Tuesday, 20 March 2018

TUESDAY, 20 MARCH 2018

TUESDAY, 20 MARCH 2018

The Speaker took the Chair at 2 p.m.

Karakia.

List Member Vacancy

List Member Vacancy

SPEAKER: I have been advised by the Electoral Commissioner that pursuant to section 137 of the Electoral Act 1993, Maureen Helena Pugh has been declared to be elected a member of the House of Representatives in place of the Rt Hon Bill English. I understand that Maureen Pugh is present and wishes to take the Oath of Allegiance. Would she please come forward to the Chair, on my right.

Members Sworn

Members Sworn

Maureen Pugh presented herself to the Speaker, took the Oath of Allegiance required by law, and took her seat in the House.

Resignations

Hon Steven Joyce, National

the Hon Steven Joyce

SPEAKER: I wish to advise the House that I have received a letter from, resigning his seat with effect from Monday, 2 April.

Motions

New Zealand Winter Paralympics Team 2018—Congratulations

Hon CARMEL SEPULONI (Minister for Disability Issues): On behalf of Labour and New Zealand First, I seek leave to move a motion without notice congratulating the New Zealand team for their performance at the Winter Paralympics.

SPEAKER: Is there any objection to that process? There appears to be none.

Hon CARMEL SEPULONI: I move, That this House congratulates New Zealand’s team at the recent Winter Paralympics in South Korea and recognises the achievement of our medal-winning skiers Corey Peters, bronze medallist in the men’s downhill skiing event, and Adam Hall, gold medallist in the men’s slalom standing and bronze medallist in the super combined.

As the Minister for Disability Issues, I extend my warmest congratulations to three of this country’s inspiring sporting heroes—our talented Kiwi Paralympians Adam Hall, Corey Peters, and Carl Murphy. We can all be incredibly proud of our high-performing Kiwi team. They exceeded expectations, winning New Zealand a gold and two bronze medals over the intense 10-day competition at the 2018 Paralympic Winter Games in Pyeongchang.

Adam, Corey, and Carl gave it their all, representing us on the world stage, where 670 athletes from 45 countries battled it out in 80 medal events. Para-alpine skier Corey Peters led the 10-strong Kiwi team of three Paralympians and seven support staff into the opening ceremony. He put New Zealand on the medal table on the very first day of the competition, winning bronze in the men’s downhill sitting event, adding to his silver from Sochi 2014.

Snowboarder Carl Murphy gave it his all, placing 5th in the banked slalom event. Alpine skier Adam Hall not only scored gold in the men’s slalom and bronze in the men’s super combined standing; he was also awarded the top honour of the event. He is the first Kiwi to be bestowed the Whang Youn Dai Achievement Award, presented to those who best exemplify the spirit and values of the Paralympics. Adam, a previous gold medallist from Vancouver 2010, is an inspiration to all New Zealanders.

It takes a team effort to achieve at this level. I would like to acknowledge the hard work, training, and dedication of Paralympics New Zealand and the Kiwi support team, coaches, officials, and their families in helping prepare our paralympians to compete at the top of their sports. I also acknowledge Aaron Ewen, who was ready to represent us but had to withdraw due to injury.

Our paralympians have persevered to achieve at the highest level in their sports. They epitomise everything elite New Zealand athletes stand for, and are inspirational role models to us all. Today we celebrate the success of our paralympians, and at the same time reiterate our commitment to all disabled New Zealanders, as articulated in the vision of our New Zealand Disability Strategy, to ensure New Zealand is a place “where disabled people have an equal opportunity to achieve their goals and aspirations, and all … [New Zealanders work] together to make this happen.”

We congratulate this year’s Paralympic team wholeheartedly. They have made our country proud.

Dr SHANE RETI (National—Whangarei): Thank you, Mr Speaker. On behalf of the National Party, we also would like to congratulate the 2018 New Zealand Paralympic Winter Games Team, who represented New Zealand in Pyeongchang, winning three medals, as we’ve heard: bronze by Corey Peters, and a bronze and gold medal by Adam Hall, who was also awarded the Whang Youn Dai Achievement Award, out of 650 competitors, for his contribution to Paralympic sport. We congratulate and celebrate them for what they epitomise in sport. Thank you.

MARAMA DAVIDSON (Green): The Greens are stoked to stand and add our support and congratulations to the winter Paralympics Team from the South Korean campaign 2018. Of course, Adam Hall: gold in the men’s slalom and bronze in the super combined; Corey Peters: bronze in the men’s downhill; and Carl Murphy, the other member of the Paralympics Team.

David Seymour: Is this a ministerial statement?

MARAMA DAVIDSON: I’ll just wait for my colleague to stop talking in my ear, while I continue to congratulate this amazing team. I had a fantastic watch of the documentary of their training, and I want to acknowledge the huge emotional strain that the training has brought. Adam Hall, in particular, talks about and questions whether he will actually, for example, return to the next campaign in another four years, because of the emotional strain, the physical strain, the spiritual strain that that takes on our Olympians—of course, noting in this case that Adam Hall, with his 16 consecutive campaigns and seasons for winter, has gifted his skill to our nation. Corey Peters, of course, became a sit-ski Olympic athlete only two years after he became paralysed in an accident.

So these are amazing feats for any human, any human on this planet—certainly amazing feats for people who are more excluded from our community than we normally are. So go with appreciation of the nation. Whatever these athletes of our nation decide they can do and decide they are up for, I hope they continue to get the support if they decide they want to continue. But go with the appreciation of our nation for what you have already given us, and how you have represented us overseas. Thank you, Mr Speaker.

DAVID SEYMOUR (Leader—ACT): On behalf of the ACT Party, I join with other leaders in expressing tremendous congratulations for these three outstanding New Zealanders and the success that they have achieved in Pyeongchang. They set a target of winning two medals and they won a total of three. It’s an outstanding performance that we can all be proud of, and I hope that they enjoy their success to every extent possible. Thank you, Mr Speaker.

Motion agreed to.

Oral Questions

Questions to Ministers

Prime Minister—Statements

1. Hon SIMON BRIDGES (Leader of the Opposition—National) to the Prime Minister: Does she stand by all her statements?

Rt Hon JACINDA ARDERN (Prime Minister): Yes, in the context in which they were given.

Hon Simon Bridges: Does she stand by her statement that “we have set a high bar” for spending taxpayers’ money; and, if so, did the fact that eight Ministers flew to the Chathams to open a wharf last week meet that bar?

Rt Hon JACINDA ARDERN: The Hon Chris Finlayson would be very disappointed to see you relegating the importance of the Chatham Islands. I think you’ll find it makes more sense to have a group of Ministers undertaking work at the same time. Each of them undertook their own work while they were there for the opening of the wharf, and so it was a productive day for each of them.

Hon Simon Bridges: Can she confirm that all eight Ministers voted against the new wharf when National put aside funding for it in the Budget last year?

Rt Hon JACINDA ARDERN: I think you’ll find they voted against giving $400 million to the top 10 percent of earners and would stand by that.

Hon Simon Bridges: Does she consider as meeting her high bar the defence Minister’s use of Air Force helicopters as a taxi service to take him from Masterton to Waiōuru—a trip that would take just three hours by car?

Rt Hon JACINDA ARDERN: Every single one of those trips was a part of the work that he does as defence Minister, and, in fact, that particular trip, as I understand, had additional aerial work attached to it, as well. And I’d point out that he’s never done anything like take it to a golf game, for instance.

Hon Simon Bridges: Well, has she given the advice to Jenny Salesa that one way to reduce her spending on Crown cars is simply to ring “Ron Air” and get them to pick her up from her place?

SPEAKER: That was a question that’s been used and ruled out.

Hon Simon Bridges: Does she stand by the statement that the Government is committed to a planting programme of “100 million trees a year”, and, if so, how many trees have been planted to date, given that 41 million would have needed to be planted already—

SPEAKER: Order! [Interruption] Order! The member will resume his seat. I want to remind the Leader of the Opposition that he asks a question. When he asks a question he doesn’t add on extra “givens”, or anything like that.

Rt Hon JACINDA ARDERN: I would hope the member would know enough to know that planting in the middle of summer is not a good idea.

Hon Simon Bridges: Given her statements about her ambitious housing programme, how many KiwiBuild houses have been built, almost 6 months after taking office?

Rt Hon JACINDA ARDERN: Actually, I have to say one of the priorities has been preparing for winter, and some of that is not going to be delivered by KiwiBuild, because we won’t be able to build homes in time for that cold season. So that’s our immediate focus, and we’ll have more to say on that soon. When it comes to KiwiBuild, we’ll have announcements that are imminent.

Hon Simon Bridges: Given her statements, how many KiwiBuild houses have been built, almost 6 months after taking office?

Rt Hon JACINDA ARDERN: As I’ve just said, KiwiBuild obviously takes time to ramp up. We’ve got a goal of 16,000 within the first three years, but the one thing I’m committed to is making sure we don’t have people sleeping on the streets in winter, unlike under that Government.

Hon Simon Bridges: So when will the first KiwiBuild house that wasn’t already planned and funded by the previous Government actually get built?

Rt Hon JACINDA ARDERN: As I said, announcements on that will be imminent.

Hon Simon Bridges: With all the statements that the Prime Minister’s made on Russia last week, why did her Government not feel able to take a definitive statement sheeting home responsibility for the Salisbury nerve agent attack to the Kremlin until 41 hours after Theresa May addressed the Commons, 40 hours after the United States and Canada issued statements holding Vladimir Putin’s Government responsible, and 26 hours after the Australian Government made its statement?

Rt Hon JACINDA ARDERN: That is because we were actually first—before. We put out a statement on Tuesday, before the UK produced further information. Every partner made a subsequent statement, so we put out a subsequent statement too, and Theresa May has since then thanked this Government for our support on this issue.

Budget 2018—Child Poverty, New Spending Commitments, and Operating Allowance

2. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Is he committed to an operating allowance in Budget 2018 of $2.6 billion, and does he agree with the Prime Minister’s answer on The Nation from the weekend when asked whether the Government has extra money to reduce child poverty, “We don’t”?

Hon GRANT ROBERTSON (Minister of Finance): In answer to the first part of the question, final decisions on the Budget are still to be taken, but I can confirm the member will know the exact operating allowance in just 58 more sleeps. In answer to the second part of the question, I agree with the totality of what the Prime Minister said, not the paraphrased interpretation of the member.

Hon Amy Adams: So how does the Government plan to achieve further progress on reducing child poverty over the forecast period, given the Prime Minister’s weekend comments that no further funding will be available this term?

Hon GRANT ROBERTSON: That is not what the Prime Minister said. What the Prime Minister said was that this Government has put $5.5 billion into a Families Package that will lift 384,000 families’ incomes by an average of $75 a week, twice—twice—the level that the previous Government was going to do.

Hon Amy Adams: If the Government already doesn’t have any money left for its so-called centrepiece policy, how will he fund upcoming fiscal pressures, such as promised teachers’ pay rises, nurses’ pay rises, or even the promised 1,800 extra police officers?

Hon GRANT ROBERTSON: This Budget contains $5.5 billion for a Families Package that will deliver to low and middle income families. What this Government is confident of is that with the operating allowance that was in the half yearly update, of $2.6 billion, that’s actually more than the $1.8 billion operating allowance the previous Government had put aside. So if she’s concerned now about teacher pay, why wasn’t she concerned about it when she was in Government?

Hon Amy Adams: How many more of the 51 new spending commitments contained in the Speech from the Throne is there now no money left to fund?

Hon GRANT ROBERTSON: As I’ve said to the member, she’ll see the detail in the Budget, but this Government has an ambitious programme, and those 51 commitments represent us making up for nine years of neglect from that previous Government.

Hon Amy Adams: Can the public expect the Minister to fund the 51 new spending commitments contained in the Speech from the Throne by increasing taxes, by increasing debt, by reneging on Labour’s pre-election promises, or all of the above?

Hon GRANT ROBERTSON: It’s sad to see a member who was once ambitious for New Zealand rejecting the programme that’s in the Speech from the Throne. You know what we will be doing? We will be growing the economy, we will be increasing the prosperity of New Zealanders, and we’ll be making sure they get a fair share, unlike the previous Government.

Fiscal Strategy—Infrastructure Projects and New Capital Investment

3. WILLOW-JEAN PRIME (Labour) to the Minister of Finance: How much is the coalition Government planning to invest in new capital over the next five years according to the Half Year Economic and Fiscal Update, and how does that compare to the previous Government’s plans?

Hon GRANT ROBERTSON (Minister of Finance): The Half Year Economic and Fiscal Update (HYEFU) shows that the Government plans to invest $42 billion in new capital over the next five years, compared to the $30.5 billion that the previous Government had planned to spend. Of course, we will continue to keep that $42 billion under review as we go through the Budget process.

Willow-Jean Prime: What reaction has he seen to his comment on 9 March that the $42 billion might not be enough to fix the infrastructure funding deficit the Government inherited?

Hon GRANT ROBERTSON: Well, for the most part, there is a shared understanding, particularly in Auckland, of the need to find more creative solutions to the funding of infrastructure. This Government is actively engaged in continuing and building on the work of the previous Government on measures such as value capture benefits. I thank the Leader of the Opposition for his support for those ideas.

Willow-Jean Prime: What expert advice has the Government received on this work?

Hon GRANT ROBERTSON: Well, we are working with Treasury and other Government agencies to develop models that facilitate the use of private capital and ensure that those who directly benefit from ratepayer and taxpayer funded infrastructure projects make a contribution. I can confirm that I will not be taking the advice of one self-proclaimed expert, who said that these ideas, that are supported by the Leader of the Opposition, amount to tax, tax, tax—or another self-proclaimed expert who said that they were about the politics of envy. In this instance, I prefer to listen to the wisdom of Simon Bridges rather than the knee-jerk reactions of Judith Collins and Amy Adams.

Hon Amy Adams: Can the Minister confirm that more than half the additional infrastructure funding he has outlined between what was in the Pre-election Economic and Fiscal Update under the previous Government and HYEFU under this Government is in fact funded by increasing the debt burden on future generations?

Hon GRANT ROBERTSON: As I’ve said many times in this House, we have a slower debt repayment track because we believe the time has come to invest in our housing and build up our infrastructure. I have said also in this House before that that party on the other side cannot lecture anybody about the growth in debt, given the $50 billion they added to debt while they were in Government.

Foreign Affairs, Minister—Russia

4. Hon TODD McCLAY (National—Rotorua) to the Minister of Foreign Affairs: Does he stand by all his statements?

Rt Hon WINSTON PETERS (Minister of Foreign Affairs): Yes, in their context.

Hon Todd McClay: Does he stand by his statement on The Nation that there is no evidence Russia was involved in the shooting down of Malaysia Airlines flight 17 and that there was no Russian interference in the US presidential election in 2016?

Rt Hon WINSTON PETERS: Both those statements are palpably and demonstrably false, and I’m asking the member to read the transcript with accuracy.

Hon Todd McClay: Why has he not joined almost every other Western Foreign Minister and publicly criticised Russia for their involvement in the nerve agent attack on British soil?

Rt Hon WINSTON PETERS: We have done that on countless occasions, so much that the Prime Minister of the UK, Theresa May, contacted us to thank us for our support—and other members of her Cabinet as well.

Hon Todd McClay: I seek leave to table a statement from Friday of last week that has only quotations from the Prime Minister in it, not the Minister of Foreign Affairs, criticising the Russian Government.

SPEAKER: Is the member seriously suggesting that he wants to table a Government press statement?

Hon Todd McClay: Speaking to the point of order—

SPEAKER: No, the member will—[Interruption] No, the member will resume his seat. The member knows that that’s out of order and unacceptable to the House, and if he tries it again I’ll regard him as trifling with the Chair.

Hon Todd McClay: I raise a point of order, Mr Speaker. It is a new point of order. I seek leave to table a statement that’s on the Government website that has been changed since the Prime Minister released it on Friday of last week.

SPEAKER: Is there any objection to that?

Rt Hon WINSTON PETERS: Point of order. [Interruption]

SPEAKER: There is objection.

Rt Hon WINSTON PETERS: I raise a point of order, Mr Speaker. The difficulty with the proposition being put by Mr McClay is that the press statement was a joint press statement between the Prime Minister and myself.

SPEAKER: Any further supplementaries?

Hon Todd McClay: Yes.

Hon Member: Wait on. What about the leave?

Hon Todd McClay: I raise a point of order, Mr Speaker. You’re not putting leave.

SPEAKER: No, it was turned down.

Hon Todd McClay: It was turned down—thank you. Does he stand by his public statement that Russia and Australia are the same?

Rt Hon WINSTON PETERS: Ha, ha! Again, words do matter, and, again, if that member reads the transcript and strives to at least get to form 6 English language, he’ll understand I said nothing of the sort. What I said was that we have differences, and a range of differences, with countries all over the world, and if we would take them to the extremes we would not be trading with anyone and our people would be so much poorer off. All I ask to be, by others, is to be quoted properly.

Hon Todd McClay: Can he explain to the House his preoccupation—in fact, his infatuation—with Russia?

SPEAKER: Order! Order! The member—

Rt Hon WINSTON PETERS: I’m happy to do that.

SPEAKER: No, the question is out of order.

Rt Hon WINSTON PETERS: Can I just say, Mr Speaker—

SPEAKER: No—well, is it a point of order?

Rt Hon WINSTON PETERS: It is a point of order. Well, if you want me to protest about those statements, I want to just say this: on 27 March last year—[Interruption]

SPEAKER: Order! Sorry, I’m going to interrupt the Deputy Prime Minister for a minute to remind members on my left that points of order are heard in silence. If they think that they aren’t points of order, when they are completed they can say so, but not during them.

Rt Hon WINSTON PETERS: When this was said last year in March: “Do we want to do a deal with Russia? Yes, we do.”, or “National will push for greater access for Kiwi business to Russia”—that’s 22 August, just before the election. That is hardly being in love with any country but trade itself.

Hon Todd McClay: I raise a point of order, Mr Speaker.

SPEAKER: I’ve got a point of order to rule on first, I think, and I am going to rule that there’s not a point of order there. The member might have put—

Rt Hon WINSTON PETERS: Point of clarification.

SPEAKER: There’s no such thing, as the right honourable gentleman knows well.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. [Interruption]

SPEAKER: Ms Bennett, would you like to stand up and say that out loud?

Hon Paula Bennett: If you’d like me to, Mr Speaker.

SPEAKER: Well, I’m just trying to make clear whether the member has a point she’d like to make or whether she’ll just, sort of, contribute by interjection in front of the shadow Leader of the House.

Hon Paula Bennett: My point would have been that we’re shut down pretty quickly if you think it’s not a point of order—in fact, very quickly—on this side of this House.

SPEAKER: Well, I thank the member for her advice, and if she’d been quieter to start with, it would have been shut down earlier. The Rt—the Hon Gerry Brownlee. Sorry, I promoted the member.

Hon Gerry Brownlee: That’s all right. Well, it’s an unusual thing for me these days, so I thank you. Now, look, you’ve just ruled out the question by the Hon Todd McClay and said that it was out of order, but how can it be out of order to ask a Minister of Foreign Affairs about the emphasis that they put on a particular nation—

SPEAKER: The member—

Hon Gerry Brownlee: You haven’t heard—

SPEAKER: No. Well—

Hon Gerry Brownlee: Well, this is a perfect example of what Ms Bennett was just talking about; the deputy leader. It would seem to me that when it is a subject that is particularly written into a coalition agreement that has a certain amount of obligation on the collective Government to deal with this country, then it’s not unreasonable to question the Minister of Foreign Affairs about, one, lack of statements and, two, what appears to be quite a preoccupation in changing New Zealand’s position with regard to Russia.

SPEAKER: I’m going to remind the member of Standing Order 380 and suggest that he have a good look at it and I—[Interruption] The National Party will have an additional two supplementaries now because of the interjection from my right. But I think Mr Brownlee knows as well as Mr McClay that that supplementary question was out of order. Are there any further supplementaries, Mr McClay? Right.

Economic Programme—Regional Development

5. Hon PAUL GOLDSMITH (National) to the Minister for Regional Economic Development: Does he stand by his Cabinet paper statement that “Regional economic development is an essential component of the Government’s economic strategy”?

Hon SHANE JONES (Minister for Regional Economic Development): Yes.

Hon Paul Goldsmith: What are the other components of the Government’s economic strategy?

Hon SHANE JONES: The move slightly to the left, so I can see him. The other components of our economic strategy are human capital development, unleashing the potential of Māori resources, and also going into the areas where the last Government squandered opportunities by stacking everything up with red tape. In relation to the provincial growth fund contributing to the economic narrative, we are actually going to fund infrastructure. I’ve started to do it in the North, unlike the “10” Bridges.

Hon Paul Goldsmith: Does the Minister think ceasing all oil and gas exploration would help New Zealand’s regions?

Hon SHANE JONES: The extractive sector is an important part of the provincial economy. However, it along with a whole a host of other industries are about to enter the transition phase as this Government leads New Zealand towards a 2050 position of carbon neutrality.

Hon Paul Goldsmith: Does he still hold the view that parts of Northland are commercially barren, not unlike the minds that conceived the rhetoric opposed to further oil and gas exploration?

Hon SHANE JONES: Yes, to the extent that I understand that came from Greenpeace, I absolutely stand by my words.

Hon Paul Goldsmith: Why doesn’t he upbraid the Prime Minister with the same vigour he upbraids Air New Zealand, given that her actions will hurt the regions far more?

SPEAKER: No—no, no.

Jami-Lee Ross: Why not?

SPEAKER: The Minister for Regional Development has no responsibility whatsoever for the Prime Minister’s statements.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. That wasn’t the question. The question was “Why is it that the Minister can be so free with his criticisms of anybody else around this particular issue when he hasn’t conveyed that message also to the Prime Minister?” That’s quite a reasonable question.

SPEAKER: And if it had been phrased that way, it might have got through.

Hon Gerry Brownlee: Well, could he have another go?

Hon Simon Bridges: I raise a point of order, Mr Speaker. Speaker’s rulings 155/3: “Members are able to ask Ministers whether they agree with the views of other people, as long as that view that is being expressed is about a matter that is very much the Minister’s responsibility.” So I’d ask respectfully how your ruling fits with that Speaker’s ruling.

SPEAKER: Because the tone of the question, the wording of the question, and the area of responsibility—I think it failed on three counts. Paul Goldsmith, do you have any further supplementaries?

Hon Paul Goldsmith: Yep. [Interruption] I’ll work my tune. A different question—if he were to visit the region of Taranaki, would he repeat what he said in 2013, “I’m keen to defang the misrepresentations that are abounding that somehow the oil and gas sector has disappeared from our purview. Nothing could be further from the truth, and if my visit provides the opportunity to reinforce the centrality of jobs, the importance of industry, and the need for a future Labour-led Government to assuage whatever anxieties might be in the minds of employers or future investors, then I am up for the task.”?

Hon SHANE JONES: I think it’s fair to say that political rhetoric isn’t static.

Rt Hon Jacinda Ardern: Can the Minister confirm that this Government has never proposed retrospective decisions and, therefore, won’t impact on the current oil and gas industry jobs that exist today, and that he has seen the statements by the Leader of the Opposition on 3 March stating that New Zealand needed to transition away from fossil fuels?

Hon Paula Bennett: That was a bad tone.

Hon SHANE JONES: Paula, turituri e kui.

[Paula, keep quiet old lady.]

Yes, I thoroughly agree with everything the Prime Minister has said—

Hon Simon Bridges: Well, you’re allowed to now.

Hon SHANE JONES: —and I myself was quite—taiho, e tama [hang on, young fellow]. The reality is that we’ve heard a flowering, an opening of ideas from the new Opposition leader about the transition economy.

SPEAKER: Just to make it clear, because I had been asked by a senior member of the Opposition to identify people who result in the Opposition losing questions: two of those were Dr Nick Smith and one was someone unidentified but down that way as well. So there were three. There was minus three out of that.

Hon Paul Goldsmith: Does he think the taxpayer investment he is sprinkling around the regions will make up for the reduced foreign investment likely to result from his Government’s proposed overseas investment rules?

Hon SHANE JONES: The final shape and form of the overseas investment legislation lies still with the House. The small interventions to date that have been made are a monstrous improvement on the barren promises of the last Minister in the north for 10 bridges. In fact, everywhere I go, National former politicians are congratulating me.

Provincial Growth Fund—Decision Making

6. MARK PATTERSON (NZ First) to the Minister for Regional Economic Development: Can he confirm that projects in Northland only receive Provincial Growth Fund support because he lives in Kerikeri?

Hon SHANE JONES (Minister for Regional Economic Development): A scurrilous and false allegation. As I recall the term, 4.5 kilometres was used. As should be evident to anyone, I have walked that distance on a regular basis. Kororāreka, Paihia, and Ōpua are well beyond 4.5 kilometres and it may only be as far as that Epsom-based member can see, but the provinces are far more lively than that.

Mark Patterson: Could he elaborate on why these projects were so desperately needed?

Hon SHANE JONES: The projects that have been identified by the Mayor of the Far North District Council, Mr John Carter, and the recently appointed director, Mr Murray McCully, are of high quality—maybe in contrast to how we may view those personalities in another world, but they came through a regional economic policy development process, and, not wanting to be capricious to the people of the north, I have supported them and that has improved my popularity.

Mark Patterson: Will the Minister have to move to other parts of the country before they can feel the benefits of provincial growth fund funding?

Hon SHANE JONES: I hope to move with more efficiency after my observations about Air New Zealand, but more on that at a later stage. I have recently come through the Murihiku, the Southland area, and there’s a sense that the regional development fund will do great things there. The reality, however, is that they’ve heard a great deal of rhetoric and promise, but I am a man of my word and I’ll deliver to the deep south.

Hon Paul Goldsmith: Can he understand why—given he rolls around the country climbing in and out of helicopters, handing out cash like Pablo Escobar, and emphasising his local region particularly—people are asking questions?

SPEAKER: No. I mean, I think, the member—do I need to explain to the member?

Hon Members: Yeah.

SPEAKER: Right. We’ll start with irony, expressions of opinion—both of which are ruled out as part of questions, both of which were involved in that question.

Rt Hon Winston Peters: I wonder whether the Minister could tell us exactly how he has been received around the country, and particularly up north, by the people up there with respect to projects for which they have waited sometimes three decades?

Hon SHANE JONES: Across the cold concrete of the Paihia wharf, a literal red carpet was rolled out by John Carter.

Energy Market—Electricity Pricing and Renewable Generation

7. JONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and Resources: Does she stand by her reported comments in Energy News on 13 March this year?

Hon Dr MEGAN WOODS (Minister of Energy and Resources): Yes, in the context in which they were given.

Jonathan Young: Does she stand by her reported comments that “The Government understands the need to maintain peaking capacity in the power market as it works towards its environmental goals.”—capacity which is currently delivered through gas-fired generation?

Hon Dr MEGAN WOODS: Yes, I do, and that is why this Government has made one of the first two tasks of the interim independent climate commission its job to chart our path to 100 percent renewable electricity by 2035. We understand very clearly that there are three fundamental parts of our energy system that we need to get right: security of supply, affordability, and sustainability. That is why we will be doing the work to put in place carbon budgets so that we have a clear transition plan to 2035.

Jonathan Young: Is she expecting households to carry the extra costs of overbuilding generation in order to meet her straight 100 percent renewable goal by 2035—costs which potentially will double the power prices in New Zealand, as has been the case in Germany?

Hon Dr MEGAN WOODS: One of the things that this Government is absolutely committed to is making sure that we have an affordable electricity system for New Zealanders. One of the key areas for the review into electricity pricing is around what future technology means for electricity pricing for consumers. It’s also one of the reasons why this Government wasn’t prepared to sit around saying, like the Leader of the Opposition did, that we need to transition to a fossil-free future but not put in place a transition plan. We will not let New Zealanders be left high and dry by not adequately planning for our future, and that is what this Government is committed to doing.

Jonathan Young: If New Zealand bans gas generation backup, as she has foreshadowed and as the Prime Minister foreshadowed yesterday, will New Zealand experience power blackouts, as South Australia have faced, when the sun isn’t shining, when the lakes are low, and when the wind doesn’t blow?

Hon David Parker: You sound like Gerry Brownlee.

Hon Dr MEGAN WOODS: I reject the premise of that question. The Prime Minister made very clear yesterday that we are currently doing some work that is required around the future, and what the member asks simply isn’t what was said yesterday.

SPEAKER: Before I call James Shaw, I want to remind the Minister for the Environment that he should not insult Mr Brownlee by describing me in that way.

Hon James Shaw: Does the New Zealand energy market operate in the same way as Germany and South Australia?

Hon Dr MEGAN WOODS: A very good question. No, it does not, and one of the things that we are utterly committed to doing in the review of electricity pricing is looking to the future—something the previous Government did not do—and considering how coming technologies are going to impact on pricing.

Climate Change—Carbon-neutral Goal

8. TODD MULLER (National—Bay of Plenty) to the Minister for Climate Change: Does he agree with the Prime Minister when she said that the world has already made the decision to transition out of fossil fuels?

Hon JAMES SHAW (Minister for Climate Change): Yes, I do—strongly. When the previous Minister for Climate Change Issues, the Hon Paula Bennett, signed the Paris Agreement on behalf of the National Government, she committed New Zealand, alongside 195 other countries around the world, to achieving a net zero emissions economy in the second half of this century. It is technically not possible to achieve a net zero emissions economy and at the same time continue the use of fossil fuels. Therefore, every country in the world has already made the decision to transition away from fossil fuels, and I thank the former National Government for their part in that decision.

Todd Muller: Does he stand by his statement of 18 December that “the transition will take decades.”; if so, does he see natural gas as a critical transition fuel for developing countries?

Hon JAMES SHAW: We have committed ourselves in New Zealand to a net zero emissions economy by the year 2050, so by definition that transition will be three decades to get to that point. We are asking the interim climate committee to take a good look at the energy system and what we need to do to transition to 100 percent renewable electricity generation by the year 2035. We are also doing other pieces of work to look at the use of fossil fuels—for example, in industrial heat processing and in our transport energy mix as well.

Todd Muller: Does he support exporting our natural gas resources to assist other fossil fuel economies to move away from coal?

Hon JAMES SHAW: Ultimately, 195 countries have made that commitment to hit net zero emissions in the second half of this century, and so every country, ultimately, is committed to phasing out the use of fossil fuels. More than 50 countries, from Sweden to Ethiopia, including New Zealand—several US states even—have signed up to the Powering Past Coal Alliance. France is not granting any new permits and has set an end date for oil and gas exploration when current permits expire.

Todd Muller: I raise a point of order, Mr Speaker. I specifically asked: “Does he support exporting our natural gas resources to assist other economies to move away from coal?”, and I got a—

SPEAKER: It is fair to say that the question wasn’t properly addressed. The Hon James Shaw, have another go.

Hon JAMES SHAW: Ultimately, that market is going to dry up because other countries are as committed as New Zealand—195 other countries are as committed to phasing out the use of fossil fuels as New Zealand is—

Brett Hudson: What a load of rubbish.

Hon JAMES SHAW: Well, they have signed up to the Paris Agreement, and that does say that they want to get to net zero, and, in fact, other countries are moving far more rapidly than New Zealand on this front. So if investors are looking for a kind of guaranteed bet—if they’re actually looking for predictability about where to invest their money over the course of the coming decades—I would recommend that they put their money into renewable energy, which needs to grow as a sector and which has, I would say, a very long and very happy future ahead of it.

Todd Muller: Should New Zealand end oil and gas exploration?

Hon JAMES SHAW: I have said on a number of occasions that it is inconsistent with a net zero emissions economy target to look for new oil and gas when your current reserves will actually get you to that point. So my advice has always been that we need to phase it out as fast as possible. Ultimately, it is a matter for the Minister of Energy and Resources to decide on what happens between now and then, in terms of new exploration. But I do think that if you look at the global situation, we know that 80 percent of all existing oil and gas reserves around the world simply cannot be burned if we are to live within the 1.5 to 2 degree temperature target that’s outlined in the Paris Agreement. I want to reinforce that point: it is completely inconsistent with trying to hit the Paris Agreement targets, to continue to look for new oil and gas exploration. It just doesn’t make sense.

Housing, Auckland—Development and Response to Government Programmes

9. MARJA LUBECK (Labour) to the Minister of Housing and Urban Development: What response has he seen to Government initiatives that are intended to boost the supply of affordable housing in Auckland?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): I’ve seen an encouragingly positive response from the building industry and property developers to the Government’s ambitious plans to build affordable housing in Auckland to deal with the national housing crisis. KiwiBuild will deliver affordable homes for Kiwi families by working with the private sector, with iwi, and with councils and other investors to establish major urban development projects across Auckland and across the country.

Marja Lubeck: How important are urban development opportunities within Auckland to increasing the supply of affordable housing?

Hon PHIL TWYFORD: Building high-quality affordable townhouses, terraces, and apartments in medium-density developments will help meet demand in the city. Building large-scale urban development projects around transport connections is the sensible way to alleviate both the national housing crisis and Auckland’s chronic traffic gridlock.

Marja Lubeck: Is there any resistance to Government programmes intended to boost the supply of affordable housing in Auckland?

Hon PHIL TWYFORD: There will often be a small group opposing new housing developments.

Hon Dr Jonathan Coleman: Only Labour MPs.

Hon PHIL TWYFORD: On the North Shore currently, a proposed apartment development in one of the former Government’s special housing areas, permitted under the unitary plan produced under the last Government’s law, is currently drawing some local criticism—surprisingly, from someone who actually voted for both of those laws, Jonathan Coleman.

SPEAKER: I want to remind the Government that using Government supplementaries to attack the Opposition in that way is not permitted. As a result of that, the Opposition will be granted two additional supplementaries.

KiwiBuild—Progress and Targets

10. Hon JUDITH COLLINS (National—Papakura) to the Minister of Housing and Urban Development: How many KiwiBuild houses have been built in the 145 days he has been in Government?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): The KiwiBuild programme kicks in on 1 July this year, with an appropriation of $2 billion and the ambition to build 100,000 affordable homes in response to the national housing crisis. The first houses will begin to reverse the deficit of over 71,000 houses, inherited from her Government. The number of houses built so far is the same as the number of cars that she crushed. But don’t worry, there are thousands more on the way.

Hon Judith Collins: I raise a point of order, Mr Speaker. The Minister did not answer or address a very straight question, which was: how many? If the answer is none, which is not what we could have got from what he said, he needs to say it, I suggest.

SPEAKER: I’m not sure that the answer was accurate, but the Minister did address the question.

Hon Judith Collins: When he said on The AM Show last Friday that he was confident of meeting his KiwiBuild targets from 1 July this year, did he include in his estimates any of the developments that were already consented prior to the change of Government?

Hon PHIL TWYFORD: The number of houses that have been set out in the KiwiBuild pipeline is far, far greater than the number of affordable houses that the former Government could say that they built over nine years, and that was none.

Hon Judith Collins: I raise a point of order, Mr Speaker. I do not believe that the Minister has addressed that question. He’s talking about pipelines. No one is suggesting people should be living in pipelines.

SPEAKER: I think the member can ask her question again.

Hon Judith Collins: Thank you, Mr Speaker. When he said on The AM Show last Friday that he was confident at meeting his KiwiBuild targets from 1 July this year, did he include in his estimates any of the developments that were already consented prior to the change of Government?

Hon PHIL TWYFORD: Firstly, the number of houses consented is irrelevant because everybody knows you can’t live in a consent. Secondly, the former Government did not plan to build any affordable houses. This Government is committed to building houses that young Kiwi families can afford to buy and live in.

Hon Judith Collins: Has he discussed with developers how he plans to convert existing consented housing land into KiwiBuild land?

Hon PHIL TWYFORD: The task is not to actually convert existing consented housing into KiwiBuild land. We’re working with the private sector on plans to buy and underwrite KiwBuild properties off the plan. Our land for housing programme is working with third-party developers to develop vacant Crown land and private land that’s been acquired for that purpose, and we’re building KiwiBuild homes on Housing New Zealand land that’s been developed, and we’ve got large-scale urban development projects under way that will include thousands of KiwiBuild houses.

Anahila Kanongata’a-Suisuiki: How many KiwiBuild houses will be built in the first three years of the programme?

Hon PHIL TWYFORD: Once the KiwiBuild programme’s up and running from 1 July, we expect around 1,000 KiwiBuild homes in the first year, 5,000 in the second year, and 10,000 in the third year, delivering the promised 100,000 affordable homes by mid-2028.

Hon Judith Collins: Why is he proposing to count houses from 1 July 2018, when by that date he will have been the Minister for a whole 248 days?

Hon PHIL TWYFORD: Because that’s when the $2 billion Budget appropriation for KiwiBuild kicks in.

Hon Judith Collins: When he became the Minister of Housing and he said he would begin the KiwiBuild programme within his first 100 days, does he now mean that 100 days equals 248 days?

Hon PHIL TWYFORD: I said that because that’s exactly what I have done and exactly what this Government is doing.

Jobs—Work The Seasons Website

11. Hon LOUISE UPSTON (National—Taupō) to the Minister for Social Development: Does she stand by all her statements?

Hon CARMEL SEPULONI (Minister for Social Development): Yes, in the context in which they were given.

Hon Louise Upston: Is it correct that there are over a thousand job vacancies registered on the Work The Seasons website that she launched on Friday?

Hon CARMEL SEPULONI: Yes.

Hon Louise Upston: With the website operating for more than one month, why are only 44 vacancies listed on the website?

Hon CARMEL SEPULONI: My understanding is that there are over a thousand vacancies on the website.

Hon Louise Upston: Is the Minister not sure that she’s confusing the thousand training places with the number of job vacancies?

Hon CARMEL SEPULONI: My understanding is that there are a thousand vacancies on the website.

Hon Louise Upston: When will the Minister figure out, based on the interview she had with Radio Live, that if she’s going to claim credit for the work done by the previous Government, at a minimum she should do her homework and get her facts straight?

Hon CARMEL SEPULONI: We’re really proud of the Work The Seasons website that’s been launched, which I launched with the Minister of Employment, Willie Jackson, last week. Can I just say that this Government is committed to working with businesses to ensure that we provide options for New Zealanders, opportunities for employment, and that’s what we’re working hard towards.

Comprehensive and Progressive Trans-Pacific Partnership—Progress and Public Submissions

12. PAUL EAGLE (Labour—Rongotai) to the Minister for Trade and Export Growth: What progress has the Government made on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership?

Hon DAVID PARKER (Minister for Trade and Export Growth): Recently, in Santiago, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) was signed on behalf of the Crown. This was a historic moment for New Zealand, securing greatly improved market access with Japan, Canada, and Mexico—the 3rd, 10th, and 12th largest economies in the world.

Hon Simon Bridges: Iron your shirt before you come down, David.

Hon DAVID PARKER: With the rules-based trading system increasingly under threat, the CPTPP has increasing importance to the more than 600,000 New Zealanders whose jobs depend on trade. This coalition Government has continued to take more of the rough edges off CPTPP, agreeing bilaterally with Australia, Peru, Brunei, Vietnam, and Malaysia not to use investor-State dispute settlement provisions.

SPEAKER: OK. Before we have the next supplementary, I’m going to ask the Leader of the Opposition to cease commenting on my ironing skills.

Paul Eagle: How will the public get to have their say on the agreement? [Interruption]

SPEAKER: Sorry, there was sort of like one each then, so we’ll just leave it. But Judith Collins and—I’m not sure who it was who was going the other way, David Parker—are not to interject during supplementary questions.

Hon DAVID PARKER: Last week the Foreign Affairs, Defence and Trade Committee announced a two-week period for public submissions on the committee examination of CPTPP. I’ve since written to the committee asking for the time frame for submissions to be extended. The committee has since agreed to extend public submissions by three weeks to 18 April—a total of five weeks. I expect public hearings to be held. In my view, it’s important that the public are allowed to have their say.

Paul Eagle: What is the expected time frame for the Government to ratify the CPTPP?

Hon DAVID PARKER: Should the Government decide to ratify CPTPP, we expect the enabling legislation to come to the House in June, with the expectation of completing passage of the bill or bills by the end of 2018. Again, we expect the select committee to call for public submissions and to provide adequate opportunity for public submission and consideration. While we may not agree with every opinion expressed on the agreement, this coalition Government is willing to listen.

Hon Todd McClay: Can the Minister confirm that the side letter he signed with Australia has the same effect as the side letter signed by the last Government with Australia in the original Trans-Pacific Partnership (TPP) and that the four new side letters with Peru, Vietnam, Malaysia, and Brunei represent less than half of 1 percent of all foreign direct investment in New Zealand?

Hon DAVID PARKER: I can confirm that the form of agreement is the same as it was with Australia, as I’ve previously done in this House. It is true, though, that of the 10 other countries that are in CPTPP, we now have side letters with half of them.

Hon Todd McClay: Supplementary. So in claiming—

SPEAKER: No. Order! Order! The National Party has no further supplementaries.

Hon Todd McClay: You gave two back to us.

SPEAKER: I am advised that the National Party has—if the shadow Leader of the House is willing, we will go back into account and take it off tomorrow, if in fact I’m wrong.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. I’d never have the temerity to refer to you as being wrong. But if, by a chance, the count doesn’t add up, then we’ll take the extra one tomorrow.

SPEAKER: Well, whichever way it breaks, we’ll work it out for tomorrow—and maybe the Greens could help you.

Hon Todd McClay: In claiming that he has fixed TPP, does he remember saying to the House that market access between the two agreements remains the same, that the labour provisions chapters are the same, that the US is still mentioned all the way through the text, and that investor-State dispute settlement provisions are still there, that the four additional—

SPEAKER: Order! Question please.

Hon Todd McClay: —side letters he signed are responsible for just half of 1 percent of foreign direct investment in New Zealand? My question is: after all his hard work, does he think he needs a lie down?

Hon DAVID PARKER: Mr Speaker.

SPEAKER: No. No. The member will just resume his seat.

Hon DAVID PARKER: Well—

SPEAKER: No. There’s a pile of irony in that, which was just not acceptable. The member will resume his seat.

Hon DAVID PARKER: I raise a point of order, Mr Speaker. I’m left in the position that left on record are the ridiculous assertions that this is the same agreement as the prior one.

SPEAKER: No. I have ruled the question out. All right?

Hon Iain Lees-Galloway: I seek leave for Mr Parker to be able to answer the question, despite its egregious breaches of the Standing Orders.

SPEAKER: No. If Mr Parker seeks leave he can—

Hon DAVID PARKER: I so seek leave.

SPEAKER: Is there any objection to David Parker being able to answer the out of order question? There is.

Rt Hon Winston Peters: Can I ask the Minister for Trade and Export Growth as to whether this is a fact: that he inherited a Lada and turned it into a Rolls-Royce.

SPEAKER: No.

Hon Gerry Brownlee: Point of order.

SPEAKER: No. Well, I’ve ruled it out. I hope the—right. Is there any—the National Party’s not having any further?

Reports

International Treaty Examination of the Pacific Agreement on Closer Economic Relations (PACER) Plus

SIMON O’CONNOR (Chairperson of the Foreign Affairs, Defence and Trade Committee): I move, That the House take note of the report of the Foreign Affairs, Defence and Trade Committee on the International treaty examination of the Pacific Agreement on Closer Economic Relations (PACER) Plus.

I’m pleased and confused to take a call on this—pleased in so far as this is a very good treaty examination of the Pacific Agreement on Closer Economic Relations, which we basically know as PACER-Plus. It’s a good treaty. It was led primarily by the Hon Todd McClay when he was the Minister of Trade. I acknowledge, though, of course, our current Minister, who will be bringing this to conclusion. But it was Todd McClay, in particular, who’s done a lot of work to bring this about, and I’ll elaborate on that a little bit further soon.

I do say I’m slightly confused as well. Here we are, after a two-week recess, and the first Government order of the day is not work around welfare or a Kiwi housing bill or the like. We are here talking about a foreign affairs piece of process, which is the examination of a treaty. I find this, I suppose, again, confusing, in that, as the chair of a select committee, we always welcome the opportunity to speak on our work, but it’s highly, highly unusual for us to be spending time as a House actually debating these topics. But seeing that we’ve been given the opportunity to do so, I will point out a few aspects which I think we should draw attention to. As I say, this is a good agreement. Todd McClay’s worked very hard at it, and I do look forward to the current Minister of Foreign Affairs and the Minister for Trade and Export Growth bringing this to a successful conclusion.

The agreement is interesting in so far as when this committee reported back in August—and I should acknowledge Todd Muller, who was the chair at the time and is with us here; he was the one who was chair of the committee at the time and brought this report to the House in August. They worked very hard to examine this treaty to point out, obviously, its benefits. The long and the short is enormous benefits to New Zealand and to the Pacific. No one’s losing out here.

What was interesting, though, is that New Zealand First actually spoke and voted against PACER-Plus. It’s in the report itself. I was a little surprised, I must admit. I was flicking through the notes when I took over the chairmanship of this committee, looking particularly at the trade agreements, and, yeah, was a bit surprised to find New Zealand First opposed—and now I understand because of a coalition deal in behind it. I would be interested to hear a bit of a further discussion today on that. The Greens, as well, have thrown up a number of red, or perhaps green, flags around this treaty. It will be interesting to get their sense of where they are now and if, in particular, they are now supporting this trade agreement because they’ve transferred onto the Treasury benches. I’ll be interested to know why.

Look, the agreement affects the Pacific Islands Forum, so it’s about 18 countries, in effect; 11 of those have signed up, New Zealand being, of course, one of them. The report itself, as tabled in August, refers to 10, but since then we’re up to 11. One of the first things I did as chair of the Foreign Affairs, Defence and Trade Committee was to ask for an updated briefing from the Ministry of Foreign Affairs and Trade, and I acknowledge the Minister in allowing the officials to come in and speak to us and bring us up to speed there.

So 11 countries have signed up. None yet has ratified, but that is coming. I understand New Zealand and Australia are committing to be the first two countries to do so; I’m looking forward to that happening. Three countries are working to finish their negotiations at the moment—that’s the Federated States of Micronesia, Palau, and the Republic of the Marshall Islands—and four, in my own parlance, are still thinking about it. That’s the likes of Fiji and Papua New Guinea, and I think it’s in their interests, and certainly in New Zealand’s, that they come on board. So 18 countries in total; 11 have signed up.

We now have to go into this ratification process. Obviously, this debate today has nothing to do with the ratification process. As I mentioned earlier on, it is slightly confusing that this is what we’re choosing to spend the House’s time on, but I look forward to that ratification process. It’s my understanding that eight countries are needed out of those to effectively bring this into effect, and most of the changes are just on our domestic legislation.

What I think this does, though—this agreement—is really show New Zealand’s continued commitment to the Pacific. Obviously, it’s a trade agreement, but this is slightly different than many. One difference is that it’s not just, obviously, wanting to trade between these countries, but, I suppose, we understand there’s a bit of an imbalance between a number of the Pacific Islands and New Zealand, particularly in the space of trade. We are a stronger economy compared to many, so it’s pleasing to see in the agreement that there is a readiness package as part of this agreement. The long and the short of that is that New Zealand and Australian aid, effectively, will be going into these islands, into these countries that are signing up. So over two years we’ll actually help those countries—the likes of the Cook Islands, Kiribati, Nauru, and the others—to help them move through the ratification process. Their Parliaments often are still maturing or evolving, so assisting them with some of the legal and ratification processes will be important. We’re also proposing a $25 million fund to help develop trade, to develop that economic development. If we want to work with free trade, well then, we want those Pacific Islands to be operating very well.

Finally, I suppose, a part of it is around the aid for trade, as it’s called. We’re looking, along with Australia—you can see we’re working quite closely—to work towards a 20 percent target of our aid in the Pacific going to these islands, ultimately to help facilitate their trade. We know, I think on both sides of the House, and certainly this side, that trade is good, and not just for the respective economies. It actually flows right through those countries, and, having lived and worked in the Pacific, more trade, I can say, will be very well welcomed and have excellent flow-on effects on everything from their healthcare through to anything like welfare, social development, and the like.

So I’m pleased, as I said at the start, that this is progressing—pleased in some ways, that we do have a chance to discuss this today, and still a little miffed, to use the vernacular, that this is how we’ve chosen to use the time. I am pleased, though, that the Government is engaging more on the trade space. I think engaging with our closest neighbours is really important, and while, obviously, this side of the House sees that the Trans-Pacific Partnership has been primarily worked from the last Government, I do acknowledge the Minister for Trade and Export Growth being in Chile recently and signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. I think it’s a great step forward for us. Speaking personally, I am keen to see that we continue to have engagement, particularly with the EU and with Great Britain—that we proceed there. I do have reservations around the continued statements around Russia, in and of itself, but certainly with what has happened in recent days, and I would ask the Government to consider that more fully as we continue working towards these free-trade agreements.

So I will leave it there. The committee has been very pleased to examine this. We are very pleased that we’ve been able to have further briefings from officials and the chance to better understand it. I look forward to this returning to the House for ratification at some point, and look forward to seven other countries joining us so that we may proceed with this agreement, for the betterment of this country and those in the Pacific.

Hon DAVID PARKER (Minister for Trade and Export Growth): Thank you, Madam Deputy Speaker. I rise in support of the motion. Just dealing with the question as to why it is important that we debate issues relating to trade, I would have hoped that the members of the Opposition now see that one of the mistakes that was made not by the last Minister of Trade, Todd McClay, but by his predecessor, Tim Groser, was to think that he knew best, and that there was no need to engage with the public in order to build support for trade. Now, there’s no doubt in my mind that New Zealand is a trade-dependent nation, and that, whilst trade agreements are not the be-all and end-all of trade, they are important to accessing other markets and for other countries to access New Zealand, particularly for the Pacific Islands. But, notwithstanding that obvious truth, it’s also clear that there is disquiet in the international community. A lot of countries around the world are experiencing a backlash against open trading relationships. That’s been true in New Zealand in recent years, where, when the prior Trans-Pacific Partnership agreement was proposed to be signed, there was a protest of about 20,000 people, who blocked the motorways in Auckland.

Hon Todd McClay: 10,000.

Hon DAVID PARKER: 10,000. Well, whether it’s 10,000 or 20,000 is a moot point, but there were a lot of people. In contrast, the protests this time have been a lot smaller, and I think that’s, in part, because we’ve been willing to engage with people on the importance of trade agreements, on their concerns about inappropriate provisions that can be found in some trade agreements, and on how their interests are protected by the detailed provisions of trade agreements.

Now, in respect of the PACER-Plus agreement, although it is a less significant agreement for New Zealand in terms of our own economic future, in some ways it’s more important to New Zealand in respect of the settled security arrangements that we have in the Pacific, because if New Zealand’s going to maintain a strong relationship with the Pacific, and aid the Pacific to succeed economically in a way that means that there are less likely to be problems in those Pacific countries because they will be more prosperous and settled in their way of life, then that’s really important to the future security issues of New Zealand and the Pacific.

That’s the reason why the last Government, with the support of the Labour Party—then in Opposition—concluded the PACER-Plus agreement. The PACER-Plus agreement isn’t so much for the benefit of New Zealand as it is for the benefit of the Pacific Island States who trade with us. Most of New Zealand’s trade agreements push pretty hard for other countries in the agreements not to be persisting with subsidies for their industries. This agreement expressly allows Pacific Island countries to take a development path that enables them to support emerging industries in a way that we would not agree, for example, in a trade agreement with Australia.

So there are provisions in here that, in strict commercial terms, New Zealand would not typically accept in other trade agreements. That’s important because some of the critics of trade agreements with the Pacific say that in New Zealand we are somehow being paternalistic in the Pacific, forcing upon them a trade agreement that they don’t want. I reject that criticism. I think that the Pacific Island States have been sovereign and considered in their decisions to join PACER-Plus, partly evidenced by the fact that some of them have chosen not yet to join. I think it’s a little bit paternalistic—or maternalistic—for other critics of this scheme to somehow claim that there is a naivety in the Pacific on the part of those countries’ sovereign decisions to join this agreement.

I certainly back those other countries to take their own decision as to whether they join this agreement, and I know from my understanding of these issues that those countries have chosen of their free will to join this agreement because they think it is beneficial to their country to do so. I applaud them for doing that because I truly believe, as the last Government did, that one of the things that the Pacific needs to do is to grow the prosperity of their own economies for the benefit of their own people so that they can enjoy a standard of living that is closer to ours. I believe that, through their trading relationships with New Zealand, they will be able to sell our goods and services to New Zealand, to have some more labour mobility at times to New Zealand, and through those measures they will be a more prosperous economy.

Having said that, there are also protections in here for New Zealand should those countries that are part of the PACER-Plus agreement then do a separate bilateral agreement with another country that is on more favourable terms to that other country—then those benefits flow through to New Zealand and Australia. So that’s fair. If New Zealand and Australia are at one level entering into an agreement from which a strict free-trade agreement point of view is less advantageous to New Zealand than our agreements normally are, if those other countries enter bilaterally a separate agreement with another country that is more beneficial to that other country, it’s only fair to New Zealand and Australia that those same benefits flow through to New Zealand.

In respect of the separate agreement and labour, I don’t have much time to dwell on that, but I think most of us in this House know that some of the existing labour mobility schemes—for example, the regional seasonal employment (REC) scheme. The REC scheme, as it’s abbreviated to, has worked well for both Pacific Island countries and for New Zealand. It’s assisted us to get grapes harvested, pruning to be done, apples harvested, and at times kiwifruit harvested.

Now, we always have to be mindful that we owe a primary duty to New Zealanders to be employed in those industries, but when the REC scheme was introduced it was absolutely clear to the original Labour Government that introduced it that if it weren’t for the additional labour that was coming from Island countries to meet that labour shortage, there would be less output from our horticulture and that would have been a diminution in value to New Zealand. Other people who have jobs in those industries would have had those jobs at risk, and the money that was being returned to the Pacific islands would not have been earned by them.

I would make a note of caution in respect of that. We’ve got to be careful that we are not creating additional dependency in the Pacific Islands on only low-value labour, because in the next 20 years I expect many of those jobs to be replaced through technology. We are getting ever closer to robotic fruit picking and robotic pruning. When that happens, the need for the summer seasonal labour for fruit picking and pruning will disappear. It would be unfortunate if we have created a level of dependency in Pacific Island countries on that as an income source, which is why PACER-Plus, outside of labour mobility, is important and it shows a shared ambition between New Zealand, Australia, and the Pacific Island States in the agreement to help them build their economies to a more sustainable position and a more prosperous position.

We know that as countries improve their standard of living they can afford better health services, better education services, and better environmental services to enforce the rule of law and the like, and we hope that the development path that we want Pacific Island countries to take is improved by this agreement.

So I’ll end there. I deserve no credit for this agreement. It should all go to the prior Government. The final point I would say is the criticisms that were made of New Zealand First in respect of their minority view—they did not say that PACER-Plus was a bad agreement; they said that they would have preferred that all of the countries, like Fiji and Vanuatu and Papua New Guinea, had committed to the agreement before it was brought to New Zealand for ratification. I can understand that as a viewpoint. I think, though, I differ in that view, and I think we were appropriate to bring it into effect when we can with the countries that have already committed themselves to it.

So I am very happy to support this motion. I think if this treaty proceeds, the Pacific Islands will be better off and we will be a more secure neighbourhood generally in the Pacific. Australia and New Zealand, I think, should be thanked, as should the other countries that are participating in this for bringing this advance to the House’s attention.

Hon TODD McCLAY (National—Rotorua): I, too, rise to speak with pleasure on this debate around the Pacific Agreement on Closer Economic Relations (PACER) Plus. I do so because it is a very long time coming—whilst maybe not so much for this House or New Zealand, certainly for the small and, in many cases, vulnerable Pacific Island countries who, in good faith, started negotiating with New Zealand and Australia in August of 2009. It’s often said that nothing good happens quickly in trade negotiations—or, some would say, any negotiation; look at the coalition agreement—but, putting all of that aside, certainly, nine years or eight years is a long time for these vulnerable States to wait for us to reach agreement about their future.

As Minister at the time—or when I became associate trade Minister under the last trade Minister, Tim Groser—I asked for specific responsibility for PACER-Plus because I was of the view that the only way we would make progress is if we, with Australia, shared a vision of driving this forward. I would say that there was great animosity and concern from our Pacific Island neighbours about the harm a trade deal could do or might do to them, and we spent a lot of time talking about it being more than just trade. The PACER-Plus agreement is a model agreement that Pacific Island countries I know are proud of and should take to other parts of the world—the European Union, the Americas—and hold it up as something that, actually, large countries can do with small, vulnerable nations to help them secure a brighter and a stronger future.

We said it was not a trade agreement; it was a trade and development agreement, because we’ve found a way of marrying together trade and the importance of international trading rules with the development component of how we want these countries to grow, to develop, for poverty to be eradicated, and, in many cases, where they’re able to, a greater self-sufficiency. It is a model agreement, as I’ve said, because it has achieved things that have never been done before with developed countries. So New Zealand, with Australia, I think, can be quite proud of that.

The last speaker, the Minister for Economic Development, spoke a bit about labour mobility and the Recognised Seasonal Employer scheme, which is extremely important for the Pacific Island countries. There were challenges that we faced as a larger trading nation with trade deals with others around the world in not being able to make the commitment to them in a trade deal that they wanted. My approach—and, in fact, the approach of the Ministry of Foreign Affairs and Trade—was not to say no but, where there was an issue, to find a solution to that with them. That’s why I agree with the Minister that it is important that we are going ahead even though not all of the Pacific Island nations are ready to sign up and join, because, actually, if we decided we’d wait till they would all sign, we wouldn’t be good neighbours. What always happens in trade negotiations is arms are twisted and things are done to make people come to the table and to, finally, decide they have to sign.

In the case of particularly two countries, Papua New Guinea and Fiji, that they need some more time, as larger economies, and want to work through some other things, I think is acceptable. What wouldn’t be acceptable is if we made all of the other nations that have worked very hard to persuade their citizens of the importance of this agreement—they have made some very tough decisions around the table to put their name on paper in Tonga; it wouldn’t be fair to them to then make them wait for what could be an extended period of time. They’re ready to go ahead with it now, they want the better access to New Zealand and Australia, and they want the development assistance funds—more than $50 million—that will flow to help them with trade, to get them ready. They want the aid-for-trade component of the agreement that says much more of New Zealand’s development assistance will go towards the Pacific.

I want to make particular mention of a number of people who have worked very hard here, and, indeed, the officials in the Ministry of Foreign Affairs and Trade, and particularly the Pacific desk, who actually have made friends with many of their counterparts in these countries to help us all arrive in a place where we can find this is acceptable. The Australian trade Minister, Steve Ciobo, put a lot of effort into persuading not only his Government but also some of the countries that PACER-Plus was in their best interests. I want to recognise the Hon Shane Jones, as a former ambassador, who joined me in Australia not so long ago—where there was no dining, it was working hard right throughout the night with our colleagues in the Pacific. That was the meeting where we concluded PACER-Plus was done and, then, that it would be signed.

Finally, to all of the parties in this Parliament—the Minister mentioned a desire for bipartisanship. Well, we’ve had a lot of to-ing and fro-ing in the last little while about the revised Trans-Pacific Partnership (TPP) and exactly what bipartisanship means. It’s the Opposition’s job to absolutely hold the Government to account, and, Minister, we will continue to do so over the revised TPP, but when it comes to other areas of trade, if he is genuine in his desire to be bipartisan, we would welcome that, because trade is good for New Zealand, and New Zealanders don’t do well when this Parliament fights over trade.

That’s why I’m grateful to all other parties who are in this Parliament who accepted an invitation from me as Minister—from New Zealand First, from Labour, and from the Green Party—to go to Tonga to witness the signing. It was a real show of strength and support on the part of the New Zealand Parliament—and, whilst Australia was there, it was not in the significant numbers or representation that New Zealand was. That sent a very clear message to the Pacific Island nations who were there to sign and the ones that weren’t yet ready to sign, that the New Zealand Parliament—not just the Government but the Parliament—supports them and wants to work with them, and we do so through respect as neighbours and as equals.

Finally, for some of the nations that are yet not ready to put pen to paper, the very good news was Vanuatu, who couldn’t be at the signing because they had some issues, have since signed, and we left the door open to them to be able to. So I would say to Fiji and to Papua New Guinea and a few of the compact countries in the North: we want to continue to work with you, because it’s a high-quality agreement, it’s done in partnership, it will help our nations grow closer together, and it will really deliver a better future for islands that are full of wonderful, talented people, in many cases who are vulnerable. Thank you.

DEPUTY SPEAKER: The Hon William Su’a Sio.

Hon AUPITO WILLIAM SIO (Minister for Pacific Peoples): It’s a pleasure to take a call on the PACER-Plus agreement. I want to begin, firstly, by acknowledging that more recently the right honourable Prime Minister, with the Rt Hon Winston Peters, led a delegation to the Pacific, supported by members of this House and a strong community and business delegation from New Zealand.

Prior to that delegation visiting the Pacific, the tone and scene was set by the Rt Hon Winston Peters when he declared at a leadership forum that this new Government was looking at resetting its relationship with the Pacific. Many would have seen a number of reports in the media that flowed around as we were travelling from Samoa, Niue, Tonga, and the Cook Islands that the leadership provided by the Prime Minister and the Deputy Prime Minister was about treating the Pacific with respect, treating it as a different kind of relationship—more of a partnership relationship. This was the first time for some of us who are new in our ministerial roles to sit and participate in the bilaterals that took place. I can say to this House that the number one issue that was raised constantly by the Governments we saw was the need for their island countries to grow their economic wealth, to grow the benefits that go back to their people. So I think it’s timely that we’re talking about this PACER-Plus agreement.

I’ve also been a student of the previous agreements, the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), which once existed in the 1980 and is a precursor to the PACER agreement in 2001, and now this one. In those days, one of the biggest issues that the Pacific would highlight with us was the fact that the benefits of our trading arrangement were always one-way, that the benefits were to New Zealand and that over the years from 1980 onwards it became harder and harder for the Pacific Island nations to secure some economic benefits to their own population, because it was one-way mostly throughout those years.

There was also a provision made in those days that where a product began its inception through the raw materials from New Zealand and was produced in the Islands, it could also be exported from the Islands back to New Zealand and Australia, and whoever was producing that product would have favourable benefits to them, and they would not be charged out by increased tariffs at our borders. I think it worked at that time, but I know that in the case of one such company called Yazaki—which once upon a time was in my electorate of Māngere, producing wire harnesses for dryers, refrigerators, washing machines—it was, once upon a time, profitable to have it there. Then it moved to Samoa and now it no longer exists because of the competitive world that we live in.

I’ve not been part of this PACER-Plus, but I get a sense from the reports that I’ve seen and from the discussions with some of our counterparts in the Pacific that we’re moving forward, that there’s a step up from the original SPARTECA agreement, and that this PACER-Plus seems to be a renewed focus on creating, with some sense of genuineness of recognising that the Pacific is a special area. I have said to the Rt Hon Winston Peters and a number of my colleagues that we really need to circle the Pacific and treat it with some distinction, because of the Realm Island nations that are part of New Zealand—Niue, the Cook Islands, Tokelau—but also because of the special nature of the treaty of friendship; the one and only that New Zealand has with Samoa, and other close relationships.

But of the 400,000 Pasifika people who live in New Zealand and call New Zealand their home, all of those people have strong and deep connections back to the Pacific. It’s in our interests that when these Pacific Island nations are strong and thriving and are generating wealth for the local population back in the islands, it actually means less expectation or less burden on those of us who are living in New Zealand, constantly engaging, constantly providing remittances back to support our families and relatives, whether it be for funerals or whether it be just basically helping them to move forward.

We met on this trip to Samoa the Samoa Small Business Enterprise Centre, and New Zealand has a significant investment in that. I saw the benefits many, many years ago, and those benefits continue in helping small businesses and social enterprises in making a profit but giving back to their community. For these small islands, tourism seems to be their biggest focus at the moment. I know that in Niue what was raised by the Premier there was our assistance and support as they look to market themselves as a niche market for those high-value tourism dollars. So it is to the benefit of this country, New Zealand, that we support and do all we can in terms of ensuring that wealth is generated for the Pasifika, for the Pasifika countries, and that the potential employment opportunities are provided to the local population, because when we do that, when we assist the Pacific Island countries to be strong, to be thriving, we’re actually helping ourselves move forward.

I know that not all countries have signed up to this, and this, I suspect, has a lot to do with the historical relationships and the way that, perhaps, we have treated the Pacific. So that’s why I’m highlighting that the theme and the tone that the Prime Minister and Winston Peters set for this latest mission, the first mission of this Government, was important. It is important to look at that reset, and many of us are going to be offering up our advice to the Prime Minister and to the Minister of Foreign Affairs about what it means to reset that relationship from a Pacific perspective, providing a Pacific lens, because that’s important going forward.

The relationships in these economic trade agreements are critical at personal levels, not just at the Government levels but at personal levels. I think we have an asset in this country in the 400,000 Pacific people whose potential we’ve not yet fully utilised. I know that when the Hon Shane Jones was our Pacific economic ambassador, Matua Jones, he got it. He understood those relationships because it’s the same kind of relationships that we here in Aotearoa have to build with our various iwis up and down the country. I believe that at the higher level, with the leadership of Winston Peters and the Prime Minister, we’re getting that. That’s an important higher message. But that message also has to now filter to our officials—that the relationship of Aotearoa New Zealand is interlinked. There is that strong connection, because the Pasifika population of New Zealand, one of the youngest populations, is the population that this country is going to have to rely on and depend on in years to come, combined with the Māori population, simply because it is the fastest growing. We’re growing faster in numbers than other populations whether we like it or not.

So I just want to re-emphasise that this is an important agreement going forward. Not all members of the Pacific are members of the World Trade Organization, so it’s important. But I believe this is a stepping stone, and I think the scene that the Rt Hon Winston Peters has set by talking about this reset relationship, a new partnership, a new dawn for the Pacific is important for us to build on, going forward.

DEPUTY SPEAKER: Before I call the next speaker, can I apologise to the member for the incorrect address and correct that for Hansard as the Hon Aupito William Sio.

Rt Hon WINSTON PETERS (Minister of Foreign Affairs): Can I just say that we have always been for trade when it’s fair and it’s free, and that’s why we are supportive of this deal. We have sought to go out there to ensure that they, as much as they can, in combination, advance the wealth and security of their part of the world; we have—both Australia and New Zealand—facilitated it. I want to pay my respects to the previous Ministers who have worked on these projects in the Pacific and, in particular, the Hon Shane Jones, who cut quite a figure as our ambassador in the Pacific itself—

Hon Todd McClay: He never walked past a single umu.

Rt Hon WINSTON PETERS: No, no, but the reality is, you see, Mr Jones understood these people, like we do, because it’s in our DNA, and it’s very, very important that we in this part of the world give other countries in Europe and in Asia, and indeed the United States and the Americas, to clearly understand the level of severity and earnestness of our approach in the Pacific when we say we’re going to have a Pacific reset of our policies and that we’re going to go into it with our eyes wide open. That means we’ve got to ensure that we do a whole lot better to confront some of the challenges, some of them very untoward and very adverse, that are emerging in the Pacific. I’m not identifying any one partner or any one player, because there’ve been a number of players where their interventions have not been in the interests of the Pacific in the way we would have liked them to have been.

The reality is that New Zealand is defined by the fact that we are in the Pacific and we are a Pacific nation. I can recall a former National Party leader saying that we’re an Asian nation, and I was staggered by that because it was so geographically wrong. We may be in a part of the world where the populations are not great, but, given the resources in this world—and the sea is one of them; we occupy an enormous theatre, where our DNA goes all the way to Hawaii and around the Pacific itself. So this is a very important arrangement. I’m sorry that we haven’t got Papua New Guinea and Fiji in on this deal, and the Solomon Islands as well, but if there’s something that we can demonstrate to them very quickly that works, well, I hope to see them sign up.

Can I just say that there’s never been a time when we have mattered more to the Pacific or the Pacific matters more to us, and trade facilitation is seriously important. I saw recently a comment by, I think, an Australian attacking this Pacific Agreement on Closer Economic Relations (PACER) Plus arrangement. What was staggering about this attack on it was that he didn’t put out one definitive argument to support his opposition to it; he just ridiculed it. I often would think, at this point in time, why other members of the media didn’t demand that he actually justify what he was saying.

PACER-Plus is situated firmly within New Zealand’s broader trade and development objectives in the Pacific region. It’s about liberalisation, but only at the pace the Pacific can sustain. It’s also about protecting New Zealand’s commercial interests and supporting the objectives of New Zealand’s aid programme. New Zealand and Australia have made serious commitments here, at $7.7 million over two years to fund support to Pacific signatories with their domestic ratification processes and $25.5 million over five years to fund the management and delivery of the development and economic cooperation work programme, an aid-for-trade funding target of 20 percent of total official development assistance for the Pacific. This funding will be delivered through New Zealand’s existing bilateral and regional programmes in the Pacific, adopting a framework that will monitor and measure the development and trade impacts of PACER-Plus for the Pacific and for New Zealand. This will include determining how PACER-Plus can contribute to positive progress under the global sustainable development goals.

But here’s the real point. If you look around the world and the trade arrangements we have, in nearly all of them we’re in serious deficit. That is, we’re importing a whole lot more than we’re exporting, except when you look at the Pacific, where the ratio is over 8:1. And maybe we should have paid more attention to how that could advantage us, because, seriously, the more trade we can do in the Pacific, the better it will be for the Pacific nations and the easier it will be for us to transition them to a more wealthy, sustainable future. It’s in our joint interest to ensure that we do the maximum we possibly can, so that when others come knocking on their door—as they do—they don’t forget where their friends really are and who that country, in our case, really is.

It’s best evidenced by the recent cyclone in the Pacific, and, before that, a cyclone appallingly named after a certain politician, in Fiji—I can only think by some malignant person in the meteorological service who came up with that. But the fact is when it was all over, the Fijians and the Samoans and the Tongans got to see very quickly who their friends were. In fact, we had a plane provisioned, ready to go in the case of Tonga before the cyclone happened, and I have to commend our foreign affairs officials and all those involved in the preparation of those missions for the work that they’ve done, as we’re doing right now in flying resources to the highlands in Papua New Guinea as a result of the appalling earthquake that they had there.

So, whilst I could go on, I think my colleagues have very adequately covered that. But I suppose the biggest part about this, which is probably what we would hope would be more likely the future of New Zealand politics, is that this has been bipartisan. It hasn’t been petty and it hasn’t been nasty, and if we put that aside, then maybe we can make far more progress when it comes to trade deals.

Now, the other trade deal that I could mention but I won’t is the Eurasian economic deal that involved the three countries at the time last August when the Opposition spokesman on trade was so loquacious and anticipatory about how it would work. He thought it was the greatest thing since sliced bread.

Now, just because something else happened that we couldn’t have forecast, it does not mean that trading arrangements should be set aside permanently, and we hope that when we have had more information on these and other deals that we will sign up as a Parliament—bearing in mind, of course, that one of the beauties of our approach when it comes to trade deals is we approach Parliament before we pass the law, not after. Do you see what I mean? I mean kind of getting the horse before the cart, so to speak, is what we’re trying to do, because in previous times we’ve sat there in this House and had deals foisted upon us where we have no parliamentary capacity to change it. That is not democracy, and I want to say that I do commend Mr Parker for ensuring that when it comes to trade deals in the future, we’ll come to this Parliament where the basis and authority of this country really lies.

Hon MARK MITCHELL (National—Rodney): Can I, firstly, just acknowledge the previous speaker, and I want to put on record that I was wrong. I was told, when I came into this Parliament and we were doing a lot of work on free-trade agreements, that New Zealand First were low-level flyers; they wouldn’t support trade agreements, they had a history of not supporting trade agreements, and, like I said, they were just low-level flyers when it comes to trade. But I’ve been proven wrong, because since they’ve gone into Government they’re soaring like eagles. They’re supporting the TPP, they’re supporting PACER-Plus, they’ve got right in behind trade, so I just want to congratulate and acknowledge to the Rt Hon Winston Peters that I was wrong, that you weren’t low-level flyers, that actually you’re soaring with the eagles.

But, in all seriousness, the PACER-Plus is a very important agreement. We are a small trading nation in the Pacific, as well, and our interests must be bound with those of our Pacific cousins, whether it be security, whether it be our economic well-being, whether it be our environment, and the PACER-Plus agreement is just providing another very strong platform for us to be able to work together with our Pacific partners.

On that note, can I please acknowledge and congratulate them. We’ve got Australia, the Cook Islands, Kiribati, Nauru, New Zealand, Niue, Samoa, the Solomon Islands, Tonga, and Tuvalu who have all signed the PACER-Plus agreement, and the Federated States of Micronesia, Palau, the Republic of the Marshall Islands, and also Vanuatu are still completing their domestic approval processes and will be joining the agreement, also. So you can see just how strong and how important this agreement is.

I just wanted to make one other quick observation, which is that the Rt Hon Winston Peters, Deputy Prime Minister, was talking about a deficit. I’ll acknowledge those comments that he was making, but I’d also add that if you look at us as a nation and our trade—the countries that we actually have free-trade agreements with, or a trading agreement with, generally speaking, annually, we experience about 10 percent annual growth in that trade. The countries that we don’t have free-trade agreements with, it’s quite the opposite: we’re seeing a decline, annually, of about 10 percent in our trade. So it just highlights the importance of these agreements.

Finally, can I just acknowledge the Hon Todd McClay. Like he said, when he became Associate Minister to the Hon Tim Groser he made a point of saying as part of one of his delegations, could he please take on the PACER-Plus. Without a doubt, it’s been his commitment, focus, and energy that has driven this agreement through as quickly as it has—and, of course, with support from our Australian partners—and so I just want to acknowledge him and the work that he’s done in getting this agreement across the line. Thank you very much, Madam Deputy Speaker.

GOLRIZ GHAHRAMAN (Green): Thank you, Madam Deputy Speaker. I rise to answer my colleague Simon O’Connor’s question: to maintain the Greens’ principled and substantive opposition to this trade agreement. The stated aim of the PACER-Plus agreement is to provide benefits to the development of Pacific nations. That would be a trade agreement that we would be very happy to support. But, in reality, the previous Government’s pursuit of this agreement at any cost has resulted in an agreement that threatens some of the most unique but vulnerable nations in the world: our Pacific neighbours. This trade agreement undermines the interests of the majority of the Island nations who have joined—their social equity, their environment, and their cultural heritage.

PACER-Plus is a trade agreement that involves Australia, New Zealand, and a handful of small Island nations. It’s 16 years in the making. It’s designed to have those countries drop tariffs on most goods being imported from Australia and New Zealand and for them to rewrite their regulations for us to much more easily pressure them into privatising their core State-owned enterprises—for deregulation, for them to drop policies that would protect domestic innovation, and to make it harder, or impossible, for those nations to trade with countries outside of the zone. It’s very difficult to see what benefit there is to the Island nations signing on to this agreement.

Like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that New Zealand entered into just a couple of weeks ago, this is an agreement that’s far less about trade and far more about impeding Governments from regulating big foreign business—this time, ours and Australia’s. PACER-Plus, rather than creating free and fair trade to help development and stability in the Island nations, undermines those nations’ sovereignty. It’s much more about ensuring unfair and unfettered advantage to us. We gain privileged access to Pacific markets while they gain no new access to our markets—for example, nowhere in this agreement is Australia and New Zealand required to drop our protectionist policies against the export by those nations of fruit and vegetables that are also grown here. While New Zealand exporters will gain a small benefit in the dropped tariffs, by our standards, we deprive Governments who are already struggling to provide basic healthcare and education for their populations.

The supposed gain for the Pacific nations is that 20 percent of New Zealand’s already allocated aid budget will go to Aid for Trade. Now, according to the mandate of the New Zealand aid programme, aid should be for the promotion of sustainable development and poverty alleviation, not to sweeten trade deals. That is not new money that is going to the Pacific; that’s money that’s being reallocated from helping with their education system and their healthcare system—money that would have prioritised growing social equity—that’s now just going to go to big business. All it’s doing is helping those businesses—urban centres—to have access to our markets. It’s not going to benefit those Island nations in combating climate change, for example, or helping them to bring about gender equity—the types of things that our aid programme would otherwise focus on.

For this illusory benefit and ill-placed pay-off, the Pacific nations are threatened with forced privatisation. This means that their telecoms, their ports, and their airports are now vulnerable to forced privatisation—something that comes from an archaic, neo-liberal world order that we saw collapse and cause catastrophic loss in the last global financial crisis. Now, it’s being enforced against our Pacific neighbours by us.

This deal will also cause food insecurity to rise in the Pacific, as privatisation of family-owned land, where families grow crops and feed themselves, will threaten that source of food. It will also open up their markets to cheaper food produced offshore that’s far less healthy, contributing to a rise in already pandemic proportions of diabetes and obesity that these nations are facing and combating. All this for some small amount of tariff gain by us—taking that away from struggling Governments.

Now, it will be of no surprise to find that, like the negotiations of the CPTPP, the negotiations for PACER-Plus were done in secret with very little consultation, though they do affect the vital interests of the Pacific people. There’s been some talk—and the Minister himself said that it is paternalistic to criticise the ability of the Pacific nations to maintain their sovereignty in those negotiations. An example of how that was, in fact, undermined is that because these small nations did not have enough experienced negotiators among them, the negotiators used by the Pacific nations in this negotiation process were paid for by Australia and New Zealand. The lead negotiator was a Ghanaian, an Australian-educated negotiator who had no experience of the complexities of the economies of the Island nations. That is the level of disparity in power involved in this negotiation process, done in secret. The text of the agreement was not released until very recently.

The PACER-Plus negotiations took some 16 years, and, even then, the two largest economies in the Pacific, Fiji and Papua New Guinea, did not join. They knew that this deal was not in their best interests. Vanuatu is still deciding, so only 14 percent of Pacific Island people are actually involved in this trade deal—something that is a blow to Pacific cohesion and regionalism that New Zealand has invested huge amounts of aid in in the past, as have other donors over the years.

So, as a reasonable, responsible regional actor and as a Pacific capital, why are we contributing to undermining stability and cohesion in these communities by pushing them further into abject poverty through gaining an unfair buck? For all the real damage and loss of trust that we engender through this deal, it is unlikely to be in our collective best interests in our Pacific neighbourhood. We are undermining democracy. We are pushing for privatisation. We are pushing communities who are already poor and struggling further into poverty by bullying their Governments into an unfair trade deal. That is why the Green Party does not support this deal. It’s not in the collective best interests of New Zealand, Australia, or the Pacific.

Hon GERRY BROWNLEE (National—Ilam): The proposition just put forward by Golriz Ghahraman, the previous speaker, is utterly ridiculous. PACER-Plus did take 16 years to negotiate and only some of the Pacific nations have come to the table, but those who have have recognised that their small economies are going to be best served by getting greater access to the markets of larger economies. It never ceases to amaze me that there are many people in this world who believe that tiny little countries are going to be somehow swamped to their detriment by larger countries who trade with them. The usual way these things work is that smaller countries, with their smaller markets, actually are able to expand their economic base by getting access to those bigger markets, and that’s exactly what PACER-Plus does in one part of it as an agreement.

There are many aspects to it, and those aspects all are about favouring smaller countries in the Pacific. The speaker previously mentioned that both Fiji and Papua New Guinea have not joined. Well, it will interest her, I’m sure, to speak to relevant Ministers inside the Government that they are part of, to find from them that Papua New Guinea does want to progress to the signature stage, and that part of the reason why they didn’t previously was because they were in the middle of a general election and somewhat uncertain about exactly who it would be that would go and sign the agreement.

Further, when you look at a country like Fiji, you’ll see that it is an economy that is much bigger than most others in the Pacific, but they are also a country that has, for a time, been slightly closed to their other Pacific neighbours. Up until very recent times there was a case there of them being ruled by, you’d say, a military rule anyway, but now, of course, they have come into the fold of democratic nations by having their elections. You will see also over time Fiji wanting to be part of this agreement as well. It is a good agreement; it is to the betterment of small Pacific nations, and it is only right that a country like New Zealand that spends currently some $700 million a year in the Pacific on aid looks to maximise that sum of money by trying to focus on development in the Pacific, as opposed to just aid.

It’s interesting that the Rt Hon Winston Peters recently gave a speech, which he entitled “Resetting New Zealand’s engagement with the Pacific.” There is nothing new in that speech at all. It has been the policy of the previous Government and now continues to be, albeit with a flash new title, the policy of the current Government, to make sure that the significant aid funding that we put into the Pacific has some enduring effect, and it’s not just there project by project, but it does have a long-term focus.

I’d actually encourage the Minister responsible for regional development in New Zealand to have a look at what’s happening in the aid space, and then perhaps revert to a similar position where he’s looking at development in the regions of New Zealand as opposed to the aid programme that appears to be going on at the present time. So this is an agreement that is one that will work very, very well for those small Island nations. It’s one that will give them a bigger voice in all sorts of fora around the world, and one that I’m very pleased our party supports.

ASSISTANT SPEAKER (Adrian Rurawhe): This is a split call—five minutes, the Hon Willie Jackson.

Hon WILLIE JACKSON (Minister of Employment): Kia ora, Mr Assistant Speaker. It’s not often I will ever agree with that previous speaker—in fact, I can’t ever recall agreeing with him, in the history of Parliament—but he did have some very relevant views with regard to the perspective of the Greens with regard to this argument.

We must be very careful when we start inferring that Pacific Island countries don’t know what they’re doing—we must be very, very careful. These are not stupid people, and good old white New Zealand doesn’t always have the answers, you know. Just because a people have signed up to something—it doesn’t matter whether it’s National or Labour—we know what’s needed in the Pacific. So, I find sometimes this view—that the poor islanders don’t what they’re doing—is patronising and arrogant. And that can come from all sides of the political spectrum, and today, sadly, it came from the Greens.

But anyway, we’re really glad to support the Pacific Agreement on Closer Economic Relations. You know, Mr Brownlee, it’s a lot better than when you were involved at the start. Things are moving along and—

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. I think it would be an appropriate point, for the order of the House, to make it known that the agreement was signed during the term of the National Government.

ASSISTANT SPEAKER (Adrian Rurawhe): There’s nothing to rule on, I don’t think.

Hon WILLIE JACKSON: Kia ora. I just want to thank him for that clarification. But I think things have improved, particularly since the Pacific talk, which was led by the Rt Hon Winston Peters and Shane Jones—and Gerry Brownlee, I believe, joined the team over there, supporting the Government in our relationships with the Pacific, and apparently everyone enjoyed his company over there.

So I want to thank him for all that support, but I say to the Greens today, you must listen to the speech of the Hon Aupito William Sio over here. This is the Minister for Pacific Peoples, who we have within our group, within our Government. He is clear that this agreement is good for his brothers and sisters in the Pacific Islands. So I would think that the Minister for Pacific Peoples would know a little bit about this agreement and why it’s so important.

“Strong local economies that work for their people and will assist them to not just grow and strengthen the economic benefits of their nation but the social aspects too.” So this agreement “aims to create jobs and wealth in the Pacific region by making it easier for countries in the region to trade and attract investment”, while it’s also seeking “to create greater certainty and transparency for businesses operating in a region where most of the countries are not members of the World Trade Organization (WTO), and not subject to its rules.”

I just want to relate to some of the things that are happening with what I’m doing at the moment as Minister of Employment, because I’ve had the opportunity to get around the regions and speak to the communities. These are the communities that were starved by the previous National Government. They weren’t resourced; they weren’t funded. But the one thing, I suppose, that’s clear was that, without the ability to create jobs, their young people are forced to look elsewhere for opportunities. So I got to see first-hand the commitment of these regions to work alongside their people, businesses, and with Government facilitation to find local solutions that not only grow the ability for people to work within those regions but also strengthen community ties.

So, you know, the same sorts of principles apply in this PACER-Plus agreement. I’m excited about this, because we need similar outcomes for our Pacific Island neighbours. The importance, I think, of growing a resilient economy, which was emphasised by Mr Brownlee, by Mr Peters, by Aupito William Sio, is just so important. By growing strong employment pathways, our Pacific Island cousins are able to also grow their people and provide them with opportunities to build careers without necessarily having to leave their homes. That’s really important, given that 400,000 Pacific people reside here.

I want to commend our select committee. I think we get on pretty well, apart from Mr Brownlee dominating as much as he can. And Todd McClay—it’s hard to get a word in. But it’s also a committee that is committed to supporting the sovereignty and the tino rangatiratanga of people in the Pacific. This is significant in order for us to help grow the economies of our Pacific Island cousins, which has certainly been made clear by some of the Government speakers and most of the Opposition today. I thank you, Mr Assistant Speaker, for this time to support this kaupapa. Kia ora.

ASSISTANT SPEAKER (Adrian Rurawhe): Five minute call—Alastair Scott.

ALASTAIR SCOTT (National—Wairarapa): Thank you, Mr Speaker. I am surprised slightly that I also agree with much of what the previous speaker, Willie Jackson, has spoken of—in principle at least.

Hon Gerry Brownlee: Not about me trying to dominate the committee.

ALASTAIR SCOTT: Well, I was going to mention that I thought he’d have the confidence and mana to contribute to the committee despite Mr Brownlee’s expertise and experience. So I’m sure he will contribute more going forward.

I do want to agree, alongside the previous speakers, and just clarify for the benefit of the Greens; I’m sure no matter what I say it won’t make any difference to their philosophy. And that is, free trade is a good thing—free trade is a good thing for both parties. Free trade is a win-win situation. Free trade allows people to contribute, to focus on what they are good at, and to trade their expertise or their products with each other freely. The fisherman can focus on the fishing and the farmer can focus on the farming. The benefit, of course, is that they can have a balanced diet.

But if there are barriers of tariffs in place, one can only eat fish and the other can only eat red meat, and that is not a good thing. So I really want to emphasise the benefits of free-trade agreements to the Green Party. In this, I would also like to agree particularly with Minister Sio when he talked about the benefits of this agreement being another stepping stone in closer trade agreements and the free flow of people and goods and services between particularly this country, New Zealand, and the Pacific Island nations. I agree with the Minister, that there is a huge potential—400,000 I think was the number talked about. Whatever is good for the Islands is good for New Zealand, and I absolutely agree with that sentiment.

There is the untapped potential, I agree, in the point that we can see the benefits of the Chinese free-trade agreement that we’ve had with China for a number of years. We’ve seen a huge increase in trade between those two countries, and a lot of that has to do with the New Zealand - Chinese community based here, with connections back home, back to their cousins, back to their whānau. I think that this agreement will contribute to more trade, more communication, and to the free flow of trade and services between New Zealand and the Islands, and I think that is a potential yet to be realised.

So the free-trade agreement is part of it. The other part of it is the facilitation, by using the aid money that is dedicated to aid, to not be used as a handout, but more as a facilitator, to be invested—to be invested in trade facilitation, to give people the education to allow market access. Market access is a huge part of that. Labour mobility is a huge part of that. Increasing the knowledge and capability of those small and medium sized businesses in the Pacific is a huge part of that. So that is a very useful and productive and constructive use of what is termed aid, in my view.

So, two parts to the agreement. Both are very good and very positive, and I look forward to all parties to the agreement benefiting from it.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Mr Assistant Speaker. This is not a free-trade agreement. In fact, I’m not sure I’ve ever seen a genuine free-trade agreement. It’s a managed-trade agreement. And that, indeed, is why it’s a good agreement for the Pacific nations and also for New Zealand.

It’s with some disappointment that I see the Green Party doesn’t support this, because if we do look at the terms of the PACER-Plus agreement—and it is 806 pages, so I can see why perhaps it hasn’t all been read—we’ll see that it’s much, much more than a carte blanche. In fact, it’s quite different to any of the other free-trade agreements we’ve seen.

It recognises the disparities between the various nations. What it really does is look to provide a pathway, and in doing that it isn’t a sudden leap into a borderless world, without tariffs or barriers. It is, therefore, with some sadness that I disagree with both the Greens view on it, which seems to think it to be an evil neo-liberal document, and also, to an extent, the last speaker, Alastair Scott, who presented it as if it was an entirely free - trade agreement. In fact, free trade, we know, is indeed an illusion. What we really have in any agreement is managed trade—a set of rules around which trade may be liberalised in some respects and not liberalised in others.

It’s also important to recognise that this agreement—

ASSISTANT SPEAKER (Adrian Rurawhe): Order! I’m sorry to interrupt the member, but could the hui that’s taking place over there go outside? Kia ora.

Dr DUNCAN WEBB: Mr Assistant Speaker, thank you. This is, of course, much more than just a treaty about trade in goods. It’s a treaty about trade in services and also the flow of investment. If I may say, investment in the Pacific Islands is of particular importance because we know that investment in infrastructure, investment in businesses, is very, very important. What we do need is to have some transparent rules around that, which will give investors from New Zealand, from Australia, and from other nations the confidence to be able to put their money in those jurisdictions.

So it’s heartening to see that that is the case and also, of course, trade in services. We know indeed, and we must, of course, value extremely highly, the fact that many Pacific Island workers come to New Zealand, and those services move relatively freely across borders. It’s great to see that we’re now having that approach that is much more widespread, so we can have trade in services of all kinds between these various nations.

What I want to say is that this agreement, the PACER-Plus agreement, is in fact not just an agreement in which New Zealand is seeking to advance its own fiscal and financial interests. I would put it that this agreement is, in fact, part of New Zealand stepping up and playing its role in the Pacific. In fact, on a purely financial basis it would be a close-run thing. The national interest analysis makes that very clear—that it’s only when we look at the much wider perspective and the fact that we are a citizen of the Pacific, and that when the Pacific flourishes, New Zealand flourishes, that we can say that this is, in fact, in New Zealand’s national interest.

It also does something else, and that is that it throws the mantle of legitimacy over a lot of the trade between these various Pacific nations. A number of these nations are not members of the World Trade Organization. They do not have well-developed international jurisprudence. And it brings them into a trading and a legal framework, so that when there are disputes, there’s a disputes resolution framework that introduces them to concepts such as most favoured nation clauses, so that, ever so slowly, these nations can be brought into the international fold.

So whilst over time, and I must say it will be over a very long period of time, tariffs will be reduced, that is by no means the only thing. There’s other rules—for example, the rule whereby those nations all agree that there will be no arbitrary expropriation by the State. In New Zealand, that almost goes without saying. It’s not something we think we need to talk about. But in some of the smaller nations, where the rule of law is not as well entrenched, it’s important that we have that—have it expressed in an international treaty, so that in fact it can be set there. It can be there for international investors to know, so we can also have international investment rules, so that, once again, international investors will know the rules by which they’re bound.

It is interesting, also, to note that the indigenous nature of these economies is also recognised. There’s not a suggestion that these economies westernise. One of the things that’s carefully recognised is the unique nature of many of the landholdings and the fact that land is not freely transferable and that that is a matter that is in fact very close to the hearts of Pacific nations. The sale of land is not something—and this is something, of course, we’re talking about ourselves—that is encroached here. In fact, it recognises that leases are important but freehold sales are not likely and aren’t necessary.

So it recognises disparities. It recognises that many of these nations are very, very small nations, that they are developing nations, and that they are nations with particular cultural and indigenous approaches. And that’s a really good thing. If I may say, it is a real step forward in trade treaties, in trade deals, to recognise that not all nations are equal—that we need special approaches to bring different kinds of nations into the fold, whether they be very small Pacific Island States or whether they be elsewhere in the world.

It’s also important to recognise that these States are fragile States; we know that. Their economies are fragile, and their geography is fragile. The freeing up of trade in this way in fact will give them greater resilience. They’re not necessarily going to be dependent entirely on food. They’re no longer going to be subsistence economies that are reliant entirely on food produced in their own backyard, so to speak. And, further, if they enter to trade, they will be able to generate cash reserves, they will be able to earn foreign exchange—something which is a real challenge at the present time for many of these Pacific nations. So this is a way for these nations to diversify their economies, and it’s simply not the case to say that any free-trade deal is a deal which is bad. One of the things is that the linking in with aid and development—and I entirely endorse the foreign Minister’s approach, which is that we need to have another look at aid and how it works. We certainly need to examine the split between humanitarian aid and development aid. That’s something which is being looked at actively now. But, absolutely, it’s appropriate in this context to look at the use of aid to build economic resilience, to build trade, and to build trade networks.

So if we think about this agreement standing back, it is an exceptional deal. It is, perhaps, unfortunate that the net couldn’t be cast so wide as to capture all Pacific nations, but the door is still open. I suspect that as this progresses, as States accede to it, and once it comes into force, other nations will indeed be very interested in joining the PACER club, because it will be very much in their favour. Why they didn’t is a matter for those nations. I don’t think it’s accurate to say that it wasn’t in their interests. There are many and complex questions for those nations. Papua New Guinea, in particular, had a lot of matters before it.

But if we look at it, this really is New Zealand being part of a cooperative network—a network which recognises differences and where we can use our economic strength and our knowledge in a way which is beneficial for our Pacific partners, and, equally, we can benefit from what goes on in those islands. I entirely endorse this PACER treaty. Thank you, Mr Assistant Speaker.

TIM VAN DE MOLEN (National—Waikato): Thank you, Mr Assistant Speaker. Look, it’s a pleasure to rise to talk on the Pacific Agreement on Closer Economic Relations. As most of us would be aware, trade is of huge importance for the New Zealand economy, and we have a significant number of agreements in place supporting those opportunities with our trading partners. Whilst, as the previous speaker mentioned, they may not be, in the purest sense, free-trade agreements, that is certainly what we would refer to them as, and so I will be doing as such as well.

Despite that strong reliance on trade—or, perhaps, because of it—we are a very small nation, and so it’s so important for us to have that connection internationally, to be able to trade with the significant volume of goods that we produce. Conversely, if we wind that back to the Pacific scenario in particular, we’re actually a much larger player in that environment. So whilst we enjoy the benefits of free-trade agreements with many larger international parties, which add significant benefit, wealth, and opportunity to our country, we also need to be responsible Pacific citizens and make sure that we’re extending the same opportunities with our smaller neighbours in this region. So this agreement, indeed, gives those countries the opportunity to grow, to expand, and to enhance their prospects as individual nations as well.

I certainly agree that it is very important here to be focusing on encouraging their development and building that economic cooperation, rather than just providing aid handouts to support them. It goes back to that classic story about giving someone a fish for the day versus teaching them to fish. This is an extension of that, where we are providing a platform by which these trading partners in smaller nations will be able to develop their own systems, their own prosperity, and build strength within their communities off the back of that.

I just think it’s really important, again, to acknowledge the leadership role we can play in the Pacific, given our scale in this area. We do need to lead these, be on the front foot, and take these opportunities where we can, and that’s something I think we saw strongly reflected through the last Government’s stance with bringing this forward, and I’d just like to acknowledge the Hon Todd McClay for the work he did in progressing this through to the signatory stage. Well supported within the Pacific—yes, there’s a few countries that aren’t on board yet, but they’re working through that and intending to get to that position if that is possible. So, look, I’d certainly encourage them to be involved with that as well.

It just reminds me, I was fortunate enough in the Waikato just a couple of days ago to be at a business start-up event where they were looking at creating new initiatives, and this is an extension of that as well. One of the themes that came out of that was “better together”, and I think that’s really relevant in this situation as well. When we support other countries, other trading partners that are doing the same as we are, we can actually all be better off as a result of that combined contribution, that support, the initiative, the extension, and the programmes you develop through those cooperation agreements.

So off the basis of that, I think this is certainly a great agreement to be in place. It’s fantastic to see it well supported around the Pacific, and with a few additional signatories still to come to the table. I think this will be a fantastic agreement, and I look forward to seeing it play out to the benefit of those Pacific countries and New Zealand. Thank you.

LOUISA WALL (Labour—Manurewa): Tēnā koe e Te Māngai o Te Whare. Tēnā koutou katoa. It is my pleasure, as a member of the Foreign Affairs, Defence and Trade Committee to debate the report prepared by that committee on the international treaty examination of the PACER treaty. I think a lot of people are wondering what PACER stands for. It actually stands for Pacific Agreement on Closer Economic Relations. It relates to the 16 Pacific Islands Forum countries, of which New Zealand is a member, with Australia. I’d like to just read who else is involved in this particular agreement. It is the Cook Islands, Kiribati, Nauru, New Zealand—sorry, I’ve said New Zealand—Niue, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu who have signed the agreement. The Federated States of Micronesia, Palau, and the Republic of the Marshall Islands have completed their negotiations, so we’re waiting for them to sign the agreement. Another four forum members, Papua New Guinea, Fiji, French Polynesia, and New Caledonia have the option of joining.

So this particular agreement was first committed to in Nauru on 18 August 2002, and, essentially, it is a development and trade cooperation agreement. Over the last eight years, a process of negotiations has been entered into, and I do want to acknowledge the former trade Minister Todd McClay because it’s true that this agreement was finalised in April 2017. In preparing for my contribution, I thought it’d be really interesting for people to know what the benefits, challenges, and way forward was for PACER-Plus, and this was released by the Institute for International Trade in its final report in June 2008, which is essentially when we started the process of negotiations. What it said was that what this PACER-Plus agreement provides is actually a framework for an optimism for the future for Pacific regional collaboration.

At that time, in 2008, then Prime Minister Rudd from Australia announced that they would be investing in what they called a Pacific Partnerships for Development programme. There was a huge focus on an increase in labour market access, and specifically for Pacific workers into the Australian and New Zealand markets, which is actually seen as the most beneficial outcome for this agreement to the Pacific Islands. What does that currently equate to from a New Zealand perspective? That’s $40 million every year in remittances that goes back to the islands, because Pacific Island workers have access to New Zealand as employees.

What did they also focus on? They focused on increased investment, particularly in agriculture and fishing, and I too would like to acknowledge my colleague the Hon Shane Jones, who in his previous role was very much focused on that agriculture and fisheries development to increase capacity, to increase productivity, and to increase infrastructure development opportunities that would then facilitate trade-related capacity development for our Pacific Island whānau. But it was also to build a job base at home in the Pacific Islands. So, yes, one part of it was providing work opportunities here in Aotearoa, but the other part of it, actually, is providing work opportunities in the Pacific. I think, from all of our perspectives, it would be a much better option for Pacific people to have high quality, well-paid jobs in their own countries, as opposed to coming to New Zealand and being dislocated from their whānau for periods of time to then send money back.

So this PACER-Plus treaty, this trade agreement, actually was trying to ensure that our Pacific Island brothers and sisters have opportunities that, in their own words, must not see them left behind because of economic globalisation. So for people to suggest that the Pacific have not been fully engaged in what has been now an over-17-year process in the fruition of the PACER-Plus free-trade agreement—I think they’re actually undermining a lot of the work that has been done from a lot of people over a long period of time.

I did also want to highlight, particularly, that part of this arrangement has seen the opportunity for our Pacific whānau involved in this PACER-Plus agreement to apply for funding. So we created a $7.7 million fund that allowed for jurisdictions to prepare legislation to enact this—what will be a piece of legislation. We also provided money for public awareness campaigns so people understood the benefits of the PACER-Plus trade agreement.

The other part of this arrangement—well, there are two more parts that I think really emphasise that this is not just a trade agreement; that it is about Pacific development—was the implementation of a $25.5 million fund to look at priority trade and related needs. And I think that we should really focus on what that means, because, actually, for most trade agreements we would say, “What’s in it for us?” But, actually, what’s in it for us is the collective well-being of the Pacific region that we are proud to be a member of.

And the other part of the agreement that needs to be emphasised is a commitment that we will spend 20 percent of our aid for trade. So 20 percent of our total official development assistance spend will be committed to the implementation of this PACER-Plus agreement. And I know my colleague the Hon Gerry Brownlee has been speaking quite a lot in our Foreign Affairs, Defence and Trade Committee meetings about what aid is versus what development is, and I think that this provides a really good context for why and how we should spend money in the Pacific. It does create, I guess, a bigger opportunity for a conversation about how that then is going to interfere, possibly, with our current funding allocations, but if that means that this provides a bit of a motivation and an impetus to look at whether or not we’re spending enough in this area, then I think that’s a good thing.

I also wanted to highlight that this PACER-Plus agreement also enables us to fulfil some of the Sustainable Development Goals (SDGs), and I do want to highlight those because the SDGs are about alleviating poverty. They’re about increasing living standards. They are about helping support the United Nations in its quest to make the world a better place for everybody and not leave anyone behind. So this agreement, particularly, will give effect to SDG 8, which looks at decent work and economic growth, and I think I’ve outlined how that will happen, both in opportunities for Pacific workers to come to New Zealand but also for us to help create that base for that decent work in the Pacific. There’s also a commitment through this investment for support for affordable and clean energy, which will help us—or help the Pacific—achieve SDG 7. And there is also an SDG goal around industry, innovation, and infrastructure.

The last of the goals, actually, is a focus on women’s economic empowerment. So SDG 5 is all about gender equality. I suppose, if there was one thing that I’d like to see from the agreement, it is specific opportunities for women, because I believe, through the interactions that I’ve had, that our capacity in the Pacific, particularly through our Pacific Women’s Parliamentary Partnerships programme—you know, we’ve heard and interacted with Pacific women who talk about the continued use of their mātauranga, their knowledge, and their cultural practices around crafts, and utilising their natural resources to continue to have trade in that area is incredibly important.

So what I would hope to see from this PACER-Plus agreement into the future are, in fact, those opportunities and how we can help sustain that cultural practice to make sure that that cultural practice has a trading base. And, obviously, we’ve got the Pasifika Festival in Auckland later this week, and I know that there will be a lot of artists who will come over from our Pacific Islands to participate in that. So I see a lot of opportunity for the PACER-Plus agreement, and, as a member of the Foreign Affairs, Defence and Trade Committee, it’s been a pleasure to speak on this. Kia ora.

Motion agreed to.

Bills

Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill

Instruction to Committee

Hon AMY ADAMS (National—Selwyn): Under Standing Order 176(1), I move, That it be an instruction to the committee of the whole House to restrict consideration on Supplementary Order Paper 13 in the Minister’s name for one month to allow the Finance and Expenditure Committee to seek public submissions on the Supplementary Order Paper’s provisions.

This is an important Supplementary Order Paper (SOP), which changes a significant piece of the legislation, in effect. It’s come into this House post the return of the legislation back to the committee of the whole House and to this Parliament, and there hasn’t been an opportunity for the public to make submissions on this. It is important, when you’re dealing with a change of this magnitude and this effect, particularly given the concerns that have been raised about the breadth of the SOP and the effect that it will have, that there is the important opportunity for the public to give the matter proper consideration. And so the point of order that I have suggested—the motion that I am moving—is one that will allow this House to ask that that SOP not be considered further until there has been that opportunity for public input, and for the Finance and Expenditure Committee to consider the matter and report back to this House so that when the committee of the whole House does consider the Supplementary Order Paper and the matters contained within it, it does so with the benefit of understanding the potential impacts of the change, the potential unintended consequences of the change, and the public’s very view on the change.

None of those opportunities have been afforded to date, and it is incumbent on this House, in my view, to ensure that when we debate such significant changes, we do so in full knowledge and understanding of their impact and the public view on them. To date, that has been denied to this House, and I think it is important that this House turns its mind to the impact of that and takes the opportunity of this motion to remedy that situation.

Hon Gerry Brownlee: Mr Speaker.

ASSISTANT SPEAKER (Adrian Rurawhe): There’s no debate on—

Hon Gerry Brownlee: Yes, there is debate. It’s a full debate.

ASSISTANT SPEAKER (Adrian Rurawhe): There is debate. My apologies.

Hon GERRY BROWNLEE (National—Ilam): I rise to support the Hon Amy Adams in her motion calling on the House to instruct the committee that they should take no further action or have no further consideration of Supplementary Order Paper (SOP) 13 laid on the Table by the Hon Stuart Nash extending the brightline test on residential property from two years to five years.

The reason for the brightline test in the first place was to remove speculators from the market, to get rid of people who come in and buy a chunk of, perhaps, a residential offering—whether it’s a new apartment building or a new subdivision or whatever it might be—and put them into the category of being a trader in property, because those who do trade in property do pay tax, and always have, and then, effectively, tax them if they sell that property within the five-year period.

Now, you might say that actually that’s not an unreasonable thing. Why shouldn’t someone who does trade in property have to be caught this way? But then what we do know is that people do make investments, and those investments can be quite reasonably made, and there is a trade-off, because at the moment, while they don’t pay a capital gains tax, they don’t get depreciation on that, and the extent of their write-offs was somewhat limited by tax changes in recent years. So it seems to me that that is a matter that needs to be discussed by the wider community rather than just the narrow position that would be taken inside the House.

We all know that there are ma and pa investors across the country, particularly people who might get to their late 50s who decide that they want to do a little bit with the equity that they have in order to enhance their position in retirement. This will be a huge impediment to those people being able to make that sort of progress. You’d have to ask what the advantage is to any community in that, particularly when it’s lined up against the Overseas Investment Amendment Bill that’s currently going through the House—currently before the select committee—

Hon Shane Jones: I raise a point of order, Mr Speaker. I direct your attention to the actual legislation before us. It is not dealing with overseas investment rule changes or law changes, and if we’re going to continue with this time-wasting, direct the member to talk about what’s in front of us.

Hon GERRY BROWNLEE: Speaking to the point of order, this is a debatable motion, and material relevant to the debate on this motion is most certainly able to be introduced into the debate. I’m simply making the point that we have here a proposal that brings in a brightline test for property purchases in New Zealand that prohibits people selling them without a tax consequence for five years. At the same time, we have an investment act going through the Parliament that allows exactly that.

ASSISTANT SPEAKER (Adrian Rurawhe): Thank you. I thank the member.

Hon GERRY BROWNLEE: Can I finish my speech?

ASSISTANT SPEAKER (Adrian Rurawhe): I’m going to rule on the—

Hon Members: Point of order.

ASSISTANT SPEAKER (Adrian Rurawhe): No, I’m going to rule on the point of order, thank you. I thank the members. This is a debatable motion. It is restricted to the instruction, and it’s my opinion that the member has traversed within the instruction. There’s a little bit of latitude within that, but the Hon Shane Jones is correct; it is not a debate on the content of it, but on the instruction.

Hon GERRY BROWNLEE: That is quite true, and thank you very much for that ruling, Mr Assistant Speaker. The point, though, that I was making is that the instruction, in fact, is to allow the public time to try to line up these two very, very different positions that have been taken through the legislative programme of the current Government.

It’s not an attempt to say that we want to encourage property speculation. By and large that’s not a good thing, but it should be a point that we recognise that those who do engage in legitimate property speculation—in other words, people who invest on a large scale, frequently, regularly, and in very vast numbers of properties—do, in fact, get caught by our current tax laws. There’s no need for the brightline test in those cases. Anyone, for example, who’s registered for GST and has claimed GST against a property because it is going to be part of future development is caught by our current tax laws, and untroubled by the brightline test. The people who will be caught by the brightline test, extended particularly to five years, will be those people who, in a very small way, have decided to use the equity that they have in their property, or perhaps some inheritance that they’ve got, to invest in a property—which, of course, does add to the pool of rental properties available in the market—and then, of course, now are finding that if they were to exit that property to a buyer, perhaps a first-home buyer, in those first five years they would be subject to tax.

Now, it’s not unreasonable that the committee accepts the instruction and says, “OK, we will send it back to the select committee for the one-month period. We’ll call for public submissions on this, do the work that’s necessary to hear from either those who are in favour of it or the many who I know will be opposed to it, and then consider whether or not it’s still worth pushing through the House.” Even today this House has had questions asked about the availability and supply of new property into the market, and I would like to suggest that one thing this instruction does is allow consideration of what the brightline test has done so far to inhibit some of the development of new property in this country. You can’t have a Government going around saying, “There’s a shortage of 70,000-odd residential dwellings.”, but then at the same time bringing in tax provisions that prevent an expansion of that particular supply in the New Zealand market.

So I think what the Hon Amy Adams has done today is present a fair opportunity for this Parliament to pick up the concerns that some New Zealanders have, to tidy those up inside a consideration of all the other factors that are going on at the moment in a constrained housing market, and to see what is going to be good for that housing market to expand. It would be unfortunate if this House were today to simply go about its business and push through this piece of legislation and inflict the five-year test upon New Zealanders without ever hearing what those New Zealanders thought about that particular proposal.

And it’s not acceptable, six months after an election, to say, “Well, we said we would do something about it.” If it was so important, it would have been done in that 100 days, and it would have, I think, at that stage, when the Government had a view about being a little more transparent and open and up front with people, probably had a short select committee period. It could have been sent to the select committee at any time when they were having hearings over this particular taxation bill, but it was not. It slipped into the House, because everyone who is promoting this bill knows it is not a good thing for housing supply in this country. So I would hope that the House this afternoon can say, “One month is not going to make a huge difference. One month is not going to make or break.” We’ve had six months with no new affordable housing being built by the current Government, so one more month won’t be such a bad thing, but it could be that by going hard at it today it is many, many, many months before hard-working New Zealanders who have small amounts of capital to invest in the housing market don’t decide not to do anything because of the pernicious regime that this particular measure brings in.

I certainly hope that those who are listening to this debate are not going to be just dyed-in-the-wool, do-as-they’re-told, follow the—

Hon Amy Adams: Sheep?

Hon GERRY BROWNLEE: —well, I’ve got to be careful about my words here. I don’t want to be insulting to anyone—follow the ideological lead of some in Government who believe that anybody who buys any asset, other than the State, is somehow out to rip everybody else off. That is simply not the case. Everyone knows—and particularly I would expect Mr Nash to know—that if you really did get stuck into the residential property market in this country, in the way that we suspect the tax working group wants to do, then the supply of that housing to New Zealanders who need it would almost certainly either dry up or become massively more expensive, and I think it would be well worth taking that one month for that broader consideration about the wisdom or otherwise of this particular initiative.

Hon SHANE JONES (Minister of Forestry): The instruction has been ventilated. I put it to you, Mr Assistant Speaker: put the motion to the House now.

Hon JUDITH COLLINS (National—Papakura): Thank you, Mr Assistant Speaker. I rise to support the motion that the particular part of the bill that’s being proposed to be introduced today—Supplementary Order Paper (SOP) 13, around the brightline test—be, in fact, sent back to the Finance and Expenditure Committee, so it can be properly aired in front of and with the people of New Zealand but also to get the benefit of the expert advice that we are very fortunate to be able to receive in New Zealand from the tax practitioners and also those involved in the building and construction industry, the real estate industry, and those who are better placed than many people in the House to actually advise on this matter. I am particularly concerned that the bill, which was previously in my name—a very fine bill—

Hon Member: That’s right.

Hon JUDITH COLLINS: —a very fine bill—working on the excellent work that the Inland Revenue Department has been undertaking over the course of some years, is proposed to be actually hijacked by an addition which is all about making it harder for people to buy properties in terms of being able to sell them again and to invest in them.

I am very concerned because I know that even the brightline test that there is at the moment for two years’ ownership has caused quite a lot of administration costs for law firms and, therefore, for their clients. I know this because, as a lawyer, lawyers have advised me of this—that it has actually added quite a lot to the cost of doing business.

If we take a situation where it makes it even more difficult for those who own properties for up to five years to be able to sell their property when they need to, I put it to the House that when we consider these matters, that’s why it should be with the Finance and Expenditure Committee, because, quite clearly, relationships break down and people’s mortgage payments suddenly become less able to be made. There are people who are going to find that they won’t invest in property any more. They won’t be able to because they can’t take the risk that they won’t be able to sell a property earlier than five years without taking a substantial hit to what they would have expected.

We could say, “Well, surely this is just going to be around speculators.” Well, who are these speculators? Well, actually, they’re often mums and dads who have got some money together, they’re in the stage of their life where they want to add to their retirement income, and they even, in some cases, want to be able to provide a house for their children or a child to live in and that child’s family. These people are the people who will be badly affected.

People who are property developers already pay tax on their sales, on their profits. We already have a provision in the Income Tax Act that allows, in the sale of a property, for a tax on any gain in the value of that property if the purpose was, in fact, to buy the property for gain. Also, of course, that becomes available at the moment for anything like planning decisions that have changed the use of the land that can be used. That’s been there since about 1976. It’s already there.

The Inland Revenue Department has made some comments, I understand, and so has Treasury, around the efficacy of bringing in this five-year brightline test. It is absolutely important that the people of New Zealand, who have heard a lot of promises about what can be done with housing, get a chance to hear some experts and what they actually say about this. I think it is all very well to take some rhetoric from an election campaign and pop it into a bill and then ask for submissions on it, in the normal course of events. But what’s not all right is to take a bill like this, which is very much about, obviously, the annual rates for 2017-18—which is really a past event—and also around the excellent AIM procedure, which is all about an accounting income method for PAYE and tax generally to make it easier for small businesses to be able to operate and to get rid of some of the issues that they have around provisional or terminal tax, and hijack it with some form of attempt to skew the market of housing. It is simply not appropriate.

When we look at that particular skewing, I think it is very important that the New Zealand public not be skewed by a Government that is not interested in having this—

Hon Paul Goldsmith: Skewered.

Hon JUDITH COLLINS: —skewered, yes; thank you—by a skewed attempt to actually use a very convenient method to bring about a major change in tax, particularly around the administration of it. Let’s be really frank here: nobody who’s going to be caught by this is going to be one of your big-time developer-speculators, or speculator-developers—or whatever you want to call them—that the Government wants to hit. Nobody will. The people who are going to be caught by this are very much mum and dad investors, and it’s those mum and dad investors who have a right, I believe, in this liberal democracy to be heard on what this Government is wanting to do to their assets.

I think it is absolutely incumbent—I know it is incumbent—on this Parliament to take a major piece of legislation, which changing the brightline test for five years is, and put it in front of the Finance and Expenditure Committee. I think any Government that is too frightened to do that—too frightened to hear from the people—is a Government that’s too frightened to be the Government. This is a liberal democracy, and people expect this Parliament to follow its normal course of procedures. When we hear about the need for transparency in Parliament and what we’re expected to hear, people would like to say, “Well, hang on, why is this suddenly going to be rushed through without the benefit of a select committee hearing?” Now, my colleague is not asking for six months; she’s asking for one month. What’s the problem with having four weeks of a select committee to look at this, to get some submissions quickly, and to ask the experts for advice? What’s so wrong with that?

I would contend to you there is nothing wrong with that, and that even to attach the proposed brightline test changes to a bill which has nothing to do with the brightline test is actually a cynical attempt to push through and ram through legislation without giving the public of New Zealand, the mum and dad investors, the lawyers, the accountants, the tax advisers, the real estate agents, and the people who have to work and live in the property market every day—why can’t they have a say? And the answer that we’re getting is nothing, really. “Let’s shut down the debate on it.”—that’s the answer we’re getting. Why shut down the debate?

This is a Government that has been in office for, what, five months, and we are already seeing a tremendously arrogant move towards actually treating New Zealanders, who, by the way, pay the taxes that—

Hon Carmel Sepuloni: Oh, my goodness! Who’s talking about arrogance?

Hon JUDITH COLLINS: And the Hon Carmel Sepuloni laughs at that. She laughs at the fact that New Zealanders want to have a say. You know, that’s her right to do so, but do you know what? She can have that right, doesn’t she? She can say what she wants in Parliament. The people of New Zealand, those mum and dad investors, they’re being told now: “We don’t care. It doesn’t matter. We’re not going to let you have your say. We’re just going to do this to you, anyway.” And if that’s what this Government is like after five months, imagine what they’re going to be like coming up to their three-year limit—

Hon Stuart Nash: Transformational—transformational.

Hon JUDITH COLLINS: —because that’s what this tells us.

Business transformation, as the Hon Stuart Nash has said, is an excellent piece of work. That’s why this bill should not be sullied with a desperate political attempt to take mum and dad investors out of the housing market. Who’s going to replace them? Tell us that. It won’t be other mum and dad investors. It’s going to be the big players, or else the taxpayers are going to have to do it.

Five years is a long time to commit to when you’re 65 or 70 and you’re buying something for your kids. It’s a long time. I think it’s really important. Just one month—that’s all we ask.

KIERAN McANULTY (Junior Whip—Labour): I move, That the question be now put.

ASSISTANT SPEAKER (Adrian Rurawhe): No. This is a debate.

Hon PAUL GOLDSMITH (National): Thank you, Mr Assistant Speaker. Look, I’d like to speak in support of this excellent motion from my colleague Amy Adams, which is very much focused on the simple question of allowing this Parliament to have more time to consider the proposed extension by this Government of the brightline test from two to five years. One of the advantages we have as a small developed nation is that because of our compact nature and the closeness of our democracy, we have the opportunity to actually engage effectively with the industries which we regulate through Parliament.

Over the years, New Zealand has developed one of the world’s most highly respected tax development processes, whereby Governments come up with proposals, the industry—the tax industry—engages in a detailed way, and the officials and the Government actually listen to what the experts have to say on the potential consequences of the tax changes. Now, in many big countries and huge economies around the rest of the world, it’s very difficult to achieve this, given the immense scale of those countries and the widespread nature, whereas New Zealand—it is one of the few real advantages we have, as a small, compact society, where we can actually engage sufficiently.

So that’s the normal process, and so when tax changes come up—and anybody who has tried to engage with tax legislation knows how complex it is and how easy it is to have unintended consequences as a result of tax changes. That is the process that’s developed, and what we find such an affront in this instance is a significant tax change is being made through the back door and slipped into a bill that was halfway through the parliamentary process already, has been through the select committee process. So this significant change will not—there will not be the opportunity for either Parliament or the general public, and, indeed, those tax experts and those who have full understanding and engagement of the industries that we’re dealing with here, to have their say. That, inevitably, will lead to a poorer outcome and significantly increases the risk of mistakes being made.

I’m not going to get into the policy details of the changes, but going from two to five years is not a simple mathematical change; it is a significant move. A lot can happen in five years, and that will have—

Hon Stuart Nash: Three years.

Hon PAUL GOLDSMITH: Yes, in two years you have a constrained period of time where speculation can be shown. When you’re looking at five years, all sorts of events in life can intervene, and so there is a real prospect that much more than what was originally intended could be captured by this change. So it behoves us as a Parliament to take the time to consider those potential consequences, particularly given the intensity of the issue in terms of housing affordability, particularly in our big cities, in Auckland. We want to ensure that we have continued investment in the housing stock, and we need to be very careful that any changes that we make in the tax situation don’t make that problem worse.

That is why I firmly believe that if this Government was sensible and listened to the broader sector who are concerned about this, they will take that extra month and give the opportunity for the Finance and Expenditure Committee to get some advice from officials. Most of the advice that we have in the regulatory impact statements from officials at the moment say, “Basically, there wasn’t time to investigate and we don’t really know—there was only one option, and we don’t really have a clear understanding of the potential costs of this.”, because they haven’t had a chance to deal with it properly. That is not satisfactory, and there is no reason why we should be exposing ourselves as a country to this risk when, if we took the time, gave the opportunity for officials to brief the select committee, and gave the opportunity for the industries directly affected by this legislative change to have a say and point out to the Government what some of those consequences would be, I think we’d end up with a better result. So I support this motion.

Hon IAIN LEES-GALLOWAY (Deputy Leader of the House): I move, That the question be now put.

Andrew Bayly: You can’t do that; it’s debatable.

ASSISTANT SPEAKER (Adrian Rurawhe): There can be a closure motion. I will call Andrew Bayly, but I just want to tell members—remind them again—that this is a narrow debate on the instruction. Most of the content has been OK, although straying outside the boundaries of the instruction itself but relevant nonetheless, but I want to make certain that members know that if they do continue to do that, that will be the end of the debate.

Hon GERRY BROWNLEE (National—Ilam): I raise a point of order, Mr Speaker. Is that a new ruling from you, because it would seem to me that it’s almost impossible to talk about the instruction without considering the reasons for the instruction. It would be ridiculous if all we could say is, over and over, “The motion instructs the committee …” and then repeat it. It is a debate about whether or not the instruction should be given, and therefore the merits of the intention behind the instruction can surely be debated. I have also had a look at the Standing Orders, obviously, in this case, and I would have thought that you are relying on 176(6), which says that the “purpose of the instruction is to increase the number of questions”, etc., etc., then there could be “no amendment or [no] debate”. But there is no other restriction in here about what can be spoken of in an instruction. It would be unreasonable for the House not to hear the reasons for an instruction.

ASSISTANT SPEAKER (Adrian Rurawhe): Yes, within the boundaries of the instruction. So that’s not a new ruling, but this is not a full debate on Supplementary Order Paper 13.

Hon Gerry Brownlee: No.

ASSISTANT SPEAKER (Adrian Rurawhe): No, that’s right.

ANDREW BAYLY (National—Hunua): Thank you, Mr Assistant Speaker. I’d hate to be known as a stray. I’d like to, first of all, acknowledge and support this motion put up by the Hon Amy Adams, because, in my view, this was a relatively straightforward bill that the Finance and Expenditure Committee took a great deal of time to work through. It’s a very complicated bill and it traverses a number of issues. That in itself was fine, and there was a lot of agreement within the committee. However, this Supplementary Order Paper (SOP) 13 that was slapped on the table, in my view, is an absolutely callous and quite deliberate move. At the time that it was introduced by the Minister, I too stood and put a motion that this SOP should be debated by the select committee, because this deliberate attempt to wait until the select committee had completed its final deliberations, after some months of working through the elements of this bill, and then to complete its report, and within a matter of hours this SOP, which goes to seven pages—it’s not an insignificant SOP, this. It covers, I think, about 15 sections, and it covers seven pages. It’s a very unusual and substantial SOP. For me, as one of the members of the Finance and Expenditure Committee, I find this whole motion, turned into such a substantial change without allowing the committee to consider that, is a travesty.

But, more than that, it raises the question of why a Government would even do this, when it says it’s been flagging policies but does not allow people to make an input and be consulted on it. I think that’s what vexes me the most.

I think, if you look at this bill—and it actually states in the SOP, on page 6, “The objective in extending the current bright-line test from 2 … to 5 years is [about ensuring] speculators pay tax on the gains”. Now, the thing that I think, in a contextual way—as soon as you go about making this change without allowing people to be informed of it and allowing people to be consulted on it and allowing input on it, we run the risk of seriously deviating from good legislation.

I’ll just highlight some of the likely parties who will want to show interest in this. The first thing about this SOP: it is likely to have an impact not only on existing housing, and ownership thereof, but it also is likely to have substantial implications for new houses. Secondly, it will have implications for social houses and, thirdly, emergency houses.

Now, in the context of what we’re talking about today, we heard a Government who is saying that they’re not about to undertake any new housing until after 1 July, until they’ve got their money. But if you take this bill on face value, I now know, without even thinking about it too much, that the likely parties who will want to be heard on this bill will include Government agencies, particularly those relating to social and housing outcomes; councils; property investors; renters, and I think the renters will have a lot of concern about this bill; lawyers; conveyancers; bankers and financiers, particularly those who already finance houses that people have acquired; and developers. I just think, you know, there’s a list of—what—10 parties who would be almost guaranteed to front up to this select committee, if it has the opportunity in a transparent way, and make very substantial submissions on this SOP. I just find the issue of why this Government would choose to callously not allow that to take place—because this is not a simple issue.

We’re not talking about one little SOP. This is a substantial, complicated piece of tax and has implications not only for tax, which is a purpose of the original bill, but also in terms of social and economic and housing policy. I think that just dictates, in fact justifies, or even stronger than that, that we must hear from those people, that the committee should have the opportunity to do that in a robust and open way, and that the press should be allowed to report on that when that process is completed. This is an issue that will cut to the core of many, many New Zealanders who own property or potentially want to own property or are in the process of owning property who may actually now, if this SOP is adopted, find themselves in significant financial difficulty. So on those grounds alone, I think it’s absolutely imperative that the committee has the opportunity to do that.

I think, if this was truly representative—and I believe I remember the words of the Hon Clare Curran, who said she wanted to make this party, her party, the Labour Party, the most open and transparent Government in New Zealand’s history. I may be slightly out with my quote, but words along those lines. How does that reconcile with that statement? It does not reconcile at all. This is an issue that should be before the select committee and the public and should be debated openly, because it is quite significant and it demands an approach where everyone can have their say.

Kieran McAnulty: Mr Speaker?

ASSISTANT SPEAKER (Adrian Rurawhe): I call—

Hon Amy Adams: He’s had a call.

ASSISTANT SPEAKER (Adrian Rurawhe): Sorry, I call Lawrence Yule.

LAWRENCE YULE (National—Tukituki): OK, I am new to—

Hon Iain Lees-Galloway: I raise a point of order, Mr Speaker. In my experience, where members have sought to take a closure motion and that closure motion has not been accepted, they have been able to take further calls in the debate.

Hon Members: No.

Hon Iain Lees-Galloway: Well, I have seen that occur on several occasions.

ASSISTANT SPEAKER (Adrian Rurawhe): I’ll make the ruling. I’ll decide who is speaking next and I have called Lawrence Yule.

LAWRENCE YULE: It gives me—

Hon Iain Lees-Galloway: I raise a point of order, Mr Speaker. I draw your attention to Speakers’ ruling 77/4, which states that in procedural motions for an instruction to the committee of the whole House “[this] is a narrow debate.”, and “The only matter under debate is whether the committee should have the power to examine and adopt [the] Supplementary Order Paper;”—or in this case to refer it to a select committee—and “members cannot debate the content of the amendments; they are tabled for members to look at.” I would submit that this debate has been wide ranging in its nature and has ventured outside of the bounds of that Speakers’ ruling.

ASSISTANT SPEAKER (Adrian Rurawhe): Yes, thank you very much. It’s my call. [Interruption] No. I don’t need any more help, thank you. I’ve already stated that three times now and we’re going to hear from Lawrence Yule.

LAWRENCE YULE: I wasn’t intending to speak to this, but I feel I have to—I feel I have to.

Hon Member: You don’t have to.

LAWRENCE YULE: No, no. Because what we’re seeing today is a further example of a lack of transparency, a lack of openness, and a lack of accountability. I actually want to support the Hon Amy Adams for a very fair suggestion and direction. I haven’t heard what her direction was before, but I know what it is now and it seems very fair.

Actually, I’m a reasonable man, and I actually think the Hon Stuart Nash is a reasonable man. We represent a great area together. However, what’s being done here is completely unreasonable. There is a bill that has been through a whole process and is coming towards the end of it, and suddenly we’re clipping something on, like a bridge. We’re adding it on at the last minute without any public scrutiny, debate, or even consideration. And when this Prime Minister, the Rt Hon Jacinda Ardern, and the Hon Clare Curran talk about being an open Government, transparent, and clear with the people, here is an example where you could simply take one more month—that’s all that’s being suggested—to go to the Finance and Expenditure Committee to have this thrashed out.

I sit on the Finance and Expenditure Committee, and we’re currently going through another piece of legislation, the Overseas Investment Amendment Bill. There are members on the opposition benches, who actually happen to be in Government—opposite to me, I should say—who have actually found the intricacies of what happens when you rush things really quickly. So in that piece of legislation there was a short submission time; it was then extended.

The point I’m raising is that if you rush things, you get unintended consequences and massive challenges. So I think this is actually a deliberate backdoor move to try and get something through that Labour has promised. If you actually look—one piece of information I have here is that in 2015 to 2016, 4,700 properties were transacted; only 6 percent of them appear to be taxable under the existing two-year brightline test—6 percent! So here we are, saying that, actually, let’s extend that out to five years.

The previous speaker behind me, the honourable Mr Paul Bayly—sorry, not honourable yet—Mr Paul Bayly—

Andrew Bayly: Andrew.

LAWRENCE YULE: Andrew—Andrew. “Mr Paul Bayly” has said to us that of all the people that would want to be influenced by this—real estate agents, lawyers, property developers, mum and dad investors, because this actually is significant, these changes. Even in the Supplementary Order Paper (SOP) 13 itself, in the explanatory note, it goes on to say, “These rules generally require a conveyancer to withhold tax [for] the proceeds of the sale of residential land by an offshore person” when it’s disposed of. Now, actually, that’s what it says in the explanatory note, but it actually covers every property transaction in New Zealand, which is another example of why this legislation hasn’t been thought through.

I’m new to this, but I believe in democracy. The Hon Amy Adams has simply asked for one month for the select committee. That is the direction. That’s what’s being asked for. I’m fair and reasonable, and I ask the other side of the House to be fair and reasonable as well. I guarantee if this goes to the select committee, this SOP will be changed to reflect some things that would actually make the legislation better. I think it’s an indictment on this House that we would try and pin something on the edge of a significant piece of well-thought-out legislation at the last minute and try and sneak it through. I strongly support the direction that the honourable member is seeking.

A party vote was called for on the question, That it be an instruction to the committee of the whole House to restrict consideration on Supplementary Order Paper 13 in the Minister’s name for one month to allow the Finance and Expenditure Committee to seek public submissions on the Supplementary Order Paper’s provisions.

Ayes 56

New Zealand National 56.

Noes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Motion not agreed to.

In Committee

Part 1 Annual rates of income tax

Hon AMY ADAMS (National—Selwyn): Madam Chairman, thank you for the call on Part 1 of this, the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill. I thank you for that call.

Look, we’ve just come out of a detailed debate on a procedural matter, and now, of course, we turn to the substance of the legislation, and it’s a good opportunity to reflect on the fact that this bill is actually a very good bill. It’s a bill drafted with a huge amount of work that has gone into it from my colleague the Hon Judith Collins when she was Minister of Revenue, now picked up and continued by the Minister in the chair, the Hon Stuart Nash. On the whole, the bill picks up a number of very important matters in our taxation system, and it is probably worth taking a moment just to reflect on those because, of course, as I say, we have just come out of a very specific procedural debate about one aspect which I’m sure will be getting a lot of committee time over the course of the next few hours.

Broadly speaking, of course—and I’m sure the Minister will turn to this in his contributions—these are bills that are passed on an annual basis, as the name would suggest, to reconfirm the tax rates for the 2017-18 year, and, of course, because that year is almost largely completed, it will be of no surprise to anyone in the Chamber or watching that, of course, the matters remain unchanged. But also, in going back to my first stint on the Finance and Expenditure Committee, quite a few years ago now, these remedial matters bills that come up from time to time are critically important for picking up often small and important—but none the less perhaps not earth-shattering—changes that keep our tax laws working well.

There is, though, one other very important aspect of this bill before we turn to the matters within the Supplementary Order Papers (SOPs) that is worth highlighting, because this bill is about some of the critical changes to give effect to what has been labelled the Business Transformation programme of the IRD. This is a matter that the National-led Government put considerable work and money into over a number of years, and I’m pleased to see that it is a matter that really does transcend the politics of this House, and, actually, it’s my experience that those matters occur more often than the public might think, because they don’t perhaps attract the attention of the gallery. But this project to transform the way in which the IRD operates—to transform the way we think about and collect tax, the way we allow New Zealanders to understand their obligations in the tax system, to report on them, and to make moves that are incredibly important to the good functioning of the economy: the ability, for example, of small businesses to pay their tax on a pay-as-you-go basis so they don’t get into those situations we see far too often when they are, in fact, reaching the end of the year and have a large tax bill and haven’t accounted for it properly; so that ability for them to pay as they go and have a real time understanding of their tax liability—is critically important. Not actually all that much—yes—for the Government, but that’s not the primary consideration. The primary consideration is that taxpayers understand and can give effect to those obligations.

The other aspect, not just the payment of tax by, particularly, smaller businesses, is also this niggly issue of secondary tax, which I know as an electorate MP comes up repeatedly in my electorate office, and the concerns and the frustration that taxpayers have at what they perceive as a higher rate of tax on secondary income. Now, I know from having signed out any number of letters back to constituents and meeting with them that while the tax rate isn’t any higher when it all comes out in the wash, the net effect is what they pay is often quite considerable on them in terms of their cash flow, if you will, on an ongoing basis. So the ability to move the Inland Revenue Department to a system where tax can be assessed and paid in a much more real-time way is incredibly important. The frustration, that I’m sure is shared across Governments and through the IRD itself, of course, is the massive task of building the ICT capability to deliver that, and it’s not a secret to say that on many occasions, when changes to tax policy or the delivery of taxes were looked at, it was actually, in fact, the inability of the machinery behind our tax system to cope with that that actually prevented some of those changes being given effect to.

So the Business Transformation programme represents a significant investment in ICT and in computing technology certainly but also in actually just the way we think about and deliver taxation services. I did want to spend a little bit of time reflecting on that, because that is actually at the heart of what this bill does. Now, you will hear a lot of discussion from this side of the Chamber over the course of this debate around the two SOPs that the Minister has tabled. Let me set out at the outset the National Party position for you on this legislation and the SOPs. The core legislation in front of us, as returned from the select committee, we would, on the face of it, be happy to continue to support it. It is a good bill. It is a bill that, as I say, was started under our Government, and, while there’ll be questions for the Minister to answer about some of the changes contained within it, it is a bill that we’re broadly supportive of.

The Minister’s SOP 16 I regard as largely a technical Supplementary Order Paper and again, while there’ll be questions for the Minister to answer in respect of that, we are broadly supportive. The second, though, of the Supplementary Order Papers that cuts across a number of the parts in this bill is—

CHAIRPERSON (Poto Williams): I do have to remind the member that the SOPs come up in Part 2—

Hon AMY ADAMS: In 2 and 3, yes; thank you. I’m just setting out the position of National at the outset of this debate. As a contextual matter it’s one, of course, where we are strongly in opposition and we will be raising those matters as we proceed through the legislation.

So, by way of introductory comments and setting out the view of the National Party on this legislation, it is a very good bill. It came back from the select committee as a very good bill but we are deeply concerned that with the changes that may be made during this committee of the whole House stage, it will turn into a bill that we’re unable to support. It will be important to us that the Minister addresses a number of the questions that we have as we work through the legislation, and I look forward to hearing him do that.

GREG O’CONNOR (Labour—Ōhāriu): I rise to speak on Part 1 of the annual rates of income tax bill. Tax, like death—a certainty in our life. And I might just start by taking this opportunity to note the passing of my uncle John O’Connor, who is actually the father of the Minister of Agriculture, the Hon Damien O’Connor, and for him death in the last day has become very real. He was a well-respected man both within the West Coast and nationally and I do note the passing. And he was a man who often railed against tax. He was a man who was very quick to rise when the subject of tax came up, so when I look at what we are now considering, the annual income tax rates for the 2017-18 tax year, which, as laid out in the bill, will be set at the rate specified in schedule 1 of the Income Tax Act.

I go to that schedule 1 and I look at it as laying out, to the extent to which a person does not have a basic rate under clauses 2 to 10—it outlines the formula by which people will be taxed. It is a relatively simple formula; certainly it’s not in rival of Einstein’s theory of relativity by any means. It’s a tax under table 1 and is divided by the taxable income. Tax under table 1 means the total tax calculated for each dollar in the person’s taxable income using table 1. Obviously, “divided by the taxable income” means the number of dollars in the person’s taxable income.

So then I look at just what those ranges are. In the range of the dollar in the taxable income for zero to $14,000, 0.105 percent is the tax rate, which, if you are on that income, is still a big imposition on your income. For $14,001 to $48,000, it is 0.175. Above $48,000, for $48,001 to $70,000, it is actually 0.3—30c in the dollar. And, of course, for over $70,000, it is 0.33.

So I think it’s good that those listening understand. It’s a reminder of just how our tax is calculated. Of course, there’s so much discussion we have on tax, and we’ll hear so much more later on today. It is important that this country is a good country, is a fair country, and the reason that it does thrive is because we have a fair tax system, and what we will be debating later on is how we make sure that it does remain fair. Thank you, Madam Chair.

Part 1 agreed to.

Part 2 Amendments to Income Tax Act 2007

CHAIRPERSON (Poto Williams): Members, we turn to the debate on Part 2, which is the debate on clauses 4 to 185B and schedules 1 and 1B.

Hon STUART NASH (Minister of Revenue): Thank you, Madam Chair. Let me just agree with Amy Adams on a couple of things she said in her opening contribution. This is a good piece of legislation. We had robust debates about this, normally at the Finance and Expenditure Committee. It went through the select committee process. We all agreed; it was a bill that I took over from the Hon Judith Collins—and it makes the tax system easier. But what I’d like to talk about in the majority of my contribution is a Supplementary Order Paper (SOP) that I have introduced, and this is about extending the brightline test from two years to five years.

Now, what I’ve heard this afternoon is a whole lot of people talking about how investors are going to get caught by this brightline test, but I dispute that. I myself own rental property, and I don’t consider myself to be a speculator. I’m an investor. I have bought the property to hold on to for rental yield.

Before the two-year brightline test came in, we had something that was called the intention test in the Income Tax Act. What the intention test was based on was the intent of the purchaser of what they were buying that property for. If the intent of the purchaser was to buy that property for capital gains, then the investor—the purchaser—had to pay capital gains tax on that property when it was sold. If the investor, or the purchaser, bought that property to make a rental yield, then they did not need to pay tax on the profit of that property when it was sold. What we found—when I say “we”, what the IRD found—was the intention test was almost impossible to police, because all anyone needed to do was say, “Well, you know, I bought this property for a rental yield. My circumstances have changed within six months. I’m going to flip this property on.” What we found was that speculators were getting around having to pay capital gains tax because it was almost impossible to prove their initial intention when buying a property.

So what happened was the last Government introduced a two-year brightline test, and that was done in 2015. On the select committee that considered this was David Bennett, Andrew Bayly—who’s spoken—Chris Bishop, Clayton Cosgrove, Julie Anne Genter, myself, Winston Peters, and Grant Robertson. Now, we heard numerous submissions on this. We went through this full select committee process and heard a number of arguments for and against. But one thing I will say is that the Labour members on that select committee, in all the speeches we gave when we were debating this bill in the House, talked about the fact that two years was not long enough and it had to go to five years, and the reason we said that at the time was because, even then, Treasury could not determine how much money this was going to bring in.

There was so much uncertainty about it that we did not think it was going to provide any real, meaningful change in behaviour. Speculators were still going to buy those houses and hold on to them for two years and one day and still flip them on, and, in fact, we have seen a lot of that continue. In fact, it is interesting. Even just looking at the consequences of the two-year brightline test at the moment, the IRD gets all information on land sales, and what we’re finding is 50 percent of a small sample that they looked at had not complied with the rules. These are speculators. Investors are not going to get caught under this.

We believe—I believe fully—that investors are the sorts of property owners who buy a property and who hold on to it for rental yield, as per the purposes of the Income Tax Act, and then sell it after five years. They’re holding on to it for the true purpose of rental yield, not to flick it on. We always felt that two years was not long enough. We actually signalled this throughout the election campaign, we signalled this when the bill was in the House, and we’ve signalled it ever since. So it should come as no surprise to anyone that we have made this change through this SOP 13 to take the brightline test from two years to five years.

The other thing I’d also like to point out is the amount of money we think this will bring in and the amount of people we think this will affect. We think it’ll bring in an extra $50 million and we think it’ll affect perhaps another 2,000 people. It’s not too many more, but it will get those people who were buying and flipping properties. It will get those people who should be paying tax in the first place. The reason that this is important is because we believe that if you are making income out of selling rental properties, you should be brought into the tax system. So this is about enhancing the integrity of the tax system—most important—because we felt there were too many people who actually were getting away with not paying their fair share.

So we’ve heard the arguments. They were presented in front of the select committee. We know what they are. We think this is the right thing to do.

Hon JUDITH COLLINS (National—Papakura): Mr Chair—Madam Chair, sorry. Apologies—

CHAIRPERSON (Poto Williams): That’s all right.

Hon JUDITH COLLINS: —for the wrong gender.

This particular part of the bill is one which we would normally wish to support, particularly when the work was done when I was the Minister of Revenue, by the excellent people at the Inland Revenue Department. I am, however, deeply concerned that this bill is being hijacked, and to hear Minister Nash, who’s just resumed his seat, speak in such glowing terms about all the money that they expect to get from it tells me that this is definitely a Supplementary Order Paper that’s been attached to this particular part of the bill that should go to the Finance and Expenditure Committee and should be properly debated. It’s all very well for the Minister to say, “Well, the brightline test was debated under a previous bill.”, but the problem is that this is a different brightline test. The effect is far more wide ranging and far more intrusive on New Zealanders. I think there’s also a good opportunity in a select committee for the administration costs of having to administer this new tax that Labour wants to bring in to be considered.

I well remember that there’s been the Tax Working Group that’s been set up, and I have been assured time and time again in the Parliament that there will be no new taxes before this Tax Working Group reports back. Well, here’s a brand new tax now that’s set to come in, and no one gets to have a say. So what happened to the Tax Working Group? This is just a working group to find even more ways to tax. There was nothing in the contribution from the Minister about how to grow the economy and nothing in that contribution about how to grow the number of houses that can be built. There was nothing in that contribution about everything that people should be considering, which is how to actually grow the economy. What it was all about was “Let’s take $50 million off mum and dad investors because they’ve got too much.” It is, yet again, another attack on people who pay their bills, save some money, put themselves at risk, and actually want to invest.

I have no problem with people who are in the business of buying and selling houses paying tax. They are already taxed under the Income Tax Act. They already have it, and I recall from my days of university learning and doing a Master’s in taxation studies at Auckland University that it was, I think, about 1976 when that came in. It was maybe a little bit later than that, but it’s not that far off. It was certainly in that decade. It’s already taxable. The point that the Minister may wish to make—and, no doubt, is now wishing he had made—is: if only we knew that people are buying and selling properties, then we’d be able to tax them if their purpose is to buy and sell properties.

Well, under so many of the changes that our Government made around the administration of tax and the huge input and funding that we gave to the Inland Revenue Department around the digitalisation of so much of what they do, all of these sorts of things would be much easier to pick up in the first place. I am very concerned that such a substantive and substantial change to our taxation system is being brought in, and if I wanted to be dramatic, I’d say just before dinner time on a Tuesday with no notice at all to the public. But I’m not going to be dramatic about it; I’m going to say, quite clearly, that this is another attack on mum and dad investors and people who are the small landlords. So much of what this Government does is actually about attacking those very people who are the backbone not only of our economy but also of our communities. These people deserve a lot better than the cursory “Well, we looked at it once before and you had your opportunity to have a say then.”

When I think about just how hard it is for people to get themselves in these situations, it’s all very well for the Minister and some of his ilk to say, “Well, they shouldn’t be investing in property. They should be investing in shares.” These same mum and dad investors invest in property because they can see their investment. It’s not that they’re after super profits; it’s because they have an investment where they can see what it is. They’ve long seen through the booms and busts in the sharemarkets, and they don’t know enough about the companies, in many cases, to feel that their investment can be safe. They’ve lost money when they’ve lent into mortgage funds where they’d been offered high interest rates; they lost money in the global financial crisis; they lost money in mezzanine financing firms where they were being paid substantial amounts of interest; and they’ve lost a lot of confidence in many of the market solutions working for them.

I see nothing wrong with a mum and dad deciding that they are going to buy another property, and that they’re going to rent that property out, because it’s going to be their nest egg. I don’t see anything wrong, if one of them gets ill and they suddenly can’t work, or whatever—one of them can’t work—with them deciding that they need to sell that property. They haven’t set out to make squillions. They’ve set out to build an asset and also to provide housing for someone else. What happens when these mum and dad investors go out of the market is not only do they lose an investment but, actually, as a Government that should be concerned about housing people and making sure that there is enough houses, rental houses—rental houses—

Hon Iain Lees-Galloway: It’s about thankfulness that we’ve finally got one.

Hon JUDITH COLLINS: Rental houses, Mr Lees-Galloway—rental houses. Why shouldn’t these people, these mum and dad investors, be a landlord if that’s what they want to be. Why shouldn’t they be that?

Hon Member: Why not?

Hon JUDITH COLLINS: And why not? Why should they go into this now thinking, “Well, if something happens, if one of us has a heart attack, if one of us can’t invest any more, we’re going to end up having to pay, when we sell the property, tax on that.” Well, actually, if they went in with the purpose of making money, they won’t. Does this mean, for instance—I think it’s a genuine question; not all property goes up all the time. Anyone who’s had any experience—

Dr Deborah Russell: In that case, you don’t pay tax on it.

Hon JUDITH COLLINS: And there’s the person from New Lynn, who’s got a view, and she’s often on Twitter with very strange views, but anyway. Often properties go up and down in value. Anyone who’s been through the 1990s, the 1980s, the 2000s will know that these are often seven-year cycles, or thereabouts. Just because a property has gone up in value doesn’t mean to say it won’t come down in value. A lot of that’s dependent on supply and demand. It’s also dependent on interest rates and other things.

So these mum and dad investors, if they have to sell their property within five years for some various reason and they take a loss, are they now going to be able to claim back against their tax the loss that they’ve made on that property? I’d love to hear the Minister on this. Is he now opening that up to them? Because, clearly, he’s decided that they’re all in a business. And should one, for instance, buy a property, a new property—new houses often don’t go up in value to the extent that some people might like. Many of them, after an entire subdivision, actually they start to drop in value, and that is actually the history of it all. It’s so good to see the Minister’s now seeking some advice from his officials. I think that’s an excellent thing. But I think he should’ve done that before he came to the Chamber to discuss it.

I think it’s one of those areas where people need to understand we could actually end up with a massive liability in tax if, in fact, properties start to go down in value. Everything I’ve heard from the Hon Phil Twyford is that he is not going to do anything except bring down values. That means a lot of people having to sell up quite early, and I think they’ll be quite legitimate in coming forward and saying, “Hang on, you’ve decided I’m in a business. I am. You can pay the difference.”

Hon PAUL GOLDSMITH (National): Thank you, Madam Chair, and that’s a very excellent question posed by my colleague Judith Collins that I’d be very keen to hear the Minister respond to: if we were going to insist upon a brightline test and property values fall, what happens?

This is a piece of legislation introduced by the previous Government which does a number of quite technical things that will help improve the experience of taxpayers, particularly business managers, who are trying to engage efficiently and effectively with the tax system. So there’s been a huge investment made particularly, and continuing to be a big investment made, in the technology platform which Inland Revenue works on, so that it will be easier and faster for people to do business and to get the information across in real time, so that there is less hassle in the way the tax is paid.

So we support all of that. What we don’t support is the Supplementary Order Paper that’s been introduced by the Minister extending the brightline test from two years to five years in the manner in which he’s done it, in the sense that, as we’ve said in the previous discussion, there hasn’t been the opportunity for the industry and the people of New Zealand and the Parliament to have some detailed thinking about the consequences of that to ensure that that is a sensible thing to do.

There are three sorts of areas that are of concern. One is potential overreach that it’ll capture not just speculators but also normal investors and people who have bought holiday homes, for example. A lot can happen in five years, and they are being treated as speculators. A lot of people might be shocked to find that somehow they are treated as speculators and will have to pay tax on a second home, a holiday home or a rental home, that they have bought, not in any sense just to milk capital gains but circumstances have changed.

So extending that out to five years will have an impact on behaviour and what impact that is is something that we’re not clear on. The officials have talked about the potential lock-in effect, which is the economic consequences of this. People will now make their decisions not around the most sensible thing for them and their family but they will make their decisions around tax—whether they sell; they’ll hold on to it for five years in order to avoid the tax and hold on to properties that it wouldn’t make sense for them to hold on to for any other economic reason. The consequence of that is the lowering of efficiency of our housing stock, which anybody who’s concerned about that right now will wonder why we would want to be doing that.

The third thing is we do need to be careful about the impact that it could have on rental properties. So I’m looking at the revised regulatory impact statement from the officials in relation to this, and they do make the point that the extension of the brightline test may reduce the supply of rental accommodation if tax discourages speculators from investing and investors from investing in the rental market. Well, for goodness’ sake, anybody who’s tried to get rental accommodation in this city, in Wellington, at the moment, or Auckland, or many parts around the country might be shocked to find that this Government right here, right now is bringing in a Supplementary Order Paper (SOP) to change legislation, which, their own officials tell them, may have the consequence of reducing the supply of rental accommodation. And that’s what we’re seeing here. Why on earth would they be doing that? The Minister might have an explanation. I’d be surprised if he does. But why would we be doing things that may reduce the supply of rental accommodation? It is not compulsory in this country to go out and provide rental accommodation for other people. Anybody who is a renter or who is a landlord and knows landlords will realise that there are a lot of expectations on landlords now.

There are all sorts of difficulties associated with renting. It’s not compulsory for the people who do it. They might just stop. Why would I deal with the hassle? As a result of that, the rental market is squeezed. There are fewer properties available, and we are seeing the market responding with higher prices in many cities around this country. So this bill—the Government’s officials are telling them that introducing the extension of the brightline test may reduce the supply of rental accommodation. That’s why we need to take more time to consider just why we are opposing this SOP.

Hon STUART NASH (Minister of Revenue): Thank you very much, Madam Chair. There are two things I would like to say. First of all, it’s somewhat surprising that the former revenue Minister and the current revenue spokesperson don’t actually know the rules around the two-year brightline test, let alone the five-year brightline test. What I would say is that the rules aren’t changing at all. Under the two-year brightline test that was brought in by your Government, the losses were ring-fenced. That remains, and I’m sure the former Minister does know that. So, just to answer your question: no, they are ring-fenced, as they always were. In fact, this is the interesting thing about the brightline test. Nothing changes. The exemptions still exist. Everything is there, except under the two-year test.

I would say that the current revenue spokesperson, the Hon Paul Goldsmith, made a very, very good point. What he said is that, under this, people will take into account tax considerations when buying property. The problem we have, Mr Goldsmith, is that that is what they’re doing at the moment. People are saying, “I don’t have to pay a capital gains tax if I buy a house and hold it for after two years.” Therefore, they are making a decision based on tax implications, as opposed to, say, for example, a balanced portfolio.

What we want to do is say, “If you are buying a property, that’s all very well, and we’ll encourage that. That’s fantastic. However, if you flip that house within five years, you will have pay tax on the gains you make.” I think that is incredibly fair because with salary and wages, with shares—as the former Minister talked about—you pay tax on these. Why shouldn’t you pay tax on a house if you are not buying it for a rental yield but if you are just buying it for a capital gain?

The former Minister, the Hon Judith Collins, actually brought up a very good point. What she did say, and I’ll quote her, is, “The property market goes in cycles.” She said, “It normally goes in seven-year cycles.” And she is dead right. If you’ve held your property for over seven years—in fact, if you’ve held it for over five years—under this rule you’re not paying tax on that. So this is how this works.

So we are not after the people who were buying properties for rental yield, which is exactly the argument the former Minister made. So if you hold your property for seven years, if you hold it for 14 years, if you hold it for 21 years, and you go through those market fluctuations, you’re an investor; you’re not a speculator. This is differentiating between the investors who do hold their houses, who are after rental yield, who are after providing social houses, rental houses, for people in our communities; it’s not the speculators who are flipping houses and paying no tax.

The other point I would like to make, which the Hon Paul Goldsmith brought up, is about rental accommodation. The former Minister is right only under the assumption that the housing stock remains static. So if, in fact, we weren’t building any more houses and someone was buying a house as a first-home buyer, as opposed to a renter, then, in fact, what we have done is we’ve moved someone who was renting into a house. So they’re no longer renting. They own their own home, which is not a bad thing.

But what this Government is doing is actually building 100,000 more houses over 10 years. We are substantially increasing the level of housing stock in this country. So, again, I don’t think there is anything wrong in someone moving out of a rental because another couple, another family, another person has bought it to get into that housing market. We’ll encourage that. But, Mr Goldsmith, I just would like to say to you that this is not about punishing the ma and pa investors. This is not about punishing someone who has bought a house and is holding it as their retirement nest egg. By the very virtue of holding this for their retirement nest egg—I’m the first to admit I’ve done that myself. I bought some rental property six years ago—[Interruption] No, I’m an investor. I bought it for my retirement. It’s a nest egg. But I’ll tell you what. If I was a property trader, if anyone is a property trader—if they’re buying houses and they’re flipping them, if they’re a property speculator, not a trader, if they’re a speculator and they think they can get away with not paying tax, they can’t.

So I will go back to one of my original points. This is not about punishing anyone at all. This is about the integrity of our tax system. This is about saying, “If you are a speculator, as a society, as a community, we expect you to pay tax on your capital gains.”

LAWRENCE YULE (National—Tukituki): Most parts of this bill, we think, are fantastic. That’s because the genesis of it came from the honourable members in front of me. It seeks to modernise the taxation system. I agree with the previous speaker Greg O’Connor, who said that nobody likes paying tax, and they don’t. But, actually, to run a nation you need to pay tax to fund the public good. We need to make sure that it’s more modern, and that’s actually the fundamental part of this piece of legislation. So I congratulate the Minister for bringing the bill forward and adopting the good work of the Hon Judith Collins and other people. [Interruption] Sorry, only you; my apologies for spreading the credit.

I also support the Business Transformation model, and sitting in the select committee there’s more work to be done, and I congratulate IRD for that. What we have to make sure, though, is that how we collect tax is done fairly. How we collect it needs to be fair to all parties in the taxation system, so everybody pays their share. We also need to make sure—and I think this bill goes a long way towards that—that we have on-time information for the Government of the day to be able to understand what’s happening to taxation revenues.

But I do want to come to the Supplementary Order Paper (SOP), and you might be surprised at this, Minister Nash.

Andrew Bayly: Which one?

LAWRENCE YULE: It’s the one that talks about the brightline test. I’ve talked about making things fair, and I actually think there will be some unintended consequences that may not have been thought out, which is why I supported a direction to give four weeks to the select committee. It hasn’t happened, and I accept that that’s democracy. But I do think there could be some unintended consequences for mum and dad investors.

If I look at the regulatory impact report, it talks about over-reach and it talks about lock-in. Actually, the significant concern that Treasury and IRD had was around over-reach. All of this is a balance. If you choose two years, you might not get quite enough people. If you go for five years, you run the risk of getting some of the wrong people. So that is a judgment call that’s made.

But, actually, I’m more concerned about the lock-in clause. The lock-in clause says that if people think that after two years and one day they can flick it, you now transfer that out to five years. So people make a conscious decision to hold on to investment and property for that time when, actually, for a whole lot of non-capital reasons it may make sense to them to release that property—and they’ll get caught. That actually does have an impact on the flow of sales of property and the economic market as it operates. That’s in this document.

The Hon Stuart Nash—I wonder if you’ve actually read the regulatory impact report. Some of it is actually counter to what you’ve just told us, and, on balance, you’re making a different direction. But I want you to reflect on the things that are being said in here, “The Treasury notes that the risks relating to over-reach and lock-in are unable to be quantified and therefore it is difficult to assess their significance in relation to the Government’s objectives”.

I come back to what I said previously. In the SOP, when it talks about targeting foreign owners—that’s what it says in the explanatory note, as to one of the things that it wishes to do. I think that’s an error. Actually, you’re going to target everybody. But if you read the SOP as written and the explanatory note, they talk about foreign investors. I think that something probably needs to be fixed.

But I come back to this point. There will be unintended consequences. If somebody has a family illness or a requirement for a restructuring for a whole lot of reasons, then, actually, they are caught—

CHAIRPERSON (Poto Williams): I apologise for interrupting the member. The time has come for me to leave the Chair for the dinner break. The committee will resume at 7.30 p.m.

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

LAWRENCE YULE: The issue I wish to bring is unintended consequences, and I’m pleased the Hon David Parker’s in the Chamber, because, actually, we found this in the Overseas Investment Act legislation as it’s gone through the select committee as well. What I worry about is some unintended consequences here.

I’m told, for instance, the Hon Stuart Nash, that Habitat for Humanity would be one of the entities that gets caught up in this brightline test. The very same group who are trying to help people get into homes and transfer them into proper homeownership will actually get caught in this test. It’s the type of unintended consequence that was the reason why we supported it going to the select committee for a month.

I think this is a fine balance between two and five years. We had it right as two years before. The taxation working party should be looking at this, and, in closing, I think this is another form of capital gains tax by stealth.

Hon AMY ADAMS (National—Selwyn): Thank you, Madam Chair. Look, I do want to take a call—at least a couple of calls—on Part 2 of this Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill. I had the opportunity earlier, in moving a procedural motion, to start to canvass some of my concerns. I took the opportunity in the debate on Part 1 to go through my views and my position on the bill more broadly, so I do want to focus my contribution in this call on the Minister’s Supplementary Order Paper (SOP) 13. Just for the sake of clarity, reconfirming that SOP 16 we see as largely technical and have no issue with, but SOP 13 is a significant change.

Now for those listening at home, a Supplementary Order Paper is something that is tabled in the House in front of us, often at the last minute. We’ve had this one for a little while—I acknowledge that’s the case, from the Minister. But it is intended to be something that corrects errors, adjusts drafting, and picks up little tidy-ups that haven’t been picked up through the course of the legislation. What it’s not intended to be is a significant change in the taxation settings that affect New Zealanders. There’s one thing I learnt very early in my study of legislation and the processes of this House, and that is that tax law, above everything else, must be very clear; very concise; if in doubt, in favour of the taxpayer; and really must go through the rigours of a proper select committee examination—a proper opportunity for the experts and those affected to feed into it

In fact, I’m fairly sure that I sat on the Finance and Expenditure Committee with the now Minister in our first term, when we had the opportunity to test a number of pieces of tax legislation. I’m sure he would agree that, actually, that select committee rigour creates a great deal of value in finding issues with legislation—irrespective of the political party differences around particular settings, but simply operational issues. My colleague Lawrence Yule, in the last moments of his contribution, talked about a very good example of that, which is the very real concern that’s been raised by Habitat for Humanity about the fact that the very nature of what they do in using sweat equity and volunteers and social capital to build those properties—their very model would be disrupted by this requirement that any transfer within a five-year period of taking the acquisition of the site would be caught and have an automatic capital gains tax imposed on it.

That, I think, goes to the heart of what it is the Government is seeking to achieve through this legislation, and what they’re actually achieving. The Minister will talk, I’m sure, from his perspective, but as I’ve understood the Government’s comments, the Government’s objective here is to try and help housing affordability. It’s a laudable goal—no one has any issue with the goal—but having a laudable goal doesn’t mean that everything you do in pursuit of it makes sense. I would seriously question whether this five-year brightline test is going to do anything for housing affordability.

In fact, the very regulatory impact statement that goes through and looks at the legislation and looks at this proposal says there is a lack of any clear data that tells us whether this will help housing affordability. So what we have is this knee-jerk reaction from the Government, desperate to be seen to do something, anything, just to have something to say that they’ve done, without any clear evidence that it makes a difference.

Let’s be a little bit more clinical about what they’ve said. They’ve said this is about helping housing affordability by attacking those nasty property speculators. Well, fair enough—but actually, there’s a couple of things to get very, very clear about. First of all, property speculation is already taxable under the Income Tax Act. So a property speculator—someone who buys property for the very purpose of selling it again and making a capital profit—is already subject to taxation.

When National was in Government, we brought in the two-year brightline test because we recognised, actually, that the balance of likelihood is that someone buying and selling a residential property within two years—more likely than not, they had bought it with the intention of selling it on and making a profit. So there is a natural alignment between likely outcomes and the period of time. You can’t simply extend it to five years and say the same holds true. A five-year window of transaction dealing is far more likely to catch property investors.

Now investors are a good thing, actually. We’re in a market where we need people to want to invest in the property market. We need people who are prepared to invest and grow housing stock. If we seriously want to make a difference—and I take the Government at their word that they do—about housing affordability, you don’t do it by constraining demand; you do it, Madam Chair—Madam Chair?

CHAIRPERSON (Hon Anne Tolley): Ah, beg your pardon. I call the Hon Amy Adams.

Hon AMY ADAMS: I got ahead of you, Madam Chair.

CHAIRPERSON (Hon Anne Tolley): There’s a lot happening here at the moment.

Hon AMY ADAMS: That’s all right, Madam Chair. I’ve got your back.

CHAIRPERSON (Hon Anne Tolley): Women can multitask.

Hon AMY ADAMS: That’s right. They do it not by constraining demand, not by stopping people wanting houses. You affect and impact positively home affordability, housing affordability, by increasing supply. So here we’ve got an attempt by the Government to stop people wanting to buy houses, to stop people wanting to own houses. Well, I would suggest that that is entirely the wrong approach. The right approach would be to say, “We want people to invest in the housing market. We want people to want to own properties and grow the housing stock.” What we need to do is increase the number of houses being built, not make it unattractive to hold them.

So here you have this knee-jerk, non - evidence-based approach to say, “Let’s just tax everyone who buys and sells a house within five years, whether or not they’re a genuine investor. We’ll call them all speculators, and somehow, we kind of hope, in the wash, that will help housing affordability.” Well, it won’t. It’s misguided; it hits exactly the wrong part of the market. If the Government had been big enough to be prepared to actually hear some open and honest debate about whether this was a good idea, we would have seen the SOP go to select committee and we would have seen discussion about it.

Interestingly enough, the Inland Revenue Department—who are not a department who are known for wanting to constrain their own powers and reach—have said themselves that they think a two-year brightline test is a better period. They are not in favour of extending it to five years. They’ve said that because of the very risk of overreach that I’ve talked about, where you actually risk taxing a whole lot of people undertaking legitimate and proper investment activity; two years is the better period. And yet, the Government doesn’t want to hear that—doesn’t want to hear from the actual people who will end up paying this tax, whether or not it’s a good idea; doesn’t want to wait for analysis of whether this will have any impact at all on home affordability. Nope, they want to chuck it in as an SOP—a total abuse, in my view, of the processes of this House—and not have it go to select committee.

I asked earlier this evening that we take a mere four weeks for the public to have a chance to have a say on this, for the practitioners to have a say on it, to test whether there are unintended consequences—and I have no doubt the Minister’s about to jump up and tell me that his officials have assured him not to worry, it’ll all be fine. Well, frankly, we shouldn’t have to rely on that. We should have the right to hear from the individuals themselves whether they’re affected, and from the tax practitioners themselves how they see it playing out. But instead, we’ve got a Government so desperate to be seen to do something that they will abuse the processes of this House, they will cut out the right for New Zealanders to have a say on a proposition that is opposed by the IRD as not being the better framework; that has not got any evidence that it will help affordability; that doesn’t address the core issue, which is about supply.

Actually, even worse, or certainly just as bad, what there is clear evidence of is that proposals like this have the opposite effect, because as you drive investors out of the property market, you get a reduction in the number of rental properties available, and as rental stock becomes unavailable and rental rates go up—and I know this as a previous Minister of Social Housing—it makes it that much harder for people to transition from social housing back into the rental market and then through, hopefully, in the long term, to homeownership. If you take out, or make unaffordable, that rental step by reducing supply, you’re making it harder for those in the housing market and you’re increasing the housing costs on real New Zealanders.

This is an SOP to this bill that is outrageous. It is a total abuse of the process of this House. It is being rushed through for no good reason—there is nothing that a four-week time frame would have hurt the Government. They don’t want to hear whether or not it’s a good idea; they just want to be able to point to it and say they’ve done it. The Government don’t appear to care whether it’ll make any difference at all, and, in fact, despite clear evidence that it will tax people who should not be taxed, it will push up rental pricing, and it will create inefficient use of the housing stock that we have, the Government is still intent on ramming it through.

For that reason, not only will National continue to oppose this capital gains tax by stealth, clearly designed to be an interim measure before Sir Michael Cullen and Grant Robertson manage to impose their full capital gains tax that they absolutely appear to want and have set up the Tax Working Group to deliver—we will oppose not only this SOP, but if this SOP is included in this tax bill, even though it is a bill that our Government put together, that our Ministers introduced, and that we would otherwise have supported, the nature of this SOP makes it so egregious that we will oppose it. We will oppose it strongly, and we’ll make it clear to the people of New Zealand what an abusive, arrogant process this is.

ANDREW BAYLY (National—Hunua): Thank you, Madam Chair. Thank you for taking my call. I thought I just might follow on a couple of little technical points from the Hon Amy Adams, particularly around Supplementary Order Paper (SOP) 13—as she’s been discussing, and as we have all canvassed tonight, this issue of bringing this substantial change into the House at a late stage without the opportunity for anyone to have the ability to consult on it. As I said earlier, I identified at least 10 parties who would be very keen to be making a submission on that because it will directly affect them. Also, the sheer fact that the select committee—the Finance and Expenditure Committee—hasn’t had the opportunity to debate this just raises the whole question around transparency and the willingness to operate in a proper manner. And I just lay it at the feet of the Government for taking this very disparaging approach to people’s interest in this topic.

So what I just wanted to do around this SOP is just note that, as many of you are aware, what the SOP, essentially, does is extends the brightline test from two years to five years. And, of course, it’s restricted to houses, and anyone who owns a house is subject to this rule. There are three exceptions. The first one is that the family home is exempt and you can only have one family home. So for people who live in different areas during the course of a week, they must nominate a family home. No tax will be required in the event of the dissolution of a marriage. And, thirdly, if there is a transfer as a result of an inheritance arrangement, then that is also outside the scope. But otherwise every piece of residential property comes under the scope of this bill. Of course, what this now does is that for anyone who owns a bach or owns a second home, whether it is for investment—the Government loves talking about speculators, but some people choose to invest in a second home—or, for instance, if parents want to invest in a home to provide for their children, then, theoretically, they’re captured under this new arrangement, which now places a five-year term before they can sell without the possibility of having to pay tax on that gain.

Of course, the question I did want to put to the Minister who’s in the chair, Stuart Nash, is at the moment—he talked earlier that there is a ring-fence around those gains, and there’s sort of this assumption, the expectation, and the Hon Judith Collins mentioned it earlier today, that there is always an increase in property over time and, of course, everyone is a successful speculator or investor. But, as my good colleague right beside me, Stuart Smith, is saying, that’s not right. And of course it’s not right—of course it’s not right.

So the technical question I just want to ask the Minister to comment on, when he gets an opportunity, is what happens with the loss offset when people buy property and they may have to sell it because their financial circumstances change—and the SOP doesn’t provide for that. So these are people who get into difficult situations, have to sell a property within five years, therefore, at that point, they may have to pay tax, but in the event that they have to sell that property at a loss, what happens to that ring-fenced tax loss. Now, is it available to be offset against other income—and as I understand it’s not. I can see the Minister looking behind just to get the right answer to this. But, if it is ring-fenced and can only be applied to future gains or losses on other property investment, does that loss basically sit in abeyance until that person—so the Minister looks like he’s nodding, which I think is an absolute travesty. It is an absolute travesty if that’s the case, because, if a person gets into a situation where they have to sell a house because their financial straits get them into that unfortunate circumstance, and they can only have that loss sitting there to one side and they cannot access that in the future, then I put it to you that I think many mum and dad investors round the—[Time expired]

Hon STUART NASH (Minister of Revenue): Thank you very much, Madam Chair. I’d like to actually address a couple of the points that the two previous speakers have brought up. First of all, when Mr Bayly said that every single property in New Zealand is subject to this—

Andrew Bayly: Residential property.

Hon STUART NASH: Residential property—residential property. Well, let me just tell the member, there’s about 1.7 million residential houses in this country. The two-year brightline applies to about 3,000 of those; we think that this will bring in about another 2,000 houses, so, in total, about 5,000 houses. That equates to about 0.03 percent of all residential properties. Of all residential properties in this country, 0.03 percent will come under the five-year brightline. So it’s only a small part—it’s only a very small part. And when that member, and certainly when Amy Adams, says that Labour views speculators, and I quote, as “nasty, horrible speculators”, that’s not the case at all. Speculators have a place in the housing market—of that there is absolutely no doubt. It’s a part of commerce—it has been for a long, long time.

All we are saying is, in fact, the intention test in the Income Tax Act, which will determine whether someone has to pay money on a capital gain they made versus not, just is not working, and we all recognise this fact. We all recognise this, and we think that the difference between speculation and investment is about five years. It could be four, it could be six, but it’s about five years. At the time when that Government introduced a two-year brightline tax—I do smile when Amy Adams talks about the fact that this is a nasty, nasty tax going after ma and pas; well, I do have to remind the member, it was actually the National Government that introduced this—we, Labour, said that it should be five years, because the two years, it wasn’t long enough. We debated this in the Finance and Expenditure Committee. Mr Bayly was on that select committee. We debated it. We got scenario analysis from Treasury and from IRD about whether we should do two and whether we should do five, and we came up with the conclusion that it should have been five years.

So this isn’t something we’ve just sprung on the people of New Zealand. We went to the election with it. We also debated it at select committee. So when the member says this hasn’t had a proper hearing from the people of Zealand, it actually has. And the member knows that, because he was sitting there. He read all the submissions, and I know he did, because he’s a very good member of select committee, and he is one of the few that actually does read everything that’s put in front of him. So he will have heard all those submissions. I’m confident of that. He will know the arguments that are put forward by the various lobby groups and interest groups and sector councils that he’s outlined.

One point I would like to make that Lawrence Yule and the Hon Amy Adams brought up was Habitat for Humanity. Now, I mean, I understand Lawrence Yule doing this, but I’m a little surprised that the Opposition finance spokesperson doesn’t quite understand the tax law here. Habitat for Humanity is a registered charity. Therefore, they won’t be paying tax under the brightline test. So you don’t have to worry about Habitat for Humanity; they’re fine.

Hon David Parker: How could that mistake be made?

Hon STUART NASH: I don’t know how that mistake could be made. In fact, it was quite interesting, because, in terms of ring-fencing, the finance spokesperson for the Opposition didn’t know about ring-fencing, either. But, Mr Bayly, one thing I would say is that people who make a loss on this property—sure, it is ring-fenced, and those losses are held over in case they buy something else, but this is the interesting thing: when you go into an investment, it is not a fait accompli that you’re going to make a profit. That’s what profits and risks are all about. Sometimes you win, and, hopefully, if you are an investor, you win more than you lose, but sometimes you lose.

The Hon Judith Collins made the very good point earlier on that the property cycle is about a seven-year cycle. It goes up and down and up and down, and if you’re a shrewd investor or if you’re lucky or if you get it right, you’ll hit it going up. If you’re unlucky or you haven’t judged the market well, you’ll hit it going down. Now, that’s unfortunate—it really is—but the point we are making is if you ride out those cycles, if you do it for seven years or 14 years or 21 years, you’re not going to get caught out by this. It’s only if you buy a property with an expectation of making a capital gain, and you sell within the five years and you make a capital gain—we are going to tax that capital gain. We’re not going to take all the money you made. We’re only going to tax that capital gain. The way the Opposition is talking about this is that every single cent that you have made, the Government’s going to take. That’s actually not the case at all.

The other thing I would like to talk about, very briefly, is housing affordability. Now, for me, the number one thing for this brightline test is about the integrity of the tax system, and I fully believe that if someone is making money out of flipping houses, speculating on houses, they should pay tax. I think that is only fair. As I talked about earlier, and as the member is well aware, there is an intention test in the Income Tax Act at the moment, and the intention test is supposed to determine whether someone who is buying an investment property pays tax or not. How the intention test works is if you buy it for a capital gain, then you pay tax on the gain you make, but if you buy it for a rental yield, you don’t have to pay tax. It was so difficult to police this that we all thought there had to something done about it—all of us. So the then National Government brought in the two-year brightline test, in recognition that the Income Tax Act simply wasn’t delivering in the way that it needed to.

We agreed that the intention test simply wasn’t working. In fact, if you look at analytics at the moment—the Inland Revenue Department did some amazing work. The Inland Revenue Department get all the property information, so they know what is happening in terms of the market, who’s buying and selling. They had a look at a small sample, and what they found is that even in the two-year brightline test, 50 percent of people who should have paid tax did not pay tax. So the level of compliance, even after two years, was only at 50 percent, which I think all of us would agree is unacceptable.

I remember sitting around a committee table with the Governor of the Reserve Bank, and we were talking about Auckland property prices. He had showed us a graph on how they’d gone through the roof, and we asked him, “Are people buying these for rental yield? Are people buying these for a yield, or are they buying them for capital gain?” That was the then Governor of the Reserve Bank, not the current one, obviously—I don’t even know if he’s been appointed. He said, “No, no. They’re buying them for capital gain, because the rental yield on these properties was below the price you could get if you stuck your money in one of our trading banks.” So it was plainly obvious that people were buying these properties for speculation, to make a capital gain, and if that’s the case—if it is the case—then that person should be paying tax on the gain they make. But I’m the first to admit that if in fact they were buying it for rental yield, if they were buying that as a retirement nest egg, if this was part of their savings plan, that’s fantastic. They won’t be caught by this, because they will hold that property for longer than five years. So keep that in mind: if you hold the property for longer than five years, then you are not covered under the brightline test.

And we did talk about this. We did debate this long and hard. Mr Grant Robertson and I were also both on that select committee that heard all the submissions, and we heard everyone talk about the difference between speculation and investment, and when we were in Opposition we both came up with the conclusion that, in fact, the difference between investment and speculation is about five years. So one thing I would caution everyone on is saying, first of all, it’s about dirty, nasty speculators. I don’t view speculators as dirty, nasty people doing a rotten job. I view them as participating in the economy, but all I’m saying is if you’re speculating on houses, you should pay tax, and this is what this does.

In terms of housing affordability, for me that is secondary. The most important thing here is the integrity of the tax system. Now, in terms of driving people out of the rental market, or driving people who may buy an investment property out of the market, I don’t think that will happen, and the reason I say that is you pay tax on shares. That hasn’t driven people out of the sharemarket. If people still believe they can make a profit speculating on houses, then they will continue to do that. And this will be the real test: if people actually do move away from buying rental properties and flicking them, then we will know that the only reason they were buying these properties is for the tax advantage.

The member Andrew Bayly talked about the fact that we want people to do the right thing in terms of investment, and I’m exactly in that camp. We want people to do the right thing, but we absolutely believe that people were buying these houses for the tax advantage it gave them, not for the investment advantage—so not as part of a balanced portfolio, but for a tax advantage, and that is the wrong reason, and that’s the wrong signal we want to send. So this is really about taxing speculators, bringing them within the tax net, and maintaining the integrity of the tax system.

KIRITAPU ALLAN (Assistant Whip—Labour): I move, That the question be now put.

ANDREW BAYLY (National—Hunua): Thank you, Madam Chair. First of all, I’d like to congratulate Minister Nash for standing up. There are a couple of things that he just said that I’d like to pick up on, and it would be very nice to hear his comment.

Hon Stuart Nash: I’ll come back and comment.

ANDREW BAYLY: Very good. The first thing is he said that this will only affect roughly 3,000 properties, or about 0.13 percent of all properties. So the question is, if you’re going to put this bill in, if those are actually the figures that you’re talking about, why on earth would you be putting this in? I think there’s a logic break in terms of what the Minister’s just said, and I think, actually, it’s because he’s incorrect about the number of houses his Supplementary Order Paper (SOP) 13 potentially affects.

Because if you look at the make-up of the market at the moment, of all the houses in New Zealand, roughly 40 percent are owned by mums and dads in New Zealand, who own those second houses quite legitimately and for a number of different reasons. I’ve talked about the people who have baches and things like that, or outright investors, but I will also refer to mums and dads who buy a property, often for their children to live in, or to at least support them into that house.

Under the rules at the moment, I’m not sure, if you have an investment in a second home where you’ve been providing support to offspring—whether, in fact, this is going to be captured by this Draconian bill. I think this is the issue that I’d like to hear back from the Minister on, because, first of all, I think he’s erred in his facts, because I think what he was in fact referring to was, of all the houses, potentially the small number that Treasury and officials have assessed may enter into the situation where they are sold under a speculation-type regime.

But there are many other houses that are bought and sold within five years for quite legitimate reasons. I think this brings me to the second point. Yes, of course, the National Government brought in the brightline test for two years, and we were very judicious about it, because, of course, we wanted to stop speculators flipping houses—to use the common parlance. That’s what the brightline has been very, very successful on and has been recognised by officials to be exceptionally successful on. What this SOP has done is extend it to five years. What I haven’t heard is any logic to that because we actually, unfortunately, haven’t had the ability to have an open conversation around it. Why take it from two years to five years? The implications of that are incredibly significant.

Going back to the example I said earlier, under the two-year brightline test, if you are a mum and dad and you get into financial difficulty, something—

CHAIRPERSON (Hon Anne Tolley): I hope I don’t.

ANDREW BAYLY: No. Madam Chair, I hope not, and I know you wouldn’t.

But for those who get into financial difficulty, under a two-year time frame, that’s manageable. But under a five-year time frame, we have now entered a realm where the unintended consequences are quite significant. The issue with that is, as noted in the summary, the officials haven’t been able to assess the impact of this change. So, if you cannot assess the impact of this change, why on earth be proposing it with all the potential downside of the unintended consequences? These are the issues that we haven’t had discussed with us. What we’ve had during the election was a sort of a nice mantra about stopping speculation, with no one actually sitting down and doing the hard thinking behind this policy. It sounds great, but what it ultimately does is potentially effects many New Zealand people, who for the correct and honest reasons decide to buy a second property, who are now potentially going to be in a situation where they have to pay tax. I think that’s a travesty around that.

The last thing: I do not think the Minister has properly addressed the issue of the stranding or the abeyance of those tax losses for those unfortunate people who do have to sell their property. They will sit there in abeyance where no one can access them—only the people who are lucky enough to be able to get back into the property market, and to be able to access that, they’d have to get back in and re-trade property. All that does in incentivise people if they’ve got tax losses somewhere to at some point start trading again, which is actually counter-productive to the whole intent of this bill.

This bill and the SOP lack an incredible amount of logic.

KIRITAPU ALLAN (Assistant Whip—Labour): I move, That the question be now put.

Motion agreed to.

The question was put that the following amendment in the name of the Hon Stuart Nash to Supplementary Order Paper 13 be agreed to:

in SOP No 13, in proposed new clause 28E(2), replace “.” with “receives the Royal assent.”.

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

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 56

New Zealand National 56.

Amendment to amendment agreed to.

CHAIRPERSON (Hon Anne Tolley): Now, with the Minister’s permission, we are going to split the vote on the Supplementary Order Papers 13 and 16.

The question was put that the amendments set out on Supplementary Order Paper 13 as amended in the name of the Hon Stuart Nash to Part 2 be agreed to.

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

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 56

New Zealand National 56.

Amendments as amended agreed to.

The question was put that the amendments set out on Supplementary Order Paper 16 in the name of the Hon Stuart Nash to Part 2, and the following amendments in his name to clauses 25 and 106 be agreed to:

in clause 25, proposed new section CW 26G, replace “section CW 26(7)” with “section CW 26C(7)”.

in clause 106(5), replace “(2) and (3)” with “(3) and (4)” in each place where it appears.

Amendments agreed to.

A party vote was called for on the question, That Part 2 as amended be agreed to.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 57

New Zealand National 56; ACT New Zealand 1.

Part 2 as amended agreed to.

Part 3 Amendments to Tax Administration Act 1994

CHAIRPERSON (Hon Anne Tolley): Members, that brings us to Part 3, which is a debate on clauses 186 to 284 and schedule 2.

Dr DEBORAH RUSSELL (Labour—New Lynn): I am pleased to speak about Part 3 of this very important bill. It’s the part of the bill that deals with PAYE and how employers pay PAYE. I think it’s a really interesting part of the bill, because it’s one where the Finance and Expenditure Committee worked together very hard to ensure that the pretty good changes which have been proposed under the bill were actually improved a little to make it easier for business.

There’s a really old principle in tax law, set up first by Adam Smith in his great book, The Wealth of Nations, published in 1776. One of his principles for a really good tax is that “Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the [taxpayer].” When it comes to PAYE—that’s the tax that all of us pay on our salary and wages if we are salary and wage earners—it is pretty convenient for us as salary and wage earners because our employer is the person who does all the work around the tax. So, as ordinary people, they kind of almost have nothing to do with the calculation of tax, but employers have to do it on their behalf.

One of the interesting things that’s going on with the big Business Transformation project of the IRD is that they are working really hard on working with employers and using that Business Transformation project to make it more convenient, to make it easier, for employers to calculate and pay their PAYE. So as part of that, there have been a whole set of changes to the Tax Administration Act to make it easier for employers to pay tax—in particular, now, employers are going to be asked to calculate PAYE on a payday basis. So every time they’re running a payroll, they’ll run the PAYE at the same time, and that information will get sent over to the IRD. That was the change in the original bill, but one of the interesting things that came out of the Finance and Expenditure Committee was that some employers found that wasn’t going to be so convenient after all. In fact, for some employers having to report the PAYE information every single payday was going to be very inconvenient.

It turned out that those employers were in fact the very small employers—the people who were perhaps still working with paper, the people who had only one or two employees. So one of the changes that the select committee has suggested is that, in fact, some of those very small employers, the ones who have a payroll maybe of about $200,000 a year, maybe one or two or maybe three employees, they can still continue—and if they’re working on paper, instead of doing those calculations and paying it up and sorting it out with IRD every payday, they can elect to do it twice a month instead. So, in other words, the number of times they have to communicate with IRD is reduced, that reduces their compliance cost, and it makes paying the tax more convenient for them. That’s a change I really recommend that has come through from the Finance and Expenditure Committee.

Look, there was another change, and, at first glance, this does look pretty bad. There’s a payroll subsidy for small employers. Very small employers who are working through what we call a PAYE intermediary—someone who would calculate the PAYE for them—could get a subsidy for that. It wasn’t a very large subsidy, but it was enough to make it a bit easier for small employers to calculate and pay PAYE. Now, in the original version of this bill, that subsidy was removed altogether, but, as it turned out in the submissions which came in, a lot of small employers made the case, saying, actually, it was still pretty hard for them to calculate tax; actually, they still needed a hand with it; actually, it would make life easier for them if they could still access that subsidy through a PAYE intermediary. So that is exactly the change that the select committee has recommended. The change we’ve proposed is that employers who have less than $50,000 of PAYE deductions each year—so that’s going be about $200,000 of salary and wages; one, two, or three employees—they can still get that payroll subsidy.

So that’s something that select committee has suggested. I recommend it as an example of making PAYE much more convenient, much easier for employers to calculate and pay.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you very much, Madam Chair, and, I must say, the introduction to tax legislation on the Finance and Expenditure Committee has been a surprising pleasure of my time in Parliament. It was, I must say, interesting to sit on that select committee and just understand some of the tensions in tax law and the real need to balance the department’s demands for efficiency against the public’s need for workability and simplicity. I must say, the select committee received some very good advice that was really well-balanced, and, as we go through this Part 3 of the bill, it has some technical aspects, but, in fact, really, what it’s about is assisting the IRD with its Business Transformation project and ensuring that they have information which is timely and accurate so that the tax is paid as accurately and as timely as possible, in a way that’s most likely to be paid.

Having said that, it’s clear that in some cases, that provision of information is an undue burden, and it’s quite right that we identify where the costs, whether they be costs in time or money, are balanced against the usefulness of that information on time. So we look, for example, at the reporting of tax information on paper or via the internet on myIR, the internet platform, and the fact that for some people, using myIR simply isn’t feasible. In those kinds of situations, the reporting at regular intervals on payday is really not appropriate because it simply takes too much time, it’s too cumbersome, and it’s much easier, in fact, to do it after the event. So at select committee that was one of the important changes which were introduced. Similarly, and perhaps more technically, employers with shadow payrolls—overseas employers who, in fact, are employing New Zealanders—indeed, were not required to do reporting on a payroll basis. So there’s another example.

Also the transition, the payroll subsidy—the idea that payroll agents who provide that information are able to be subsidised. It’s only a few cents per employee, but nevertheless it’s some millions of dollars that the revenue forgoes—the idea that that be not taken away immediately but that it be reduced over time, because some of those small employers are going to have to learn how to put those returns in in a timely basis. So, firstly, that threshold is going to be lowered down to $50,000 rather than $500,000 in terms of PAYE, and the time for implementation is being pushed out, ultimately, to 2020. But, having said that, this is part of the transformation project; I do think it’s really important in this transformation project that we don’t leave behind those people who still struggle with electronic filing and so on. We’ve got to have a tax system which accommodates everyone.

This part of the bill also deals with resident withholding tax, and tax on dividends and interest income. One of the important changes is, in fact, the increase of the non-declaration rate to what is, essentially, in our tax framework, a penal rate of 45 percent. That’s to make sure that people actually do give their banks or the companies who are paying them dividends their IRD number so that that matching process can go on and we can follow people’s overall income. So that’s an important move as well.

The other area in respect of resident withholding tax was the requirement of payers of interest and dividends to report. Now, this is a pretty well-known requirement. We know that our banks report to the IRD. But, in fact, what became clear was that there were numerous transactions where interest would be paid, perhaps through family loans or other modest arrangements, where the tax would be only a few hundreds, or perhaps thousands, of dollars. In fact, the liability for that, along with the cost and, in fact, the fact that the person receiving or paying that income may not even know that it was captured by the Income Tax Act meant that it was entirely inappropriate. So a threshold of $5,000 for investment income was placed on that. So it’s not required to declare or to provide that information to the revenue.

So, overall, obviously, this is a bill which is intended to improve the Income Tax Act. It’s really an administrative bill to make it work better, but it’s good to see that through that select committee process, we’ve managed to soften the hard edges of it, make it more workable, and this certainly will improve this piece of legislation. Thank you, Madam Chair.

Hon DAVID PARKER (Attorney-General): Thank you, Madam Chair. Can I thank the Finance and Expenditure Committee for the work that they’ve done on this part of the bill, which, as other speakers have said, reforms the administration of the PAYE system. The first point I would make to the committee is that these changes are intended to reduce compliance costs by, essentially, aligning the Act with what is modern computerised practice enabled by computerised PAYE systems.

PAYE systems are now set up being able to electronically forward the data to the Inland Revenue Department at the same time as the payments are made to employees, more often than not on a fortnightly basis. Most people are paid fortnightly; some are paid weekly. It’s inconvenient to employers to have to do that on a monthly basis when their computer systems are spitting it out on the pay period when people are actually paid, and it’s easier for them if we align their obligation to make their returns to the Inland Revenue Department when they’re making the payment. There is no unfairness to employees here. The employer isn’t paying the money; they’re deducting it from the wages of the person who is in their employ. Instead of paying that part of the wages to the employee, they are deducting it at source and handing it on to the Inland Revenue Department, and now that technology enables this to be done virtually instantly with no inconvenience to the employer—and, indeed, with greater convenience to the employer—what this part of the bill does is make that the new norm so that in future the PAYE reporting obligations of employers will be occurring at the time they pay their employees and make the deduction. So requiring this to do this seems eminently sensible to me.

In respect of the Finance and Expenditure Committee (FEC) recommendations, they do make a recommendation in respect of out-of-cycle payments, which is an amendment to allow employers to include reporting on out-of-cycle payments of employment income with their next regular payday report except where this would carry information over beyond the end of the PAYE payment. As introduced, the bill would have required out-of-cycle payments to be reported on a per payday basis, and as a consequence the FEC has come up with what seems to be a practical change to that proposal.

In respect of late filing and non-electronic filing penalties, amendments are being made as recommended by FEC to give inland revenue discretion in applying late filing and non-electronic filing penalties during the transition to the new payday reporting requirements. I think that’s sensible. There is a period here when parties will be transitioning to the new regime, and I, for one, am very happy to trust the wisdom of the officials at inland revenue to give them a discretion to waive penalties so that their focus can be on education, as we transition into this new, more efficient scheme, rather than punishment for early non-compliance. That seems sensible to me, and I think the FEC can be congratulated.

There’s another practical change. There is an amendment to allow a regulation-making power to enable transitional regulations to be made for correcting errors in employment income information so that they can be made from the date of the Royal assent, rather than having to wait for the new empowering provision to come into effect. If there’s a need for a transitional regulation-making power and it’s identified earlier, it seems sensible to me that we get that regulation in place from the date of Royal assent rather than from coming into force, so that by the time it comes into force those regulations can be in place, and the operation of the regime is more practical and simpler for those who are collecting tax on behalf of the Government.

GREG O’CONNOR (Labour—Ōhāriu): It is with some trepidation that I stand to speak on the amendments to the Tax Administration Act, following, as I am, Drs Webb and Russell with their in-depth knowledge of this topic. One wonders where one can go after such great in-depth knowledge and work. Then, of course, the Hon David Parker stood to fill any gap that did exist, with his vast knowledge and experience.

But I look at Part 3 and I then dig deep into my own experience with tax, having been in charge of quite a large company for several years. I look down through these provisions and look at just how commonsensical they are, just how much they will improve the whole system and the efficiency of the system. I would like to congratulate the Finance and Expenditure Committee for the work they’ve done and I comment on the fact that it is, obviously, done—with one serious exception—with cooperation between the parties.

But I look at the requirement for employers to provide the Inland Revenue Department with information about their employees’ income on deductions on a payday basis rather than on the current monthly basis. I just reflect on how much sense that really does make. So many workers these days—the employers are approached and are under some pressure to advance to their workers because so many of them do actually struggle to make ends meet, and payday looms large as something that is going to make a major difference to their families and themselves. So payday to payday is where so many people, so many workers—and, subsequently, the employers—are living their lives. So this proposal requiring of employers information about income on a payday basis rather than the current monthly basis does make sense, and I certainly commend that, as I do when I look at the information about new and departing employees.

One thing that any system, tax or otherwise, when we look at employment—is to make ease of employment at a time when certainly our Government is focused on ensuring we get as many people into work as possible, and it’s incredibly important that we make that as seamless as we can. As many people who haven’t worked for some time come back in, anything—something relatively simple—can provide something of a barrier to them and confusion, and can impact on not only their work performance but also their very confidence in the system. So when I look at the information about new and departing employees, requiring employers to provide inland revenue with that information, again I reflect on how much common sense—and we’ve spoken before about the work done by that committee, and I congratulate them that they’re able to come up with such sense.

I look at another provision there: the declaration of entitlement to work in New Zealand. Well, again, something of a confused area, particularly when we saw the vast increase in the number of those who were coming into New Zealand in recent times—so, again, an area that’s absolutely essential that we give those who’re involved in the workforce, both employer and employee, clear rules around that. Repealing the requirement for an employee, when advising their employer of their tax code, also to declare their entitlement to work in New Zealand—well, again, now we’ve seen where that has left employers vulnerable, taking the work. It would be nice if we lived in a world where we could always believe everything we were told. I think employers now will be very complimentary of the system, because it makes it quite clear that really the existing requirement is not needed for tax purposes and actually the obligation is on employers to determine that prospective workers are legally entitled to work for them. So actually repealing that requirement for the employee—again, it makes considerable sense.

Also again, as I go through these provisions, I’m amazed that just something that starts—and when one looks at it, one can actually be somewhat glassy-eyed, but as I dig deep, so much of this actually applies to so many of us. Again I congratulate the committee—the changes to the collection of investment income information. I look at how many, come tax return time, when we’re looking at how many of our dividends were imputed, just putting things together—[Time expired]

KIRITAPU ALLAN (Assistant Whip—Labour): I move, That the question be now put.

Motion agreed to.

The question was put that the amendments to Part 3 set out on Supplementary Order Papers 13 and 16 in the name of the Hon Stuart Nash be agreed to.

Amendments agreed to.

A party vote was called for on the question, That Part 3 as amended be agreed to.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 57

New Zealand National 56; ACT New Zealand 1.

Part 3 as amended agreed to.

Part 4 Amendments to other enactments

JO LUXTON (Labour): Thank you, Madam Chair. It’s a pleasure to take a call on this, the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill. I also join in the trepidation of the previous speaker, Greg O’Connor, about speaking on this bill. I have to say that taxation is not something I’m hugely familiar with or that is a definite strength of mine. I want to thank the Finance and Expenditure Committee for the work on this bill. I can imagine that it would have been fairly time-consuming, but I think that the bill is fit for purpose.

The purpose of this bill is to simplify and improve taxpayers’ experience of tax administration in New Zealand, and, let’s face it, anything that simplifies and improves individuals’ or businesses’ taxation situations has got to be a good thing, right? I know for myself as a business owner that I’d welcome any legislation that makes life easier and, in particular, the part that has just been passed, Part 3, will definitely have some benefits.

Part 4 covers amendments to other enactments and is a big chunk of the remedial matters mentioned in the bill’s title. Part 4 includes necessary updates by amending the KiwiSaver Act 2006, the Student Loan Scheme Act 2011, the Goods and Services Tax Act 1985, the Child Support Act 1991, the Accident Compensation Act 2001, and the Income Tax Act 2004. The amendments found in Part 4 of this bill are important to ensure maintenance of our broad based - low rate tax system, and this is part of the reason that the bill was reinstated by Minister Nash.

I’d like to speak about clauses 308 and 310 of this bill, that amend the Goods and Services Tax Act 1985. It is widely noted that the best feature of our GST system in New Zealand is its simplicity. It catches virtually all goods and services in New Zealand, ensuring that the tax system doesn’t introduce distortions caused by unequal taxation. It is important that this House continues ensuring that we have a taxation system that doesn’t increase compliance costs, and this is what clauses 308 and 310 do.

Currently, associated rebates paid by suppliers to Pharmac under an agreement for listing on the pharmaceutical schedule have a different GST treatment depending on whether the pharmaceuticals are purchased in the community setting or in the hospital setting. Pharmac buys drugs and then onsells them to pharmacies and district health boards, and sometimes suppliers give Pharmac big discounts due to the volume of drugs that Pharmac is buying and Pharmac passes these discounts on by way of rebates. There are GST consequences for this, but it differs between rebates paid to hospitals and rebates paid to pharmacies. But the basis transaction is the same; it’s just that they get defined by the Goods and Services Tax Act that makes a difference. So the result is that Pharmac and the drug suppliers face a lot of uncertainty in working out whether or not GST applies to a particular set of rebates, and they spend a lot of time and effort sorting it out. So it is a big issue with compliance costs, and we always want to reduce compliance costs where possible, especially if there are no actual tax consequences.

Compliance costs make it easier and less expensive for people to comply with the law in general and, in this case, with tax law. It’s always an issue with tax law, given its complexity. What we need is we need for Pharmac to be spending its money and hours of labour on ensuring that New Zealanders get the medical access to the pharmaceuticals that they need, not wasting time on tax compliance and having to differentiate between community and hospital rebates. It’s about creating a fair and equal system with regard to paying GST.

Dr DEBORAH RUSSELL (Labour—New Lynn): I’m just sort of intrigued by some of what my colleague Jo Luxton has been saying about compliance costs and convenience to taxpayers. I think one of the difficult things about tax law—and we see it in this bill—is that it is extraordinarily complex, and that changes in one part of the Income Tax Act, or whatever, will presage changes in other Acts as well. This particular one that my colleague Jo has picked up on has been the amendments to the Goods and Services Tax Act, and it is to do with the way that rebates are paid to Pharmac. Now it’s a little bit hard to get your head around this, but there are some GST consequences when rebates are paid. What it can do in some circumstances is it can, in effect, change the price of the original negotiated contract, so it has a backwards effect on the original contract, and that means you need to do some thinking around how the rebate is actually paid and how much the contract is going to be valued at.

But even more complicated than that is that because of the nature of district health boards (DHBs) as opposed to the nature of community suppliers of pharmaceuticals—so that’s your average family chemist—the rebates could be different. The GST consequences of those rebates could be different, depending on whether Pharmac was paying that rebate through to the DHB or paying it through to the community pharmacist. That’s problematic for this reason. Now often Pharmac actually calculates those rebates—it’s because it manages to negotiate a discount with the supplier—and that, of course, can be a commercial and confidence matter. So there’s a really extraordinary flow-on of effects from what was going on with the GST Act and the payment of these rebates, right back through to the suppliers of drugs and a whole set of stuff that sort of interacted together and created some real difficulties for DHBs. Now it happened to be something that really had no fiscal effects. It didn’t actually change the amount of tax revenue collected. It didn’t really change anything significant there. But what it did do, and it does do, is it creates quite significant compliance costs, in particular for Pharmac. It gives rise to a whole set of uncertainty and compliance costs for Pharmac.

Now going back to my friend, I should say—the person I admire greatly when it comes to tax, Adam Smith—one of the things that he says about a good tax is that a good tax must be certain. That is, the person who is paying the tax must be able to calculate it, must know how much it is—there must be a whole lot of certainty around tax law. There’s good reason for that. It is so that people can actually calculate their tax obligations, so that people can understand the consequences of any transactions they enter into. So we do aim for certainty in tax law. Now because of this sort of confusion over what was going on with pharmaceuticals and with the rebates paid by Pharmac, the amount of certainty was decreased. There was a whole lot of uncertainty in the Goods and Services Tax Act, and this particular amendment sets out to change that. It’s going to apply to rebates paid by Pharmac on or after 1 July 2018, so provided that this bill goes through in time, we’ll get that particular little wrinkle sorted out.

Now, interestingly, the Finance and Expenditure Committee had no changes to make to the recommendations made by the officials as to how we should structure the law. Our colleagues on the other side of the Chamber haven’t made any particular objection as yet—though I see Mr Bayly scribbling—as to the way this particular law is structured. What it is is one of those simple measures that we actually all want to work on together, to make sure that we get the law right. In fact, if we look through Part 4 of the bill, that is largely what Part 4 is about. It’s about clarifying and tidying up the law. It’s about making it more certain, and, of course, as soon as you make the law more certain, you also make it easier for people to comply with. You reduce their compliance costs.

So that is why I support this particular amendment that both Jo Luxton and I have talked about, but it’s also why I support the intent of Part 4 of the bill, which really is to tidy stuff up to make it more convenient and more certain for taxpayers, and to make our tax law the best law we can possibly have within the constraints of the sheer complexity of it all. Madam Chair, I recommend this part to the committee.

ANDREW BAYLY (National—Hunua): Thank you, Madam Chair. Life is sometimes delightful, and it’s particularly pertinent that the good Minister for Climate Change is sitting in the chair at the moment, because one of the important aspects that the Finance and Expenditure Committee turned its mind to was, of course, the tax treatment for petroleum mining companies. The bill sets out how we might make it more advantageous so that offshore mining companies—and, of course, New Zealand companies—want to take advantage of our geological conditions in New Zealand to mine for these resources, and what the bill promotes is to improve the tax situation for these particular companies. Of course, I find that intriguing today, given that the Minister for Climate Change was asked twice, no less—twice—as to whether, in fact, he thought we should be continuing to explore for gas as a transitional fuel, and of course we couldn’t get a straight answer on it. Of course, we’ve had the Prime Minister also confusing the situation, saying, “Of course we’re not going to allow any future mining of this petroleum resource.” So I thought it was very appropriate to talk about this.

So, as you may know, Madam Chair—and I’m sure you do, because you’re very knowledgable on these things—the current tax treatment for petroleum companies is based on a spread-back process, which allows prior income tax periods to be reopened to include losses arising through expenses such as decommissioning or other such expenses. So what the bill does do—and it applies from 2018-19 and later income years—is that it confirms that use of money won’t be applied when companies go back to a prior period of losses or profits and use the more current costs as a way to offset either some of those losses or some of those profits.

Of course, the main impact of the bill is to replace the existing spread-back process for petroleum mining companies, and under these new rules, a petroleum miner will be eligible for a refund for any development expenditure that has not been deducted at the time commercial production ceases or a decommissioning cost. But these clauses not only relate to that but they also relate to the relinquishment of a permit, decommissioning, ceasing commercial production, restarting commercial production, and farm-out arrangements, which, of course, are very common in the petroleum sector.

So I just find it slightly intriguing that here we are. As a committee, we’ve been beavering away, doing these things, and working out a more effective way to promote the petroleum industry in New Zealand because, of course, it’s one of our major export earners. Here we have had, in the last couple of days, the Government on another hand saying, “Oh, we don’t want to do that. We shouldn’t be doing any new such development.”, and yet we’ve got a bill before the House which is actually contrary to that. So I think—now that the Minister of Revenue has reassumed the chair, and I’m looking forward to his response—why should these improvements that are designed to assist with the exploration of oil and gas in New Zealand actually be in the bill? I’d love to hear the response, given we’ve got contrary views across all the three partners of the coalition Government. Hopefully, we’re going to get some clarity at some stage, because I am really looking forward to it.

CHAIRPERSON (Hon Anne Tolley): Well, the member may well be, but, unfortunately, he missed his opportunity, because that’s Part 3. Those clauses are in Part 3. I’m having a look at clause 265—

ANDREW BAYLY (National—Hunua): I raise a point of order, Madam Chairperson. The clauses actually refer—I do take it from actually 17 bar 21, 33, 38—it goes right through to 172(3), as you’ve said, but also 265 and 266.

CHAIRPERSON (Hon Anne Tolley): Yes, I agree. But we’re on Part 4, which is clauses 285 to 320—OK.

Andrew Bayly: Yeah—there must be another one.

CHAIRPERSON (Hon Anne Tolley): Ha, ha! But it was a very entertaining speech.

PAUL EAGLE (Labour—Rongotai): Thank you, Madam Chair. Well, what was that? Look, I did ask for his colleague Simeon Brown to educate the member from Hunua about what part we were on. So thank you for wasting 4½ minutes on Part 3 when we’re actually on Part 4. But it is complex, so he’s forgiven. He’s forgiven because it’s a complex bill, and I’m thankful that I’m only concentrating on Part 4.

In fact, I will remind the member what Part 4 has in it.

Andrew Bayly: Oh, looking forward to this clarification!

PAUL EAGLE: No, no, I will. I will. Don’t try and stop me. If we go to the bill’s list of contents, there’s actually 10 Acts, and let’s have a look at these closely: the KiwiSaver Act 2006, the Student Loan Scheme Act 2011, the Goods and Services Tax Act 1985, the Child Support Act 1991, the Accident Compensation Act 2001, the Income Tax Act 2004, the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Act 2017, the Health and Safety at Work Act 2015, and the Compensation for Live Organ Donors Act 2016. Nothing about petroleum decommissioning—nothing, nothing, nothing, nothing, nothing.

So let’s go through Part 4 and have a closer look, and I want to just reiterate and support some of the comments that have been made by my colleagues when they talk about this being, really, a clean-up, a tidy-up. We heard that from the Minister, who talked about some of these Acts being in place for a long time, and for this particular part, there are many Acts which, after being in there for so long, could do with a bit of a clean-up. They’re small, but they make a big difference to Kiwis and everyday New Zealanders.

I want to just focus on the KiwiSaver Act of 2006, because when that was introduced nearly a decade ago, we were told that that was about retirement savings made easy. So let’s get some legislation and let’s change the bits, after a good decade of being in use, to make retirement savings easier for Kiwis and to make sure that the little things in there, the practical things—so, when you get an application form or you want to opt out or you want to give information across from employees to employers, you can do that easily. The legislation here and what’s been proposed will enable employers to do that. It also ensures that employees are treated with good customer care and are able to opt out, change things, and talk to the Inland Revenue Department about those changes, and it can be done really easily.

If we have a look at the Act too, we know—I want to just point out a few things. We know that the changes in many cases have been difficult, and I know that when we look through the parts of this particular part, it will make things far more simpler. I also want to point out in clauses 285 to 301 just some of those simple things, and it’s as simple as a word such as “notify”. When you’re having to notify someone, that act is far more different than what’s in the law at the moment. I also want to look at some of the other changes around—

Matt Doocey: 40 seconds.

PAUL EAGLE: —40 seconds—section 97, where the commissioner must give notice if employer contributions are not remitted, and you’ll see a change there.

These are simple changes that reflect the current environment. I’m really supportive—as are my colleagues, as is this party—that we bring a suite of changes to these 10 Acts in this part that ensure that everyday lives are made much more easy under this Government.

A party vote was called for on the question, That Part 4 be agreed to.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 57

New Zealand National 56; ACT New Zealand 1.

Part 4 agreed to.

Schedule 1 agreed to.

Schedule 1B agreed to.

Schedule 2

The question was put that the amendment set out on Supplementary Order Paper 16 in the name of the Hon Stuart Nash to schedule 2 be agreed to.

Amendment agreed to.

Schedule 2 as amended agreed to.

Clauses 1 and 2

A party vote was called for on the question, That clause 1 be agreed to.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 57

New Zealand National 56; ACT New Zealand 1.

Clause 1 agreed to.

The question was put that the amendment set out on Supplementary Order Paper 16 in the name of the Hon Stuart Nash, and the following amendment in his name, to clause 2 be agreed to:

in subclause (7), replace “(2) to (4)” with “(3) and (4)”.

Amendments agreed to.

A party vote was called for on the question, That clause 2 as amended be agreed to.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 57

New Zealand National 56; ACT New Zealand 1.

Clause 2 as amended agreed to.

House resumed.

Bill reported with amendment.

Report adopted.

Bills

Health (National Cervical Screening Programme) Amendment Bill

First Reading

Debate resumed from 1 March.

DEPUTY SPEAKER: So when we were last considering this bill Harete Hipango was speaking, and she has eight minutes remaining to speak if she wishes so. I take it she doesn’t. So I call—Angie Warren-Clark, my apologies.

ANGIE WARREN-CLARK (Labour): That’s quite fine, Madam Deputy Speaker. Tēnā koe. Ngā mihi nui ki a koutou. Tēnei te mihi o Te Paremata.

[Thank you. Good evening to you all. This is a greeting from Parliament.]

I rise this evening to take the final call on the Health (National Cervical Screening Programme) Amendment Bill. This bill was brought to the House two weeks ago for its first reading, so I do intend to summarise the bill and our discussion of some of the salient points made across the House.

Firstly, I’d like to congratulate the Hon Julie Anne Genter on this excellent bill. Ko tēnei tū he tautoko, e taku tuahine—I stand in support of you, tuahine. I would also like to thank the members of this House who have provided thoughtful comments to this first reading.

I note that across the House we have agreement that this bill is commended, and it will move into the next stage at the Health Committee.

I would like to make special mention of the member Dr Shane Reti, who explained very clearly to the House two weeks ago about the role of the smear-taker and why it is so very important that they have the cervical health history of the woman before they commence taking a smear. This, if I understood the member correctly, is because this may change the way the smear is taken and may also explain what the smear-taker, the lab, or the specialist may find. I won’t go into where they may find that. Many members of this House got a little bit squeamish with Dr Shane Reti’s detailed explanation and mention of such things as brushes, spatulas, and how to perform a smear. Well, I must say that that detail provided a great context as to why it is so necessary to have efficiency of data at the point of smear-taking. Direct lookup access by certain health professionals is going to improve this system immensely.

Currently, the system works this way. The national cervical screening register is administered by authorised persons and when a woman is called in for a smear, the register administrator then searches the register, identifies the information, prints the information, and manually faxes the medical history to the smear-taker’s office. This process is manual and pages, sometimes up to 20 pages, arrive by fax. They come by fax because the medical profession recognises that emails are not necessarily secure. I do have to say that being in some of the medical offices I’ve been in that it’s also a little bit unsafe, as well, to have sheaths and sheaths of paper coming through. So I would just like to say the fax method, although it is preferred, is something that I personally feel is a little bit outdated and worrisome.

But then someone has to get the fax off the machine, pop it manually into the notes, and then the smear-taker has to read these notes. It’s slow, it’s cumbersome, and the process requires these records touching various people. Surely this can be done better. So this bill ensures a modern approach to give direct lookup access.

Now that we’ve dealt with the subject of smear-taking, why it’s important to have immediate access to that data, and how cumbersome that process is, I’ll move to the technical aspects of the bill as a wee refresher—just what you need this time of the night. The bill amends Part 4A of the Health Act 1956 to enable health professionals along the cervical screening pathway—who knew there was a pathway?—meaning the smear-takers, the laboratory staff, the colposcopy staff, and the screening support staff, to directly access info from the national cervical screening register.

Currently, this information is noted and is gathered by fax, with primary smear-takers waiting for clinical information, and laboratory and colposcopy staff can only gain access if authorised by the Director-General of Health. Therefore, these amendments would enable direct lookup access to the national cervical screening register—in other words, checking the register would be as simple as looking up a database, and it would be done by the person who’s going to be taking the smear. A small point to note, however, is that the register is not yet platform ready, which means that the future design of this database must occur. So this bill is the first step to modernising the system.

I’ll quickly traverse the legislative amendments. This is a little bit complex, so I will read some of this. Clause 4 of the bill adds a new subparagraph to section 112A(b). The purpose is to facilitate the operation and evaluation of the National Cervical Screening Programme by “enabling access … by specified classes of persons for the purpose of … screening, assessment, and treatment services and by researchers.” Clause 6 replaces section 112J of the principal Act with two new sections providing separately for access to use, retention, and disclosure of this information. The sections list who can access information and for what purpose.

Finally, clause 8, which I like to call the stickybeak clause, outlines the offences or consequences if failing to comply with the requirements—i.e., if you amend the register without permission or authority, and you look up someone’s medical notes or history without good cause or proper reason. So that’s it, in a nutshell. It’s quite simple and it just provides for the data to be accessed in a quick and simple method.

Many of us here in the Chamber, and no doubt those at home watching, will recall the Metro article by Sandra Coney and Phillida Bunkle, back in the late 1980s, which eventually moved the Labour Government to instigate what was known as the Cartwright inquiry, led by Dame Silvia Cartwright. Out of this inquiry came many positive changes to the health system for patients. The National Cervical Screening Programme was created as a recommendation of this inquiry and rolled out in 1990.

I still remember myself enrolling, and over the last 28 years I have been reminded to have my smear regularly, and indeed re-reminded when my smear is overdue. In today’s busy world, this has been a brilliant wellness tool to support us women to stay well and to get early warning signs of issues. Ultimately, it reduces deaths by cervical cancer. However, I do have to say that there are some groups within our country that are less likely to access cervical screening and they are our Māori women and our Pacific women. I’d just like to encourage everyone here and also across the land to go and have your smear. There is a poem that came from America, so it’s a little bit different to what we do here. It says, “On your birthday every year, go on down and have a smear.” Now, our smears are generally once every three years. However, you get the picture. Go do it. It’s for your safety.

So, finally, the smear-takers and the people involved with keeping our data safe and secure actually do save our lives. Therefore, I’d like to thank those smear-takers and those involved in the process of supporting our health. You do a great job. It’s time to modernise the system, to help you do your job more efficiently. I therefore take great pleasure in commending this bill to the House.

Bill read a first time.

Bill referred to the Health Committee.

Bills

Education (Tertiary Education and Other Matters) Amendment Bill

Third Reading

Hon JENNY SALESA (Associate Minister of Education) on behalf of the Minister of Education: I move, That the Education (Tertiary Education and Other Matters) Amendment Bill be now read a third time.

I thank the members of the select committee, who have done a lot of work on this bill. I would also like to thank the over 2,000 individuals and organisations who made submissions during the select committee process. Their suggestions have helped to improve this bill. I would also like to acknowledge and thank the Minister of Education, the Hon Chris Hipkins, in advancing this bill.

I want to focus my comments tonight on three key themes of this bill: first, I want to talk about increasing provider accountability and strengthening monitoring and compliance; second, I’d like to discuss supporting fair treatment of tertiary education providers; and, third, I’d like to talk about broadening student protection arrangements, as proposed by this legislation.

I now turn to the first—increasing provider accountability and strengthening monitoring and compliance. This legislation balances a more flexible system with appropriate accountability and monitoring, to ensure that our providers can focus on delivering better outcomes for all of our students.

Firstly, the Tertiary Education Commission, TEC, will be able to recover costs for an investigation when a provider is found to be at fault. We know—we have read in the news, in the media—of many instances where this has been the case here in Aotearoa New Zealand. This legislation we’re introducing will actually address that issue. This provides a strong incentive, we believe, for our providers to cooperate with our investigations and to ensure that the investigations conclude quickly.

Secondly, this bill will allow the Tertiary Education Commission and the Minister of Education to make funding approval subject to conditions that they consider reasonably necessary for effectively monitoring the performance of the system and the tertiary education sector overall. This can be useful to quickly address any unforeseen issues and it should help prevent potential misuse of public funding.

Thirdly, this bill aligns record-keeping and inspection requirements for tertiary education institutions with those of private training establishments. All tertiary education organisations will therefore be required to maintain records of their use of Government funding and how they are complying with funding conditions. This will ensure that the Tertiary Education Commission is able to access important information when required.

This bill will introduce a new offence provision for making false representations on a student’s record of achievement and it will significantly strengthen the offence provisions by increasing the penalty for such offences concerning falsification of student records from $10,000, as it is, up to $50,000. These changes will provide a strong incentive, we believe, for providers to act honestly and with due diligence in their maintenance of student records. And, again, we have read many media coverages of instances where this has been the case, where, unfortunately, some of our providers have falsified some records, and it does not help Aotearoa New Zealand’s international standing when this happens.

And what we know is, whether it is private training establishments, whether it is a polytechnic or any other institution, when this actually happens it actually, unfortunately, smears the reputation of our tertiary education institutions internationally, and it is not in any of our interests that this kind of behaviour continues in the future. So we believe that, overall, these changes will increase provider accountability, that it will strengthen the system, and that monitoring and compliance of tertiary education providers across the system will be so much more improved.

The second theme I would like to discuss is the fair treatment of tertiary education providers. This Government is committed to supporting a better and fairer tertiary sector. That is why we have listened to the submissions of over 2,000 individuals and organisations when they presented to the select committee, when they have told us that they would like fair treatment, especially in terms of funding.

We are introducing a new term. Currently, we have what’s called the private training establishment—PTE. This legislation will introduce a new term called community tertiary education provider—CTEP. The current term “private training establishment”, or PTE, does not distinguish between for-profit and not-for-profit education providers, nor does it accurately reflect their intentions. In our opinion, this is not fair. When you cannot tell whether a provider is a not-for-profit or whether it is for profit, it is not fair, and so we will be addressing this.

This bill will also allow wānanga to seek consent to use of a protected term—terms such as “university” or “polytechnic”, which are currently protected in legislation. Currently, only wānanga are disadvantaged because they are not having their own title protected in law, and we don’t think this is fair to wānanga, that they face difficulties in finding an appropriate English translation of their own institutional title or the fact that they cannot put in an application to use a protected term. We believe that allowing wānanga to use protected terms such as “university” or “polytechnic” will be treating our wānanga fair.

There will, however, be a tough test for applicants to use protected terms. The Minister of Education will have to be satisfied that consenting to the use of protected terms such as “polytechnic” or “university” must be adhered to, and for this to happen, the Minister will also have to consult with experts in Māori education, who have the knowledge. We are confident that in consulting with experts who have the knowledge of who should be able to use the protected term of “polytechnic” or “university” with the advice of specialists in Māori tertiary education, the term will indeed still be protected. So I’m comfortable with the use of the term, and the fact that wānanga will now be able to apply to use these two protected terms.

The third and final theme that I would like to discuss tonight is broadening student protection arrangements. To fulfil the pastoral care responsibilities to international students, schools need to be able to respond to situations, especially those where an international student’s behaviour puts themselves or puts other people at risk. This bill clarifies that international student enrolment is governed by the enrolment contract.

What this means is that we will ensure that the contract relating to international students under the age of 18—that the Contract and Commercial Law Act of 2017 as well as the Education (Pastoral Care of International Students) Code of Practice will apply to those who are under the age of 18. The change that we’re proposing will allow schools to move effectively to manage international students’ misconduct by taking appropriate disciplinary action if students breach their enrolment contracts. This bill will extend the coverage of the export education levy to international students enrolled in private schools. This will protect those students in the same way as PTE students are currently protected. The bill also aligns entitlement for domestic students enrolled in a short programme at a PTE. In conclusion, I would like now to commend the Education (Tertiary Education and Other Matters) Amendment Bill to the House. Thank you.

Hon LOUISE UPSTON (National—Taupō): Thank you, Madam Assistant Speaker. National will, of course, be supporting this piece of legislation in the third reading. It was introduced in our time in office and does a few simple things that I want to just cover off in my brief address. I just do want to pick up on one point, though, and I want the House to reflect on that as we go through some of this discussion. The Minister, in her speech, outlined that the broad intent of this is about fair treatment, and of course there is one considerable area where there is absolutely no fair treatment in a change that the Labour Government have made to this legislation.

But in terms of the broad perspective of the legislation, it was around making sure that tertiary education organisations (TEOs) were delivering for students, first and foremost. So it was making sure that they were in a strong enough position to be delivering the skills that we need for the 21st century. It’s also about making sure that they are run well, day to day; have greater levels of accountability; and are delivering for each and every student. That’s the expectation that taxpayers would have—that there are strong accountability measures, but sufficient flexibility for the TEOs to deliver what students need, and, actually, what our workplaces need in our employers of the future. So there were already significant improvements in terms of the monitoring of tertiary organisations that resulted in some of the investigations that took place, and so the proposal in this bill also improves some of the information collection and oversight.

But when it comes to fair treatment—I do want to come back to that point, because there is one significant change that the Labour Government have made to this legislation that absolutely is unfair, and that is around the fairness of funding. The intention was that there be fair funding, equal funding, irrespective of whether it’s a for-profit or not-for-profit provider. The Minister of Education, Chris Hipkins, has actually been on the record stating that private training establishments often do better than the Government-owned, public sector polytechnics. And yet even having said this, even having said that the quality of delivery in the private training establishments is often better than the polytechs, he’s said no, they’re unwilling to fund them equally.

There is no reason for doing this, other than pure ideology, so I do want to correct the Minister who made the first speech in this third reading, because this is one component where there is absolutely not fair treatment. It is pure ideology. I think it’s probably more spite from the Labour Government, because they don’t like anything that actually might turn a profit, and so it was an ideological removal of that. When we put forward a Supplementary Order Paper in the name of the Hon Paul Goldsmith to correct this—to make it fair—of course they opposed it.

So the broad objectives of this bill—it was our legislation, so of course I’m very proud to support it in the third reading.

Hon KELVIN DAVIS (Associate Minister of Education (Māori Education)): Tēnā rā koe e Te Māngai o Te Whare. Tuatahi, māku e hiahia ana ki te mihi atu ki ōku hoa minita, arā ko Te Hon Chris Hipkins, rāua ko Te Minita mō Ngā Take Mātauranga, me Te Hon Jenny Salesa, Te Minita Tuarua; nā rāua i kōkirihia tēnei pire ki roto i Te Whare. Kua hanga mīharo ana ahau. Kua hanga mīharo ahau kia rongo ai neke atu i te 2,000 ngā kaitono i tukuna mai ō rātou whakaaro mō tēnei pire. He mea pai tērā i te mea he tini ngā tāngata e tukuna ana ō rātou whakaaro hei whakapakari ake, whakapakari ai i tēnei pire.

[Greetings to the Speaker. Firstly, I would like to greet my ministerial colleagues, the Hon Chris Hipkins, the Minister for Education, and the Hon Jenny Salesa, the Associate Minister; they have led this bill in the House. I am amazed. I am amazed to hear that nearly 2,000 submitters submitted their thoughts on this bill. That is great because many people are submitting their thoughts to strengthen, to strengthen this bill.]

First of all, I’d just like to acknowledge the work done by the Hon Chris Hipkins, the Minister of Education, and the Hon Jenny Salesa for bringing this bill through the House and getting it here to its third reading stage. I was pleasantly surprised to hear the number of submissions—over 2,000 submitters—who added their thoughts and gave their opinions to strengthen this bill. We, of course, welcome people when they contribute to democracy. So I welcome the amendments proposed in the bill, as they will support better educational outcomes for our tauira—that is, our students—and, overall, fairer treatment in the tertiary system.

As my colleague the Hon Jenny Salesa has expressed, the bill aims to improve accountability, strengthen monitoring of tertiary providers, strengthen equitable treatment of tertiary education providers, and broaden the student protection arrangements. So this Government wants to remove unnecessary elements and barriers and ensure that we have an education system that delivers for all students.

The changes proposed in this bill are a reflection of this Government’s priority for greater accountability in the education system and more equitable opportunities for all parts of the education system. It’s also a reflection of this Government’s priority to listen to Māori about what Māori aspirations are for education and how we can help them to reach those aspirations. As we know, there is a gap between Māori achievement and non-Māori achievement. Our Government sincerely tries—and I’m sure the Opposition, when they were in Government, sincerely tried—to make sure that Māori achievement is as good as, if not better than, any other achievement of any other sectors of society. This Government is about supporting Māori to succeed as Māori.

I particularly want to draw attention to the current treatment of our wānanga. So, for those who don’t know, there are three wānanga: Te Wānanga o Aotearoa, Te Wānanga o Raukawa, and Te Wānanga o Awanuiārangi. I just want to he tuku atu ōku mihi ki a rātou mō ngā mahi e mahi ana rātou hei whakapakaria, he whakahāpaitia i te mātauranga o ō tātou tauira Māori, nā reira e tika ana kia mihi atu ki a rātou mō ā rātou mahi, e whakapau ana ō rātou kaha kia tukuna ai Ngāi Māori mā kia angitū ai ki roto i tēnei ao hei Māori [express my acknowledgments to them for the work they carry out to strengthen, to promote the education of our Māori students, therefore it is right that I acknowledge them for their work, the energy they expend so that Māori can be successful in this world as Māori].

So it’s important to acknowledge the work that those wānanga do: striving to allow our students to achieve academically, but as Māori. I’d just like to acknowledge the work they do.

At the moment, private training establishments are able to apply to use protected terms such as “university” or “polytechnic”, but wānanga cannot. This isn’t a level playing field. It’s particularly unfair, given that there is nothing stopping universities from using the word “wānanga” in their name—so Te Whare Wānanga o Tāmaki Makaurau, the University of Auckland—but a wānanga couldn’t use the word “university”. So there wasn’t a level playing field, and it’s unfair, given there’s nothing stopping universities or polytechs using the term “wānanga” in their Māori names.

A key shift in this bill is to allow wānanga to apply to use protected terms. This shift will provide wānanga with an avenue to pursue their aspirations and to be recognised as high-quality education institutions. Any tertiary education provider wanting to use protected terms already requires ministerial approval—a process that includes consultation with institutions and organisations deemed appropriate by the Minister. But for wānanga, this bill also requires consultation with experts in Māori education who are knowledgable in āhuatanga Māori—that is, in Māori tradition—according to tikanga Māori, which is Māori custom within a kaupapa Māori pedagogy. This will give the Minister a fuller understanding of the wānanga in a Māori tertiary education context and it adds balance to the consultation process.

This kind of consultation reflects the Government’s wider focus on genuine and meaningful engagement with Māori, and this is also the reason we have created the Crown-Māori relations portfolio. I’m pleased and proud to say that both as Associate Minister of Education and as the Minister for Crown/Māori Relations, I’ve been able to engage with wānanga around their aspirations.

In fact, there’s one wānanga that has had an issue that’s been floating around for many years, in fact, and they were getting nowhere, to the point that they decided to take their issue to the Waitangi Tribunal. Myself and Minister Hipkins visited this wānanga and, in one meeting, engaging with them personably and face to face, we were able to, basically, say, “Do we think we can sort out this issue within a matter of months? It’s been going for a number of years. We think we can sort this out in a matter of months.” Just by engaging with the wānanaga in both an educational sense but also in the Crown-Māori sense, we were able to get what we believe is going to be a fine outcome for that wānanga.

Just on that, I said to them, “I can engage with you as a Minister of the Crown and you as Māori, or we can engage whanaunga to whanaunga.” I think they appreciated that change of approach, and I think it’s going to reap rewards.

So we want to reset the relationship between the Crown and Māori, which has been less than ideal for the last 178 years. Like our broader work with Māori, the changes in the bill recognise the importance of Māori having more say in education that impacts Māori.

One possible reason why a wānanga might want to describe itself using a protected term is to help explain the institution to international partners and potential students, and, in fact, for the wānanga that we engaged with, that was indeed one of their aims. They wanted to be recognised as providing courses—internationally recognisable, acceptable courses—and to be able to attract people from overseas, because they are providing those high-quality courses. The term “wānanga” is not well-known or understood outside of New Zealand. For them, being able to use the term “university” will help them.

So, as I said, I recently met with one of the wānanga, and they expressed that with this change they hope to open their doors to the world and market themselves as a world-leading indigenous university. That’s how they want to be known, and we believe—well, we don’t believe; we support that aspiration. The Ministry of Education hasn’t received any evidence of reputational harm to universities or even to wānanga about this change.

Although we’ve got a long way to go to address inequities in our education system, we should be proud of the indigenous education system we have, and that goes from kōhanga reo right through to kura kaupapa, to wharekura and to our wānanga. Many indigenous communities from around the world look to Aotearoa as models of what can be done to grow and nurture indigenous language and knowledge systems. Growing Māori-medium education sector from kōhanga through to wānanga is a key priority for this Government. The change through this bill is one of the steps that we intend to take to improve and better support our wānanga, and it is part of a wider goal to grow mātauranga Māori and support Māori succeeding as Māori.

So, more generally, the bill is about increasing accountability in the tertiary sector. The bill supports better outcomes for students in the tertiary system by providing better tools to identify and manage questionable practices in tertiary education providers imposing higher consequences where contract breaches or legal activities are confirmed, and by broadening protection arrangements for students starting—

ASSISTANT SPEAKER (Poto Williams): I apologise to the honourable Minister. His time has elapsed. Thank you.

SARAH DOWIE (National—Invercargill): Thank you, Madam Assistant Speaker. Well, I rise to take a very short call in support of this Education (Tertiary Education and Other Matters) Amendment Bill, and in support because, of course, this is a National Government bill. It was interesting that the previous speaker, Kelvin Davis, paid praise to the current Minister and Associate Minister of Education for shepherding this bill through the House, but, of course, this was an Hon Paul Goldsmith bill from the National Government.

It reflects the respect that this side of the House has for tertiary education, and, in particular, international education, not just because the sector is the fourth largest export industry, generating $4.28 billion per annum, but also because of the role that tertiary and international education play in regional development, in diversifying communities, and in adding to the vibrancy of provincial cities—and that’s certainly the case in Invercargill in Southland.

So what the Hon Paul Goldsmith wanted to do was to modernise the framework governing our tertiary institutions and private training establishments. He wanted to make the framework fit for purpose for the 21st century, to allow institutions to innovate and to provide a better system for students to learn in and to gain qualifications that are fit for purpose in today’s modern world. So what this bill does is, of course, create an accountability framework for tertiary organisations that ensures consistency across the board; obviously, monitor performance of those tertiary institutions; introduce a code of conduct for international students that are coming to the country to study; and put in place standards that they must adhere to while they are here in New Zealand—as I said before, evolving the system to make it better, not only for New Zealanders but also for those international students.

This is a good bill. Of course, my colleague, the Hon Louise Upston, talked about one of the changes that the current Labour Government have made with respect to creating an uneven playing field between private providers and public providers relating to the fees structure. That is unacceptable on this side of the House, and has resulted in the Hon Paul Goldsmith’s Supplementary Order Paper (SOP) 17 to challenge this. Apart from that change, that the Labour Government have made regardless of Paul Goldsmith’s SOP, we do support this bill, because it was a National Government initiative, and we do need to make tertiary education and the framework of such fit for purpose in the 21st century.

This is my last contribution as the chair of the Education and Workforce Committee. I’d like to finish by thanking the current members and saying that it is a very good committee, and I wish them all the best moving forward with the work stream that they do have, in the workforce section but also in the education sector.

MARK PATTERSON (NZ First): It’s a great pleasure for me to rise in support of the Education (Tertiary Education and Other Matters) Amendment Bill. I would also like to commend Minister Hipkins on tidying this bill up and bringing it forward. I also would like to acknowledge the Hon Tracey Martin, who I am speaking on behalf of this evening. She has done most of the heavy lifting on behalf of New Zealand First for this bill, and what a fine Minister she is proving to be in a number of fields. These are big boots to fill tonight, but I will be doing my best. I’d like to also acknowledge the officials. I have come on to this Education and Workforce Committee and seen the wash-up of the bill, as we tidied it up from those 2,000 submissions that we heard about—both private and institutional submissions. I would also like to acknowledge Sarah Dowie, the outgoing chairwoman of the Education and Workforce Committee. As a new committee, coming in with lots of new members on our side, she’s been very fair and helped shepherd some of this stuff through, and we wish you well in your new spokespersonship, Sarah.

I know that this is a National Government bill, as the previous speaker, Sarah Dowie, has alluded to, although the priority that she discussed probably is overstating a bit given that it took nine long years for them to lumber into action on this, and given this has been such fast-growing sector, with lots of publicity around issues, I think it was probably a bill that is long overdue. The aim of the bill is to update the legislation and the running of tertiary education and the organisations. It’s a wide-ranging bill. It clarifies many important issues, and it adds accountability.

I’d like to focus a little bit on the international student side of things. Of all our tertiary students, 15 percent are now international students—some 50,000 of them in 2016, and rising. The $4.3 billion in revenue that has been mentioned makes it our fourth-largest export earner, and by gee do we need those funds. As we go around the country trying to rebuild under-invested infrastructure, housing, and regional development, we need this money. The danger, I guess, with this sector is that it can be a commodity, and we don’t want to become the international education equivalent of what Nigeria is to banking. I think that from my agricultural background I can see, actually, that there are a lot of parallels in this. We need to be aiming at that high end. We need to be adding value, not just going for numbers. We need to have really high-quality courses, attracting the best and brightest pupils and students, and this legislation gives us a strong regulatory base on which to build and continue to evolve and develop this very important sector.

It is also important for our international reputation and the pride that we take in being good international citizens. Those 50,000 young people coming here represent sons and daughters of people who have entrusted us with the care of their children. They’re sending them here with great hope and expectations for their future, and it’s important that we have the legislation in place, and the accountability and the structures, to make sure that that is exactly what we deliver.

Just in terms of the penalties, I think that’s a pretty important provision, because the integrity of those qualifications that these international students are investing huge amounts in coming here to get needs to be beyond reproach. They need to be qualifications that they can take into the international market, or, indeed, for those that choose to stay here, they need to be of value, and the raising of the penalties from $10,000 to $50,000 sends just that signal to the institutions.

This bill gives these provisions teeth. It also responds to a High Court ruling. There was a high school that had its right to respond to some poor behaviour by a pupil or pupils outside of school—it had its code of conduct that was written into the contract that it had with those particular pupils overturned by the courts, so we have to address that. The ruling found that schools could not stand down, suspend, or exclude international students for misconduct outside school, even though it was part of the contract, so the law actually overrode that. That has massive consequences for the safety and well-being of international students. We are, as it stands, effectively, unable to manage risky or potentially harmful behaviour, and imposing higher penalties on the perpetrators, as mentioned, also will be helpful in this regard.

Just some of the other provisions: the discretion that it gives the Minister to let the wānanga apply for university or, you know, the protected terms—the polytechnic. New Zealand First did have a few concerns about this. We wanted to know that the bar was going to be high for that. I think, given that we want to strive for quality, our universities, for example, need to be of the highest level. We don’t want to be watering down or diluting those institutions without thinking really carefully about it. So the bar’s got be high, but we felt that the provisions within this bill certainly meant that the bar was high enough. The Minister does have the discretion, but there is a wide range of consultation that can happen, and it allows the wānanga to level the playing field a little bit for them in that.

The other side that was also mentioned by the previous speaker and others is Supplementary Order Paper 17, which looks to have private, for-profit providers treated at the same level or be able to get the same subsidies as the public educators. New Zealand First makes absolutely no apology for backing high-quality, publicly delivered education, certainly with support from our colleagues on this side of the House within that. That is important for us, that we back our public educational institutes. I guess the paradox there is if these private, for-profit entities were any good, they would be attracting that private investment anyway, so it shouldn’t really affect them too much at all. If they want to play in that space, that’s fine, but we as a Government are here to promote the public-good entities, and that’s exactly what this bill does. So we will not, as New Zealand First, be supporting the Supplementary Order Paper.

But we will support the wider bill. It is a bill that tidies up, adds accountability to the current laws, adds to the credibility of this incredibly important, emerging sector of our economy as we try to add some value, not just volume, and that’s got to be a mantra that we have across the spectrum of our economy. This is a very important sector, so New Zealand First has great pleasure in supporting this bill. Thank you.

DENISE LEE (National—Maungakiekie): As my colleagues before me, I’d like to confirm our support for this third reading of the Education (Tertiary Education and Other Matters) Amendment Bill. I too would like to take just a quick, brief moment to acknowledge our outgoing chair of the Education and Workforce Committee, of which I’m a member, the honourable Sarah Dowie.

Hon Michael Woodhouse: Soon to be!

DENISE LEE: No? Sarah Dowie—she’s honourable as far as I’m concerned. And, from what I can see, there are genuine accolades from both sides of the House for the role that she’s undertaken.

The bill that we are having our third reading for here tonight will update legislation that affects the day-to-day running of the tertiary education organisations (TEOs) and will help the system deliver the right skills for the 21st century. Like all entities that receive public funds, it’s important that TEOs are being held accountable and that they’re delivering for students—actually, all students, students that may be in both private and public institutions. So it’s a real shame—it’ll be no surprise that I’m going to raise, as other colleagues have before me tonight on my side of the House that the Hon Paul Goldsmith’s amendment calling for equal treatment of all tertiary education providers didn’t pass. That seems a no-brainer.

International education is our fourth-largest export industry, worth somewhere in the vicinity of $4.3 billion to our economy every year. So it’s vital that this industry receives the support, and the right support, and this bill does go a good way to doing that. It is a shame that we can’t see all providers in the same bracket, but we do, however, confirm our support for this third reading. Thank you.

GARETH HUGHES (Green): Kia ora, Madam Assistant Speaker. Ngā mihi nui ki a koutou. Kia ora. I rise to support this legislation.

Let me just say after nine years it’s good to be here in a Parliament on a third reading of a bill to be voting for positive tertiary education policy, because for the last nine years what this Parliament has rammed through is a huge number of incredibly negative tertiary education policies. Remember this was the Government that restricted access to student loans for over 55s, reduced access, reduced ability, increased the fees on student loans, rammed through the additional student loan takeback, which affected, basically, the tax rate that graduates pay on their student loan, and arrested graduates at the border. For nine years, we saw a Government whose policy was to reduce access, reduce affordability, and, in fact, make it harder to be a student in New Zealand.

Now, when former Minister Woodhouse talks—I remember talking to him about the voluntary student membership legislation, another negative National bill, where they gutted university governance, where National said Steven Joyce should decide what happens with students’ compulsory levies, not students themselves, democratically. It’s like going to a council—Lawrence Yule, you’ll know about this—and actually saying, “Steven Joyce is going to decide what happens with your rates, not the students.”, because that’s exactly what a student council was, it was the governance body representing students.

On that note, let me say tonight, though, how good it is to be voting for positive legislation which is going to support students, which is going to support those institutions. Now I welcome the National Party supporting this legislation, because the history, for people watching, is that the Hon Paul Goldsmith originally tabled this legislation, and it was incredibly negative. Now, sure, there was the marginal common-sense stuff around the common seal of institutions, the common fund, the enrolment of international students, and some penalties that can be applied—no one could disagree with that stuff.

Now what the member Denise Lee was just talking about was the crux of the issue and why these parties were opposed to the original legislation, because the member Denise Lee talked about the need for equal funding. Now successive Governments, both blue and red, have not used this principle, because, sure, the State does pay for private, for-profit education providers, but they’ve never done it at an equal rate, because that would be unfair, because the State has to pay for all the capital costs of institutions—the physical assets, the buildings, the infrastructure. When you’re talking to private providers, when you’re talking about equal treatment, what you’re actually talking about is the State paying for the capital assets of the private, for-profit providers.

That’s why I’d like to acknowledge the excellent work of the Tertiary Education Union. They brought in thousands of academics and workers at tertiary institutions up and down New Zealand to submit to the committee, many of them orally, and they made the point that this is unfair. In fact, what the Government, under Paul Goldsmith, was trying to do was bind the hands of future Governments to subsidise for-profit private providers’ capital assets so they could accumulate more at the taxpayers’ expense. So, sure, talk about equality of funding sounds nice, but, in practice, what you’re talking about is subsidising private for-profit providers.

And then they went and changed the language to make private for-profit providers sound more innocuous. Now National, while I welcome the support, as in previous readings, at the committee stage decried this legislation. They were calling it ideological, yet what their naming change to private, for-profit operators was was simply an ideological tool to make it easier to get more cash out of the taxpayers.

So, look, the Government’s taken a very pragmatic approach. They have changed the language. For example, community or not-for-profit private providers are now called independent tertiary establishments, which describes what they are. It’s not trying to play ideological language games, which is what previously happened. So, look, it’s fantastic to be voting for positive legislation which is going to make high-quality education more likely for New Zealanders.

We’ve got a fantastic tertiary sector, and I want to also acknowledge the private providers. They do do sterling work. I don’t think the taxpayer should be subsidising their private asset increases, but they do do excellent work, and I’d like to acknowledge everyone working in the sector.

Look, when you look at the other positive change we’ve seen in only the short amount of time of this new Government—historic, significant funding increases to make it easier for people to study in New Zealand—this is a really good Government for students, this is a really good Government for universities and polytechs and wānanga, and this is a really good Government for education, which, ultimately, is going to build a richer Aotearoa New Zealand.

Hon TIM MACINDOE (National—Hamilton West): Thank you, Madam Assistant Speaker. Kia orana to you, tēnā tātou katoa e Te Whare. It’s always interesting, I find, to speak after Mr Hughes, and, I have to say, I often enjoy listening to him. I think he frequently talks absolute nonsense, but he’s extremely articulate and he always delivers his speeches with great passion. I have to say, I found that a particularly entertaining contribution, because he waxed eloquently over the fact that after nine years of a National administration he was delighted to be able to speak so enthusiastically about such a great piece of legislation.

The only thing he omitted to mention was that, of course, it is a National Party bill. So for nine years he’s apparently opposed everything that we were doing, and now that he is part of a Government responsible for the same piece of legislation, he’s finally woken up to the fact that it’s a really good piece.

So I will keep my contribution fairly brief because others have already endorsed it. There’s clearly great support for the bill across the House. I have to say I take great umbrage with both Mark Patterson and Denise Lee, two members I used to consider to be mighty fine people. But for them to have paid such lovely tributes to the outgoing chair of the Education and Workforce Committee, Sarah Dowie, without mentioning the fact that I too am leaving the committee causes me great pain and suffering—ha, ha! And if I can only ask them to take a point of order and correct that egregious oversight—

Hon Michael Woodhouse: Haere rā.

Hon TIM MACINDOE: Ha, ha! Yes, I’m being told by even my own colleagues that perhaps that’s enough, but let me just conclude. As others have noted, this is an eminently sensible piece of legislation, not least because of the greater flexibility that it introduces into the system. I’m delighted that it is so warmly welcomed across the House, and for that reason I, too, have great pleasure in supporting it.

ASSISTANT SPEAKER (Poto Williams): I call Marja Lubeck. I understand this is a split call.

MARJA LUBECK (Labour): Thank you. Tēnā koe, Madam Assistant Speaker. It’s a great pleasure to take a call on the Education (Tertiary Education and Other Matters) Amendment Bill. I’m sorry to the previous speaker, Tim Macindoe: I’m going to cause a little bit more pain, because I too, at the risk of overkill, will pay my respects to Sarah Dowie. It was my very first time on the select committee, and I think she did an absolutely fantastic job, in sometimes challenging circumstances, to be a fair and neutral chair. So I thank her for that. I hope her successor is going to be just as good.

So this is the first time I’m speaking to a bill going through all the stages in the House. This bill has been before the Education and Workforce Committee but, of course, it started its life with the Education and Science Committee, that the previous speaker referred to. I believe they received and considered over 2,000 submissions from organisations and individuals and heard oral evidence from 49 here in Wellington. Now, it is important that we do mention those submissions, because the 2,054 submissions on this bill had a vast majority that did not support the equity of funding treatment that the member for Taupō earlier mentioned and other members subsequently picked up on. So, really, why the other side of the House keeps going on about this particular issue is a mystery to me. The vast majority of submitters thought it was not a good idea. It was widely felt that spending public money on what is, essentially, a private business was incorrect and would give those private businesses an unfair competitive advantage. Also, I think, during the committee of the whole House, Minister Hipkins made another excellent point in that regard: namely, that if the Government were not able to put extra funding into our public institutions without also having to put it into private ones, there would be a whole network of regional public institutions at serious risk of falling over because the previous Government put them into serious financial difficulty, and this Government will have to fix that.

So what this bill does is it does strengthen the tertiary education system in several ways, and it does that in two parts to the bill. We have already spoken at length about the clauses where international students are now better managed because schools will be able to control misconduct outside of school hours, and that will be welcomed, we know, by many of the schools as a way for them to uphold their obligations and ensure the welfare and well-being of those international students. That was pretty much Part 1.

In Part 2, there are quite a number of significant changes. We have mentioned the loophole with regard to falsely awarding credits on students’ records of achievement, and as a result of the changes that this bill now makes, providers can be held to account for not only issuing false qualifications but also now for false representation on a student’s record of achievement. At the same time, the penalty is increased for a fine up to $50,000, which is comparable to offences of a similar nature. The increase also allows for an increase in the time that a prosecution can be pursued, from what is now 12 months to five years under the Criminal Procedure Act 2011. That makes that particular issue a lot more workable.

We’ve heard from Minister Davis about the wānanga. This is really important because, at the moment, a wānanga cannot use a protected term such as university to describe themselves, which really puts them in a difficult situation if they want to market themselves overseas. It is a term that not very many people will understand outside of New Zealand. There was, in fact, a submission from Te Whare Wānanga o Awanuiārangi, specifically pointing out that it was difficult for them to market themselves because of that misunderstanding or non-understanding of the description of whare wānanga.

There are so many of these changes to the bill in Part 2, but I see that I’m running out of time, so what I would like to do is I would like to commend and say thank you to the previous select committees, thank you to all the 2,054 interested groups and individuals who provided submissions, and commend this bill to the House.

LAWRENCE YULE (National—Tukituki): It gives me pleasure to speak to this third reading of the Education (Tertiary Education and Other Matters) Amendment Bill, and I do want to reiterate something I said in the House earlier today, which was that, actually, it’s nice to see National Party policy and bills making their way through the Parliament, even if they’re not completely intact. I acknowledge the Hon Paul Goldsmith for the work he has done on it, and I also acknowledge Sarah Dowie, but I do so in order to acknowledge my friend the Hon Tim Macindoe, who’s been left out of the acknowledgments so far, because his work on the Education and Workforce Committee and the Education and Science Committee over several years has greatly improved the quality of this debate and this bill, and his former knowledge as a teacher no doubt had a significant part to play in how this bill was considered. So I thank the Hon Chris Hipkins for picking this bill up and bringing it before the House.

There’s two parts I wish to particularly comment on because they haven’t really been mentioned a lot so far in this reading. One is the false declarations provisions. We have heard this is a response to some abuse that’s occurred in terms of how records are kept and used and certified, and I think by lifting the level of fine up to $50,000 that is a significant disincentive for people to breach that. The second one, really, is around international students. I think it’s great that this House has acknowledged the importance of them—15 percent of the tertiary student population, on average worth about $4.3 billion to the New Zealand economy—and it is important that the pastoral care and the activities of those students outside of the schools is able to be managed and monitored so the experience both for the students and for the school and for New Zealand can be as positive as possible. How we achieve that I think is clearly set out in this bill, and I congratulate the Parliament on getting to this point.

So that’s all I wish to say. I think it’s a significant achievement after a long and hard battle by the National Party in the first place, and I’m grateful that’s been taken up by the current Government. Thank you.

JAMIE STRANGE (Labour): Madam Assistant Speaker, thank you for the opportunity to take what will likely be the final call this evening. I am still in a state of shock, realising that my Hamilton-based fellow MP is leaving our committee, the Education and Workforce Committee. I hope it wasn’t something I said.

Hon Tim Macindoe: I’ll miss you too, Jamie.

JAMIE STRANGE: Yeah. We will miss you—we will miss you, Tim—and we wish you all the best for whichever committee you are heading to.

Now, this bill was a National bill and it’s now become a Government bill. So it was with the previous Government; it’s now with this Government. Like many bills in the past few months, it’s been improved. It’s sort of like taking a car, putting some mag wheels on it, and maybe a bit of a tinted paint job, and, basically, improving the quality of this bill, and I am going to go on to talk about how this bill has been improved, but before I do—

Hon Member: It’s still a car.

JAMIE STRANGE: With a better engine as well. But before I do, I would like to pay tribute to some of the quality institutions that have had a big impact in my life. So I studied at Wintec in 2007 to 2009, I studied at the Waikato University in 2010, and, after a stint in the education workforce, I decided to go back to Waikato University and I finished my Master’s in educational leadership, which I finished about three weeks ago, and I’ve just found out I passed, so I’m very happy to announce that—only just, but we’ll take that.

So I would like to pay tribute to the importance of our tertiary institutions. We’re proud of these in our country. There’s a high level of integrity, respect, and competency, and, as we’ve heard tonight, these institutions provide our fourth-largest export industry, so it’s absolutely vital that we protect these industries, that they keep their area of accountability—

ASSISTANT SPEAKER (Poto Williams): I apologise to the member.

Debate interrupted.

The House adjourned at 10 p.m.