enough. I understand that there is a consultation paper out, but my question to the Minister is: why could this opportunity within this bill not be taken to strengthen the integrity of this register? The impression is given by financial services providers that fulfil the very procedural requirements of the register that somehow they have gained approval from the New Zealand authorities for being a member of the register, whereas, in fact, that is by no means the case. So my question to the Minister, then, is: why was this opportunity not taken to strengthen the integrity of New Zealand’s reputation internationally with regard to the operation of the financial service providers register?

With regard to other clauses in Part 1 of the bill that we are considering, we are certainly in support of clauses 95 to 100 on the Friendly Societies and Credit Unions Act, and also the advice under the New Zealand Superannuation and Retirement Income Act, that the duty should also promote education about financial decisions and financial capability. That seems very sound, and we fully support it. So with those three questions, the Green Party is broadly in support of the bill. We have these concerns, and we look forward to hearing the resolution of these concerns on Part 1. Thank you.

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

Motion agreed to.

The question was put that the amendment set out on Supplementary Order Paper 276 in the name of David Seymour to insert new subpart 3A be agreed to.

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

Ayes 49

New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1.

Noes 72

New Zealand National 59; New Zealand First 12; United Future 1.

Amendment not agreed to.

Part 1 agreed to.

Part 2 agreed to without debate.

Part 3 Energy and resources

Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): Mr Speaker—

Hon Ruth Dyson: Mr Chairman.

Hon DAMIEN O’CONNOR: Mr Chairman—sorry, Mr Chairman. I apologise for that.

The CHAIRPERSON (Hon Chester Borrows): Elevation is fine.

Hon DAMIEN O’CONNOR: I apologise. I was not a member of the Commerce Committee, but it is a very important piece of legislation. I was reading through Part 1. Unfortunately, I did not get a chance to speak to that, but I accept your judgment, Mr Chairman—

The CHAIRPERSON (Hon Chester Borrows): I thank you for that.

Hon DAMIEN O’CONNOR: —and appreciate that. Part 3A, inserted by clause 91, as we are talking about—“Transitional provisions relating to Regulatory Systems (Commercial Matters) Amendment Act”—to most people out there, I guess, unless you are in the commercial world, it probably is a bit like watching grass grow or paint dry here. There are a number of issues in here, and I have the Financial Markets Authority—I have to say that I have taken issue with it on numerous occasions, because I do not think it does a very good job in general terms. I think that a country that has, in 1 year, gone from having 37 percent of its private sector economy in the hands of foreigners to 47 percent last year, by calculations, means that we have got a number of problems across our regulatory regime. I would suggest that most Kiwis would be wanting to see more of the private sector in New Zealand hands and that this passage of legislation will indeed protect the rights of New Zealanders.

I was disturbed in previous parts—Part 1, there—that the right not have an annual general meeting was passed through. I cannot understand that myself, but none the less, that was one of many changes that we just kind of debated and moved through. Financial services providers—we have had numerous issues with those providers. I am not sure whether we should feel better—

The CHAIRPERSON (Hon Chester Borrows): Order! I wonder whether the speaker can just indicate—

Hon DAMIEN O’CONNOR: Part 3A.

The CHAIRPERSON (Hon Chester Borrows): Part 3A? [Interruption]

Hon DAMIEN O’CONNOR: No, no.

The CHAIRPERSON (Hon Chester Borrows): No? This is Part 3. Actually, ironically, it does have a lot to do with the distribution of gas, which the member seems to be familiar with, but I cannot see what he is talking about. Which clause?

Hon Ruth Dyson: 131.

Hon DAMIEN O’CONNOR: 131? No, I must have the wrong one there. Mr Chairman, I would appreciate it if I could get another call later in the debate. That would be wonderful. I will just get a couple of other—

The CHAIRPERSON (Hon Chester Borrows): The member can seek a call, but he should recall that life is not always fair.

Hon DAMIEN O’CONNOR: I appreciate the judgment of the Chair. I will pass over to one of my colleagues.

Part 3 agreed to.

Part 4 Building and housing

CLARE CURRAN (Labour—Dunedin South): Well, here we come to this part of the bill. The reason why we are all standing here tonight debating the Committee stage of this bill, so that it can get passed, is that Part 4 of this bill contains clauses—I think clauses 138 and 139, if I am correct—that put in place the system for the retention framework for moneys to be put in place by lead contractors when a big construction is under way, so that there is protection for the contractors who sit behind the lead contractor and for the subcontractors if that lead contractor goes bust.

If we could cast our minds back to, I think it was, Waitangi Day 2013, when Mainzeal—and I am sure that name is etched in our brains—began that collapse that had such a huge impact on the construction industry in our country. I think, off the top of my head, it was around $161 million or $163 million owing that that collapse resulted in. We are not just talking about theoretical figures here; we are talking about contractors who were locked out, with their tools inside, following that collapse, who lost their livelihoods, who lost their tools of trade because they could not get in to retrieve them.

As someone who has sat on the Commerce Committee, I think, for pretty much the longest time in the last 8 and a bit years, I remember submitters coming before the select committee in 2014-15 on the Construction Contracts Amendment Bill, which is now an Act, who talked in real terms about the cost of those collapses to them and to their livelihoods. Let us hope that we all remember who one of the directors of that Mainzeal company was, and that was Jenny Shipley. There has been an inquiry into that collapse, which has gone on and on, and as a result we had the Construction Contracts Amendment Act passed in 2015. Now we have before us today, in this debate in the Committee, in this bill, at clause 138, the process through which the moneys in a retention scheme can be collected.

Thank you, officials, for the work that you did on this. It was very thorough. There were several submissions on this, and they were very passionate submissions, can I say. They were submissions from the Registered Master Builders Federation of New Zealand and Contractors New Zealand, or whatever they are called—

Phil Twyford: Civil Contractors.

CLARE CURRAN: —Civil Contractors New Zealand Inc.—who very passionately argued that the proposal in the bill was good and could we please get on with it, but their concern was that it may disadvantage the industry and they may have to come up for extra money once this scheme is actually enacted. So the bill that came back to the House actually has two methods of collecting that retention money, protecting that retention money—so it provides more flexibility—in ways other than holding cash.

I am hoping to take a call again in this debate, because this is such an important part of this bill. It is why we have to pass this bill this week, in order for this clause to come into effect.

PHIL TWYFORD (Labour—Te Atatū): I just want to follow on from my colleague Clare Curran, talking about, in Part 4, the provisions in this bill around retentions. There are two main things that the bill does in relation to retentions. The first is about the timing of the retentions, and the bill clarifies that the new provisions inserted by the Construction Contracts Amendment Act that would require retentions to be held in trust for those for whom the money is being held would not apply to contracts that were in place prior to 31 March of this year. That is the timing issue that Clare Curran was referring to.

The other main provision, really, is clarification, or perhaps an expansion, of the definition of the financial instruments that can be used to meet the terms of the retentions requirements. The wording in the Construction Contracts Amendment Act talks about cash and cash equivalents, and what this bill does is it makes it clear that other insurance instruments and other bonds and other financial instruments can be used.

To kind of understand the importance of this, it is really critical, I think, for people to realise that the nature of the construction industry in New Zealand is this one of cascading contracting relationships and the devolution of risk down the food chain. The problem with that is that the poor subcontractor at the bottom of the chain copped far too much of the risk, and certainly that was the case with the loss of retentions when a company went belly up. Clare Curran referred to the Mainzeal case, but there are many in the recent history of the construction industry.

Probably the largest one most recently was Stonewood Homes, which left a lot of subcontractors affected. So, basically, what the Construction Contracts Amendment Act requires is that retention monies withheld under these contracts are to be held in trust and that that obligation applies only to contracts entered into or renewed on or after 31 March. I remember the debate we had in the House here about the Construction Contracts Amendment Bill. It is a shame that Clayton Cosgrove is not here, because, actually, he is the member of this House who was really responsible for the retentions policy—for these provisions being inserted into the legislation after the Mainzeal crash. The other thing is that that obligation will protect the retention money for the benefit of contractors and subcontractors rather than allow it to be used as working capital.

The submissions that were made to the select committee on the nature of the assets—basically, the original policy intention was that liquid assets would give payers the flexibility to protect retention money in ways other than in holding cash, but a conservative interpretation of the terminology meant that, essentially, it was cash and cash equivalents only. Quite a few different industry stakeholders came forward, including contractors and subcontractors, banks and accounting firms and legal firms, and said that we needed a more expansive definition and that without that many of the firms would in fact have to borrow money and hold significant amounts of cash in order to meet the requirements for this, and that would add cost to their businesses and generally be an impost on the efficiency of those firms. That would obviously be expensive and it would kind of add cost to construction projects and, ultimately, be a cost to the customer.

So, yes, those are the main things. We support these provisions. We have been big supporters of the retentions policy, and these two things will tidy up two loose ends.

The CHAIRPERSON (Hon Chester Borrows): Before I give the member the call, I just want to pause for a little bit of in-service training. The Committee stage of a bill is where members refer to submissions that were made before the select committee and draw out questions for the Minister in the chair, stating the case that submitters have made and adding to this Committee stage. That is what this is about. The speeches that we have had so far are second and third reading speeches in many ways. They are telling the public, or maybe telling the Committee, what the bill does, what it might do, and applying various scenarios and anecdotes as to how that might be effected. That has got nothing to do with the Committee stage.

The last speaker had 120 seconds left before he was able to tell us about a submission, and the previous one had 47 seconds left before she was able to refer to any submission before the select committee. The Committee stage is about relating submissions that were made to the select committee and the points that were raised in respect of that and how they apply to the clause under debate, or asking the Minister specific questions. I look forward to that from Mr Kris Faafoi.

KRIS FAAFOI (Labour—Mana): Thank you for your guidance, Mr Chair, on the Committee stage of this debate. I do want to speak specifically to clause 138 and the new subsection that is inserted by the select committee. We have heard the benefits of what has been transacted in Part 4 in terms of retentions, but I do want to point specifically to the date that is in new subsection (3), inserted by clause 138, which is 31 March 2017. The context is that the House sent this bill to the Commerce Committee with the usual 6-month period for the select committee to have its deliberations, hear submissions—I understand the bill was presented on 18 October 2016. Six months from that date would have taken us to mid-April 2017, so that would be in about a month’s time.

The issue I have with that is the process where a select committee would have had to report back to this House after the legislation was actually required to be enacted. So the situation that the Commerce Committee was put in was that we had a report-back date of mid-April, and these changes needed to be in force by 31 March. Now, anyone at home who is doing the maths knows that is simply not going to work. A submission made to us by the officials—and I acknowledge them in the Chamber today—was that that time frame did not and could not work for what was expected from the industry. So, in what I thought was a pretty poor and slack piece of planning and parliamentary process, we as a select committee—and I acknowledge that I came quite late to the select committee process during this piece of legislation—were asked to truncate our select committee report period.

Instead of the 6 months, we were given, essentially, 5 months and 2 weeks. That might not excite too many people at home, but I think that in terms of parliamentary process, when a Minister sends a bill to a select committee, if they want to truncate that select committee process period, they have to seek leave of this House, and it is a debatable motion. We can stand up in this House and say: “Well, we do not think that truncating that very important public scrutiny period under a select committee is warranted in this instance.” It is a process issue, but the Minister who presented the bill at the time could have said: “Look, we need this in by 31 March; technically, 6 months is going to take us beyond that. If you guys haven’t got a massive problem with it—it’s only 2 weeks—then we can live with that as long as you can.” But that did not happen.

I think we got to the silly stage where I think that—and I do not want to get the officials into any trouble—officials were being blamed for the fact that this had to happen faster than what was prescribed by normal parliamentary practice. So I would like to ask the Minister in the chair, Jonathan Coleman: how did this happen? Because it is pretty poor planning, I think, when you have a piece of legislation that is pretty critical to be passed, enacted, and ready to go on 31 March, and the report-back date says 2 or 3 weeks after that. It is not very good at all. Someone obviously does not have a calendar or is not planning things correctly when you get to the stage where, in the very process that is meant to be 6 months, you get the select committee being asked to truncate the process altogether.

I think, to put it mildly and diplomatically, I put up a case that it was poor practice, and I think that most members of the Commerce Committee agreed that it was not ideal. I do not think that select committees should be put in that position—after the fact, to be told “Well, we need this back by a certain date, so whatever you’re doing, you have to shorten the process.” and be given, essentially, less time for consideration and submissions on a bill, to make sure that something is passed.

We have no problem with what is being suggested in Part 4. I think it is pretty common sense. I think it is probably well overdue, but, in terms of what the deadline is for Part 4 in terms of the construction industry, which is ready and waiting for this to be passed, the parliamentary process was poor. I think the select committee was put under pressure to come back earlier than it was asked to, and if the Minister in the chair or someone responsible for the bill can explain as to why that would happen, I think we deserve an answer.

The CHAIRPERSON (Hon Chester Borrows): I call James Wood.

Hon Member: Michael Wood.

The CHAIRPERSON (Hon Chester Borrows): Michael Wood—sorry.

MICHAEL WOOD (Labour—Mt Roskill): I am seized by the quality and value of some of the submissions that are before us, and I would like to take a moment to speak to some of those. There are a large—well, not a large number, but a number of significant submissions on this bill. The ones that I want to focus on, in particular, are the submissions that were given by Civil Contractors New Zealand, the New Zealand Building Industry Federation, and the Registered Master Builders Association of New Zealand, and these relate particularly to clauses 138 through 144, dealing primarily with the use of retention money.

We have heard previously from colleagues about the importance of getting this area right due to the structure of the construction industry in our country, in which we have contractors and subcontractors taking on a potentially significant amount of risk in respect of this issue. We have made legislative progress, and this is a tidying-up of the previous legislative progress we have made in this area.

There are two quite important points that have been raised by submitters in respect of this section that I do not think have been satisfactorily answered so far, and I would like to get some clarification on them from the Minister in the chair, Jonathan Coleman. Firstly, there is the question of de minimis. There is, I think, consensus around the House about the direction that we are taking here in respect of retention payments, about having a system where we have a trust obligation apply to ensure that there is not undue risk falling on contractors and subcontractors—and, actually, let us not forget the workers who often work under those contractors and subcontractors, whose livelihoods are at risk.

But the question of de minimis has, correctly, been raised by the submitters, and that is, effectively: is there a threshold below which it starts to become a little bit silly? Obviously, if we are talking about large amounts of money between contractors and subcontractors, I think everyone in this House would want to make sure that there is a degree of security in place through the use of holding that retention payment in trust so that we know that it is going to go to the people to whom it is owed at the end of the job, once defects, liabilities, and other things have been completed. But if we are talking about, I do not know, a $500 payment, perhaps between a contractor and a subcontractor who maybe have a good and long-standing relationship, are we actually, potentially, creating a little bit too much bureaucracy and, actually, to some extent, defeating some of the stated purposes of this bill—if we go back to talking about the effectiveness and the efficiency of the regulatory system?

Of course, that is the kind of balance we are always trying to strike in these kinds of bills. We want public-good regulation to ensure that people are looked after, but we do not want it to become overly onerous. So the question of de minimis goes straight to that. If it is a small amount of money, are we potentially overcooking it a little bit by not having a de minimis requirement here? The feedback that has come back is: “No, we do not need to have that.” It would just be good to hear from the Minister what sort of analysis has been done about, potentially, other regimes where there may be a de minimis requirement in place and whether there might be some value in looking at that to make sure that the system is as efficient as possible.

The other point I want to touch on, which came up in the submissions, is the question—let me just find my notes here—of money, effectively, coming down the chain; money that is coming down the chain, potentially, from a contractor down to subcontractors, and this chain can be several deep. The question raised in the submission was whether that retention money can potentially be counted on as money that can then be paid on down to the next subcontractor further down the train. The reason I ask this question is that the departmental advice that came back struck me as rather vague—it said: “Well, no, not as a general rule.” That is the advice that has come back, and it advised submitters to seek legal advice. Well, this is a process of making the law; that is what this House does. My question to the Minister, really, is: is that good enough advice, and should it not be the case that, through the process that we are going through now, we can give to the sector some greater clarity about that question?

I do not necessarily have a firm view on that question. It may be that you say that, actually, that does not meet the requirements of money held in trust for it to be passed from one contractor down to a subcontractor, and so on. But it is a question that has been asked, and it seems to me that the response that has been given does not provide the clarity that we should expect. It will be good to hear from the Minister on that point.

Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): Thank you, Mr Chairman—I am focusing on the right part of the bill this time. I appreciate that the Government is attempting here, of course, to put in place something that is very sound in policy—that is, that there should be some ultimate payment for sign-off, I guess, when a contract is complete. One of the things that I struggle to see in here, of course, is the threshold at which that sign-off should occur.

One of the still unresolved issues across the whole of the building industry is that of quality. In fact, I had a meeting this afternoon, actually, with the Plumbers, Gasfitters and Drainlayers Board and a representative from the electricians, and from the builders themselves, saying that the regimes they have—and the plumbers themselves are getting, I think, to a good space. But, with electricians and builders, they are not yet in a space where they can guarantee that a house or an apartment or whatever, when finished, is actually up to standard—for a whole lot of reasons.

In spite of the best attempts, I guess, by councils—the territorial local authorities—and industry scrutinising themselves, the fact is that we do not have legislation that backs that up to the point where we can guarantee that when this withheld payment—the retention—gets paid over, on completion of the contracts, that actually all of the parties will be satisfied. So I support the retentions provision in this bill, but if we think that is going to solve a lot of issues, we are kidding ourselves.

I think there will ultimately be debates that arise from—well, the work might have been done but to what standard? And if it lasts for 1 year, is that sufficient for a complete job? Or, indeed, as some are saying, a 10-year work guarantee on a property—and it should be that. In fact, it should be 20 years. If you went to Europe, it would be a 30-year guarantee on the quality of workmanship—and the fact that when the contracts are completed between the parties, then everyone has done what they are contracted to do and have done it to the standard that protects, ultimately, the person who is purchasing the property or paying the money for it.

So I cannot see anything in here that clarifies the threshold beyond which the parties will have to reach—that is, doing the work is OK, but you have to do the work to a certain standard, and at that time the retention money will be paid over, as it should be for a job well done. So I acknowledge—and I think one of my colleagues acknowledged—the Hon Clayton Cosgrove for his work in bringing this in. I think it has been an innovative policy, but ensuring that the money is not taken—and, with all the best intentions of Parliament, there are too many examples of where good ideas end up with money being rorted or with people running away with what is other people’s money, in effect.

So I say that this provision is a good one in principle, but the unresolved issue is the one of what quality of work should be required before the final sign-off on any project occurs. Is it from the person paying for the house, or is it the company that is contracted to build the house, for example, or is it one of the sub-contractors to one of their subbies? There are a whole lot of layers in the building industry. As was pointed out to me this afternoon, they all operate with different levels of accountability and scrutiny, and some of them are not very good, I have to say. I think it is something that the Government, and I am sure the next Labour Government after September, will look into—

Hon Amy Adams: 2023.

Hon DAMIEN O’CONNOR: —because it is urgently needed. Unlike the Minister over there, we believe that people buying houses should know that they are getting what they have paid for. The deregulation under the National Government in the 1990s has seen the leaky homes catastrophe—there is no other word for it—where tens of thousands of New Zealanders lost billions of dollars in assets that they purchased. They are worth considerably less because they are, simply, not up to standard. And we have to, in Opposition, ensure that every piece of legislation related to this improves the situation and does not simply exacerbate it.

In our enthusiasm to pass this legislation through and facilitate this, we cannot be naive enough to believe that by changing contract law and the retentions—and, I guess, amending the Construction Contracts Act 2002—we are now going to be all sorted. There are many, many things to be done, and I seek from the Minister and other members over there some assurance that they will look at that issue of threshold and quality. I know there are only a few more months left of their tenure, but it would be something to offer the people of New Zealand as they go to the election, because they have not done anything. We know of situations in Auckland, in particular, where substandard building is occurring every single day, with little or no scrutiny.

So although we have sorted out, or we are sorting out, the method of final payment—it is right that someone should withhold payment until the completion of a job, and it is right that when it is completed to a standard, that payment should be made and the money should not go missing. That is what we are doing here. But, ultimately, the threshold has not been clarified in law, and in the areas of plumbing and gasfitting, and the provision of electricity through a house—and we have now got, of course, issues of IT and fibre-optic and very, very technical issues around housing—there will need to be standards set there so the people who pay substantial amounts of money in the belief they are getting a good system simply do not get ripped off. I say that we support the progress of this bill, but there is still a long way to go in the area of housing for New Zealanders.

CLARE CURRAN (Labour—Dunedin South): I will just take another short call on Part 4 of this bill. Before I start, can I just clarify and correct a comment I made in my earlier contribution, which was that the money owed from the Mainzeal collapse was around $161 million to $163 million—it was in fact $153 million. It is important to get that right. I have also taken on board the Chair’s comments around the questions that need to be asked and the reference to submissions.

Can I pose a question to the Minister in the chair, Jonathan Coleman, around the definition of “liquid assets” and what his analysis is of the quantum of liquid assets that—because I note, and I am referring here to the submission from Civil Contractors New Zealand, where it said that “The current requirements mean that a very significant amount of liquid assets ($250 million according to the 2014 MBIE Regulatory Impact Statement or a minimum of $600 million according to recent industry estimates) will be required to be held by clients and contractors when the new regime takes effect on 31 March 2017.”

I think it would be helpful for the Committee of the whole House if the Minister was able to use his vast knowledge of this particular issue and actually provide some clarity to the Committee around what sort of quantum we are talking about, because there is a big difference between $250 million and $600 million. I think that is probably quite important. So I am asking the Minister whether he can actually address that question before we end this part in the Committee. I do think it is also important, because we have touched on many things in this part of the bill—and thanks to my colleague Kris Faafoi, who spelt out the difficulties that the Commerce Committee had in trying to grapple with the process part of it.

It is really important to note that the 31 March date—which is next Friday; it is not this Friday but next Friday—which is so important, and which is why we must pass all of these bills this week, is not retrospective. The new regime around retentions, which relates to the Act passed last year that amended the Construction Contracts Act—that retention process that has been put in place, where retention moneys have to be kept in trust or through using that other instrument, can apply only from 31 March 2017. When we were before the select committee, we heard from the likes of Civil Contractors New Zealand, which virtually begged us to get this legislation through as quickly as possible so that we would have these protections in place.

We are supporting this, but I think it is important, too, for the Committee to hear how this process played out, why it played out, and what the cost has been to New Zealand and to the construction industry around this, and why it is so important that we get a retention process in place that actually works. I am concerned. Having read through this again tonight, I have been thinking: “OK, so how are we going to measure that it’s working? Is it by the fact that there are fewer collapses?”. What kind of monitoring or involvement is actually going to be had with the industry to ensure that these mechanisms for the retention of moneys are actually being effective, and that is through the trust process and through the other instruments such as conversion to bonds. We are talking about multimillion-dollar contracts. We must get this right. The construction industry is important to New Zealand.

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

Motion agreed to.

Part 4 agreed to.

Schedule 1AA agreed to.

Schedule 1 agreed to.

Schedule 1A agreed to.

Schedule 2 agreed to.

Clauses 1 and 2

CLARE CURRAN (Labour—Dunedin South): I will use my dulcet tones again tonight on this bill. I just take a short call, because I want to make a point. The point is that earlier in the debate on the previous bill, which is part of this omnibus legislation, the building and housing bill, the Minister in the chair at the time, Michael Woodhouse, got to his feet very helpfully to give some commentary and some response, which is always good. It is always good to get a Minister who is actually prepared to respond in the Committee stage of the House, because, for those listening at home, it is actually an important part of the debate. But what the Minster said was that this is an omnibus bill. It is a step above a statutes amendment bill, so therefore it does not deal with matters of substance, and he said that those matters of substance are being considered in a separate review—this was in relation to the previous bill, the Regulatory Systems (Building and Housing) Amendment Bill.

However, what we have just been doing in this bill, particularly in Part 4, is, I put to you, debating matters of absolute substance. I do want to acknowledge the work that officials have done on this: the fact that they went away and came back, listened to the submitters, and went away and came back with a revised process that was trying to meet the needs of industry and to be responsible in response to some major collapses—financial collapses—in our country. Really, you cannot say that is not substance, so therefore I question what the logic was behind what the Minister in the chair previously was on about when he said that an omnibus bill does not deal with matters of substance; it is only a step above a statutes amendment bill. Clearly, maybe he had not read it or had not done any of the work.

I think it is an important point to make. We have got another bill to come, another bill to have a debate on, and I am sure there are some matters of substance in there that my colleagues will be drawing out, because, as you would have noticed, all the work is going on on this side of the Chamber in terms of actually doing the work, reading the bill, asking the questions, and having the debates. We know that the reason this bill is coming before this House this week and needs to get passed is so that that retention scheme can be put in place by 31 March, which is at the end of next week.

I just want to make the point that when there is commentary by Ministers on bills such as this that they do address the issues of substance. We had questions around substance. Very few of them were answered, and I do not think it is good practice for them just to get flicked off as being “not relevant, not relevant, out of scope”. I do question why we get the answer that issues of policy are out of scope in bills such as this. We have raised a number of them tonight in this debate, and I think that that should be on the record.

Clause 1 agreed to.

Clause 2 agreed to.

Bill to be reported without amendment presently.

Bills

Regulatory Systems (Workplace Relations) Amendment Bill

In Committee

Part 1 Employment Relations Act 2000

IAIN LEES-GALLOWAY (Labour—Palmerston North): It is a pleasure to speak to Part 1 of the Regulatory Systems (Workplace Relations) Amendment Bill, which deals with amendments to the Employment Relations Act. There are two broad aspects to the changes that are made by this part to the Employment Relations Act. The first is the change that was included in the original draft of the bill, the original version of the bill that we considered at the first reading, and the second are the changes that were made at the Transport and Industrial Relations Committee, which were further changes that were identified by officials and recommended to the select committee.

I want to deal, firstly, with the original change and that is the change contained in clause 4 of this bill, which amends section 142W of the Employment Relations Act—and this relates to the involvement in breaches. I will come to the substance, the real purpose, of this amendment in a moment, but, first, I want to commend the drafting of this clause, which refers to companies, partnerships, limited partnerships, or sole traders as entities rather than as persons. This is because we are dealing with people occupying a position within an entity and we get ourselves very tied up in knots when we start talking about people occupying a position within a person.

I could state it no better than the actual version of this section in the original Act, which says in subsection (2): “However, if the person in breach is a company, partnership, limited partnership, or sole trader, a person holding a position in relation to the person in breach may be treated as a person involved in a breach only if the person is an officer of the person in breach.”, which is bloody confusing—I think is the technical term for that. So it is fantastic to see that in this new section 142W, in clause 4, we now talk about entities. So we can talk about a company, partnership, or limited partnership, or sole trader being an entity, and a person being an actual human being—a person who holds a role within that entity. I really do commend that drafting and I hope we see that nomenclature used in further legislation in the future.

The actual change—the reason for the change offered in clause 4—is to do with an inadvertent restriction in the current drafting, as is often the case with these regulatory systems amendment bills, making changes to tidy up inadvertent consequences of the current drafting. This has to do with the scope in terms of whom the policy relating to breaches actually applies to. The original policy was intended to include a director of the employer or any of its employees, as well as any other third party unrelated to the employer, such as an accountancy or legal firm under contract with the employer. Subsections (2) and (3) then impose certain restrictions on the applicability of subsection (1). The policy intent was to ensure that such actions targeted the decision makers, the offices of the employer, and exclude the administrative staff, who have little or no influence over the decisions that are made. So the whole point of the original legislation was to ensure that the people who were genuinely responsible for decisions made in the company would be those who could be held responsible for breaches of the Act. The current drafting is potentially a little bit too broad, and potentially includes people who have no real decision-making power—who have no significant decision-making authority—in an organisation or entity and could potentially be drawn in and could be found to be in breach of the Act, although that was not the original policy intent.

So this is a good piece of tidying up that ensures that the legislation operates effectively and appropriately. The other change included in Part 1 is the change that is now recommended in new clauses 3A and 3B, which were not included in the original draft of the legislation but were brought to the attention of the select committee by officials. This refers to cross-referencing within the Employment Relations Act. It is actually a case where cross-referencing potentially has a real impact on people who are seeking redress under the Employment Relations Act.

So as a result of changes made by the Employment Standards Legislation Bill—which was the bill that dealt with, amongst other things, zero hour contracts—there are now three additional grounds on which an employee may pursue a personal grievance despite being under a 90-day trial period. Those three grounds are that the employee has been treated adversely for refusing to perform work in the absence of a valid availability provision, which is relating to the changes we made to eliminate zero-hour contracts; the employee’s employer “has failed to pay [the employee] the compensation to which they are entitled when a shift has been cancelled”; and the employee’s employer “has treated [the employee] adversely for a prohibited health and safety reason or has contravened section 92 of the Health and Safety at Work Act 2015.

Those additional grounds for taking a personal grievance despite being under a 90-day trial period are contained in section 103(1)(i) through to 103(1)(j) of the Employment Relations Act. However, current section 67B(3), which allows employees to take a personal grievance despite being on a trial period relates only to section 103(1)(b) through (h), so it does not include paragraphs (i) through to (j). There is potential there—it is small but there is potential—for employees to have their ability to take a personal grievance under those grounds diminished as a result of that incorrect cross-referencing between those two different sections of the Act.

Because there was the potential for those to be diminished we had a conversation at the select committee about whether this provision, clauses 3A and 3B in Part 1, should in fact be applied retrospectively. However, officials assured us that because employees have always had the ability to take a personal grievance on the grounds of unjustified dismissal—which I think is contained in section 103(1)(a) of the Act—should an employee wish to take a personal grievance under the three additional grounds, essentially everything is covered by the ability to take a personal grievance for unjustified dismissal.

Just to put it on record once again, in the unlikely event that the judiciary, the Employment Relations Authority, finds itself dealing with a case where an employee has taken a personal grievance for one of those three grounds whilst on a trial period, let it be absolutely clear that it is Parliament’s intention that from the moment those three grounds were added to section 103(1)—from that moment forward—an employee would be able to take a personal grievance if they were dismissed during a 90-day trial period for any one of those three reasons, despite the fact that we are not applying clauses 3A and 3B retrospectively.

With those two changes—the original changes to section 142W associated with the involvement in breaches, and these changes ensuring that workers get slightly better rights under 90-day trial periods than they do ordinarily—we are supportive of these changes and supportive of Part 1 of this bill.

SUE MORONEY (Labour): Thank you for the opportunity to rise and speak on Part 1 of the Regulatory Systems (Workplace Relations) Amendment Bill. Of course, people who have been following the debate will know that this is the third of a series of bills where we are looking at quite specific technical changes to the regulatory systems. We have already looked at the two areas of housing and commercial law, and now we turn to workplace relations.

I want to just concur with my colleague Iain Lees-Galloway and add a little bit more detail to the new clause 3A that has been recommended in Part 1 of this bill, which, of course, is with reference to what was known as the “90-Day Fire-at-Will Bill”. It is called “trial period” in regard to the bill that we are debating, and those are the words that are used now. People listening to this debate will understand the importance of getting the technicalities of this right, because we are talking about a group of workers who have fewer rights than other workers because they are in the first 90 days of their employment. So it is incredibly important that we get the technicalities right, because this group of workers is the most vulnerable of all, and so getting that right is important.

I want to congratulate the officials on the excellent work that they have done on this, and, in particular, I want to draw attention to one of the issues that inadvertently did not get picked up in the original employment standards legislation bill when it was passed through, and it is incredibly important because it is about health and safety at work. It is one of the provisions in section 103: subsection (1)(j)(i) that had been inadvertently dropped. My colleague Iain Lees-Galloway is correct in that I do not think it was purposeful; it was simply, in doing cross-referencing from one section to another, paragraph (j) (i) was not necessarily covered, and this amendment will fix that. It will address it so that we know that where an employee has been treated adversely for refusing to perform certain work—and in almost every situation that is a reference to people’s right to withdraw their labour in instances where the work is so dangerous that it would actually cause them serious harm to undertake that work. That is why an employee must have the right to refuse to perform certain work.

The area that Iain Lees-Galloway did talk quite substantially about is the area where the employer has failed to pay them the compensation to which they are entitled when a shift has been cancelled. That was as a result of some great work that was done—actually, I have got to say—by the Opposition parties, to make sure that we got rid of zero-hour contracts. But the third part that it actually makes sure that employees can take a personal grievance over is where their employer has treated them adversely for a prohibited health and safety reason, or has contravened section 92 of the Health and Safety at Work Act 2015.

These are all incredibly important things to get right, to ensure that these most vulnerable workers do have the right to take a personal grievance. The law as it stands today, I think we could argue, does already include those three areas. However, it is unclear in the drafting of the legislation as it stands about whether they would have the right to take a personal grievance on those grounds specified alone, or whether they would have to prove that whatever had happened to them in those three areas was an unjustified disadvantage. That is an additional hurdle that these vulnerable workers would have to pass, if we did not pass these clauses through in the Committee stage here this evening.

So I am pleased to stand in support of doing exactly that, because, as I said, these are some of the most vulnerable workers. As a parent of teenagers, I can say how frightening it is for people in their first 90 days of work, when they are just learning and trying to get on that ladder and get their things on their CV, to be exposed to that 90-day trial period. It is a very difficult thing already. Let us make it safer and ensure that people do not have their health and safety rights diminished as well.

Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): In reading through this bill, although I was not on the Transport and Industrial Relations Committee, I have to say I took some comfort from the question that sprang into my mind. Is this another improvement in legislation because of the Pike River tragedy? I read through this and it is referring in Part 1 to health and safety breaches—“Involvement in breaches”—and there could be many, if you read the royal commission report. It has identified a number of people, none of whom, of course, have been prosecuted—none of them, at all—because the Government has chosen not to. But I guess that if this piece of legislation passes, does that clarify the position for any Government—particularly a National Government, which seems to struggle around ethical issues in this area—and would it help it push ahead with the prosecution in a way that most New Zealanders would think was fair and reasonable?

It says here, in new section 142W(2), to be inserted in the Employment Relations Act by clause 4 here: “However, if the breach is a breach by an entity such as a company, partnership, … or sole trader, a person who occupies a position in the entity …”—the point being that it is anyone involved in the breach—“only if that person is an officer of the entity.”, and it goes on in new section 142W(3) to explain who an officer of an entity is. Actually, most people probably do not need to read through this, but post - Pike River, the Government struggled and the department of labour struggled to work out who was an officer of the company. In fact, it was not the mine manager, they said—“We shouldn’t prosecute that person.” Well, who else, then?

Well, by definition in this piece of legislation, an officer of an entity is “(a) a person occupying the position of a director of a company if the entity is a company:”. So a director of a company that is in breach of any health and safety provision in any workplace is liable or could be prosecuted—which is the way I would read it—and, actually, it is pretty good law. But I would have thought that that was in place now. I would have thought that the mine manager at the Pike River mine, and, indeed, the directors of the company, should be liable for knowingly allowing an unsafe situation at that mine to continue.

There is another question, which is perhaps answered here, as to why the Government did not proceed with prosecution. It says here, in new section 142W(3)(e), “any other person”—this is an officer of the entity—“occupying a position in relation to the entity if the person is in a position to exercise significant influence over the management or administration of the entity.” Actually, a mines inspector—that is, an employee of the Government, who should have been doing their job—was in a position to close down the mine. They were in a position to say: “This is unsafe.”, and could have done so. So I guess that would say that that person is in a position of significant influence over the management or administration of the entity.

So, in fact, this change here—insignificant as many might see it—does a couple of things. Firstly, it tidies up law that might be untidy, or it is a whole new revelation of completely inadequate law, which the Government was happy to sit on, or to not act on, because it did not proceed with any of the prosecutions. The Chairman, in his wisdom, kind of nods his head when he says: “Well, it is a tidy-up of the law.” I accept that, but how could we have in law such un-clarity, or such a lack of clarity—I will sort that one out, Mr Chairman.

The CHAIRPERSON (Hon Trevor Mallard): It’s clear.

Hon DAMIEN O’CONNOR: The point being that I still think the Government had the ability to proceed with prosecutions in the Pike River mine disaster without this change in legislation, because any sensible New Zealander understands that anyone responsible in that company, be it the mine manager or be it the directors, should have been held responsible in some way. Not a thing—all paid off by insurance money.

I have to say, in conclusion, that this minor change in the law here makes huge progress for the families of the 29 people who still lie in the bowels of the Pike River mine. I do not think they realised what was going on tonight. In fact, I am not sure I realised myself, until I read the legislation. I think that those of us who were not on the Transport and Industrial Relations Committee did not realise that this significant change in legislation, probably prompted—although the Government would never admit it—by that terrible tragedy, is progressing through Parliament, and I think it will offer some comfort for those families to know that their loss was not for no reason at all—that, in fact, they have made some progress.

So I am not going to go on, other than to say I acknowledge that the Government is making the change. It seems as though it was necessary—although I do not buy into it being absolutely necessary—to make officers of the company, people in the company, and people responsible for actions at a workplace ultimately responsible for the health and safety of their workers. That is what this is about. And so I hope that it proceeds without amendment and as quickly as possible, so that we do not have another Pike River mine disaster.

BARBARA KURIGER (Third Whip—National): I move, That the question be now put.

Hon DAVID CUNLIFFE (Labour—New Lynn): Thank you, Mr Chairman. I do appreciate the opportunity to make a—[Interruption]

The CHAIRPERSON (Hon Trevor Mallard): Sorry, I am just going to interrupt and say that it is most unhelpful—just as we do not like comments that deride Chairs’ rulings, comments that are supportive are also out of order. So I want to thank Megan Woods for her support, but I ask her to restrain herself in future. The Hon David Cunliffe—we will start again.

Hon DAVID CUNLIFFE: Peace, love, and goodwill is breaking out all over the Chamber tonight, but I will refrain from extending my own, just in case I get in trouble and am sat down.

The CHAIRPERSON (Hon Trevor Mallard): Yes.

Hon DAVID CUNLIFFE: It is a pleasure to take a very brief call on the Regulatory Systems (Workplace Relations) Amendment Bill, Part 2. I want to touch on two things: the grounds on which an employee may take a personal grievance, and the term of eligibility for paid parental leave.

Firstly, on personal grievances, this bill, helpfully, extends the grounds upon which an employee may take what we know colloquially as a PG. It covers grounds such as when an employer has failed to pay them the compensation to which they have been entitled—in this case, when a shift has been cancelled. That recognises the relatively powerless position that an employee has in a large organisation when it makes scheduling decisions, often for very good scheduling reasons—product flow, product mix—but those decisions should not come out of the pocket of the employee who has turned up for work and should not lose income and employment because the business has made what for it might be a prudent business decision. The business wears the cost. The business wears the risk. Of course, repeated infringements of that nature should be a cause for a personal grievance.

The question of compensation calls to mind the matter that my colleague Damien O’Connor has raised in relation to Pike River coalfield. It sticks in the craw of the Labour Opposition that a substantial insurance cheque was held by the owners of the mine and the parent company and not paid to the families of the deceased. New Zealand Oil and Gas, I understand, is a parent, and Pike River mine company when it was pre-liquidation. That is not appropriate. That compensation should have gone to the families, and that is part of the unresolved business. This is not exactly the same circumstance, and I know you are going to, rightly, bring me back to the bill, but I think it does attest to the same principle: employees who are owed compensation should be able to get it, just as you, Mr Chairman, should be compensated when you are unduly praised by my noisy colleagues sitting just to my right.

The CHAIRPERSON (Hon Trevor Mallard): Unduly praised? Well, that’s purely—[Interruption]

Hon DAVID CUNLIFFE: Well, outside the Standing Orders it must be undue, and I am reflecting your own ruling on that.

The second thing about this bill that leaps out is the paid parental leave provisions. Labour, led by Sue Moroney on this issue, has pushed since—

The CHAIRPERSON (Hon Trevor Mallard): No, no, no. It is the next part. We are doing Part 1 at the moment. So if the member wants to keep going on Part 1—or does he want to wait? We will be on Part 2 quite soon.

Hon DAVID CUNLIFFE: I will foreshadow my next call on Part 2, Mr Chair. But thank you, you are quite right to draw me up. Such was my enthusiasm for the paid parental leave provisions. I know Sue Moroney is just waiting to expound on the demerits of the financial veto that was issued but that story will have to wait. We will come to that soon.

I will just close by saying that the personal grievance process is a really important one for employees. Employees are often in a powerless relationship relative to particularly large employers but employers of all size. We support the extension of the grounds for a personal grievance. We know that due process is required. The select committee did look at whether those provisions should be retrospective. They were advised that that was unnecessary and that the rights of employees to take personal grievances would not be curtailed by the lack of a retrospective provision. We are prepared to live with that, and we support that part of the bill. Thank you.

Aupito WILLIAM SIO (Labour—Māngere): I appreciate the opportunity. I want to take a different tack and address a part of this bill that I do not believe any other member of the Committee has pursued, and that is the fact that this is legislation written, in my view, to benefit and to enable workers to understand.

One of the points I want to bring to the attention of this Committee in Part 1 is clause 3B, “Section 110A (Adverse conduct for prohibited health and safety reason)”, which says: “In section 110A(5), replace ‘section 103(1)(h)(i)’ with ‘section 103(1)(j)(i)’.” When I look at the report by the Transport and Industrial Relations Committee, it essentially says that the original “Section 110A(5) of the Act sets out an employer’s possible defence to a personal grievance claim for prohibited health and safety reasons.”, and the committee then recommends changing that. What concerns me is the reference “This would ensure that employers have the correct defence available if an employee makes a personal grievance claim on the grounds that they have been treated adversely for a prohibited health and safety reason.”

Is this legislation about protecting workers, or is this legislation about enabling an employer to have the right argument to rebuff any grievance by a worker? Because that is what I am reading—that this is what it is saying, essentially.

I am not a member of that committee, so I do not know what the answer to that is, and I do not know whether the Minister is aware of whether that is the correct intention, as I understand it. My understanding is we are arming employers with arguments to rebuff any personal grievances by a worker who may have a personal grievance on the grounds that they do not want to carry out a function or work for health and safety reasons. Why that is important is we know in this House about the hundreds of workers, or maybe thousands or tens of thousands of workers, who die each year as a result of a lack of health and safety protection being provided in the workplace. It just seems to me that that particular clause is enabling employers to get away—it is enabling employers not to provide the protection that workers may need because the workers refuse to carry out a function because of health and safety reasons. So I, clearly, do want to understand, and that is why I am posing the question to the Minister as to whether she would be able to help me to better understand that.

I do not see any other avenues here to help me better understand that particular clause—clause 3B in Part 1. I will give time to the Minister to think about how to respond to that.

The other factor is—and I do not know whether this is deliberate or not, or whether it is just legal jargon, but when I read the entirety of this particular bill it is not very helpful in the way it is written. It is not very helpful. How on earth can one expect workers in the workplace to be able to use the legislation and understand what their rights are if it is written in this form? Surely, in the new millennium, we can find appropriate words to convey messages to the working-class people of New Zealand so that they can better understand their rights and responsibilities and ways of helping them protect themselves. If I refer you to clause 7, “Section 71L amended (End of parental leave payment)”, this is how I read it: “In section 71L(2), replace ‘Subsections (1)(b) and (c) do not apply, and parental leave payments continue to be”—[Bell rung] Mr Chair, let me just finish that.

The CHAIRPERSON (Hon Trevor Mallard): I will let the member finish, but I think I know what the member is going to say.

Aupito WILLIAM SIO: So let me start again: “In section 71L(2), replace ‘Subsections (1)(b) and (c) do not apply, and parental leave payments continue to be payable until the date specified in subsection (1)(a)’ with ‘Subsection (1)(c) does not apply, and parental leave payments …”. How on earth does a worker understand this jargon?

So, surely, now we are in the year 2017, we have lawyers and we have Ministers who can better understand the working people of New Zealand, who just want simple messages. Simple messages—be safe, stay away from this machine, and put the cover on that machine. Surely we can come up with words that can better convey how to enable the workforce—our workforce, which this country relies on—to make sure that they are safe, because if we do not do that, then we will continue to add to the numbers of injuries and the numbers of deaths that have occurred, year in, year out, in the 8 or 9 years that this Government has been in power.

I think, and I hear this from the trade unions themselves, that this is a Government that should be—my colleague Damien O’Connor raised the fact of the Pike River mine. This is a health and safety issue.

Coming back to that, I just think the Minister should be able to take the opportunity to now just respond and help me understand whether this is what that particular clause is about. Is it arming employers to rebuff workers from taking up a personal grievance on a matter of health and safety? Thank you.

Part 1 agreed to.

Part 2 Parental Leave and Employment Protection Act 1987

SUE MORONEY (Labour): I rise to speak, with some misgivings, actually, on Part 2 of this bill, which is, as I said before, just purely technical amendments to the Parental Leave and Employment Protection Act. But I have got to say that what this Parliament should really be doing at this part of the year is actually making the amendments that would have been in place in just 10 days’ time, actually. The irony of standing to talk to technical improvements to paid parental leave, when, really, if the Prime Minister, Bill English, had not vetoed Parliament’s will to extend paid parental leave—

The CHAIRPERSON (Hon Trevor Mallard): Order! I am now going to sit the member down and say that she might just be able to say that in the third reading, but it is not relevant now.

SUE MORONEY: More is the pity. We are just doing some really minor technical things that really do not improve the bonding between parent and baby at all, but we are doing things that, I guess, recognise how complicated people’s lives can be when a new person enters the world.

The one that I really want to start off talking about is in clause 6 of the bill, which clarifies the entitlements to pre-term baby payments. We did not have a thing called pre-term baby payments until quite recently in New Zealand’s history. And, boy, there is a good story to tell—probably in the third reading—about how that came to pass, because it certainly was not the will of the Government to have a new thing called pre-term baby payments, but they have ended up here none the less. This is when a baby is born prematurely, and now parents have the right, for each week that the baby is born premature, to have an additional week of paid parental leave, effectively. Although, in the legislation, of course, it is not called that. It is called a pre-term baby payment.

So what clause 6 of this bill does is it takes into account—if a baby is born prematurely, quite often that baby is in hospital and under hospital care. It is not able to go home. The bill imagines that the parent who is claiming the pre-term baby payment might actually leave the baby behind in hospital and go back to work instead. I am not sure how often this is going to happen, actually. I am just not sure how many parents would be in the headspace, having just had a premature, tiny little, vulnerable person, to leave the baby behind in hospital and go and start work, but this legislation imagines that might happen.

The effect of clause 6 is to make sure that should that happen, although the parents forfeit their right to the pre-term baby payments, they do not then go on to forfeit their right to paid parental leave, as long as they start their paid parental leave no later than the date on which the baby would have been born—that is, the full-term date on which that baby would have been born.

I guess it is a protection of sorts. But I guess I query how often, in reality, this technicality is going to be used. I cannot imagine the situation in which a baby is so vulnerable and so fragile that it is in the intensive care unit or in the neonatal unit of a hospital, and the parent who is entitled to the pre-term baby payments would go back to work. I really cannot see how you might be in a mindspace in order to do that. However, should that happen, this amendment will address that.

A person who has already started their parental leave period early, for example to take bedrest on doctors’ orders, and that does happen quite frequently, particularly in the situation where a pre-term baby is about to arrive—if the person has already started their paid parental leave payment early for that reason, then they have a pre-term baby and they have their parental leave suspended, then they return to work, forfeiting some or all of their pre-term baby payments, then they recommence their parental leave payment period no later than the original expected due date, that will now all be able to take place because of these technicalities. That particular provision, I think, will be used much more frequently than the one that I described earlier.

This is, again, just describing how complicated things can get when a baby enters into a family. Quite frequently I get people talking to me about the need to start their paid parental leave payment early on doctors’ orders, often because it is for bedrest. That is frequently the situation under which a baby will arrive early. So we are getting the situation where we have got paid parental leave starting, and then baby arrives early—that ceases the paid parental leave and it becomes a pre-term baby payment.

Should the person go then back to work after the baby has been born, then this provision fixes all of that up so that they can continue. They will forfeit their pre-term baby payment, but they can continue to pick up their paid parental leave provision where they left off. That, of course, is the 18 weeks of paid parental leave that we do have in legislation, albeit that on 1 April we should have been going to 22 weeks of paid parental leave. We will not be doing that under this Government.

The other part that I want to spend a little bit of time talking about is the keeping-in-touch days. This bill also amends provisions for the purpose of clarification about these keeping-in-touch days. This, again, is a new piece of terminology, and so I guess it is right and proper that there were always going to be some technical improvements to this legislation, because it is a new concept. It is a concept that has not been tried before. It is the concept that women—well, actually, parents, whichever gender they might be, whoever is the eligible parent taking up the paid parental leave—may go back to work, during the course of their paid parental leave, for up to 40 hours without losing their entitlement to 18 weeks’ paid parental leave.

The reason for that is that when the parent is off on their 18 weeks’ paid parental leave, there might be a course that comes up, which may be offered only once through their work, and so they should not be disadvantaged because they go back and they work for that day, because they do that course.

The CHAIRPERSON (Hon Trevor Mallard): This is a very narrow clause, and I must ask the member to come back to what is in the clause, not the general topic.

SUE MORONEY: Sure. I am just ensuring that people know what keeping-in-touch days are, and I am sure they understand that now. Section 71CE(3) of the Parental Leave and Employment Protection Act provides that parental leave payments can be recovered as an overpayment when an employee performs work in certain circumstances while on parental leave. So that was the current situation.

This clause 5A will amend that section of the Act by inserting the word “paid” before the phrase “parental leave”, so that it makes sure that it is the paid parental leave where overpayments can be brought back from, not just the unpaid part of the parental leave provision. Of course, parents can choose to go back to work at any stage during an unpaid period of parental leave and not lose their entitlement to continue with unpaid parental leave.

People might wonder why on earth that is even a technicality that we are fixing up here, because what is the harm if the parental leave is unpaid? The harm is that the parental leave provisions in the original Act, the Parental Leave and Employment Protection Act, actually give the parent the right to take a certain amount, up to 12 months, of parental leave, albeit that only 18 weeks of it is paid. So making that distinction is important, in terms of parents and their return to work, their brief period of returning to work, and how that impacts on their payment or non-payment or the overpayment being sought from them.

I want to, again, commend the officials, because these are all quite tricky technicalities. They are difficult to think about, the various forms and the things that happen to people in these circumstances, and how we write a piece of legislation that actually reflects real life, that takes into account the human fragilities and all of the issues that families face when a baby is born, and in particular when a baby is born earlier than expected. I want to commend Part 2 of the bill to the Committee.

IAIN LEES-GALLOWAY (Labour—Palmerston North): Thank you, Mr Chairman—a fine choice. I would like to speak very, very briefly to new section 5A of Part 2, which relates to the keeping-in-touch days. In this clause we are inserting one single word—the word “paid”—before parental leave. It is a very important distinction to make because the parents who make use of this new keeping-in-touch-days provision are able to work for up to 40 hours. If they work over 40 hours during their paid parental leave period, then any parental leave paid to them at that point is considered an overpayment. So it is really important to make a distinction between the paid parental leave and the unpaid parental leave people can take, because a parent can come back for as long as they like during the unpaid period of parental leave, work for as long as they wish, and still be entitled to unpaid parental leave, and they are entitled to keep any pay that they receive. It is, actually, a very, very important distinction that we make between the period of paid parental leave and the period of unpaid parental leave. The addition of that single word “paid” before the words “parental leave” is very important.

I said that my comments would be brief. It is half past 9, so I am happy to relinquish the floor at this point.

Part 2 agreed to.

Clause 1 agreed to.

Clause 2 agreed to.

Bills to be reported without amendment presently.

House resumed.

The Chairperson reported the Regulatory Systems (Building and Housing) Amendment without amendment, the Regulatory Systems (Commercial Matters) Amendment Bill without amendment, and the Regulatory Systems (Workplace Relations) Amendment Bill without amendment.

Report adopted.

Bills

Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill

Third Reading

Hon NATHAN GUY (Minister for Primary Industries) on behalf of the Minister of Revenue: I move, That the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill be now read a third time. It has been the Government’s ongoing focus to steadily reduce inconsistencies in our tax system, to improve and strengthen and also update our tax rules. Ensuring that our tax rules work well in practice helps to keep compliance costs to a minimum, which in turn helps our economy to grow and prosper. The bill continues that overall focus.

A number of items in the bill are business-friendly and were favourably received by the private sector during the consultation phase of the proposals. Chief amongst the business-friendly measures proposed is the change to the look-through company rules and the dividend rules as they apply to closely held companies. Closely held companies are a significant proportion of the total number of companies in New Zealand, so reviewing their tax treatment is very important. The proposals aim to simplify the current rules by addressing a number of complexities raised by the private sector. We must always aim to uphold the integrity of the tax system, so there are always proposals to tighten the eligibility rules for an entity electing to become a look-through company. A decision by a small business to convert to a company must be made for sound business reasons and not simply to gain a tax advantage.

Following on from the Government’s recently released package of base erosion and profit shifting proposals, this bill continues the Government’s focus on international taxation matters. Changes are proposed to the non-resident withholding tax and approved issuer levy rules to ensure the rules for the tax treatment of interest earned in New Zealand by foreign lenders remain robust. Briefly, they aim to ensure that the non-resident withholding tax rules apply as intended to related party debt or equivalent arrangements; also, that non-resident withholding tax is paid on related party debt rather than the approved issuer levy and to ensure that anomalies are corrected, which currently can be used to circumvent non-resident withholding tax or the approved issuer levy.

The bill also contains a number of measures to ensure that the tax rules continue to work as intended and do not impose unnecessary compliance costs on taxpayers. These range from refinements to the GST rules through to mainly technical amendments that aim to ensure that the tax rules are clear and apply as intended. The proposed changes to the debt remission rules, for example, address a problem that can arise under the current debt remission rules when a debt is remitted between associated parties.

The bill also adds 14 charities to the list of donee organisations with overseas purposes, in schedule 32 of the Income Tax Act of 2007. Donors to those charities will be eligible for tax benefits on their donations, effective from 1 April 2016. Finally, the bill sets the annual rates of income tax for the 2016-17 tax year.

These are the main features of this bill. It is a good bill. I would like to thank everyone involved, and I acknowledge the officials for their contribution in developing the policy and drafting the detail of this legislation. I would also like to thank the organisations and individuals who made submissions on the proposed legislation, and, of course, the Finance and Expenditure Committee for its consideration and good work. I commend this bill to the House.

MICHAEL WOOD (Labour—Mt Roskill): I am very happy to rise to speak to the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill. Following on from that Churchillian speech, can I open up by noting, first of all, the value of passing this bill with a week to go to ensure that the Government’s appropriations over the last year have, in fact, been lawful. That is running it pretty close, but we are pleased that we are there.

This bill is a very important bill. There is one important—very important—aspect of it, in fact, that Minister Nathan Guy did not spend one second of his speech talking about. That is the setting of the income tax rates for the previous year and the rates that will take us through for the next period. What I want to touch on, in respect of those rates, is a comment made by my colleague Mr Robertson in a previous debate on this bill. This is what Mr Robertson had to say: he said that here the bill “would have been an opportunity for the Government to say: ‘It’s time for some fairness. It’s time to have another look and make sure that we’ve got the rates set in a way that’s fair, instead of just automatically rolling them over.’ ” And “fairness” has to be the central word in any debate about tax policy in this House. It cuts straight to the heart of the purpose of our tax system.

Why do we need a fair tax system, and why do we need a fair set of tax rates? Well, it goes to the kind of country that we want to live in. It goes to the kind of incentives that we want our people to have. It goes to the notion of fairness in our economy. It goes to the kind of productive economy that we want to have. And it goes to overall confidence in our tax system, because our tax system, at its core, relies on trust. When we set these tax rates, we are saying to 2 million New Zealand salary and wage earners: “This is the amount of money that you will hand over to the Government every year to fund public services.” Most New Zealanders accept that. Most New Zealanders think that is a good thing. But we do it on the basis of the fact that it is a fair system and that everyone will pay their fair share.

If we have a system in which those 2 million New Zealand salary and wage earners—and, next to that, every single small business operating in New Zealand—are having to pay their fair share, and are having to pay these rates that we are setting in this bill, which the Minister did not mention once, but we have other entities operating in our country that do not pay their fair share, then that cuts straight to the integrity of the tax system. And, of course, it opens up questions for people who do pay their fair share: “Why should I do that when others do not?”. That is when the house of cards starts to fall down, and we simply cannot have that. Across this House I believe that it is maybe not unanimous support, but there is broad support for there being a progressive tax system in this country that funds our public services, that taxes people at a fair rate, and that distributes income fairly within our country to create the kind of society that we would all want to live in. But what have we got from this Government? We have got a set of rates that have simply been rolled over here—rolled over as they have been for 6 years.

And what about those people who are not paying tax? Of course, we have had the news this week about Apple—a multibillion-dollar corporation operating in this country, with billions of dollars of revenue over the past 10 years. How much tax has it paid? If we look at the income tax rates that we are talking about here tonight—let us have a look at them. Let us have a look at them. The lowest-paid New Zealanders in our country, from the first dollar of income that they earn, pay 10.5 percent income tax. What is Apple paying? What has it paid over the last 10 years? Did it pay the 10.5 percent that the lowest-paid New Zealanders pay? It paid zero. It paid zero. It did not pay 30 percent, as people earning between $48,000 and $70,000 pay. It did not pay 33 percent, as people earning over $70,000 pay. It did not pay 17.5 percent, as people earning between $14,000 and $48,000 pay. It did not pay 28 percent, as every struggling or successful small business in New Zealand pays. It paid nothing. So in this debate about the income tax rates that we are affirming for this year and taking forward in our country, it cannot go without saying that there are some in this country who are paying, and there are some who benefit from this country who are not paying. This Government, so far, has done absolutely nothing about that.

What about the people, often low paid, who are paying secondary tax at 45 percent? Have we heard a whisper about that today? We have heard plenty about it from the Government benches over the years. We have heard that it might come someday. We have heard that we need to get a new computer system. But we have heard very little in terms of a commitment to actually helping those New Zealanders who could really do with it. This is a Government that does talk a big game on tax, but actually delivers very, very little indeed. We have had 6 years of bracket creep under this Government, as well. We on this side of the House say that we do need a fair and progressive tax system, but this Government actually does not address the fundamentals at any point at all.

There are some good things in this bill, if we set aside the setting of income tax rates for the year for the moment. There are a range of helpful technical measures. In the area of tainted capital gains we have got some sensible technical changes to ensure that we are not casting the net more widely, in respect of tainted capital gains, than we really want to. In respect of look-through companies, we have got some sensible changes as well, and these have been worked through constructively by members across the House in the Finance and Expenditure Committee. We know that look-through companies are a useful structure within our economy, but we do not want them to be abused. So we have got to make sure that they are being applied to the right kinds of organisations. I also, just in these comments, as I did in my previous speech, want to commend the select committee for the work that it did in transitional measures around look-through companies, particularly as they might apply to charities and to Māori organisations that have previously used that mechanism but are affected by the changes in this bill. That was sensible, collegial work in this House.

But really those things are useful but “small beer” adjustments to our tax system, and they really go to the world view of this Government. We have had this described to us from the Prime Minister himself this year. This is a Prime Minister and a Government that says they have reached their limits. This is a Prime Minister and a Government that says that when the issues are difficult, it is just too hard. It is a bit like that with this tax bill—those small but useful adjustments, but nothing about those fundamental issues.

If we return to that issue of multinational tax, on the Minister’s own estimates, since the Government was warned about multinational tax rorting 5 years ago, we have lost about $1.5 billion in revenue—$1.5 billion in revenue, based on a $300 million loss every year. That is the Minister’s own figure. But what did we hear in question time earlier today? We heard that there was absolutely no commitment to actually passing legislation to deal with the rorting of multinational tax in this country in the term of this Parliament. Yet we are, of course, setting the rates for every single New Zealander to pay their income tax.

Do you know what the thing is? What happens if an ordinary New Zealand wage or salary earner tries to avoid their tax? We know exactly what happens in that event. There is a knock at the door and there is a phone call from IRD, and you are on the leash. Yet what we had last week was credible information that one of the world’s biggest companies has been avoiding $300 million of tax, and the Minister would not say boo to a goose about it. That speaks to the lack of fairness in our tax system under this Government, and that is something that needs to change.

There was one other good thing that has come through the passage of this legislation, and that was the depreciation rollover relief, through the Supplementary Order Paper put forward by Minister Judith Collins, for victims of the Kaikōura and greater Wellington earthquake. That was a measure that was strongly supported by this side of the House. It was only right and just that we provided that relief, to provide some fairness to the victims of that earthquake. But we should not restrict fairness to people who have gone through a natural disaster. Every New Zealand taxpayer should be able to expect fairness out of our tax system. That is what we call for on this side of the House. That is what is so patently lacking in the current tax system, and that is what the Labour Party looks forward to changing when we next debate this bill from the Treasury benches next year. Thank you.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking—

Hon Member: It was better when you didn’t have a voice.

ANDREW BAYLY: —in this third reading of the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill. Yes, I have got my voice back. Last time, I was talking about the fact that Opposition members were saying about this bill that we were doing too much too fast—things we should not be doing—and that we should be slowing it down. And, of course, that is not what we are going to do; we are going to push through stuff.

I just heard that previous speaker, Michael Wood, talking about making our tax system fairer. Well, this is what this bill is about. It is precisely about making the tax system fairer. This is a continuation. And everyone knows that New Zealand has one of the best tax systems in the whole of the world—the whole of the world. So I am just going to talk for a couple of minutes, or perhaps for just a minute, about a couple of the examples in this thing.

One of them is about closely held companies. Not many people know about closely held companies, but these are all about look-through companies. What this bill does is it looks at the dividend rules and how those are paid out. One of the things that this hard-working Finance and Expenditure Committee actually did—and I am just looking across at the other side there, at a couple of the members over there—was we actually changed and made an amendment there about reducing the overreach of one of those provisions. So this is the good work that this committee has done. I commend it. I think it is a great bill.

STUART NASH (Labour—Napier): Of course that member loves this tax system, because he makes a whole lot of money out of capital gains and he does not pay a cent. If you are making a lot of money out of capital gains, you love the system because you are not part of it. You are not part of it if you are making money out of capital gains.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

STUART NASH: That is why that member loves our tax system.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

STUART NASH: Sorry, Mr Assistant Speaker.

The ASSISTANT SPEAKER (Hon Trevor Mallard): That is right. I think you should address me but not talk about me.

STUART NASH: Oh, sorry. I did not mean to talk about you, Mr Assistant Speaker; I meant to talk about that member over there.

The ASSISTANT SPEAKER (Hon Trevor Mallard): I accept the member did not know what he was doing.

STUART NASH: Anyway, it was quite a naive speech, but not in a bad way, because the member is not a bad person; he is just naive. To say that we have one of the best tax systems in the world just bears no relation to reality. It is quite sad, actually.

This was a wide-ranging debate. In the Committee stage it went for a number of hours. We talked about a whole lot of different measures: some good, some interesting, and some a little quizzical. For example, section 306(2) of this bill, wait for it, “comes into force on 1 October 1986.” Todd Barclay was not even born then, and I guess he was not even born now. I can inform the House that if, between now and 1986, the “transfer of ownership of the asset would be a financial service, the subsection deems the person to make a supply of the asset by a transfer of ownership.”

So, in 1991, if you got away with not providing transfer of ownership papers or a contract, you are about to be caught out. You were waiting for this day, were you not; not you, Mr Assistant Speaker—people who thought they had got away with this. Well, we caught up with them in 2017. This is what this Government has been doing. From 1986 to 2017—what has it been doing? We never asked this Government to slow down. We have never said to the Government: “Stop implementing things that are important to the people of New Zealand.” What we have said is at least come up with a policy framework, not throw a whole lot of bills at the Committee where it is Arthur one day and Martha the next, and no one knows what the hell is going on—none more so than the people who have to submit. These are the experts. These are the nation’s experts who have said to the Government: “Hold fire. We haven’t got time for this whole lot of stuff we’re supposed to be submitting on.”

The thing about tax legislation is that it has got to go through a very robust process if it is going to be good legislation and if there are not going to be loopholes that you can drive a bus through. This is the criticism—not that the Government has been going too fast but the fact that it has left it to 2 minutes to midnight.

There is some good stuff in here. We are supporting the bill—there is no doubt about that. The closely held company changes will drive efficiency, and we support that. But this structure, this legal company structure, has been around for a long, long time. There has been plenty of time for the Government to have actually put in place a measured framework to get the efficiency through a hell of a lot sooner than after 8½ years in office. It is a tired Government that really has not done much until now, and it is too late. But it is also muddled, and the experts are saying there is no policy direction, there is no framework—that is why they are getting frustrated, Mr Bayly.

One of the things that this bill does is it separates out the cost of maintaining aircraft engines—fantastic. Well, if you are in the business of aircraft engines, that is really good. But there are some fundamental problems with our tax system, like the fact that the IRD owes Kiwis $700 million, and it is not giving it back unless you proactively go towards it. Yet if you owe it money, if anyone owes it money, then, by God, it comes after you with a huge big stick, which is not a bad thing, because another thing that happened in this bill is that the Committee changed the GST rules.

So when I mentioned the fact that the IRD owes Kiwis about $700 million, what happens with that money is that after 4 years, if it has not been claimed, it falls off a cliff—so it is no longer yours. The IRD does not give it back. It would probably account for it, so if it rolls over—let us make an assumption that there is about $200 million or $175 million a year that just does not get paid back to Kiwis. The IRD is pretty quiet about it, not in a dishonest way but just in a “You know, let’s not give it back. Here’s $175 million we can use ourselves.”

But if you owe the IRD money then it will chase you to the ends of the earth. There is a good provision in this: if it has been deemed that there has been an honest mistake around the overpayment of GST, instead of having to wait only 4 years they have actually extended it. What the IRD is saying—what this bill says—is that we will now allow you to have not only that 4-year window but another 4-year window, if it has been proven it is a genuine mistake. That is not a bad thing.

But what I would have loved to see this bill say is it is not just for companies and GST but for individuals, because a lot of the time the people who are actually overpaying tax are those who can least afford to overpay tax, and it is usually people paying secondary tax. How secondary tax works is a person has one job—let us say they earn $30,000—and they pay the tax rates for $0 to $30,000. Then what they do is they go home, they change, and they go to another job. Let us say they earn $35,000 in that, so they pay the tax rates for $1 to $35,000. That is what happened in the past. What happened then was that at the end of the year they had to pay tax on $65,000, and they ended up with a big tax bill.

So we brought in secondary tax, and, to be fair, it is not a bad regime, because it meant that those who could least afford it were not presented with a big bill at the end of the year. But what it did mean was that these people often overpaid tax. There was a classic case of a very good friend of mine who runs a company. They had a woman working for them 20 hours a week, and they convinced her to phone one of those tax refund lines. She did not want to—she was a little bit scared, to be honest, of interacting with the IRD—but in the end she did. It took her, literally, 10 minutes. They had her IRD number, she put it in, and she ended up with a refund of, I think, about $450. This was actually, quite coincidentally, at a time when one of her children was starting school and there were the expenses of the uniform, etc.—$450 was fantastic.

But my point is that it would actually be really good if that $450 did not come as a lump sum 3 years after she had actually overpaid it, but if it had been in her back pocket the day she earned it. It is like this: if that person had not phoned the IRD and got their $450 back, after 4 years it would have disappeared.

We have said that if you have overpaid your GST, there is a provision here—we will look at this. Good. But it needs to go further, because there are a hell of a lot of Kiwis who actually just need to be prompted a little bit to check their IRD numbers; either phone the IRD—that is easier actually: go on to the website and check it on the IRD site; it is pretty easy to do—or, if that is a little scary, interacting with the IRD, then at least go to one of these tax refund companies, and you could end up with a lot of money back. So that is another good thing in this bill.

Michael Wood talked about accelerated depreciation for damage in the Kaikōura and greater Wellington earthquake—that is a good thing. By and large, we are not saying that these bills are not good legislation, and we are not saying that they are not necessary legislation, because the vast majority of the time they are. I sort of question the wisdom of having a clause in the bill that comes in 30 years previous, but, you know, that is the way it is. What I am saying is that my criticism over the last year—because we have been speaking on a lot of tax legislation over the last year—has been that it has done some good stuff, but it is just too late.

This is the Government that says “We are the party of business.”, and yet, by and large—and Mr Bayly knows this—it has taken it 7 years to put tax legislation in place that actually would have helped business. If this had come in 4 years ago then the regime would be well bedded in, efficiency would have been driven through the IRD, people with look-through companies or aircraft engines or GST, etc., etc., would have got the benefit of this. But to just leave it until after 8 years in Government is, I think, too long. To be honest, it sort of treats the taxpayer with a lack of respect—which I think is unnecessary—and I am not too sure why. Anyone who is a constituent MP, and even a lot of the list MPs—you know, we get hit up about this stuff quite a lot.

So, just to sum up, we are supporting this legislation, the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill. There is a lot in this tax bill, and there is a lot for the tax experts and business owners to digest. But my worry is that before they even get an opportunity to get halfway through it, we are going to have another piece of tax legislation that is going to have a similar impact or is going to amend tax legislation, or the Tax Administration Act, or the Companies Act even more. The burden on the people who are required to implement this is becoming too much, and that is the feedback we are getting from the industry itself. That is the feedback we are getting from the industry. So we support this, of course, but with reservations. Thank you very much.

BRETT HUDSON (National): I rise in support of this bill, a bill that makes technical changes to improve, strengthen, and update our tax rules so that they continue—continue—to work well for taxpayers and the Government. Let us take note of something that Mr Wood remarked upon earlier, when he talked about multinationals and tax, and he specifically used the example of Apple. Well, in actual fact, Apple does pay tax in New Zealand, but it so happens that the tax it pays in New Zealand is remitted to the Australians. Why is it remitted to the Australians?

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will resume his seat. The time has come for me to leave the Chair. This debate is interrupted and set down for further consideration next sitting day. The House stands adjourned until 2 p.m. tomorrow.

Debate interrupted.

The House adjourned at 10 p.m.