Tuesday, 12 June 2018

TUESDAY, 12 JUNE 2018

TUESDAY, 12 JUNE 2018

The Speaker took the Chair at 2 p.m.

Prayers.

Obituaries

John Baldwin Munro, QSO

SPEAKER: I regret to inform the House of the death on 4 June 2018 of John Baldwin Munro, QSO, who represented the electorate of Invercargill from 1972 to 1975. I desire, on behalf of this House, to express our sense of the loss we have sustained and our sympathy with the relatives of the late former member. I now ask members to stand with me and observe a period of silence as a mark of respect for his memory.

Honourable members stood as a mark of respect.

Visitors

Kenya—Select Committee on Members’ Services and Facilities

SPEAKER: I am sure that members would wish to welcome delegates from the Select Committee on Members’ Services and Facilities, from the Kenyan House of Representatives, led by Vice-Chairperson Ms Catherine Wanjiku Waruguru, who are present in the gallery.

Points of Order

Kermadec/Rangitāhua Ocean Sanctuary Bill—Leave to Introduce

Hon Dr NICK SMITH (National—Nelson): I raise a point of order, Mr Speaker. I seek leave for the Kermadec/Rangitāhua Ocean Sanctuary Bill, in my name, to be introduced and set down for first reading as members’ order of the day No. 1.

SPEAKER: Is there any objection to that? There is. It will not be set down.

Ministerial Statements

Mycoplasma Bovis—Government Response

Hon DAMIEN O’CONNOR (Minister of Agriculture): I wish to make a ministerial statement in regard to Mycoplasma bovis. A fortnight ago, Cabinet approved a phased eradication plan to remove Mycoplasma bovis from the country’s cattle herds. That decision came after much work and discussion with industry groups. These groups, including Dairy New Zealand, Beef and Lamb, Federated Farmers, rural support trusts, the Dairy Companies Association of New Zealand, and the Meat Industry Association, backed eradicating the disease, which has an impact on the health of cattle, including high mortality among calves, mastitis, high rates of abortions, and reduced milk production. The eradication plan is likely to cost more than $850 million over 10 years, with industry groups contributing 32 percent of that. I’d like to thank them for their contribution, not just in terms of investment but the expertise they are supplying on the ground.

Since the announcement two weeks ago, I have visited many parts of the country to talk to farmers and ensure that the response is taking into account the needs of people on the ground. Most farmers I talked to support phased eradication while acknowledging it will be difficult. Although the eradication programme is predicted to affect less than 1 percent of the national herd, it is tough financially and emotionally for farmers and families whose animals are infected by the disease. I want farmers to know that this Government and their industry leaders are committed to helping them and their families, because they are taking the hit for the other 99 percent of farmers in our efforts to stop Mycoplasma bovis going through the entire national herd.

To that end, the Ministry for Primary Industries (MPI) has streamlined its compensation process and boosted its compensation team to 35 people. By the end of this week, we will have paid out nearly $11 million in compensation, but this is an area where I’m constantly pushing for improvement. I instructed the ministry to tap into even more on-farm expertise to help people on the ground with compensation claims and difficulties they face when placed under movement control. Moving to phased eradication has allowed MPI to work with industry partners to bring in more people with practical farming experience. There are now 40 people from industry groups on the ground helping farmers. More than 250 people are working on the response. The rural support trusts are doing great work, and we’re funding them to ensure people get the help they need.

In the past fortnight, I can report that the number of farms under regulatory control has been reduced from 300 to about 180. This is likely to change as the response progresses. The reduction is mainly due to farms under notice of direction being tested, cleared, and allowed to get on with business as usual. The number of properties with confirmed infections recently reduced from 39 to 36, as a result of properties completing the culling and disinfection process. The culling of some 24,000 animals on 28 of those infected properties has been completed, allowing them to go into the disinfectant stage.

In total, 44 farms have been identified since July 2017, with eight now cleaned and cleared of Mycoplasma bovis. We expect to find more infected properties in coming months as part of the normal tracking and tracing of animal movements. We’ve started to make improvements to the national animal tracing system and are committed to improving biosecurity standards and laws to ensure that they are fit for purpose. We will be tougher on enforcing the rules that protect us from biosecurity incursions. This is a big and complex challenge for all of us, but I’m committed to learning from mistakes made and improving the response where required.

I’d like to thank the farming community for the necessary honesty and support. I’d like to thank the Opposition for backing our eradication plan and my colleagues for their support in Cabinet. In the next few months, there will be more challenges for us all as we attempt to do something no other place in the world has achieved—that’s eradicate Mycoplasma bovis. When I look to countries like Ireland, which are grappling with growing problems from M. bovis, I’m convinced that we have to do our utmost to remove the disease from Kiwi farms. If there comes a time when we must give up the fight, then we will appraise that with a clear eye after more bulk testing of milk in the spring.

The Government knows how vital the primary sector is to New Zealand’s economic success, and that is why we’ve made this investment to eradicate Mycoplasma bovis. Thank you, Mr Speaker.

Hon NATHAN GUY (National—Ōtaki): The National Party stands and supports the Government’s plan to eradicate this terrible cattle disease here in New Zealand. Finally farmers have some certainty. As I move around the country, I hear from a lot of farmers and not all of them agree with this plan. We should take this opportunity to see if we can, as a country, eradicate this disease. We have a proven track record: three Queensland fruit fly responses meant that we could eradicate that from New Zealand, and I’m heartened to hear from officials that it’s likely that pea weevil will be eradicated in Wairarapa, which will be a first around the world.

No Minister can stop any incursions from occurring in New Zealand. There are 175,000 items that cross our border a day; 5 million people choose to come to New Zealand a year. I hear often that people say, maybe, from time to time when they’re under pressure or under the pump, “Oh well, just close the border down. Just stop people coming. Just stop trading.” Well, the reality is, if we did that it would collapse the New Zealand economy. And, of course, if we did that, there’s no guarantee that something could not indeed blow into New Zealand like myrtle rust did, or indeed swim into New Zealand.

If we have a look at our record in Government, in Budget 2017 biosecurity spending got to the highest ever—an all-time high of about $250 million: more people on the front line, boosting the dog detector team up from 40 to 60, making sure we’ve got modern X-ray equipment, investing $90 million in the biocontainment facility in Wallaceville, which is near completion, that will be focused on these exotic animal diseases. Also, moving forward, looking out to Biosecurity 2025, ensuring that we have a huge amount of awareness happening with New Zealanders—4.7 million New Zealanders should be more aware of biosecurity then what they are currently. We’ve heard from the Minister of Agriculture and there’s been a lot of discussion about the cause of M. bovis. It is within the farm gate. It is a productivity issue that causes lameness, pneumonia, flu-like symptoms, and abortion. We don’t want it in New Zealand. Unfortunately, it is here, and now we have an opportunity to eradicate it.

I remember when the Ministry for Primary Industries (MPI) rang me over the weekend of 21 July and said it was likely that it was here. Then I briefed Cabinet to make sure that MPI had resources to stand up to the response. Those farms in particular were locked down. We made sure that the testing and the tracing was done. We reached out to international scientists. Public meetings were held. When we left office, there were seven infected farms in Ōāmaru, and since then, it has spread to other parts of New Zealand.

There’s been quite a bit of discussion and debate about Cook Strait—whether the inter-island stock transportation should be closed down. It was interesting to hear from officials, saying “There are no clear benefits. It would be incredibly disruptive and costly, and there’s about 85,000 cattle that move from the South to the North each year.”

It’s also going to be timely for MPI to update New Zealanders, and, in particular, farmers and rural communities—where are they up to with their ongoing investigation? That is one thing that farmers want to know, and at some point soon I’m looking forward to hearing from MPI where they are up to with their investigation.

We heard also from the Minister about the problems with the National Animal Identification and Tracing (NAIT) scheme. It came in in a phased roll-out in 2012 to 2015. The review was kicked off by this Government in 2016. I think it’s fair to say that the Operational Solutions for Primary Industries New Zealand board need to take some responsibility for not doing the compliance of NAIT and not handing that over to MPI to follow through on those farmers that, indeed, may have been neglectful in their responsibilities.

Now that the decision has been made to eradicate, it’s going to be very important to support these farmers who are taking one for the team. Rural support trust do a great job, but we need to be very mindful of the toll that this will have on farming families up and down the country. It’s great to hear that the Government has stepped up and responded to our concerns about fast and fair compensation, and now that is going to occur within a few days, so well done.

MARK PATTERSON (NZ First): I rise on behalf of New Zealand First to support this measure of eradication of Mycoplasma bovis, and I would commend the Minister on his leadership in this matter and, as the previous speaker, Nathan Guy, has mentioned, on the fact that the certainty we have been seeking as a sector is now there. I would like to also acknowledge the leadership we have seen from the likes of Dairy New Zealand, Federated Farmers, and Beef and Lamb New Zealand, and the rural support trusts have also been mentioned. These organisations have come in behind, and I think it is incredibly important that we show a united front. I would actually include the Opposition in this list as well, because the last thing we needed was political bickering. We need to be getting behind our farmers. We’ve made the call; let’s get in behind and eradicate this disease.

Some farmers have questioned the validity of doing this—whether it’s actually a serious enough disease to have taken this measure. I would not agree. I think the previous speaker, the Hon Nathan Guy, mentioned the list of afflictions that it causes, but what he didn’t mention was the mortality rate within calves, and what we’ve seen down south is that rate up to 30 percent. Our cattle are naïve to this disease, and if it became widespread within our industry they would be very, very vulnerable. I would also point out that within the beef industry, if this was to get into the beef breeding herd, where the calf is the primary source of income, that would be devastating and actually almost clean out that section of farming. So that probably hasn’t been acknowledged as much as it should be, but it’s the reason why Beef and Lamb New Zealand have been so proactive in this, so we thank those industry organisations.

I would also just reiterate the words that have been said about the farmers who are, essentially, going to be sacrificing their herds for the national good. I have a friend, actually, who has got a herd that has been tested positive and who has stud cattle, the breeding of which goes back 100 years. The distress in that family is incredible, it’s immense, and that is replicated, of course, around the other farmers, but we must not forget them. We must get in behind our rural support trusts and resource them as possible.

I think the financial commitment—that’s the other thing; I’d like to thank Cabinet actually. When you’re doing a Budget process, Minister Robertson, there is so much call on the nation’s finances. There are so many worthy causes. But you have seen the merit of this. You have put in significant funding that, quite rightly, people could argue could have been going somewhere else, but you as a Cabinet have stood up, recognised this disease, the importance to the agricultural community and our wider economy, and backed us all the way. And whilst a response on the ground may have been left wanting in some areas and needs to lift—and, hopefully, is lifting—there is no sense that this has not been fully supported from on high, and we thank our leadership.

Just on that, I’d call all members to be in touch with their farming community—those that they know—because sometimes the response on the ground isn’t the same as the official advice that we’re getting. So keep in touch with those people. Make sure that we’re feeding that advice back to the Ministry for Primary Industries, because that is an important element.

Of course, the whole debacle around the National Animal Identification and Tracing system (NAIT)—that hasn’t been good enough. We know that. That will be a discussion, I think, for later. But we need the lessons of this to be learnt. They will be hard-won, but as a nation we pride ourselves on leading the world in agriculture, and if any country can beat this, it will be us. Thank you.

Hon DAMIEN O’CONNOR (Minister of Agriculture): Mr Speaker, thank you. I’ll just take a brief opportunity to thank all parties in the House for their support—the coalition partners in particular. This is a huge amount of commitment and funding from taxpayers to this movement—the reason being that this affects 65 percent of our export earnings. The livestock sector is significant. We are doing our very best to support them through a difficult challenge. We can give them an assurance that regarding the National Animal Identification and Tracing system, the 38 recommendations that came from an independent review are being looked at. Each and every one of them will be implemented—23 of them without legislation—as quickly as we can, and then we will be back to the House to bring in the other ones.

Can I just say, in summary, this is a time for cooperation and honesty across the farming sector. We will not beat this without the support of farmers, and they will not beat it without supporting one another. So we want some honesty in terms of tracing, so that we can track and trace every possible infected animal. We want some cooperation among farmers to help one another, when some will come under huge pressure emotionally, and we want someone to reach out and help them. Together we can do this, and we can eradicate this disease.

Oral Questions

Questions to Ministers

Justice System—Three-strikes Legislation

1. Hon SIMON BRIDGES (Leader of the Opposition) to the Prime Minister: Does she have confidence in her Minister of Justice and all of her Government’s justice policies and decisions?

Rt Hon WINSTON PETERS (Deputy Prime Minister) on behalf of the Prime Minister: Yes, and yes.

Hon Simon Bridges: Was the proposed repeal of three strikes discussed at a Cabinet committee before the justice Minister announced it was his intention to take it to yesterday’s full Cabinet?

Rt Hon WINSTON PETERS: The reality is that a number of proposals to do with serious reform of our justice system have been presented to Cabinet committees. The answer to that is that a number of those proposals are going to be taken forward, all the way to August, and a serious—

Hon Simon Bridges: So it went to Cabinet committee?

Rt Hon WINSTON PETERS: No, it is—you wait and see, all right? It’s not a yes; it’s not a no. It’s time for you to be patient.

Hon Simon Bridges: I raise a point of order, Mr Speaker. I asked, I think, a simple question about whether the repeal of three strikes went to a Cabinet committee before full Cabinet consideration, and I just want an answer.

SPEAKER: I thought I heard an answer—the question was more than just addressed.

Hon Simon Bridges: Does she agree with the justice Minister that New Zealand First Ministers “were around the Cabinet table when Cabinet made the decision to authorise me to develop a package that has a number of aspects in it, including looking at the three strikes law. [It was] a Cabinet decision.”?

Rt Hon WINSTON PETERS: Yes.

Hon Simon Bridges: When the Justice Minister announced a proposed repeal of the three-strikes law, did he breach clause 5.16 of the Cabinet Manual, which states, “Ministers are responsible for ensuring that consultation is undertaken in accordance with any coalition or support agreements entered into between political parties”?

Rt Hon WINSTON PETERS: No.

Hon Simon Bridges: So did Andrew Little follow good consultation processes, or, as he put it, “In order to get a proposal ready to go to Cabinet you go through a variety of hoops”, and New Zealand First Ministers simply changed their minds on the repeal of three strikes?

Rt Hon WINSTON PETERS: Can I just say that Minister Little is a reforming Minister—probably the most reformist Minister we’ve had in decades. And because he has been putting all these ideas out for the public, there’s no reason for him to swing from any of his statements at all. It looks like—and it is—an open Government.

Hon Simon Bridges: So is the position quite clear, then, from the Prime Minister’s perspective, that this went through good Cabinet processes and consultation with support parties, and they simply changed their mind?

Rt Hon WINSTON PETERS: The reality is in this Government, when people have heard all the facts, they do sometimes change their mind—what does that member do?

Hon Simon Bridges: Why was a Cabinet paper of proposed criminal justice reforms, including a repeal of three strikes, pulled from yesterday’s Cabinet?

Rt Hon WINSTON PETERS: Can I just say that it was pulled because the visionary Minister of Justice decided that he wanted it pulled, and we agreed with him.

SPEAKER: And the Prime Minister being the “we”?

Rt Hon WINSTON PETERS: Yeah—me and her.

Hon Simon Bridges: What, then, was decided when the Minister of Justice and the Deputy Prime Minister met yesterday morning to discuss the three-strikes repeal law?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, I can’t answer that question, for very obvious reasons. I simply wasn’t there, and therefore I am not at liberty, like some members of Parliament, to take a wild guess.

Hon Simon Bridges: Was Andrew Little correct when he told Radio New Zealand this morning, regarding the three-strikes repeal law, “It’s still going to be considered. We are doing a comprehensive reform package for criminal justice reform, and all elements will be on the table.”?

Rt Hon WINSTON PETERS: Can I say on behalf of the Prime Minister that it is the mark of wise government that you consider every possibility and every possibility’s merits. That’s what sound judicial reform looks like. It’s not coming along with a bigoted, neo-liberal view of the world and seeking to implant that upon everybody, whether they want it or not.

Hon Simon Bridges: So is the Government’s position that the three-strikes repeal legislation is still on, ultimately, the table?

Rt Hon WINSTON PETERS: The Prime Minister made it very clear on Morning Report, to which the member was part of the audience, what the Government’s position is, and it is that this is a matter that’s off the table for now. But—

Hon Members: Oh!

Rt Hon WINSTON PETERS: —hang on—this is a Government in for the long term, and I can quite envisage that downstream, as serious reforms do begin to work and we don’t have the prisons being a moral and fiscal failure, which was Bill English’s view, that we will look eventually at all aspects of reform.

Hon Simon Bridges: Is the Prime Minister’s position that the three-strikes repeal law is not off the table for all time?

Rt Hon WINSTON PETERS: With the greatest respect, I answered that question with great clarity—with great clarity—and I do hate repeating myself.

Hon Simon Bridges: So Andrew Little was incorrect on Radio New Zealand this morning, when he said of the three-strikes repeal law “It’s still going to be considered.”?

Rt Hon WINSTON PETERS: I didn’t hear the transcript about which that member speaks—

Hon Paula Bennett: But you’re part of the audience.

Rt Hon WINSTON PETERS: No, I said he was, not me. Again, you’ve got a listening problem, haven’t you?

SPEAKER: Order!

Rt Hon WINSTON PETERS: But, mind you, it’s only one of your minor problems at the moment.

Hon Simon Bridges: I raise a point of order, Mr Speaker. I’ve asked the Prime Minister a straight question about reported comments by the justice Minister, and he’s saying he didn’t hear them. That’s simply not addressing what I’ve asked him in a specific quote.

SPEAKER: The member’s point of order would have had some merit if the answer had not been diverted by the person sitting on his right. I am ruling that the question was addressed. I might have been more supportive, but Ms Bennett interjected and Mr Peters responded to that, and it meant that the answer was possibly not as good as the member might have wanted.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. Does that ruling preclude the question being asked again and your taking a different approach to the answer to the question?

SPEAKER: It doesn’t preclude the question being asked again, and if it’s heard without that sort of interjection, then there’ll be a higher standard for the reply.

Hon Simon Bridges: Is the three-strikes repeal law still going to be considered, as the justice Minister has said this morning?

Rt Hon WINSTON PETERS: It is the benchmark of wise government that all laws are constantly reviewed as to their veracity, as to their validity, and as to their soundness. In that sense, of course that law will be looked at.

Hon Simon Bridges: Does she agree the three-strikes law is the “high-water mark of policy stupidity”?

Rt Hon WINSTON PETERS: Can I just say on behalf of the Prime Minister that every member of this Parliament’s entitled to their view. It’s the hallmark of a democracy, and a party and a coalition that are capable of listening to different views.

Hon Simon Bridges: Why is the Government having another advisory panel and summit on criminal justice, rather than having Cabinet consider options and get on with what’s required in this area?

Rt Hon WINSTON PETERS: Because, on behalf of the Prime Minister, we’ve seen a massive increase in our numbers in prison. We faced building a mega-prison to accommodate between 2,000 and 3,000 people if we had not prepared to reform our laws to ensure they work. We’re in danger of duplicating the American experience of massive incarceration per population. This is a reforming Government that knows we can do far better for the victims, the taxpayers, and, indeed, the country.

Hon Simon Bridges: In light of that answer, why then isn’t the Government repealing the three-strikes legislation that the Minister of Justice thinks is such stupid law?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, this is no way to act as a Crown prosecutor—

SPEAKER: Order!

Rt Hon WINSTON PETERS: —bearing in mind he never ever held a warrant and is misclaiming that all the time. He never held a warrant. He never held a warrant because of some Crown prosecutor—

SPEAKER: Order! [Interruption] Order! The question will be asked again.

Hon Simon Bridges: In light of the previous answer, why then is the Government not seeking or moving to repeal the three-strikes legislation?

Rt Hon WINSTON PETERS: It was made very clear by the Prime Minister and others that at this time it’s not a priority. That was very clearly set out.

Hon Simon Bridges: Which Cabinet process was better: the one around the three-strikes repeal proposal or the decision to ban offshore oil and gas exploration?

Rt Hon WINSTON PETERS: Apart from that being way off the mark of the primary question, I’ll answer it. The reality is both of those decisions were typical of this Government. They were mine—[Interruption] Yes, that’s right. [Interruption]

SPEAKER: Order! [Interruption] Order! The member will resume his seat. When I call for order—Mr Bennett, Mr Bridges—and most of his colleagues heard it and obeyed it, those members will as well. I’ll remind people that not being orderly when called to order is grossly disorderly.

Rt Hon WINSTON PETERS: As I said, this—

Hon Gerry Brownlee: We don’t need to hear more answer—it’s all right, you’ve answered it.

Rt Hon WINSTON PETERS: I want to complete it. No, no, the completed answer is this is typical of this Government, which has seen a serious rise in the Government’s polling position, has seen a massive restoration, out of a Victoria University study, in the confidence in the Government. For the first time, we’re above 50 percent—in fact, we’re above 60 percent. Now, I don’t want to take all the credit for that, or the Prime Minister as the Prime Minister; it’s down to my colleagues.

Families Package—Impact and Funding

2. Dr DEBORAH RUSSELL (Labour—New Lynn) to the Minister of Finance: Will the Government’s Families Package assist low- and middle-income families; if so, how?

Hon GRANT ROBERTSON (Minister of Finance): Yes. Low and middle income families can look forward to a significant boost to their incomes through the targeted assistance provided by this Government’s Families Package, much of which will come into effect on 1 July. Among other things, the package will increase Working for Families tax credits and raise the abatement threshold, introduce a Best Start payment to assist families during the critical early years of a child’s life, and increase paid parental leave to 26 weeks. When the package is fully rolled out in 2021, 385,000 families with children will be better off by an average of $75 a week.

Dr Deborah Russell: What specific examples can the Minister provide of the impact the Families Package will have on Kiwi families?

Hon GRANT ROBERTSON: Families all around the country experiencing a range of living circumstances can expect further assistance come 1 July. From that date forward, a couple living in the Selwyn electorate with a four-year-old and a newborn on a single income of $55,000 will be better off by $129 a week than they are now. A sole parent with a newborn living in Wellington, not in work, who receives sole parent support will be better off by $112 a week through the winter months, and $80 a week better off for the rest of the year. I would encourage all middle and low income families to be on the lookout for that date, 1 July, when paying the bills will get easier.

Dr Deborah Russell: How will the Government fund the changes made through the Families Package?

Hon GRANT ROBERTSON: By reversing the previous Government’s poorly targeted tax cuts—which would have disproportionately benefited the wealthy—which will save around $8.36 billion over the next four years. The investment we’re making through the Families Package is estimated to be around $5.5 million over the same period. This means we can afford to provide significant assistance to children and families, with further money left over to invest in critical public services such as health, housing, and education.

Business Confidence—Actions and Reports

3. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: What are the current levels of the Business Confidence Index and Own Activity Index according to the 31 May 2018 ANZ Business Outlook Survey, and how do these compare to the previous month?

Hon GRANT ROBERTSON (Minister of Finance): The survey referred to in the member’s question does not measure current levels of business confidence, as it is retrospective. However, to be helpful, the May ANZ Business Outlook survey showed a drop in headline business confidence and in firms’ own expectations of 4 percentage points. I note that firms’ expectations of their own activity, which is, historically, more closely related to GDP growth, remained positive, with a net 14 percent of firms expecting a coming lift in activity.

Hon Amy Adams: Is he worried that the separate Auckland business confidence survey has also fallen markedly, from just 8 percent of respondents who thought that the economy would deteriorate, in June last year, to the now 44 percent who expect the economy to get worse now?

Hon GRANT ROBERTSON: Those are indeed the headlines of that survey, but when you look a little lower, the results are significantly varied, and the survey does show that 56 percent of people think the situation will improve or remain the same.

Rt Hon Winston Peters: Could I ask the Minister of Finance as to whether or not, as an indicator of confidence, our sharemarket is today at an all-time record high?

Hon GRANT ROBERTSON: Indeed. In fact, firms all around the country, as I’ve travelled around since the Budget, have been indicating that they’re pleased with the Budget and that they see a good path ahead of them. I also note today the Victoria University study that says that trust in Government has increased from 48 percent in 2016 to 65 percent today.

Willow-Jean Prime: Has the Minister seen any data related to business confidence released today?

Hon GRANT ROBERTSON: In addition to what I said in the last answer, the ANZ Truckometer was released today, with a rise in both the heavy traffic index and, indeed, the light traffic index. This saw the bank say that in light of less upbeat signals from other data, “the recent improvement is an encouraging sign that the economy will push through.”

Hon Amy Adams: Does he consider that it is the actions of this Government, such as the lack of a proper Cabinet process and the lack of economic analysis before the announcement that was made to end oil and gas exploration, which has contributed to these very low levels of business confidence?

Hon GRANT ROBERTSON: No. In fact, I can take my lead from OMV, the company involved in gas exploration, who said the following: “This has no impact at all. It has no impact on existing licences, neither on production licences nor on exploration licences. We are in a very good position in New Zealand.” That’s what OMV said. Perhaps the member should cheer up a little.

Hon Amy Adams: Well, does he think that the dismissive attitude that Government Ministers have expressed towards small business, such as claiming that large minimum-wage increases would be good for small business or that if they can’t handle large minimum-wage increases, then they don’t sound that resilient, has at all contributed to the declining levels of business confidence?

Hon GRANT ROBERTSON: No. On this side of the House, we’re extremely supportive of small businesses. It’s one of the reasons why we actually picked up the excellent work of the Hon Judith Collins and moved on with the “Amazon tax”. Well done, Judith.

Hon Amy Adams: Well, does he agree with Westpac’s analysis yesterday, stating that business confidence is now so low that it will need to lower GDP growth, meaning that our economy has gone from a rock star to a mere support act?

Hon GRANT ROBERTSON: We all know that under the last Government, the so-called rock star economy was a roadie economy, where people had to stand alongside looking at others who were benefiting. On this side of the House, we’re going to make sure that all New Zealanders get a say in an economy that is productive, sustainable, and inclusive.

Hon Amy Adams: Well, given that GDP per capita growth has dropped to only 0.1 percent in the last quarter, is he now prepared to accept that strong economic growth is not a continuous cash machine and can’t be taken for granted?

Hon GRANT ROBERTSON: I remind that member of her former colleague’s statement—Steven Joyce said it—“It pays not to look at quarter-by-quarter analysis when it comes to GDP per capita growth.” What I know is that the forecasts are for ongoing, solid growth in the New Zealand economy of around 3 percent. Do you know what? This side of the House isn’t satisfied with that. We want all New Zealanders to actually share in prosperity, not just be satisfied that we’re generating those levels of growth.

Superannuation—Disclosure of Circumstances

4. DAVID SEYMOUR (Leader—ACT) to the Prime Minister: Does she agree with the statement made by the Ministry of Social Development that “The Ministry works hard to protect the integrity of the welfare system to ensure it remains fair for all New Zealanders, which can include prosecution where clear evidence of fraud exists”?

Rt Hon WINSTON PETERS (Deputy Prime Minister) on behalf of the Prime Minister: Yes.

David Seymour: Would an example of such fraud be signing multiple false declarations that one’s living arrangements had not changed in respect to receiving superannuation when, in fact, they had?

Rt Hon WINSTON PETERS: That statement verges on, and it is, subject to the sub judice rule. Just because he doesn’t understand the law, it’s no reason for him to think he’s going to challenge it in this House, and besides which, it’s based on a lie.

David Seymour: Is the Prime Minister saying that so long as somebody takes court proceedings, they can get away with it for ever?

Rt Hon WINSTON PETERS: Mr Speaker—

SPEAKER: Order! Order!

Rt Hon WINSTON PETERS: I can handle it.

SPEAKER: Well, I have no—

Rt Hon WINSTON PETERS: He’s about to get it.

SPEAKER: I have no doubt the right honourable gentleman can, but it’s not an area of the Prime Minister’s responsibility.

David Seymour: Is the message that it is OK to make false statements and claim too much on one’s superannuation so long as you have the connections to get away with it?

SPEAKER: Order! That’s also not a matter of the Prime Minister’s responsibility.

David Seymour: I raise a point of order, Mr Speaker. Surely, the Prime Minister has responsibility for what is the largest-spending department in his Government.

SPEAKER: Order! The member will resume his seat. The member has been making reference to matters which are sub judice. He knows that they are. He is asking the Prime Minister to comment on them, and I’m not going to allow it.

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

SPEAKER: Mr Brownlee, I hope you’re not going to relitigate this ruling that I’ve just made, because—

Hon Gerry Brownlee: No.

SPEAKER: —it’s been very clear.

Hon Gerry Brownlee: But it would be quite reasonable to ask a question about which bit of the Hansard record will show any mention of a case currently sub judice.

SPEAKER: And none will, and we all know what the member was referring to.

Housing New Zealand—Review of Meth Contamination Standards

5. VIRGINIA ANDERSEN (Labour) to the Minister of Housing and Urban Development: Why did he commission a review by the Prime Minister’s Chief Science Advisor, Professor Sir Peter Gluckman, into meth contamination standards?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): I have been sceptical of the methamphetamine contamination panic for several years, and on 7 December it was reported that a Housing New Zealand tenant, Robert Erueti, had been evicted based on a minuscule meth reading, even though it was known that he was not a meth user himself. The former Government spent $44,000 putting Mr Erueti into motels for over a year as a result. I apologised to Mr Erueti and we found him a home, and that same day, I met with Sir Peter Gluckman and then sent him a letter commissioning this review.

Virginia Andersen: Why did he apologise to the people evicted and blacklisted from State houses based on the flawed meth standard?

Hon PHIL TWYFORD: This Government is not to blame for what happened before we took office, but we are responsible for fixing the problem and we are accountable to the people who were treated unfairly. Even though we didn’t create this problem, I felt it was still important that the public see that this Government is willing to front up, admit when things have gone wrong, and fix it for the future.

Virginia Andersen: What actions is the Government now going to take in light of Sir Peter Gluckman’s report?

Hon PHIL TWYFORD: First, Housing New Zealand has changed its policy and adopted the standard recommended by the Gluckman report. Secondly, Minister Kris Faafoi has commissioned a review of Standards New Zealand’s process used in the setting of standard NZS 1805. Third, I’ve commissioned a comprehensive report from Housing New Zealand on the whole sorry saga, and I will release that report publicly.

Marama Davidson: Given Housing New Zealand knew concerns were being raised about these standards as far back as 2016, what steps is the Minister taking to ensure compensation for tenants who were forced to pay for meth tests and forced out of their homes?

Hon PHIL TWYFORD: I’ve commissioned a comprehensive report which will include a case by case account of every property that was meth-tested and all of the consequences that followed. I want to know who knew what when in the chronology of policy development both from the Ministry of Health, Housing New Zealand, and the Government of the day. When we’ve got the facts on the table, then we can decide what the appropriate course of action is.

KiwiBuild—Building Activity, Targets, and Competition

6. Hon JUDITH COLLINS (National—Papakura) to the Minister of Housing and Urban Development: How many KiwiBuild houses has the Government built to date?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): The 10-year KiwiBuild programme officially kicks off on 1 July with a target of 1,000 houses in the first year, 5,000 in the second, and 10,000 in the third. But we haven’t waited until July to get started on that work; we’re actually ahead of schedule with the first KiwiBuild homes currently being built in the member’s electorate. Families will be able to buy them and move into them later this year. The Prime Minister also announced the purchase of land from Unitec that will accommodate more than 3,000 homes. We are working on more developments on Government land and have had very strong interest from private developers, and I will make more announcements in due course. Right.

SPEAKER: Order! I’m going to ask the member to ask the question again.

Hon Judith Collins: Thank you, Mr Speaker. How many KiwiBuild houses has the Government built to date?

Hon PHIL TWYFORD: There are 18 houses being constructed in the member’s electorate as we speak.

Hon Judith Collins: How many houses has the private sector built in the time that he has been a Minister?

Hon PHIL TWYFORD: I’m happy to get the precise number. If the member wants me to get that for her, she can put it down as a written question.

Paul Eagle: Mr Chair—no?

SPEAKER: It’s the normal practice to give two to the asker of question first.

Hon Judith Collins: Thank you. Are Westpac and ANZ banks both wrong when they say that there has been a decrease in building activity in the months that he has been the Minister?

Hon PHIL TWYFORD: Actually, the latest consent numbers show that the building numbers in Auckland are up. But, look, we’ve always been very clear that we would take three years to ramp up the KiwiBuild programme. That has always been our policy. We said that we will build 1,000 in the first year, 5,000 in the second, and 10,000 in the third. We inherited a housing crisis that took nine years to develop. The member knows you cannot build—

SPEAKER: Order!

Paul Eagle: Does the Government expect to meet its target of 1,000 KiwiBuild homes in 2018-19, 5,000 in 2019-20, and 10,000 in 2020-21?

Hon PHIL TWYFORD: We’re under no illusions that this is a big task, and we are working hard every day to achieve these targets. This is an aspirational Government. We’ve set our aims high and we’re working hard to achieve them because we believe in the Kiwi Dream of affordable homeownership for all New Zealanders. I remain committed to these targets, and we will keep the public updated on progress through KiwiBuild’s first year and into the future.

Hon Judith Collins: Will KiwiBuild prop up failed developments and failing developers?

Hon PHIL TWYFORD: No, but KiwiBuild will incentivise the building of the very affordable homes that the market is spectacularly failing to deliver at present. Around 5 percent of new builds are currently in the lower quartile and considered affordable, and our buying off the plans initiative for KiwiBuild will incentivise the building of affordable homes that are currently not being built.

Hon Judith Collins: How does he plan to get houses built that are extra to those being built by the private sector without competing with the private sector for tradespeople to actually do the building?

Hon PHIL TWYFORD: Well, I draw the member’s attention to the case in her own electorate where at the McLennan development in Papakura, there was a private sector development that had fallen over. Investors were not willing to build in it and the builder who is currently building the KiwiBuild homes in that member’s electorate thanked us for the work and said that they were glad to have it.

SPEAKER: Yes, I will ask the member to ask the question again.

Hon Judith Collins: Thank you, Mr Speaker. How does he plan to get houses built that are extra to those being built by the private sector without competing with the private sector for tradespeople to actually build the houses?

Hon PHIL TWYFORD: We’re not denying that there is a problem with workforce capacity. We inherited, after nine years of that Government, a total failure to build the local workforce. We’re committed to developing that workforce, and the Hon Jenny Salesa has led an initiative to develop the workforce for KiwiBuild both by recruiting skilled personnel from overseas and developing the local workforce by giving young New Zealanders the opportunities that they deserve.

No. 4 to Minister

Question

DAVID SEYMOUR (Leader—ACT): I raise a point of order, Mr Speaker.

SPEAKER: A point of order, David Seymour.

DAVID SEYMOUR: That’s surprising. I would like to raise a matter and ask you to reflect on it and perhaps make a ruling, because I think it’s quite important. It is in regards to the events of question No. 4 earlier today.

SPEAKER: Well, the member will resume his seat. Members are aware that points of order are to be taken at the time. It’s a longstanding Speaker’s ruling. It is Speaker’s ruling 23, I think, and the member should know that. If the member has an issue that he thinks needs to be drawn to my attention—if he wants me to go back and look at something or do something similar to that, he’s welcome to take it up with me after question time, in my office.

DAVID SEYMOUR (Leader—ACT): I raise a point of order, Mr Speaker.

SPEAKER: I just want to make sure that the member’s not going to relitigate that, because if the member is going to relitigate it I will regard that very seriously.

DAVID SEYMOUR: Well, the point I wish to make is that sometimes there are ongoing issues that do require the House’s attention, and I think we should be able to raise them in this open forum, not simply in your office.

SPEAKER: Well, I’m very pleased that that’s what the member thinks.

Transport Infrastructure—Regional Fuel Tax Impact

7. JAMI-LEE ROSS (National—Botany) to the Minister of Transport: Will the proposed Auckland regional fuel tax increase the cost of living for Aucklanders?

Hon PHIL TWYFORD (Minister of Transport): I am committed to striking a balance between affordability and taking urgent action on the transport infrastructure deficit that we inherited. The combined effect of the Auckland regional fuel tax and the proposed increases to fuel excise duty will cost an average family $5 per week. This is dwarfed by the $75 a week on average that low and middle income families will receive as part of the Families Package.

Jami-Lee Ross: Does he agree with the Minister of Transport that the regressive nature of the proposed regional fuel tax “could result in lower income households contributing a higher proportion of their income to the tax compared to higher income households”?

Hon PHIL TWYFORD: Well, I think most people would agree with that statement, but it’s also true that congestion costs are highly regressive. The effect on low-income families of not having decent public transport means that they are forced into the most expensive option, which is dependence on every adult in a household who works having to run a car to get to and from work. The regional fuel tax will generate or will free up $4.5 billion of investment in public transport that will make life better for low-income workers. It generates $1.5 billion and frees up another $3 billion. And if that member wants to abolish the regional fuel tax, as he says he does, he needs to tell Aucklanders which projects he’s going to cancel.

Jami-Lee Ross: Does he agree with Manurewa-Papakura councillor Daniel Newman, who described the tax as a “wholesale redistribution of wealth from some of the poorest blue collar workers who have the least transport choice to fund much of the infrastructure to serve those people who enjoy the greatest wealth.”?

SPEAKER: Order! Before the member answers, I’m going to indicate that the Opposition has a further three supplementary questions as a result of the interjection during that supplementary. I’ll take the time to indicate to the House that the Opposition has a choice of using them today or tomorrow.

Hon PHIL TWYFORD: Well, I think I’ve pointed out to the member that we are building a modern public transport system that will give all Aucklanders choices. It will tackle the current cost of congestion in Auckland, which is $1.3 billion, and, actually, far worse than the regressive effect of a regional fuel tax is the punishing effect on low-income people of not having access to decent public transport. On top of that, our Government has done more than that former Government ever did to put money in the pockets of low-income families—$75 a week for 384,000 low and middle income families.

Jami-Lee Ross: Does he agree with Labour councillor for Manukau, Efeso Collins, who wrote an article which described the impact of the regional fuel tax as “Taxing the poor, to transport the rich”?

Hon PHIL TWYFORD: Well, I did see that article, but I would note that a clear majority of councillors on Auckland Council, including a number of National Party - aligned councillors, voted to put Auckland first ahead of the petty politicking from that side of the House.

Jami-Lee Ross: Does he agree with the submission of transport economist Sam Warburton that this tax will see poorer and more at-risk households over-taxed and subsidising rich households?

Hon PHIL TWYFORD: Well, I agree with Sam Warburton, and, in fact, the former transport Minister, the Hon Simon Bridges, who courageously initiated work on congestion pricing and road pricing in Auckland—work that this Government is carrying on because we believe that in the long term, that provides better options for the Auckland transport system than a regional fuel tax. But we’re not prepared as a Government to wait around and do nothing while the gridlock gets worse and worse, as that Government did.

Jami-Lee Ross: Does he agree that his continued attempts to tax Aucklanders more in the face of growing public opposition was one of the biggest contributing factors behind Dan Bidois winning on Saturday?

SPEAKER: Order! It’s not an area he has responsibility for.

Marja Lubeck: What projects will the regional fuel tax fund?

Hon PHIL TWYFORD: The regional fuel tax enables the biggest civil infrastructure programme in New Zealand’s history. The regional fuel tax funds bus priority improvements and infrastructure in the central city, the eastern busway, park-and-rides in the Hibiscus Coast, Westgate, Kūmeu, Drury, and Paerata, more electric trains, redevelopment of the downtown ferry, a road safety programme, Penlink, Mill Road, and many other projects across Auckland.

Marja Lubeck: What alternatives are there to going ahead with the regional fuel tax?

Hon PHIL TWYFORD: Well, the reality is pretty simple: if we’re going to have less revenue to pay for transport projects—and I underline the fact that the regional fuel tax is responsible for freeing up $4.5 billion out of the $28 billion programme. If we don’t have that, we’ll have to run more debt, cancel projects, or both. The Opposition is asking us simultaneously—

SPEAKER: Order! Order!

Internal Affairs, Department—SmartStart Website

8. MARK PATTERSON (NZ First) to the Minister of Internal Affairs: What services has the Department of Internal Affairs provided to assist new parents?

Hon TRACEY MARTIN (Minister of Internal Affairs): The Department of Internal Affairs has developed and supports a website called SmartStart, and as of 28 February this year, there’ve been nearly 300,000 visitors to the site. They are able to access information about support services both during their pregnancy and after the birth of their child, and while this is a good start, we would like more people to access the service so that they can get information about local support for themselves, for their children, and also about possible financial support.

Mark Patterson: How does the site help expectant parents and parents of newborns?

Hon TRACEY MARTIN: The website provides expectant parents information such as lead maternity providers and family services in their area, and once the baby is born, parents are able to register their birth online and then share that digital birth record with other agencies, which, in just one instance, can save $33 for a family when they’re sharing that information with the Ministry of Social Development. Currently, 95 percent of the parents who access this site are sharing information with the Inland Revenue Department, and this is important because in the Government’s new Families Package, all families with babies born after 1 July are entitled to receive $60 a week for the child’s first year, and those in a particular income bracket will get more support for the next two years. If their baby was due on or after 1 July but they had a premature baby, they may also be eligible, and so we’d like them to go to the SmartStart site and sign up so that we can make sure that they get the support from this Government that we have provided for their children, to add to their children’s well-being.

Justice System—Three-strikes Legislation

9. Hon MARK MITCHELL (National—Rodney) to the Minister of Justice: Does he stand by all his Government’s justice policies and decisions?

Hon ANDREW LITTLE (Minister of Justice): Yes.

Hon Mark Mitchell: Does he stand by his statement that the three-strikes law is an “absolutely absurd law, the high-water mark of policy stupidity”?

Hon ANDREW LITTLE: Yes.

Hon Mark Mitchell: What is his view of the statement made by New Zealand First justice spokesperson, Darroch Ball, who said in relation to the three-strikes reform, “The law provides a firm framework to deter recidivism”—

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. The Minister is not responsible for Mr Ball’s views at all.

SPEAKER: That’s a fair comment. I apologise for letting the question go. I’ll let the member rephrase it.

Hon Mark Mitchell: Has the justice Minister seen any reports or press releases from New Zealand First justice spokesperson Darroch Ball, who has said in relation to the three-strikes reform, “The law provides a firm framework to deter recidivism, and sends a clear message to our most serious offenders”?

Hon Chris Hipkins: I raise a point of order, Mr Speaker. I think the question was closer, but the Minister has no responsibility for press releases issued by another political party.

SPEAKER: But the question wasn’t that; it was whether he’d seen it or not. And we’ve had a number of instances today where supplementary questions have asked Ministers if they’ve seen reports. I am just going to take the opportunity to say—and I’ll say it in particular and draw the attention of Amy Adams. There’s been a little bit of a growing habit, which I’ve been slack about, about asking Ministers to comment without asking if they’ve seen reports. The wording, which I let through for her question No.3 today and a number of supplementaries, is going to be slightly tightened up on going forward. And I’d be happy to discuss it with the Clerk’s Office. I’d be happy discuss it with people responsible for lodging questions. We are going to be tighter about ministerial responsibility, especially for primary questions. Now, if the member can remember the question?

Hon ANDREW LITTLE: Yes, I have seen that report.

Hon Mark Mitchell: I raise a point of order, Mr Speaker. Maybe I should have included the first part of the question—

SPEAKER: No. You had a chance to rephrase it. You’ve rephrased, and you’ve had a full answer, not just addressing the question but a full answer.

Hon Mark Mitchell: What’s his view of the report?

Hon Chris Hipkins: I raise a point of order, Mr Speaker. The Minister may have seen it; it doesn’t mean he has responsibility for it, and therefore being asked his view on it is outside of his ministerial responsibility.

Hon Gerry Brownlee: In the previous question there was a question to the transport Minister asking him what the alternatives would be if there was not a fuel tax, and the Minister chose to answer that. So, presumably, he’d read some information that gave him the information he needed to answer that. The question here to Mr Little is simply, now that there’s been an acknowledgment that he has seen the report—presumably, he’s read it—does he have a view on it? Now, that’s not unreasonable.

SPEAKER: Absolutely. The idea that a Minister can’t have an opinion on something in his portfolio that he’s read would be protecting the Minister too much.

Hon ANDREW LITTLE: Thank you, Mr Speaker. My view is that that is Mr Ball’s genuinely held view.

Hon Mark Mitchell: Did he advance his Cabinet paper, which included the repeal of three-strikes legislation, through the correct process, including Cabinet committee, with the support of New Zealand First?

Hon ANDREW LITTLE: The position that we got to last week was that I made the decision to withdraw the paper, and any further reference to the full Cabinet. The reality is when it comes to Government policy, it is the final decision of Cabinet that matters, and that is what has happened in the last few days.

Hon Mark Mitchell: I raise a point of order Mr Speaker. If I could seek your guidance on this, that was a very clear question—short and concise. I don’t think the Minister has actually answered it.

SPEAKER: Ask it again and I’ll make—

Hon Mark Mitchell: Did he advance his Cabinet paper, which included the repeal of the three-strikes legislation, through the correct process, including Cabinet committee, with the support of New Zealand First?

Hon ANDREW LITTLE: The paper went through all relevant stages until last week, when I made the judgment to withdraw the paper from final Cabinet consideration, because that is the way Government decision-making works.

Hon Mark Mitchell: Is he relieved to hear in the House today the Deputy Prime Minister state, on behalf of the Prime Minister, that three-strikes is still on the table?

Hon ANDREW LITTLE: It’s not a question of relief—

SPEAKER: Order! I’m just going to cut the member down now, and ask the member to start again. The answer was the Prime Minister stating—all right—and I’ll get the member to rephrase it. It’s important that we get these things right, because we’re about to have a change.

Hon Mark Mitchell: Is he relieved to hear in the House today the Prime Minister state that three strikes is still on the table?

Hon ANDREW LITTLE: It’s not a question of being relieved about anything that the Prime Minister, or the Deputy Prime Minister standing in for the Prime Minister, has said or believes. The Deputy Prime Minister is a man of considerable and astute wisdom and he has brought that to bear in his answers to the House today, and he is right.

NCEA—Review and Consultation

10. JO LUXTON (Labour) to the Minister of Education: What opportunities do New Zealanders have to give their views on how NCEA can better prepare students for life after school?

Hon CHRIS HIPKINS (Minister of Education): I recently released, as part of the national education conversation, a discussion document on the review of the NCEA. We want to ensure that we are helping students leave school with qualifications that truly reflect their abilities and prepare them for a rapidly changing world. New Zealanders have the opportunity to provide their thoughts on the six big opportunities identified on the future of the NCEA via online surveys and submission forms. They can also attend workshops being held around the country over the next two months.

Jo Luxton: How can younger New Zealanders take part and share their views on the future of the NCEA?

Hon CHRIS HIPKINS: We believe it’s very important that young New Zealanders whose futures are at stake have the opportunity to have their say on the future of the NCEA. New Zealanders between the ages of five and 20 can share their vision on the future of education by participating in the Make Your Mark competition. Students can participate in a variety of ways in conveying their vision for the future of education: artworks, creative storytelling, leading a workshop, research papers, and media projects. There are grants, scholarships, laptops, and other prizes up for grabs. We want to hear how the NCEA can better support our young people in preparing them for further study, work, and life.

Jo Luxton: Why is the coalition Government looking at updating the NCEA as part of the national education conversation?

Hon CHRIS HIPKINS: The NCEA is a trusted and respected qualification internationally, but employers are telling us that students are coming out of school not always with the right skills, and we need more flexibility in what they are being taught. We also need to see less assessment and a greater focus on learning. The NCEA was introduced in 2002. It’s now time to have a look at it and to see what we can do better to support young New Zealanders’ pathways that reflect their learning needs and their strengths.

Budget 2018—Police Funding

11. CHRIS BISHOP (National—Hutt South) to the Minister of Police: Can he confirm he sought operational funding of $515.3 million over 4 years to deliver his preferred model of 1,800 new police in 3 years, and alternatively sought $346.4 million over 4 years to deliver them in 4 years; if so, why did Budget 2018 only appropriate $298.8 million in operational funding?

Hon STUART NASH (Minister of Police): Yes, no, and Budget 2018 is the first of three this term.

Chris Bishop: Why doesn’t he just admit to the House and New Zealand that his 1,800 new police are funded over five years, not three, given his own draft Cabinet papers make that clear as well as the appropriations in the Budget?

Hon STUART NASH: Because that would be a lie.

Chris Bishop: Does he agree that in order to reach an additional 1,800 new police, an extra 1,000 officers will be needed because of police attrition, and why does the Cabinet paper he prepared not take account of attrition when calculating the extra 1,800 cops?

Hon STUART NASH: Yes, I do, and, yes, it does.

Chris Bishop: Does he stand by his statement in relation to the extra 1,800 police: “I want to make it very clear, I want to make it very clear, we have the money assigned to it.”; and if so, why is he now saying he will have to go back to Cabinet to get more money to deliver on his promises?

Hon STUART NASH: The way the Budget works is Mr Grant Robertson has given me enough money to deliver this year. He has also assured me if I go back next year, he will top me up, and the following year he will also top me up.

Chris Bishop: Why did the Prime Minister say the cost of the extra 1,800 sworn police was $40 million when the actual cost is well over 10 times that amount?

Hon STUART NASH: I didn’t hear the Prime Minister say that at all.

Tourism, Minister—Estimates Advice

12. Hon JACQUI DEAN (National—Waitaki) to the Minister of Tourism: Does he stand by all his statements and actions?

Hon KELVIN DAVIS (Minister of Tourism): The statements I’ve made and the actions I’ve taken regarding the tourism portfolio I stand by, but I do not stand by the comments I made to the member in select committee last week, and I hope the member has accepted my apology.

Hon Jacqui Dean: How did he prepare for the Estimates examination of his tourism portfolio?

Hon KELVIN DAVIS: As any Minister does. Through the experience of being the Minister you actually learn quite a lot about the portfolio. The opening address I gave was substantive. I gave a number of substantive answers to the questions that were in scope. Those questions that were out of scope, I don’t think they should expect substantive answers.

Hon Jacqui Dean: Has he seen any reports describing his performance and inability to answer questions as “vacant”, “complacent”, and “the worst performance of any Minister ever”?

Hon KELVIN DAVIS: I believe those came from a member of her own party and, like I say, where the questions were in scope of the tourism portfolio, I gave substantive answers. Where those questions were out of scope, they shouldn’t expect substantive answers.

Hon Jacqui Dean: Would the Minister support being recalled to the select committee to answer questions?

Hon KELVIN DAVIS: I read the transcript of the Estimates today and I was actually really proud of the answers I gave.

Hon Jacqui Dean: I raise a point of order, Mr Speaker. The Minister didn’t answer my question. I asked him whether he would support being recalled to the select committee to answer questions.

SPEAKER: And I probably should have—I was, I think, being a bit kind to the member. I probably should have ruled it out, because whether or not he is recalled is actually not a matter for him; it’s a matter for the committee.

Rt Hon Winston Peters: Could I ask the Minister: were the questions at the select committee spoken of somewhat akin and similar to the questions being asked in the House today?

SPEAKER: Order! The member has no responsibility for either set of questions.

Budget Debate

Bills

Appropriation (2018/19 Estimates) Bill

Debate resumed from 24 May on the .

Hon CLARE CURRAN (Minister of Broadcasting, Communications and Digital Media): Between 26 February and 4 March this year, 1,000 New Zealanders were asked in a Victoria University public trust survey if they trusted the Government—this Government—to do what is right for New Zealand and 65 percent said yes, which compares with 48 percent in 2016. That is a huge increase.

It’s a huge increase, and it shows that the hallmark of an authentic, purposeful, and forward-thinking Government is its willingness to confront the hard issues—to front them, to establish the facts, to make decisions, to deal with the issues, and to build public confidence and trust. The most recent example of that was this Government’s willingness to confront the issue of methamphetamine residue in State housing from smoking it, and whether there was evidence of health effects of that. Commissioned by the Minister of Housing and Urban Development, Phil Twyford, and delivered by the Chief Science Advisor, it found no evidence of health effects at all—which was confronting the demonisation of people who live in social housing.

What does this Budget do in 2018? It stops the sell-off of State housing. It will commission the build of 6,400 more State homes with 1,400 more emergency housing places. There is $143 million for insulation and heating for low-income home owners, which complements the healthy homes guarantee, and it requires rentals to be warm and healthy to live in—also complementing the winter energy payment scheme for more than 1 million Kiwis and their children.

Another example of a Government willing to confront the hard issues is the Government inquiry into mental health and addiction, confronting the tsunami of mental health issues that has beset our country in recent years. That is not in the Budget, but what is in the Budget—and while we’re waiting to have that inquiry reported to us in October—is $10.5 million over the next three years to pilot an integrated therapies programme for 18- to 25-year-olds, $28 million to better support Canterbury children, and $17 million to expand school-based health services. That is the hallmark of a responsible Government prepared to tackle the hard issues.

Another example is the just transition to a carbon-free economy by 2050. All of this goes to a plan for the transformation of our economy and public services, and how we work together to improve the lives of all New Zealanders. This requires fiscal, social, and environmental responsibility.

Budget 2018 is a foundation Budget which tackles the big issues in housing, in health, and in education to set the foundations for the transformations that are needed going forward. This requires joined-up Government. It requires a modern, agile, and nimble Government that sees digital government as being the key to increasing productivity, higher skills, export growth, and social inclusion. It is a Government that knows that digital transformation will spur innovation and productivity growth; it will transform public services and improve well-being. These things go hand in hand. They go hand in hand with the challenges to jobs and skills, and these are critical challenges that face our country. The challenges to privacy and security, to markets and taxation, to social security systems and public financing—this Government will tackle all of those challenges, which is why we are putting in place a foundation Budget to set the scene to be able to do that.

We recognise that we can’t fix with just one Budget all of the problems that we face. We have said that over and over again. We have been honest with the people of New Zealand about this, and they have listened. It’s why it’s called a foundation Budget. It’s why we are appointing a Chief Technology Officer (CTO). It’s why I have appointed a digital economy and digital inclusion advisory group to bring the good ideas and expertise outside of Government—

Chris Bishop: How’s the CTO going?

Hon CLARE CURRAN: It’s going well. The CTO appointment process is going well, thank you. It’s why I’ve appointed a digital economy and digital inclusion advisory group to bring those good ideas outside of Government closer to Government.

We are deadly serious about the transformation of our economy and our public services. It’s why we are appointing advisory groups to bring the good ideas from outside Government closer to Government. This Government is deadly serious about its agenda, and it knows that there are good ideas outside Government that we need to bring closer to Government. We’ve acknowledged we can’t do it all at once.

We’re being up front and honest with the public, and they are responding. A good example of this—it’s a small example, but it’s quite a stark example—is within the Ministry of Business, Innovation and Employment (MBIE), in the communications policy advice area. Under the previous Government, that part of MBIE was facing cuts. It was facing cuts of 16 full-time equivalents. That advice that would’ve been cut was needed for work on the digital economy, improving digital inclusion, and ensuring resilient communications infrastructure. Instead, what this Government has done under Budget 2018 is provide $6.2 million of new operating funding for policy advice on digital economy, digital inclusion, and improving communications infrastructure issues, such as 5G mobile networks and ultra-fast broadband.

What this Government is doing is being honest with the public, showing that we are deadly serious about the transformations required. We’re deadly serious about investing in the ideas that are required to do it. What the former Government was doing was a mirage. It was saying it was doing things, and it was cutting them. So, therefore, if it was committed to the digital economy, why was it cutting the key advice that was required to build up that area of the economy—the engine room of our economy? So I’d be keen for them to answer that.

I’d just like to touch on another issue, around how this Government is deadly serious about transformation. It’s an issue that’s been heavily neglected by the previous Government, and that is funding for public media. That side of the House does not believe in the value of telling our stories, which is why they froze the funding—

Chris Bishop: Oh, rubbish.

Hon CLARE CURRAN: —for nearly a decade of public media. Rubbish, Mr Bishop? Rubbish that the funding was frozen for nearly a decade? The previous Government’s approach is embarrassing. Internationally we are ranked as one of the lowest in terms of funding for public media. Thankfully, this Government has the vision to start investing properly in public media. It’s going to take time to repair a decade of neglect; we don’t shy away from that challenge. The $15 million allocated in this Budget has been described by the Minister of Finance as a down payment, and I’m excited about what we can do with this funding. The details are being worked through. It won’t be long before you find out how that money will be distributed and New Zealanders can see some real demonstration of the changes ahead.

This is about ensuring that our stories get told. It means focusing on what’s important to us as New Zealanders around the country, rather than what will bring in the most advertising revenue or what has the best clickbait title. This is about who we are as a nation. It’s about investing in telling our stories, something that the former Government froze and took no account of, put no value on, for a decade. That’s the whole point of having a strong public media ecosystem producing content that is relevant to our national identity, investing in quality investigative journalism, and telling stories that would otherwise not be told. That is the hallmark of this Government. That’s something that we can be proud of, and we won’t shy away from dealing with the tough issues.

Hon CHRISTOPHER FINLAYSON (National): It’s a bit rich to be lectured on competency and transparency from Clare Curran, the most secretive and incompetent Minister in this Government, and that really is saying something when you see the line-up of these noddies. I want to make three points about this shabby and pedestrian Budget: first, that the Budget represents a triumph for the bureaucracy over front-line services; secondly, that Māori lost big time; and thirdly, that the only winner has been New Zealand First.

Let me go to the first point, which is that the Budget represents a triumph for the bureaucracy. The previous speaker admitted the amounts of money in her area that were going into the provision of policy advice. I just want to take one small area in relation to arts, culture, and heritage, because I have a personal, as opposed to a political, interest in the arts—a long-time lover of the arts—and if one was to believe what all the luvvies were saying, the advent of the new Minister for Arts, Culture and Heritage and her six or seven Associate Ministers represented the new dawn. Nirvana had come.

Well, I have to tell you, round the country at arts events, a chill has set in because they know that that is not the case—that all the promises have come to nothing. And where has any additional expenditure in arts, culture, and heritage gone to? Well, unbelievably, it’s gone to the bureaucrats: an increase in the provision for money set aside for policy advice and monitoring of funded agencies; incredibly, more money spent on ministerial servicing, notwithstanding that there are about, as I said, four or five Associate Ministers; monitoring of funding agencies; and policy advice. I find that kind of additional expenditure simply incredible.

In the six years I was the Minister for arts, we had very tough economic times, but I could always go to the now Sir Bill English and say that the ballet was in trouble, they needed additional expenditure, and they got help. Front-line services always came first. We were able to do a huge number of things on very little money—like, for example, being country of honour at the Frankfurt Book Fair and having the New Zealand Symphony Orchestra tour through Europe. These are the sorts of things where money should have gone. Instead, it’s gone to policy advice—looking after the bureaucrats, but not the front line. And, in what could only be described as a very pedestrian and mediocre defence in her Budget speech, the Prime Minister said this was the start. But that was simply unacceptable. That’s where the money has gone across the board. The bureaucracy wins out, rather than front-line services.

The second point I want to emphasise is that Māori have lost big time—no more eloquently stated than by John Tamihere, who said there’s a caucus of 13 MPs in the coalition caucus, and, basically, all of them failed, because the expenditure set aside for Te Puni Kōkiri (TPK) has been slashed. And, incredibly, they stand up and recite in a formulaic, generic way, as the previous speaker did, the kinds of expenditure that have gone across the board. But they can’t get away from the fact that funding for TPK has been slashed and that all the promises that were made before the election have turned to ashes.

The particular area where a huge amount of work was done by the previous Government was on reform of Te Ture Whenua Maori, and through shabby deals with various people they opposed that legislation, even though they themselves, in previous manifestos, had promoted reform of Te Ture Whenua Maori. And not only has the bill gone for a skate, but expenditure into the way in which Māori land could become more productive has gone for a skate, as well. I see the Minister of Forestry in the House, who talks grandly and at length—sometimes like a barrage balloon—about promises of planting a billion trees. It will not be achieved in this country unless we can deal with te ture whenua, and nothing has happened there. John Tamihere is so right—their empty words, their promises, come to nothing.

And then we have the only real winner—and this is the third point I want to make—and that is New Zealand First. An American humourist, Will Rogers, once said, “I never tell jokes. I just look at the Government and report the facts.” And he was saying that in the last days of the Hoover administration, but it applies with equal force to this shabby, incompetent coalition Government. It so applies here. Let us look at the facts and we can see what Will Rogers was really talking about—for example, that Tracey Martin and Ron Mark are Ministers, that we have tax breaks for good-looking horses, that we have $191 million for diplomats and massively increased overseas aid at the expense of the poor in New Zealand, that we have the oil and gas industry destroyed in New Zealand so that the Greens will support the Peters waka-jumping legislation.

We have a real need within the precincts of this place for rebuilding part of the Parliament—I refer to the proposals for the office building that was going to be situated behind Parliament. We all know that the old press gallery in the Beehive was a serious earthquake risk and has been yellow-stickered. Every party in the Parliament, bar New Zealand First, was in favour of that sensible development, but it’s been held up by one small, irrelevant party and their small leader. And so what we have is all those proposals put on hold because of one person.

Rt Hon David Carter: Why?

Hon CHRISTOPHER FINLAYSON: We have a regional development fund of—but “Why?”, the Rt Hon David Carter asks. That’s a question, the answer to which will be developed over the next couple of months.

Then we have a regional development fund of $3 billion where there are no criteria, there are no tests—it’s all discretionary. It’s Hundertwasser one day, it’s the Taranaki Cathedral the next, it’s a forest in the central North Island the day after that. We have the three-strikes repeal dead, but the process is a metaphor for the chaos of a Government which has simply no coordination whatsoever.

And who does it come back to? Who is, as it were, the Mephistopheles behind this shabby Faust? Well, we all know who it is. It’s the failed member for Hunua, for Tauranga, and for Northland—our new great acting Prime Minister. He was a failure in the 1990 administration—Jim Bolger had to get rid of him after nine months. He was a failure in the 1996 administration—he walked out before Jenny Shipley could fire him. He was a failure in the last Government, where he needed to be propped up by Margaret Wilson so that he didn’t answer questions in the House. Everything he touches turns to dust, and that is the person who today is acting Prime Minister. It would be funny, it would humorous, if it wasn’t so sad for our beloved country.

So there we have it. Three—only three; there is a litany of them—points that need be made: that the Budget represents a triumph for the bureaucracy, that Māori lost big time, and that the only winners in this exercise have been New Zealand First. And we, who worked so hard over nine years in the toughest of economic times, facing the kinds of challenges we did with, for example, the Christchurch earthquake, produced prudent Budgets, got this country back to sound economic health. We were starting to produce Budget surpluses, and it’s one of those dreadful tragedies that we all see it going to waste because, ultimately, a Faustian deal was done with a very unpleasant and nasty New Zealand First Party, led by a very unpleasant person in Mr Peters, and we are all going to have to suffer the consequences of that grubby little deal.

So that’s the Budget. That’s the way things are. Mr Jones may laugh, but, unfortunately, the laugh is going to be on him in 2020.

JAMIE STRANGE (Labour): It’s an honour to talk about this exciting, progressive Budget, which is the opposite of what we’ve heard from the honourable member Chris Finlayson opposite, who, I recognise, will be hanging up his boots soon. But if he keeps sucking sour grapes, he’ll be out before we know it.

But I’d like to inform the House that I’ve been sleeping very well lately. In fact, I’ve been sleeping very well for the past few weeks because every night before I lay my head on the pillow, I pick up the coalition Budget and I have a read through the Budget and it puts a smile on my face. It warms my heart, and as I lay my head on the pillow, my dreams are bliss. So maybe some of the Opposition members may wish to follow that course of action if they’d like to be a little bit more positive.

Some of the reasons that I have been so excited about this Budget are around housing. Dave Dobbyn once said “Welcome home, from the bottom of our hearts”, singing in one of his songs “Welcome home, from the bottom of our hearts”. This Budget says “Welcome home” to 6,400 families, because we are building 6,400 more State houses. These houses will be for people—they’ll be for families, they’ll be for individuals—who have, for whatever reason, fallen upon difficult times. But we are saying, “Welcome home, see we’ve made a place for you.” This Budget, once again, puts New Zealanders at the heart of our economy. And I am very proud that we’ve got a Minister of Finance, Grant Robertson, who said that it’s the people that matter the most, and this Budget clearly articulates that in a number of areas.

Another area is around education. As the House knows, I’ve had experience in this area, and I’ve been told for years and years that the education sector has been having to do more with less, similar to the health sector. They were told by the previous Government, “You must keep delivering.”, but they weren’t being funded in order to do that. This Budget restores funding to education. There are a lot of challenges in this area, but we’ve made a start. One of the key areas that we’ve made a start in is around teacher supply. We’re employing 1,500 more teachers, and there’s provision for that in this Budget.

Hon Tim Macindoe: Where are they coming from, Jamie?

JAMIE STRANGE: We’ll build hundreds of new, modern classrooms. And to answer the member, “Where are the teachers coming from?”—so this Government will value teachers. What’s happened in the past is teachers have been more like administrators teaching to a test, testing, retesting, and retesting. But we’ve removed national standards so that teachers can once again go back to that wonderful curriculum document we have and to be able to teach from that, and teachers can get on with the job of doing what they’re passionate about, which is teaching young people. So we’re lifting the status of the profession.

Some other ways that we’re going to lift the status of the profession is by special needs. So we will provide ongoing resourcing scheme funding, which is funding for some of our most vulnerable students who require extra support. We’re going to add funding for 1,000 more students. This has been issue for a number of years—the funding in special needs. We have special needs students integrated into the classroom, and that’s wonderful and that’s the way that it needs to be. But the teachers need to be supported in this area, so we will provide that support.

We’ve provided extra funding around tertiary education and around supporting Māori students, with a programme to identify and support talented Māori students and initiatives to lift capability for delivering high-quality Te Reo Māori education.

So I’ve talked about housing, I’ve talked about education, and, in the last 30 seconds, I’d like to talk about health. The health sector has struggled under the previous Government—everybody in society will admit that. I met with 50 nurses from New Zealand’s largest hospital, Waikato Hospital, about a year ago, and they were holding back tears as they told me that patients were sleeping in the hallways on mattresses because they were 400 beds short. But we’ve started to address this issue, and I’m proud of this Budget. Thank you.

JO LUXTON (Labour): I’m honoured to take my first call in the Budget debate this afternoon. I commend—absolutely commend—our Minister of Finance, the Hon Grant Robertson, for this fabulous Budget. This is a positive, future-focused, and outcomes-focused Budget, and it lays the fundamental foundations for the future of this country, and I am really excited by that. This is a reassuring Budget that focuses on strengthening the fundamental pillars of this Government’s work programme, from rebuilding critical public services, promoting economic development, and supporting the regions to taking action in child poverty, housing, and homelessness. This Budget values these foundations and their place in providing a secure, prosperous, and reassuring future for New Zealand.

Today, I want to focus my speech on education, which is something that I am incredibly passionate about. With that, I would also like to commend our Minister of Education, the Hon Chris Hipkins, for the hard work and advocacy he has put into Budget 2018.

Budget 2018 recognises the importance of ensuring every child and young person gets the best education. In fact, this coalition Government’s three-year work programme for education places a high priority on lifting and sustaining achievement for every child and young person through championing a high-quality public education system. Despite the rhetoric of those on the Opposition benches, Budget 2018 delivers a funding boost for our education system that it not only needs but deserves.

Firstly, I would like to pay particular attention to the increase in funding in building new schools and hundreds of additional classrooms. With this expected to take place in 2018-19 and 2020-21, there’ll be a capital investment of $394.9 million. Whilst we are having to play catch-up, this vital piece of investment aims to bridge the disconnect between the spaces in which our children and young people learn, and lifting and sustaining achievement.

What is even more exciting is this coalition Government’s consideration to accelerating the Canterbury recovery and the Christchurch Schools Rebuild programme. Budget 2018 delivers $62 million in new capital investment for this programme, with children and young people in Christchurch also being able to benefit from a share of increased funding for behavioural and learning support in early childhood services, teacher-aides, and specialist services for high-needs children. We are committed to addressing the increasing demand placed on each of these areas.

Secondly, another area that I am hugely passionate about is the area of learning support. I am excited by our investment of $272.8 million, which, might I add, is more than triple the operational spending compared to what was in the previous Budget. But what I am mostly excited by is the fact that we are now delivering for students who have been severely and poorly served by an underfunded system. If that wasn’t enough, over the next four years, Budget 2018 will provide operating funding in the learning support space for the Ongoing Resourcing Scheme. This will receive an extra $133.5 million for about 1,000 additional students. Sensory schools and New Zealand Sign Language will receive an extra $30.2 million to support about 2,900 deaf and hard-of-hearing students and approximately 1,500 low-vision students.

I want to talk about our investment in supporting Māori students to succeed as Māori and, in doing so, tautoko the work that Minister Davis is leading to make achievement a priority in education. At the very heart and absolute core of our approach to lifting and sustaining Māori achievement is our strong belief that Māori students deserve to succeed as Māori.

What I find particularly heartening from Budget 2018 for Māori tamariki and rangatahi is the $1 million of new operating funding which will be used to investigate how we can better support Māori students to achieve as Māori in English and medium-term settings.

I am proud of Budget 2018 because it provides the investment in education that is necessary to support our education system so that it brings out the best in every child and young person. I’m happy for this coalition Government to be judged, as the Prime Minister has said.

Hon MARK MITCHELL (National—Rodney): It’s a pleasure to stand and take a call on this, the Budget debate. I have to acknowledge the previous speaker Jamie Strange and his passion for the Budget—telling us all that he takes it to bed as bedtime reading. That’s taking it to a new level of commitment, so well done.

I want to take a call, first of all, on defence—and I’m conscious of the fact I’ve only got 10 minutes and I’ve actually got two important portfolios, one being defence and one being justice. I want to address defence first, and first of all acknowledge all our Defence Force personnel, all the personnel in the Ministry of Defence, and the work that they do. No greater privilege have I ever had than actually being their Minister, prior to our coming into Opposition.

I want to address some issues with the defence Minister and just say that when I came into Opposition, I made it very clear to him and I said, “I will support you in making sure that you advance some critically important investment that the Defence Force needs around capability.”

That relates directly to the replacement of the P3 Orion, which has been an incredible and faithful workhorse for our air force and defence forces and country over 50-plus years. But it’s no longer possible to do upgrades on them, and, actually, they just need to be replaced.

We received a letter from the American Congress saying it was last orders for the P8 Poseidon under the military sales programme. The P8 Poseidon, after going through our procurement process with the Ministry of Defence—led by Mike Yardley, who’s done an outstanding job—emerged, without a doubt, as our preferred option in terms of the P3 replacement. It would give us an enhanced capability. It would allow us to do more and extend our capability beyond what the P3 could do. It would mean that we would close our capability gap with our partners, and particularly our Five Eyes partners and coalition partners. And it would actually provide that interoperability that we need too when our personnel are deploying overseas.

This was a critically important acquisition, and I knew it was going to be tough, because I was working it through the process myself. I’d had meetings with the Prime Minister, I had meetings with the finance Minister, and I had meetings with Treasury to find out how we could actually book the cost of this, because it’s a big expense for the Government. But I was committed to it, and I was determined that we were going to make sure that we procured the P8 Poseidon.

Part of that process also meant getting support from our partners, and the US Secretary of Defense, Jim Mattis, was extremely supportive in terms of working with us and working with Mike Yardley and the team at the Ministry of Defence to be able to smooth out the payment schedule. They also gave us an extension on the decision as well, which is important, because they’re committed to us, and they can see the importance of us having this type of equipment in the future as well.

But what I’ve been very disappointed about is that it appears to have stalled. I can’t get any clear information about whether or not the Minister has taken a Cabinet paper to Cabinet. We’re now nine months into the new administration; this should have been done right at the front end. Actually, now it’s starting to affect the morale within the New Zealand Defence Force—not just the procurement, actually, of the P8 Poseidon but also the literal capability, and the decision has been delayed on that as well. It just creates uncertainty for people that join the defence forces with an expectation that they will be supported by the Government and an expectation that, actually, they will be given the best-possible equipment that, of course, we can afford as a small nation. These things have stalled.

I was really concerned because during the election campaign, when Grant Robertson was asked where he would find savings, the only area he really highlighted was defence. I’m fearful that that is going to come to pass, because during his Budget debate speech, the only thing that he could point to—the only thing that he could highlight—in terms of investment into our New Zealand defence forces was $1 million going into the Limited Service Volunteers programme. Now, I’m a huge supporter of that programme. It’s very important. The staff on it, whether it be social development or defence, do an outstanding job, and I just want to pay tribute and acknowledge them—but $1 million? If the finance Minister can only stand in this House and talk about $1 million going into the Limited Services Volunteers programme—which is not actually a core business of defence at all. It’s a very important programme that defence support and run alongside social development. It’s not one of their core objectives or part of their core business, and that’s all that the Minister could get up and talk about.

So I just want to put it out there and say that we were very disappointed with this year’s Budget. The only real expenditure was around operational costs, and that’s the growing operational costs that any Government needs to meet. That’s, basically, all that’s being done, and this is from a Minister that said before coming into Parliament that they should be moving towards 2 percent of GDP and that there should be a reinstatement of a strike capability and a heavy investment into personnel, property, and equipment. That is not happening. We are not seeing that at all in the defence portfolio.

I just want to come quickly to justice. This week, to me, has been astounding. We had our Estimates hearing yesterday on justice, and it’s become very, very clear that the incoming Minister of Justice just simply does not have a plan. Now, I found it extraordinary yesterday in the Estimates hearing that he was attacked by one of his own MPs—a Labour MP—about the lack of investment that’s going into community law centres. I mean, there is a 0.3 percent increase in funding for the justice sector when they’re talking about doing massive justice reforms. We’ve seen, very early on, the Minister, yesterday, fail—fail at the first hurdle—at taking the first part of the reform, which he believes deeply in. He takes it through a Cabinet committee process. It’s obvious that he had support from the coalition parties, and then on the day of the Cabinet paper being taken to Cabinet, there is a meeting with the Rt Hon Winston Peters, and he has to cancel the process, withdraw the paper, and withdraw the repeal of the three-strikes legislation.

We were happy about that, because in the last three weeks, you would’ve seen our leader, the Hon Simon Bridges, run a passionate campaign around preventing that three-strikes legislation being repealed. There’s a simple reason for this, and I’m going to give an example. There was an offender—he was arrested in Hawke’s Bay—who broke into a home and sexually assaulted a lady in her 80s. He then committed a home invasion with the intent of sexually assaulting a woman in her 70s. Had they been successful in repealing the three-strikes legislation, that offender would have been eligible for bail and been back out in the community in January of this year. With the three-strikes legislation remaining in place, he’s not eligible for bail until 2026. That’s why we were so passionate about running the sort of campaign that you saw that, effectively, in the end, saw New Zealand First bend to that pressure and come out and say that they would not support the repeal of the three-strikes legislation.

The thing that really came home to me yesterday in our Estimates hearing was this: the justice Minister doesn’t have a plan. There is no new funding in terms of reducing crime. There is a confused set of policies that are emerging from corrections, where you’ve got a corrections Minister that seems to be paralysed in terms of indecision, and where there’s a growing need for capacity within corrections and there’s a policy that’s come out around 600 pop-up beds. That’s not going to meet the need. You’ve got a justice Minister that’s talking about repealing the three-strikes legislation and diluting our bail laws so that we’re letting out more dangerous, violent, recidivist offenders—because that’s who’s in our prisons. It’s not low-level—not shoplifters, not people who are found with a cannabis cigarette. The offenders—the people who are in our jails—are ones that have got multiple convictions and are normally violent.

Then you’ve got a police Minister that’s standing here in terms of the justice portfolio and saying, “We’re going to recruit 1,800 more police officers.” but can’t actually define what a front-line police officer is. He is telling us that it’s someone that sits in a back office doing a forensic accounting role—and I’m not diminishing the importance of that. That’s an important role, but I’m telling you right now that they’re not capable of deploying to someone’s house when they’ve got someone trying to break in through the back door for a home invasion. We’ve had no clarity around how those police officers are going to be recruited and trained.

So all that we’re seeing coming out of the justice sector at the moment is a confused range of policies that are counterintuitive and work against one another, and that probably highlights very clearly in the House today why you saw the justice Minister and the New Zealand First justice spokesman unable to agree in the House.

TAMATI COFFEY (Labour—Waiariki): Tēnā koe e Te Māngai o tēnei Whare, rau rangatira mā, te whānau whānui o Aotearoa, te hunga whakarongo.

[Thank you, Madam Deputy Speaker, distinguished colleagues, New Zealanders, and people who are tuned in.]

Tēnā koutou, tēnā koutou, kia ora anō tātou katoa. This is actually the first Budget that I’ve got the pleasure of being able to stand and talk to, and I do that with enthusiasm and passion because I’ve been fortunate enough to be able to have come off two weeks of recess where I’ve been out there, pounding the pavements, talking to voters in the Waiariki about exactly what the Budget is. I can understand there’s a wee bit of confusion out there, especially because they hear one message from our side, they hear another message from that side, and somewhere in the middle there, they get a little confused. So there’s nothing like a little bit of kanohi ki te kanohi to actually iron out some of those things and to talk about the things that are making a big impact for Māori, and this Budget delivers in that.

They were pleased to see me because there’s been a severe lack of engagement over the last, say, nine years out there, especially with regards to how we—the Government—are spending their taxpayer dollars. So I was pleased to get out there and talk about the fact that we, as the Government, are getting back to basics—real basics. We’re talking about housing, we’re talking about jobs, we’re talking about education, and we’re talking about health. Because of that severe lack of investment in the last nine years, we have come in on a very strong platform. On the campaign trail, people were looking for us to actually deliver on outcomes for Māori, and that’s exactly what we’ve done.

You see, the previous Government oversaw a housing and homelessness crisis. Interestingly enough, they are not prepared to admit that it was a crisis. They’re more likely to refer to it as a wee bit of growing pains and a bit of a challenge that we needed to sort out. They thought the answer to the problem was that they would sell off our State houses. They thought that was a really good idea. They thought they would turn our economy from one where we looked after each other to one where we just looked after the few at the top.

So, because of all of those things, what we did oversee was thousands of tamariki, both Māori and Pākehā, living in unacceptable levels of poverty. For that reason, the public gave their votes to an alternative, and that is us. That is the Government of today. That is us: the Labour Party, with our coalition partner, New Zealand First, and with our confidence and supply partners, the Green Party of Aotearoa. We campaigned on a new direction for New Zealanders, a new direction for Māori, and a new direction for the leadership of New Zealand too, of which our Prime Minister, Jacinda Ardern, is doing a stunning job. Although she’s off to do a few things at the moment—and, you know, we’ve all been on that journey, too—she’s made it very clear that she wants this to be a Government that brings back manaakitanga and kaitiakitanga, and that’s exactly what this Budget does.

So let’s break it down. These are the things that I went out there and I talked about over the last couple of weeks at the rugby clubs, at the marae—talking to our whānau about what we’re doing. There is $2 billion worth of investment over four years for the future of Māori. This year’s Budget will deliver for our people, and, as I’ve said over the last few weeks, this is really resonating with our voters out there. This Budget continues to improve the lives of our whānau. It continues to strengthen our communities around Aotearoa while rebuilding our core public services—things like health, things like education—and all to provide a better future for our whānau and for our tamariki. We have allocated $58.5 million for Māori-specific funding, with whānau development at the core, which is going to improve outcomes for Māori.

We’re going to provide a boost to Māori whānau incomes, with $1.2 billion allocated in the Families Package. Now, when I went out there and I talked about the Families Package, you’d be surprised just how many people had forgotten about it. It was released in December. We are paying for it this year in the Budget, but it was worthy of slowing it down and really talking to our whānau out there about what exactly the Families Package was. So I got great pleasure in sharing with them that 384,000 families were going to be lifted out of poverty with a hand up and a handout of $75 a week, on average.

We’re talking about extending paid parental leave—at the moment, 22 weeks this July, and 26 weeks that’ll be lifted to by July 2020. The Best Start payments, as well, were also a lift for all of those families out there, especially grandparents, who knew just how much the struggle was for their children to be able to bring kids up in this world. While house prices have gone through the roof, wages haven’t been keeping up, so there’s been a lot of concern about the impact of that on families. So, you can imagine, grandparents were stoked to be able to hear that this Government was actually going to be helping out our new families. They say that if you take care of baby in the first 1,000 days of life, you’re setting that baby up for a future—a strong future—and that’s exactly what that Best Start payment is geared towards.

I would love to slow down just for a moment and talk about the winter energy payment, because you would be surprised just how many people didn’t know about it. When I went out there and I spoke about it, they had no idea, so I got great pleasure in standing there and talking to them about the winter energy payment, which is $450 over the winter to help out with the cost of heating your house. Koroua, kuia, pakeke were all very excited about this because, as we all know, we’ve heard stories over the years about some of our elder members of society not actually wanting to turn the heater on because it’s a little bit too expensive. So what do they do? They sit in their very cold houses, they put on a jacket, they go and put on a scarf, maybe even a beanie as well, just to try and keep themselves warm and to save on the cost of the heating. Well, I got great pleasure in standing there and telling some of the older members of our society, of our community, that, actually, this year the Government is going to help them out with a winter energy payment so they can be warm.

More than $700 million in funding in this Budget will have a high impact on Māori households around the country. So we are all about rebuilding core public services. We are all about manaakitanga and bringing that back to our people. That $2 billion of investment is on top of the $42 billion in spending over the next five years to rebuild and properly fund our infrastructure and our public services. Now, to do that, we’ve got to keep our country strong. We’ve got to be ready for the future challenges that our tamariki, our mokopuna, are going to face, and that’s very important—so many things that we could rave about in this Budget.

I also got the pleasure of having meetings back home in Rotorua to talk to whānau there about what we’re doing in terms of housing those people that don’t have any houses. Our homelessness crisis is real. Rotorua boasts the statistic, sadly, of the second-highest rate of homelessness in the whole of New Zealand. It’s not something that our people are very proud of back home, so I got great pleasure in talking about the expansion of the Housing First policy and what that’s going to do to be able to enable our people that have no houses—that have, for whatever reason, found themselves without a house over this very cold winter. We’re going to start finding some solutions for them. We’re going to build long-term solutions, and not just short-term, band-aid solutions to the homelessness problem. We’ve actually got the goal of ending homelessness—what an admirable goal that is. How about that? We’re aiming to end homelessness and we’re trying to do that through our Housing First programme, so I was stoked to be able to go back and tell the community that we have a goal, and it is to end homelessness.

I was also quite happy to go back home and to talk about the Crown-Māori relations portfolio, which has reared its head in this Budget for the first time, and I’m proud of that. I’ve been to a couple of meetings—one in Rotorua, one in Taupō—about the Crown-Māori relationship, and lots of people are highly engaged in this particular portfolio, looking for opportunities, trying to understand what our steer is when it comes to Crown-Māori relations. There are a few themes that kept coming through quite strongly, one being the relationship that Māori, that iwi, have with their local council. That was something that kept coming up again and again and again. I look forward, actually, to our Minister for Crown/Māori Relations feeding back to us, giving us the report back on what exactly the feedback has been around the country and what we can do going forward, especially as a Government.

One more thing that I’d like to tick off just before I wrap up is the excitement that people had when I told them that this Government was going to raise the minimum wage—that we actually have taken it up to $16.50 an hour, which is going to make 28,000 Māori better off. We’re looking to increase that even more over the coming years, and I think that that is a signal that, actually, we’re doing a good job. We’re taking care of our people. We are indeed bringing manaakitanga back to our Government.

HAMISH WALKER (National—Clutha-Southland): I just want to start by acknowledging Sir Bill English. It’s the first day we’ve rejoined, come back to Parliament, after Bill was knighted as a Sir. Bill, being the previous MP for Clutha-Southland, gave me some reasonably good advice. He said, “Hamish, listen 80 percent of the time; talk 20 percent of the time.”—something the Government on the other side there could learn.

I just want to talk about the Budget debate. I want to talk about two things in particular. One is what is happening in health services in my electorate, Clutha-Southland, which is a wonderful electorate. It’s got roughly 2 percent of the population, yet we produce close to 15 percent of the country’s GDP, and judging by this Budget, this Government simply doesn’t care about the regions. Mr Jones over there—of your billion-dollar growth fund, $62 million has gone to Northland; the remaining $42 million has gone to the rest of New Zealand. In Clutha-Southland, we have got $250,000 out of a total $104 million that’s been allocated so far, and, Mr King, up your way it’s $62 million.

I just want to talk about this Government’s campaign messaging last year: “We are going to increase health and we are going to look after rural New Zealand.” If we talk about health, over the next four years there’s been an increase of $3.2 billion; over the next year, roughly $782 million. Last year, National increased health by just under $900 million, and this year we were planning to by around about $932 million. So an increase this year of $782 million compared to what we were planning—$932 million—doesn’t really stack up with the messaging last year, does it? Over the next four years, an increase of $3.2 billion; National had pledged to increase it by $3.9 billion. Why is that? The man I mentioned at the start of my speech, Sir Bill English—in 2008, we were hit by a huge global financial crisis, and we had the Christchurch earthquake. He managed to steer us through those tough times without cutting any services.

If we take Clutha-Southland, I just want to talk about our services just for a couple of moments. Let’s look at health services, for example. Several months ago it started for me after I saw the Minister of Health, Dr David Clark. He appointed a Dunedin Hospital rebuild advisory panel. What do you know? There’s no one from Southland and rural Otago on that panel; they’re all from Dunedin, and they have North Island consultants. That’s when it started to go wrong.

Then I sort of started to question: “Why doesn’t this Government care about the region? Why doesn’t it care about Clutha-Southland?” And what do you know? All of a sudden the Lumsden maternity hospital, which is bang-smack in the middle of Southland, is facing, right now—it’s been a birthing unit for decades, a very successful birthing unit—being downgraded. Why? Because this Government doesn’t give a toss about the regions.

For anyone that doesn’t know Southland, Lumsden is literally the heart—it’s right in the middle. Hundreds of babies have been born there, and this is like the glue of the community. If you downgrade this wonderful facility, it’s like ripping the heart out of Clutha-Southland.

I was there six or seven weeks ago, on a Friday afternoon, meeting a lovely couple from Queenstown. They’re in their mid-20s. They were very excited. She gave birth that morning. She drove from Queenstown, driving through to Invercargill—a 2- to 2½-hour drive—to give birth. Anyone that knows the area, Five Rivers—and baby had started to come—knows that Invercargill from there is about an hour and a half. Luckily, they got 15, 20 minutes down the road. They made it to Lumsden and, within five minutes, baby was born. Now, if that facility wasn’t there, this baby, without a doubt, would have been born on the side of the road.

I just want to highlight a letter, and I just want to highlight the good works. People like Sarah Stokes, who’s a midwife there, has been doing an amazing job, along with the board of directors. They are fighting. I started a petition; we had 5,100 signatures presented to the Minister of Health. We had a protest march through the streets of Lumsden; we had 300 or 400 people turn up. This is what the centre means to the people of Clutha-Southland. So every day for the last month, the directors have been sending emails to the Prime Minister and phoning her office, and she’s not even acknowledging them.

I just want to read out a letter from them: “Dear Jacinda, I am writing to you with regards to the proposal which has been put forward to downgrade the Lumsden Maternity Centre. If Lumsden Maternity Centre is closed I believe there is a huge risk that babies will be born on the side of the road. I’ve been fortunate enough to be able to use the facility for my births, and six weeks ago I gave birth to our second son at Lumsden following a quick labour. We left our house at 7.27 p.m., and I drove towards Lumsden. With favourable road conditions our estimated travel time was 40 minutes. My husband had tried to time my contractions during the drive, but he gave up as we had travelled five kilometres and he had counted six contractions, all with less than a minute between the next one starting. An un-forecast tail wind reduced our travel time to 33 minutes, and when we arrived at Lumsden there was nothing to do but give a wee push, and our beautiful baby was born at 8.15 p.m.

“As my first birth was also very quick, I’d been warned to make haste the second time round, but I really struggle to see how I could have left for a birthing facility any earlier than I did, and had Lumsden not been available, there is every possibility that I would have had to deliver my beautiful baby on the floor of my husband’s dirty Hilux somewhere in rural northern Southland. Our closest staffed ambulance is 45 minutes’ drive away. As I haemorrhaged during the birth of my first child, there is every chance that I could have been left to deliver on the side of the road and bleed out while I waited for emergency services to attend me. Closing Lumsden Maternity Centre will achieve nothing but endanger the lives of our most vulnerable for a grand total sum of $370,000 per annum. I’m disappointed that the Minister of Health is not concerned about this matter and that requests to meet with trustees of the Lumsden Maternity Centre have been declined.”

This is just absolutely disgraceful. What this Government is doing is basically degrading women to give birth on the side of the road.

While we’re talking about health services in my electorate, just over the border in Waitaki, Jacquie Dean’s electorate, is the Roxburgh children’s camp. Now, if you care about the most vulnerable children—some of these children have been sexually abused, physically abused, emotionally abused. This is a wonderful centre. I spoke to a boy three or four weeks ago, who is now 20 or 21, and he said to me that the reason why he’s still here is the fact that he got to use that centre numerous times. Before using that centre, he had no confidence, he couldn’t make friends. After he used the centre, it was just enough to give him a wee bit of confidence.

Now, the fact that I have a problem with this is that just a few months later, along came the rescue helicopter base bid. A couple of months ago, it was said to us, “Well, if a mother’s giving birth in Te Ānau, they can just catch the chopper from Te Ānau to Invercargill.” What do you know? The Te Ānau rescue helicopter base is now on the chopping block as well. If you truly care about rural New Zealand, don’t—

ASSISTANT SPEAKER (Poto Williams): Order! Don’t bring me into the debate.

HAMISH WALKER: Sorry.

ASSISTANT SPEAKER (Poto Williams): You were going very well.

HAMISH WALKER: Oh, thank you. If you truly care about rural New Zealand, now is not the time to cut health services such as the Te Ānau rescue helicopter base, the Lumsden maternity hospital, and the Roxburgh children’s camp, which looks after the most vulnerable. We saw $600,000 be gutted just a few months ago from the Rural Health Alliance, yet they’re quite happy to go and give $2.8 billion to some of our most fortunate people—those are students who are so fortunate they get to go and study at university. Now, I did the maths: $2.8 billion for students would keep, roughly, 2,100 Lumsden maternity centres home. So, at the moment, it’s all a bit much for my electorate.

The people of Clutha-Southland are actually wondering what they need to do to get a meeting with the Minister of Health or actually be acknowledged by people like the Prime Minister. It’s an absolute disgrace. I hope the Government take a look at themselves in the mirror. If you rip the heart out of Lumsden by degrading the Lumsden maternity hospital, you will see mothers give birth on the side of the road.

KIERAN McANULTY (Labour): What an absolute privilege it is to stand here and talk about—

Hon Grant Robertson: Well, it’s a privilege to listen to you.

KIERAN McANULTY: Thank you, the Hon Grant Robertson. I appreciate the feedback only three seconds into my speech. This is a marvellous Budget. This is a Budget that is typical of a first-term Labour Government that sets up the foundations for nine, 12, 18 years of success because, unlike the previous Government, we don’t waste the opportunities that are in front of us. We don’t inflict nine years of neglect on to the nation. We take a responsible approach to setting up appropriations into key areas that are important to this country.

Now, we have just had two weeks’ recess. What that means, of course, for those watching at home, is that’s two weeks away from Parliament. I can assure the good people of this nation it is not a two-week break.

What you would think, if we were leading up to a two-week recess, is that the National MPs in this House would use that opportunity to actually listen to people’s feedback on this Budget. They would test the rhetoric that they applied, leading up to that break, in response to the Budget to see if it rang true. They had an opportunity to talk to people, to get some feedback, and to then come back, buoyed with passion, excited about what they had heard back from the people that they represent, and what have we heard today? Nothing. We have had deflated speeches from bored Opposition members who have run out of ideas. We have seen members from that side of the House who really should be holding this Government to account and, instead, we have heard people that are just making up the 10 minutes because they’ve got a job to do, and, in fact, it seemed to me, anyway, that they did not believe what they were saying.

Now, going out and about in the last two weeks in the Wairarapa, I’ve heard some very positive feedback about this Budget, and that doesn’t reflect the speech that we’ve just seen from the good member for Clutha-Southland. I was down in Clutha-Southland recently, at the Century Farm awards with the great Minister the Hon Shane Jones, and I ask—

Hon Shane Jones: Yes, provincial champion.

KIERAN McANULTY: That’s right—that’s right. It is a great honour, as perhaps the second citizen of the regions, to acknowledge the first citizen of the regions and the impact that he is having in our regional and rural areas. So there we were down in Lawrence, the heart of National country. You’d think that having two New Zealand First MPs, the Hon Shane Jones and Mark Patterson—the local boy—and myself go down there, as three MPs from the Government—

ASSISTANT SPEAKER (Poto Williams): Order! I wouldn’t refer to a member in that way.

KIERAN McANULTY: Oh, I assure you he wouldn’t mind, but I take it on board.

ASSISTANT SPEAKER (Poto Williams): No, well, I mind.

KIERAN McANULTY: I appreciate that. I apologise.

ASSISTANT SPEAKER (Poto Williams): Thank you.

KIERAN McANULTY: “The locally based MP”, I should have said. You’d think that having three representatives from the Government go to the heart of National Party territory would be a prime opportunity for these people—all of whom, pretty much, were farmers—to come and talk to the representatives of the Government and tell them about the Budget. Did we hear the negativity that the National Party MPs have been outlining today? No, we did not. What we heard was that the Budget that Grant Robertson brought forward and produced to this House did not live up to the fears—the fearmongering—that the National Party MPs on the other side of the House laid down in preparation for the Budget. It’s set the foundation for a strong economy, because, of course—

Hon Dr Nick Smith: How’s business confidence?

KIERAN McANULTY: I appreciate the contribution from the soon-to-be former MP for Nelson—thank you very much. That MP must be very disappointed to see the results from Northcote. That MP must be very disappointed to see the results from Northcote, because what the Northcote result said is that that member cannot bring about a by-election because the National Party can no longer stand on their record of nine years. If there was a swing of 4 percent like there was in Northcote, we would have a new MP. So, as sorry as I am to say it, it looks like we’ll be looking at Dr Nick Smith for at least two years longer.

What I was about to say was about the strength of the economy. It is indeed forecast to continue to grow through to 2022. There is a surplus this year of $3.1 billion, forecast to increase to $7.3 billion in 2021-22. These are the things that matter to people in rural New Zealand, and that is why people in Lawrence and people in Wairarapa are not mirroring what we’re hearing from the National side of the House today.

I went to the Great Eketahuna Cheese Festival of a couple of weeks ago—my tūrangawaewae. The people there are true National Party supporters—except for the McAnulty family, of course—who took the opportunity to come to see the Hon Damien O’Connor and congratulate him on his approach to Mycoplasma bovis and to congratulate this Government on its commitment in the Budget of $85 million, plus a contingency to cover the cost if we chose to go for eradication, which, of course, we have. This is a decision that has been celebrated in rural New Zealand. It is yet another example of this Government investing in the things that are important, not only to this country but to rural and regional New Zealand as well.

Now New Zealanders have a choice. They can listen to the contributions of the member for Clutha-Southland and fall into the trap of assuming that the Labour Government is not committed to rural New Zealand. I could not disagree more. This Government is deeply committed to the benefit of rural New Zealand, and you only need to look at the Provincial Growth Fund to see why, with $1 billion per year committed to encouraging economic growth in the regions.

We could have done what the previous Government did in the last nine years—we could have left this to the market. We could have—as Simon Bridges has said very recently—believed in the trickle-down effect, but of course this side of the House and the majority of the voters in the country know that the trickle-down effect lost any credibility 20 years ago. You only need to travel around rural New Zealand and see the lack of opportunities leading into the last election for our young people living there, the struggling regional manufacturing base, and the threat through underfunding of biosecurity and a lack of investment in the regions to see that the trickle-down effect—the “leave it alone and she’ll be right” approach of the National Government—failed regional New Zealand.

But now, they have a Government that is committed to making sure that economic development, economic growth, and the benefits of economic growth are distributed fairly, not just in the cities—not just in Auckland, Wellington, or Christchurch—but where the heart of the economy lies, which is in our rural areas, in places like Waipukurau and Waipawa in Central Hawke’s Bay, Dannevirke and Pahīatua in Tararua, and, of course, the beautiful and the mighty Wairarapa Valley. It’s areas like this that need the support of Government, and, of course, it is a founding principle of the Labour Party—and a principle that our coalition partners in New Zealand First and our confidence and supply partners in the Green Party adhere to as well—that the Government has a responsibility to ensure that the economic activity benefits everyone, regardless of who you are, who your parents are, or where you live. It is vitally important that economic benefits flow down to our regions and that just like when my parents grew up in Eketāhuna or when my grandparents grew up in the wider Wairarapa, the opportunities that were available to them continue to be available to the next generation and the generation after that.

It wasn’t that long ago that leading economists in this country predicted zombie towns in proud areas like Whanganui. With Budgets like this one, delivered by this Labour coalition Government, the regions can actually have faith that in this House, there is a Government that’s going to put its money where its mouth is and actually look after these regions, look after the people that live there, and make sure that there are opportunities there, so that we are indeed a Government for all New Zealand, not just for big business and not just for those who live in the big urban areas.

This is a foundation Budget that’s going to set the scene by reinvesting in health, education, and housing across the board. This is setting the scene for a very long and successful tenure of a Labour-led Government. I’m very proud to speak in support of the Budget.

ASSISTANT SPEAKER (Poto Williams): Before I call the member, I just need to advise you that this will be a shortened call to allow the Minister of Finance his reply.

TODD MULLER (National—Bay of Plenty): Thank you, Madam Assistant Speaker. I just want to reflect, in my comments this afternoon, on some reflections that I had when I listened to the finance Minister give the speech that kicked this all off—and now, of course, I have to sit down and listen to him follow me—a few weeks ago. The thing that struck me when I listened to him is how much it was like we were still back in 1992. You see, I met this man 25 years ago, when he was a student politician. He was a student politician in Otago and I was in Waikato, and he was as likeable then as he is now—I’ll give him that credit—but back then, the two of us used to hold the view that education, above all else, was a right and not a privilege. When we used to reflect on that as student presidents, I would test him with: “And so does this apply to the wider needs of society?” He’d say, “Absolutely. I come from a philosophy that every single issue in society, the Government can solve. I come from a philosophy that whenever there is a need in society, Government will step up and provide the solution.”

Twenty-five years on, I would like to think that over that period—perhaps through the experience of being out of Government, being out of the bureaucracy—some of my perspectives in life have matured, but I am sad to say, listening to this Minister talk to this Government, that they haven’t in his case, because when the Minister stood up and put this Budget on the ground for us to see, you could see that there was a philosophy, above all else, that everything that they had talked to as a crisis in this country would be acknowledged with just a little bit of money. There was no plan, no coherence whatsoever.

And what was the very first thing that this former student president did when he had the opportunity to frame up a vision for this country? It was, “You know what? I want to go back to the Grant Robertson that I still I am at heart, the Grant Robertson of 1992, which is free education. Despite the official advice that it would not make a difference in terms of accessibility for New Zealanders, I still want to do it.”—$2.8 billion over four years, and the advice is that, actually, there’ll be less students enrolled this year than the last three.

There is no coherence—there is no coherence. There is no plan. It is a little bit of cash for everybody to try and keep a sense of momentum. There is no expectation around the investment on behalf of taxpayers of New Zealand—$80 billion of expense. There is no expectation around delivery, around outcome, or around actually making a difference for the money that you spend, because for the Labour Party, success is how much you spend, not the difference you make in people’s lives.

There are no Better Public Services targets. The previous Government was forensic on behalf of the taxpayer in saying, “We will spend this money judiciously. You have earned it, we have taxed it; we will spend it judiciously.” We will stand and fall on the record of a Government that delivers for people. We will not stand up and say “Vote for us because we know how to spend.”, because the function of success in a modern economy is not how well you spend; it is the difference you make for people, and that requires a coherent plan.

There was no coherent plan in this Budget—none at all. It was tied together by a whole lot of spending initiatives; their only coherence was they were in the same document. There was absolutely no strategic thought into how to drive an economy to be more productive, to deliver more for New Zealand, and, more importantly, to stand behind the specifics of “We will spend this money and we will make a difference for you, and you can hold us to account on how we have fundamentally changed your families’ lives.” I do not think that the test of this Budget around making a difference has been anywhere near passed. In fact, it is a failure when you consider the legacy of economic performance that that Government, that finance Minister, inherited. In my opinion, it’s a disgrace, it is a failure of leadership and of strategic coherence, and it deserves the reaction that it is getting from New Zealand. Sir, I don’t know which community you’re listening to when you’re testing this Budget—

ASSISTANT SPEAKER (Poto Williams): Order! I apologise to the member; your time has expired.

Hon GRANT ROBERTSON (Minister of Finance): It is a great privilege to stand here today, at the end of this Budget debate, and reflect not only on the contributions that we’ve heard in here but indeed on the reaction in the wider community. And I do want to thank all members of the House for their contributions to the Budget debate. It’s an important occasion for members of this House to be able to express their values and how those values turn into action. Mr Muller and I have, indeed, known each other for the best part of 25 years, and I’ll give Mr Muller this: he’s always been a “soft Tory”. He’s always been someone who’s actually got a kind enough heart, but he just can’t quite bring himself to believe that the privilege of being in Government offers the opportunity for the Government to be a partner in the economy and a partner in society.

As I go around the country, and I’ve done about 14 public meetings about this Budget, the message that I’m getting back from communities as diverse as the Pasifika community, local government representatives, and business representatives is that they are welcoming a Government that actually wants to listen—a Government that sits down and engages with them about what is possible for our communities today. After nine long years of being told what to do by the previous Government but not being given the support to do it, there is now finally a Government in place that will listen and that will partner with our communities, and I am very proud and privileged to have delivered the Budget that begins that work.

Can I say at the outset that I want to acknowledge, as I did in the Budget speech, the support of our coalition and confidence and supply partners. I want to acknowledge that in a Government like this, we are not always going to always agree on every single detail of what comes in front of us. But the three parties that make up this Government believe in one thing for sure: we can do so much better than what we have seen for the last nine years. We are a better country than one that leaves so many people out and so many people behind, be those the people who have found themselves homeless or be those the regions of New Zealand who have found themselves neglected by the previous Government. We know we can be better, and this Budget is the foundation for a better, fairer, and more prosperous New Zealand, and one where that prosperity is enjoyed and shared by all New Zealanders.

It’s easy when reflecting on the Budget to talk about the big numbers, and there are some big numbers in this Budget: a billion-dollar Provincial Growth Fund, a billion-tree programme. There’s $590 million going into early childhood education (ECE). But what I want to spend some time doing right now is talk about a different kind of number, and it’s a number that relates to people.

I’ll give you a few examples. Next year, a thousand extra young people are getting access to the ongoing resourcing scheme (ORS) that we use for learning support. I was on an aeroplane, going to do a Budget speech recently, and there was a mother of a five-year-old autistic boy there. She didn’t have the confidence to talk to me on the plane, but she sent me a message on Facebook straight afterwards, and she said, “I haven’t voted for your Government before, but I did at this election because I know that my boy needs more support and all the people like him need more support.”

And I am incredibly proud that in this Budget, we have over $270 million more going into learning support, that we have 2,900 deaf students and 1,500 low-vision students getting more support out of this programme, that we have an extra 1,900 ECE students getting more learning support, and that we have 1,000 more students getting ORS support. That means those people and their families can truly participate in school life, and that’s the kind of number that means something to me when I look at this Budget.

It’s the same with the 200,000 children in our early childhood education system who, for the first time in a decade, every single one of them, will benefit because there is an across-the-board funding increase for ECE—the first time in a decade. And what we know, on this side of the House, in the Government, is that those first 1,000 days of a child’s life are so, so critical, and we will be continuing to invest in that throughout the three terms in Government.

Some other numbers that are about people: 1,500 new teachers—1,500 new teachers funded in this Budget to make sure that we continue to ensure that every child is getting a world-class education. We need to do this.

When we look to the health sector, 56,000 young people are now getting free doctors visits as a result of the extension to the age of 14 for free doctors visits, and 540,000 people are paying $20 to $30 a week less to go to the doctor. The very half a million New Zealanders who put off going to the doctor because it cost too much last year now know that it will be cheaper because we, as a Government, have invested in it. That is what a good Government does.

There are the 150 front-line providers of family violence services who get their first increase in a decade, as well. When I was in Christchurch, I toured a community centre, along with the Hon Megan Woods, and we met the people from Shakti. This is the refuge service that provides services to people from ethnic backgrounds, Middle Eastern backgrounds, Asian backgrounds. They have struggled, year upon year, to get support, and this Budget delivers that support for the first time in a decade. That’s what Budgets are about—making a difference in the lives of New Zealanders—and we are very proud to have done that.

In the housing area: the 34,000 extra families that will benefit from actually getting existing transitional housing; the 1,400 people who will be part of the Housing First programme, extending out that programme that actually says, “We’ll house you first, and that’ll enable us to sort out the other issues that are in your life.” And we’re very pleased to do that in Auckland, Christchurch, Tauranga, Hamilton, Wellington, and Lower Hutt—all of those places where too many people are seen on the streets.

That is what a Budget can do when a Budget focuses on people—when we recognise that it’s not the end of the road just to generate economic prosperity but that, as a society, we use that prosperity to invest in our future to make sure that our focus is on future generations. It’s why, when we look at this Budget, when we put together the 100-day plan and the Families Package, and when we put that alongside the foundational investments in health, and housing, and education, we can say for sure: this Budget marks the beginning of a transformation in the way that we understand what success is in this country. And I am very proud of that.

What I have heard as I’ve travelled around the country since the Budget is that New Zealanders understand that this is a Budget that is also about the foundations of a new economy—an economy that is more sustainable, more productive, and more inclusive. In order to do that, we invest heavily in research and development. We invest heavily in our regions. We invest heavily in the Green Investment Fund, promoted by the Green Party, to leverage those new opportunities in technology. And we make sure that we continue to support our small businesses, and we make sure that we continue to support all of our communities to thrive.

That is the foundation of the economy of the 21st century. The alternative is to look backwards. The alternative is to say, “Everything in New Zealand was perfect on the 22 September. Everything in New Zealand was perfect.” On this side of the House, we know that we can do better. We know that we need to look to the future economy where we train all of our New Zealanders to be able to adapt to a changing world of work, and where we support our industries and our communities to evolve in a just transition to a lower-carbon economy. That’s what we are focused on. And we’ve got the balance about right, I think, because we’ve been careful and we’ve been cautious.

We have made sure that we have ticked off each of our Budget responsibility rules. That means that there is a surplus. We can put money aside for a rainy day, and that rainy day, in the case of Mycoplasma bovis, came pretty quickly for us. But, by making sure we have the surplus and by keeping our debt levels low, we can respond when there is a community that is in need. And I can say this to the rural community of New Zealand: we are here for you as you go through Mycoplasma bovis. We are a partner in making sure we’ll give it our best shot to eradicate this disease. That’s what we can do when we get the balance right.

This is the first Budget of three in this term. My staff wouldn’t let me call it “Part One of a Trilogy: A New Hope”, but what it is is a Budget that sets foundations for the future, and the next two Budgets will build on that. They will build on improving those critical public services on which New Zealanders rely, and they will build on making sure that we have an economy that is fit for purpose for the middle part of the 21st century. That’s what a progressive Government does. That’s what this Government is doing. I am proud to have presented this Budget to the House.

ASSISTANT SPEAKER (Poto Williams): The question is that the amendment in the name of the Leader of the Opposition be agreed to.

A party vote was called for on the question, ”

Ayes 55

New Zealand National 55.

Noes 63

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

Amendment not agreed to.

That all the words after “That” be omitted and the following words inserted: “this House has no confidence in the Government led by Winston Peters and Jacinda Ardern, because this Budget shows they are a Government that is borrowing more, taxing more and spending more—but has no plans for how we as a country can earn more.

A party vote was called for on the question, That the Appropriation (2018/19 Estimates) Bill be now read a second time.

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1.

Bill read a second time.

Land Transport Management (Regional Fuel Tax) Amendment Bill

Second Reading

Hon PHIL TWYFORD (Minister of Transport): I move, That the Land Transport Management (Regional Fuel Tax) Amendment Bill be now read a second time.

For too long, Aucklanders have been losing hundreds of hours of time every year sitting in traffic—time that they will never ever get back. The productivity losses caused by congestion are $1.3 billion every year, and that’s why the Government recently announced the biggest civil infrastructure programme in New Zealand’s history to get Auckland moving and it is fully funded. This is a game-changer for Aucklanders and the first step in ensuring a congestion-free alternative and a transport system that allows the roads to move more freely. This bill—this regional fuel tax—enables those projects to become a reality and provides a sustainable funding mechanism to fund those projects over the next 10 years.

The Finance and Expenditure Committee received over 500 submissions from people, organisations, and individuals—and, interestingly, not just from Auckland but from across the country—and I want to thank all of those who made submissions, especially those who appeared in person before the committee in Wellington and in Auckland. There were many private individuals who took the time to express their views and make valuable comments.

Aucklanders understand that they must pay a fair share to address Auckland’s transport problems. This bill allows them to do that. The Automobile Association (AA) pointed out in its submission to the committee that when it surveyed its Auckland members, they were, within reason, willing to pay more to improve the transport situation in Auckland. The AA points out that a regional fuel tax has been one of the more popular funding options to help address Auckland’s most critical transport challenges.

This Government is committed to making the hard decisions and addressing the most difficult problems. Drift and neglect are not options for us. We said during the election that we would implement a regional fuel tax in Auckland and we are keeping our word. Our transport policy commits us to addressing the infrastructure deficit that we inherited and we’re committed to striking a balance between affordability and taking urgent action on the deficit we inherited.

ATAP—the Auckland Transport Alignment Project—predicts that public transport ridership will go from 93 million annual boardings to around 170 million under this 10-year plan. ATAP will build 125 kilometres of new cycleways. The plan forecasts a 60 percent drop in deaths and serious injuries between 2017 and 2027, and it is fully funded. For the first time ever, Auckland has a fully funded transport investment plan co-funded and co-governed by central government and local government. Without the regional fuel tax, Auckland would have a $4.3 billion transport funding hole and would be virtually unable to build any new projects to address rapidly worsening congestion.

The regional fuel tax enables 200 kilometres of bus priority improvements across Auckland, providing bus travel time savings of up to 30 percent on completed routes, a new bus station and route at Sylvia Park, a bus interchange in Lower Albert Street for the North Shore Busway and a similar interchange in Quay Street, improved access to the airport for the 40 million annual passengers by 2044, and the 27,000 extra jobs that are predicted in the airport precinct. The Eastern Busway—that I would have thought Jami-Lee Ross would be supporting—will increase public transport patronage in electorates like Botany from 5.8 percent to 13 percent, more than doubling public transport patronage in that member’s electorate.

The regional fuel tax enables park-and-rides in Hibiscus Coast, Westgate, Kūmeu, Drury, and Paerata; 20 additional trains and the construction of associated facilities to house and maintain them; redevelopment of the downtown ferry terminal to deal with an expected 40 percent growth in ferry journeys over the next 10 years and a road safety programme for a large number of high-risk intersections. In the last five years, Aucklanders have experienced a 65 percent increase in road deaths and serious injuries. In 2017, this equated to 64 deaths and 749 serious injuries—a level of road trauma that has not been seen in the city since 1996. The combined impact of the accelerated programmes allowed by this regional fuel tax is estimated to reduce deaths and serious injuries by 60 percent over the next 10 years.

This regional fuel tax also enables Penlink. It enables Mill Road and many more projects across Auckland—projects that were talked about but nothing was done about over the last nine years. The bill enables a regional or unitary council to seek funding for specific transport-related projects.

We’ve indicated—the Government’s indicated—that in this term of Government, only Auckland will be able to put in place a regional fuel tax under this bill. The regional fuel tax must be applied for and that application must be for identified and specific capital projects. It is not there to pay for business-as-usual operating expenditure. The bill allows for a regional fuel tax of up to 10c per litre, and our modelling shows that this could result in between $150 million and $170 million a year in the case of Auckland. The bill enables a tax that will apply to both petrol and diesel but for no more than 10 years. This period of time gives Auckland funding certainty to deliver on major transport projects, but it requires it to come back to its citizens and to Ministers if it wants to go beyond the 10 years.

A regional fuel tax is not, as some have suggested, a blank cheque to Auckland Council. Both Ministers and the residents of the region expect to see delivery of the things that the regional fuel tax was raised for. I want to acknowledge that the regional fuel tax will add costs to Auckland motorists and to Auckland families. The combined effect of the Auckland regional fuel tax and the proposed increases to fuel excise duty will cost an average family $5 per week. This Government has put $75 per week into the pockets of 384,000 low and middle income families. That puts it into perspective.

Congestion costs are regressive. The best way to deal with the regressive nature of the cost of congestion is to invest in a modern rapid transit and public transport system for our biggest city that will give people genuine transport choices. The worst thing for low-income people is having no transport choices and being forced into the most expensive option, which is utter dependence on every working adult having to own and run a car in order to live and survive.

The select committee’s report back recommended a number of sensible changes to the bill that was introduced into this House. They include enabling a regional council to exclude a part of its region from the regional fuel tax, requiring Ministers to give consideration to regulations for rebates for fuel used off road, and requiring the Transport Agency to report on revenue costs, fuel prices and volumes, and compliance. These recommended changes are broadly sensible, and are reflected in the bill as reported back to the House from the select committee. I am actively considering now how to best ensure that the eligibility for a rebate for fuel used off road is both principled and practical.

This regional fuel tax enabled by this bill allows us to move ahead with a $28 billion, fully funded transport investment plan for our country’s biggest city. That plan is designed to get Auckland moving. It is designed to give people a genuine congestion-free alternative that they currently do not have. It is designed to give people—and especially in peak hour—an alternative to spending hours stuck in gridlocked motorway traffic.

Alongside KiwiBuild—our plan to build affordable housing—our urban development authority to lead large-scale projects, our plans to fix infrastructure financing and reform the planning system, these reforms will allow our city to make room for growth, to provide a congestion-free alternative, and unleash the growth and prosperity denied Auckland under nine years of drift and neglect.

JAMI-LEE ROSS (National—Botany): I always enjoy watching the faces of the Labour backbenchers as Phil Twyford is answering questions in the Parliament during question time, because you can see the despair on their faces after his performances in the House. I think, having now listened to him give that second reading speech, members of the public watching will understand the concern that the Labour Party has around Phil Twyford. Never before have they seen someone so excited to come to the House to talk about taxing people more, because that’s, effectively, what this Land Transport Management (Regional Fuel Tax) Amendment Bill is all about.

It’s about taxing people more—a tax that isn’t necessary; a tax that isn’t supported by Aucklanders; a tax that doesn’t need to be in place, because there was already a transport plan in place that was effective; a tax that will hurt low-income people the most; a tax that will hurt the very people that elected them on to the seats that they’re sitting in right now. When we get to the end of this debate, when there are more taxes in place—and it’s going to be up to 25c a litre, because that is actually what Phil Twyford has proposed; it’s not just the $5 a week—it’s 25c a litre on the people that are needing assistance the most with their cost of living. They’re the people that will be hurt the most by this tax, and they’re the people that, supposedly, they represent.

The biggest impact of this bill is to let the Labour Party Mayor of Auckland off the hook. The Labour Party Mayor of Auckland went to the public, went to the polls, and told people “I will find 3 to 6 percent savings in the Auckland Council budget.” Well, he hasn’t. He’s failed, and he’s now being let off the hook by this Government.

The reason why this tax is not necessary is because if the Auckland Council went and found the savings that Phil Goff said he’d find, then this tax wouldn’t be required, because more than the amount that this tax would raise would be available in the Budget because of the savings that Phil Goff said he would go and find. Phil Goff hasn’t found those savings; Phil Twyford is coming to the rescue with more taxes. The people in South Auckland that are struggling the most, that have the most fuel-inefficient cars, that won’t get the benefits of any taxation put in place—those are the people that’ll be paying and hurting the most because of this tax.

The Auckland Council and Phil Twyford think this proposal has huge support. Well, there was one poll back in February that did show marginal support for the proposal, but ever since then—after the efforts of Phil Twyford up and down the country, in this Parliament, and after New Zealanders have become more aware of his plans for 25c-a-litre fuel tax increases across the country—public support has been dwindling, to the point where, when it came to submissions on this bill, only about 10 percent of people were actually in favour of it.

So there was a poll back in February—I’ll give that to Phil Goff—saying there was support. A Colmar Brunton poll said there was 52 percent support. A Colmar Brunton poll in May, though—the same company—now shows that 58 percent are opposed to the bill. But let’s actually not just rely on political polls; let’s go and ask the Auckland public what they think, because Aucklanders submitted to the Auckland Council on the regional fuel tax proposal.

A couple of months ago, a majority of people who submitted were opposed to the Auckland Council’s plans and Phil Twyford’s plans for a regional fuel tax. Under the 10-year consultation, more people were opposed to it than were in favour of it. Come again to the full consultation on the regional fuel tax—a majority were opposed and a minority were in favour of it. Come to the political polls, come to the consultation undertaken on the bill—more and more people are opposed to these taxes that Phil Twyford wants to put in place, and he’s about the last man standing who is excited by these taxes.

There’s a fiction around these taxes that he’s perpetrating in this House, as well. It’s not just $5 a week for people—that’s turned into $150 million collected for the council—but he’s gone and turned that $5 a week into $150 million, which is supposedly going to be $1.5 billion over 10 years, which supposedly will lead to $4.3 billion of investment, which supposedly will lead to a $28 billion plan. Those numbers aren’t real. That $4.3 billion isn’t real, because most of that $4.3 billion would have been there anyway. If Phil Goff went and found the savings that he said he would go and find, then that $4.3 billion would be there anyway.

Let’s go to some of the comments from the people that represent those that are impacted the most by this tax. Those are the councillors—actually, Labour Party councillors elected to the Auckland Council—who represent the poorest people in the city that will be paying this. Efeso Collins—he’s a good man; he probably would’ve been supported by Willie Jackson, sitting up the back there chirping away—says that whilst he understood the council wanted to progress transport issues, when people were “below zero this is taking food off people’s tables”. This tax is taking food off people’s tables. Daniel Newman, who represents people in South Auckland, said this is a “wholesale redistribution of wealth from some of our poorest blue collar workers who have the least transport choice to fund much of the infrastructure to serve those people who enjoy the greatest wealth.” He said it wasn’t fair and he didn’t vote for it.

If the Labour Party were true to their values and cared about people who are hurting the most in this country, they wouldn’t be putting more taxes on them. Are they going to be seeing more assistance? Are they going to be seeing more public transport? Are they going to be seeing more help from a transport perspective? No, they’re not. No, they’re not. This tax isn’t required. There was already a plan in place that Phil Goff had signed up to with Simon Bridges, and that plan would’ve also led to improvements, without the need for more taxation.

Phil Twyford gets excited about taxing people more, but I think what he’s excited about most are some of the regulation-making powers he’s put into this bill. Phil Twyford stands up in the Parliament, Phil Twyford goes on the news and says “It’s only 10c a litre, it’s only 10c a litre.”—of course, add on top of that the additional tax which leads to 25c a litre that he’s proposed. He’s given himself the power, through regulation in this bill, to increase it at any point that he wants.

It is not a 10c-a-litre tax; it’s a legislative power that this Parliament will be passing—if it gets the votes from the coalition partners—to give Phil Twyford, as Minister of Transport, the ability to increase regional fuel taxes as high as he wants. We asked him about it in the Parliament. We said, “OK, so you’ve said to people it will be 10c a litre. Why give yourself that power?”, and he skirted around the issue. Then we said, “OK. Well, if it’s only going to be 10c a litre, why don’t we take this out of the bill?” No, no—Phil Twyford doesn’t want to take regulation-making powers out of the bill that will give him, as Minister, the power to increase regional fuel taxes as much as he wants.

He also went to the country and said, “It’s only going to be Auckland—it’s only going to be Auckland. It’s only required in Auckland.” Well, we’ve got councils lining up, up and down the country, saying they want regional fuel taxes too, and this bill actually gives the Minister, through the parliamentary legislative process, the ability to put regional fuel taxes elsewhere in the country. People in Tauranga that Clayton Mitchell purports to represent will be paying a regional fuel tax if that council gets its way and Phil Twyford signs up. The Wellington mayor is saying he wants a regional fuel tax—to fund light rail, most probably, which has an appalling benefit-cost ratio that Phil Twyford doesn’t seem to care about. These regional fuel taxes will be around the country, because Phil Twyford is giving himself the power.

Let’s go to price spreading. Price spreading is another issue with this bill. Phil Twyford was told by his ministry officials that price spreading would take place. It has taken place before, and we’ll see fuel prices going up around the country as a result of a regional fuel tax in Auckland. Well, what are we seeing? We’re seeing fuel companies, in anticipation of a regional fuel tax, increasing prices around the country. What’s the biggest reason why prices are ramping up in Southland, and not so much in Auckland? It’s because of the Auckland regional fuel tax. The fuel companies are doing exactly what the ministry said they’d be doing, but they’re giving themselves that ability in anticipation of a regional fuel tax. I think that’s appalling, as well.

Let’s go to the consultation that the Auckland Council had in place, and did before the bill was passed. Firstly, it’s pretty unusual to see consultation take place before a bill’s even passed, but in this case the Ministers even had to write into the bill a bit of a “get out of jail” clause, because the Auckland Council got its consultation wrong and didn’t follow the bill in the first place.

This bill is about taxing Aucklanders more in a way that is unnecessary, a way that is regressive, a way that will hurt those lowest-income people the most in the city—the people that probably won’t get much benefit from it. It lets the Auckland Council off the hook. It says to the Auckland mayor that he doesn’t need to find the savings that he said he would, and it also leads to a situation where Aucklanders are paying more at the fuel pump—up to 25c a litre—when it simply isn’t desirable and isn’t required, and this will hurt people in the pocket. The Labour Government no longer cares about those low-income people that will be paying more tax. The Labour Government is ramping up taxes on Aucklanders, and they won’t be forgiven for it.

Hon SHANE JONES (Minister of Forestry): We have just heard from the one-trick pony, Jami-Lee Ross, the one-trick pony who reminds me of that figure in Dickens—he’s got the look, he’s got the excitable language—otherwise known as Scrooge. There’s nothing Scrooge-like on this side of the House. We realise that if you want to fund infrastructure—if you want to fund infrastructure—you need to be bold; you need to take a risk and stand up and meet the challenges.

Let’s just recite a few of the facts: $28 billion committed by this side of the House over 10 years, in comparison to the miserly, stingy approach characterising the last nine years. Those days, Auckland, are over. Aucklanders know that if you want to meet the costs of modernising infrastructure, trains, or transport, you have to pay for it, and they realise that the burden has to be borne by all users of the service, because this is an investment in a transition. So this bill most certainly has the support of the first citizen of the provinces.

Now, we realise that it’s a gift that I might be bestowing on the Auckland-based fuel buyers, but in order for us, over a 10-year period, to enable Auckland to meet the targets that they were denied—denied—under the last nine years, unfortunately, investment, and not only investment but commitment, are required. I find it very interesting about the younger members—the sophomores—and even their younger cousins of the Auckland political community that have come here. They come with loud voices, but they come realising that they have nowhere to go if they want to actually themselves solve these problems in Auckland. Now, let’s just think what my senior colleague Mr Twyford is offering. He is saying that not only will we utilise the monopoly powers of the State to impose an overdue opportunity for Auckland to contribute to its own works—great step forward. Secondly, he’s going to provide that opportunity for other regional centres, but there’s such an arduous process that other centres will have to go through that there’s no guarantee that Whangarei will have such an opportunity. That all lies in the future.

In addition to that, the infrastructure required in order for users and the contributors via this tax—how are we going to fund that? He makes reference in his speech that we are willing to look at market mechanisms through to classic public-good failure mechanisms. That is something the other side of the House failed to do. How long did they take to build the loop? How long did they wait before they made a decision? That decision was made by Mr Bridges while Mr English was out of the country. That shows that not only did they not be straight up with Auckland but there’s a deep division in themselves, because I know from the provincial members on the other side of the House that they happen to believe that Auckland ought to do the heavy lifting. Auckland ought to contribute to solve the problems that are a blight on broader New Zealand society, but they do deter regional creatures, such as myself, from spending too much time on such jobs as from time to time I might be called to respond to in Auckland, which are to share with Aucklanders the justification of trees and provinces.

But I’m being distracted. I need to come back to the underlying purpose of this piece of legislation. This legislation is actually traceable back to the work that Labour did eight, nine, 10 years ago, and why New Zealanders in Auckland are quite excited about it is it shows a willingness to be bold; a willingness to put political rhetoric into legislative action. Now, we’ll hear some loud voices and caterwauling cats, etc., but the reality is that this will soon pass and it will be in the law, and Mr Twyford and Mayor Goff and the other councillors will now have a treasure trove to dip into to meet the overdue costs to upgrade the infrastructure of Auckland. And for that they will be suitably rewarded in 2020. Thank you very much.

Rt Hon DAVID CARTER (National): It’s a pleasure to follow the so-called, self-proclaimed first citizen of the provinces, and it’s interesting that a tax that’s going to affect Auckland is now defended by the Government by the Hon Shane Jones, the person who went to a select committee late last week saying, “The winner takes the booty.”—the winner takes the booty. And that shows the man to a T. He’s prepared to take any amount of money from any taxpayer at all and spend it blindly in the hope that it might get them another term after 2020. I think this will be the legislation that actually makes New Zealanders realise what they’ve got in the way of a Government of three parties that’s intent on taxing, taxing, taxing. And it is, of course, yet another broken promise by the Labour Party.

Hon Phil Twyford: We campaigned on this.

Rt Hon DAVID CARTER: Mr Twyford interjects that they campaigned on it. I know his campaign pledges better than he does. What he campaigned on was an Auckland regional fuel tax, and what this legislation does is give the ability for Christchurch and Wellington and Waikato and Tauranga all to have a regional fuel tax after 1 January 2021. Mr Twyford never went round the country campaigning on a regional fuel tax for just about every region in New Zealand. He said it would be for Auckland and Auckland only, and then he surreptitiously introduces this legislation into the House.

It is another broken promise, Mr Twyford, and at this stage Mr Twyford has stopped interjecting, and the rest of his Labour caucus hang their heads in shame because they know they’ve actually, one of two of them—Jamie Strange I see over there. He’s been in Northcote. He’s been knocking on the doors, doing what he can to get the odd vote for the Labour candidate. I was knocking on the doors too, Mr Strange, and they were saying to me, “We’re voting for Dan Bidois. We’re voting National because we’re fed up with this Government, seven months on, breaking election promises and introducing yet another tax.”

We heard it all today in question time from the Hon Phil Twyford, and this is why his colleagues are worried. He acknowledged this will collect each year approximately $150 million, and then he, remarkably, said, “We’ll spend $4.5 billion of that money on roads.” He’s the only member on the front bench of the Labour Party—now, I admit the Hon Shane Jones has got a similar ability to just manufacture money from anywhere. But how the Hon Phil Twyford reckons that $150 million will automatically turn into $4.5 billion defies logic.

The other interesting thing that Mr Twyford—

Hon Phil Twyford: NZTA subsides.

Rt Hon DAVID CARTER: He’s wound up again—he’s wound up again. The other interesting thing Mr Twyford said in the Chamber today at question time was that this isn’t a very good tax and we’d be better to be congestion charging. That’s what Mr Twyford said, and I agree with him. Aucklanders are fed up with being locked in traffic jams. It’s totally unproductive. It’s—

Hon Phil Twyford: After nine years of neglect.

Rt Hon DAVID CARTER: Well, after nine years of neglect—I’d say the problems built up over 20 years, Mr Twyford. But let’s find a way to fix it that works. Let’s find a way to fix it that works.

I listened to the submissions. I carefully went through the submissions. Mr Twyford probably hasn’t even bothered to read the submissions. But, all in one, they said there’s a problem in Auckland and we need to find a way to fix it. We need money to fix it. Everybody agreed with that. Congestion charging was popularly submitted to the select committee. It may take a couple of years to bring in, but it was a solution, and it was a solution far better than this particular regional fuel tax.

But the submission that struck me as very, very sensible came from the Hon Ken Shirley. The Hon Ken Shirley, of course, started his parliamentary career as a Labour member of Parliament. He spoke for the Road Transport Forum, and he said there’s an easy solution, Mr Twyford, if you only wanted to listen: find some money to fix the infrastructure, and do it simply by raising road-user charges (RUC), and raising the excise on petrol. That would have brought in more than $150 million. It would then have given the Government, with that money—to distribute it regionally, as indeed the regional fuel tax will do after 2021. And it would have been simple to administer.

The other thing that struck me as we went through the submission process was a very good submission from Federated Farmers. They came along and pointed out that there was already a fuel excise tax for which they legitimately claim a rebate for the petrol they buy on to their farm, which is then used on the farm. I’m one of those farmers that applies for that rebate, and it’s a nightmare. Kieran McAnulty was in the select committee the day Federated Farmers came along—

Hon Phil Twyford: Help’s on the way.

Rt Hon DAVID CARTER: Mr Twyford’s got more to say. I’m surprised he’s got anything to say. Federated Farmers came along and showed us the forms that had to be completed by hand, put back into the mail, and sent to the New Zealand Transport Agency (NZTA) in Palmerston North to claim this rebate. It’s a nightmare of a process. We got some sort of promises from NZTA that they’ll find a way to meet the modern world so we can do it by internet. But once we put a tax on diesel—

Hon Phil Twyford: Stand by, help’s on the way.

Rt Hon DAVID CARTER: He’s just said, “Help’s on the way, and we’re not going to put a tax on diesel.”—that’s the whole purpose of the regional fuel tax, Mr Twyford. Get to know your own legislation. What we’re going to have is a nightmare whereby those that use diesel off roads now also have to apply for a rebate.

Hon Phil Twyford: Help’s on the way.

Rt Hon DAVID CARTER: “Help is on the way.”—say that to any farmer who already frets night after night, after they’ve worked hard all day, now having to fill in more forms to get legitimate money back on their diesel. And he’s nodding and noting that it’s going to be a nightmare, because that’s what this legislation does. It imposes more impediment on people who use diesel, the majority of which is not actually used on road—it’s used in marine, it’s used on farm services, it’s used by contractors, for instance.

We had a very interesting question put to the officials, who have no idea how this works—they don’t support it anyway. We said, “What about a contractor who trims hedges?” “Oh, no, that person’s allowed. It’s off road. They can certainly apply for and get a rebate.” We said, “What about the tractor going from one farm to another on the road?” “Oh”, they said, “we haven’t thought about that.” And then we said, “What about the hedge trimmer who comes off the farm and trims the hedge along the road?” “Oh, we hadn’t thought about that either.”

This is a nightmare piece of legislation, and it hasn’t been worked through. If you want to see it—

Kieran McAnulty: You’ve never been the party of hedge trimmers before.

Rt Hon DAVID CARTER: —accepted by the public of New Zealand, Mr McAnulty, have a look at Saturday’s results. Jacinda Ardern can go to Northcote as many times as she wants. She was never going to win that by-election because the dominant issue was this is a tax that is imposed on Aucklanders to fix a problem. It’s a complicated tax and it won’t work.

Can I conclude with a little bit of good news, because we had one win in this select committee process. I refer members to new section 65ZE(2), in clause 5. Even the Labour members acknowledged to us that this tax should not apply to any non-road use, yet nowhere in the legislation did it say that. So we argued, and with passion—all the National members argued with passion—to get a clause introduced into the legislation which said, “The responsible Minister must consider whether to recommend the making of regulations under subsection (1)(b) and, when doing so, must have regard to the principle that regional fuel tax is intended to be borne only by those who use fuel on public roads.”

I say to Mr Twyford, if he needed the money—because I think it is justifiable to argue that you needed the money—to fix the infrastructure of roading in Auckland, do it the way Ken Shirley suggested.

Hon Phil Twyford: Tax the whole country.

Rt Hon DAVID CARTER: Stop creating another bureaucracy and do it by increasing RUC and fuel excise. When he says “Tax the whole country.”, that’s exactly what this legislation does. It’s not exclusive to Auckland.

MICHAEL WOOD (Labour—Mt Roskill): I stand here, I think, probably more proud to speak on this than any piece of legislation that I have spoken on in my time in this House. I say that because I am a proud Aucklander, a citizen of Tāmaki-makau-rau, the first city of the South Pacific, and one of the most beautiful and dynamic places to live in this country and in the world.

This bill is about unlocking the potential of our city. It is about recognising that our city is a place that people want to come to and live, that they want to come to and do their business, that they want to come to and grow and thrive. We can either treat growth like something that is going to choke us—because that is what it is doing now—or we can treat growth as an opportunity by putting the investment into appropriate infrastructure to make sure that we harness that growth for the benefit of the people and the businesses that make up our beautiful city. That is what this bill is about.

I’m going to come to some of the comments from our colleagues on the other side of the House, but I want to front up by asking this simple question: where are the solutions? Where are the solutions? Have we heard a single solution to Auckland’s chronic congestion from that side of the House? For goodness sake, we had the transport spokesperson—I believe it’s Jami-Lee Ross these days—standing up and speaking on this bill, and I don’t think I heard a single point of recognition that Auckland has a problem with traffic congestion let alone a single solution to that problem, which is rated by most people in Auckland as our city’s single biggest problem.

So I say to the National Party: that’s fine. You continue with the negativity. You continue with the yelling and the screaming and the carping and the scaremongering. This Government’s going to focus on the solutions, and that is what this bill is all about.

Brett Hudson: You’re going to focus on fleecing the taxpayer, particularly the poor ones, because you hate them the most.

MICHAEL WOOD: It’s about recognising the problem. It’s about putting forward the solutions, and then—and this is a new one, Mr Hudson, because your Government never got to grips with it—it’s about actually funding them.

Here’s a bit of credit—here’s a bit of credit I’ll give the previous National Government. The previous National Government—I do give them genuine credit for this—sat down with the Auckland Council last year, and they said that we do need an agreed plan, and it was called the Auckland Transport Alignment Project (ATAP). That was a good idea. The only problem with it was they left a $6 billion funding gap right in the middle of it, so it was nothing more than a glorified wish-list. What this Government, under Minister Phil Twyford, has done is come in and said, “We are actually not just going to come up with a better plan. We are going to do the hard work of funding it.”, and that is what the regional fuel tax that is enabled by this bill delivers.

This bill is about getting Auckland moving. Last year, we received a report—and I’m sure most members of this House read a report—which was put together by the New Zealand Institute of Economic Research, that was supported by many of the key business groups in Auckland, that estimated that Auckland loses something like $2 billion in economic activity every single year because of the chronic congestion on our roads. So it’s costing real money. But, even more than that, what I see it costing the residents of the city that I live in and the city that I love is their time. It is their time: their time to enjoy their lives; their time to spend with their families. The amount of sheer frustration that Aucklanders have sitting in their car hour after hour in gridlock is simply untenable, and our people—the people of Auckland; the 1.6 million people of that region—deserve so much better.

So I want to talk about the vision, and we’ve heard none of that from the other side of the House. The vision that this Government has for transport in Auckland is to finally build a linked-up transport network that lets our people and our freight move around our communities in Auckland freely and efficiently. It’s a vision for thriving local community centres that aren’t clogged up by traffic every single hour of the day. It’s a vision for kids being able to walk and cycle safely to school, like they used to be able to but they’re afraid to now because the traffic is so bad and there aren’t safe options for them. That is what this bill helps us get to, and that is what this bill pays for.

I want to deal with those questions around the paying for it. There’s no doubt—there’s no doubt—that’s the difficult bit to bite. We’ve got the vision here; we’ve got to find a way of paying for it. There was a $9 billion gap that this Government had to plug, and this regional fuel tax bill creates $4.3 billion of additional revenue to help us plug that gap over the 10 years. The impact is $5 per week per household, and, obviously, most people would rather not pay that—I would rather not pay that, and most of my constituents wouldn’t either. But when I sit down and I talk with those residents, they know the problems that they have in Auckland, and they would rather that we had the courage, collectively, to face up to those problems and to fix it at this point in time.

I want to address some of the alternatives that Mr Carter spoke about in his address. Actually, as I come to Mr Carter, can I acknowledge the members of the Finance and Expenditure Committee across the House, who did work on this bill. It was a constructive select committee process, notwithstanding the fundamental disagreement on the bill. Most members of the committee did engage constructively on a number of the issues that Mr Carter highlighted in his comments, and I do want to acknowledge them, as well as the very good submitters and the officials who supported the bill as well.

The reality is, if we want to shift to congestion charging, we had one very excellent submitter—who I’m sure Mr Carter and other members of the committee will recall—who were experts in this field, and who, in fact, would be one of the companies who would financially benefit from the implementation of congestion charging because their job is to implement such systems in international cities around the world. What they told us is that we’re probably six years away from being able to fully implement the kind of congestion charging solution that we would really need to fund Auckland’s transport. So it’s an option that pretty much everyone agrees with around the table, but to say that we’re going to sit back and wait for another six years as the congestion gets worse—well, maybe that’s the Opposition’s solution; that’s not what this Government’s going to do.

The question of maybe applying road-user charges across the country—really? Well, I invite the members opposite who are promoting that as a solution to go back to their constituencies and tell their residents that their solution is to have a road-user charge to fund Auckland’s transport infrastructure. This bill is about Auckland taking responsibility for itself and fronting up and funding the solutions that we need.

Let’s come to the fundamental choice here. The fundamental choice is do something and deliver ATAP or not. That’s what it is, and I’ve yet to hear from members of the Opposition whether they’re actually brave enough to front up to the residents in their constituencies in Auckland and tell them that if they were the Government, the projects would be off. That’s the reality. If you can’t pay for them—remember, as we’ve been told from that side of the House many, many times, there’s no magic money tree. If we don’t fund them, the projects don’t happen.

I have here the list of projects that—[Interruption]

ASSISTANT SPEAKER (Adrian Rurawhe): Order! I’d like to hear this debate.

MICHAEL WOOD: —the regional fuel tax funds. One of the good things about this bill is that it’s very specific. The money that is earned through the regional fuel tax can only apply to the particular projects that are in the proposal, and that’s really important for people to know.

So let’s talk through these. Let’s talk through the fact that there are major improvements to city centre bus infrastructure. Are we going to hear from the Hon Nikki Kaye that, suddenly, we’re not going to implement that? We’ve got projects here to improve airport access from Onehunga and Botany. I’m waiting to hear Denise Lee and Mr Ross say that we’re not going to go ahead with those projects. We’ve got projects here, funded by the regional fuel tax, to enable 15 new electric trains and to enable electrification to Pukekohe, My Bayly. Mr Bayly, wouldn’t you love to have electric trains running to Pukekohe? Well, here’s the good news, sir: help is on the way, and the regional fuel tax is going to help fund it. What about the downtown ferry redevelopment? Once again, the Hon Nikki Kaye’s been pretty quiet about that one. I’m sure she supports it.

My colleague immediately to the front of me, Marja Lubeck, I think, erupted with glee earlier on when we heard about the funding from the regional fuel tax for Penlink, a project that was promised and promised over nine years of that Government but never actually delivered.

Andrew Bayly: Two lanes.

MICHAEL WOOD: You can talk about as many lanes as you want, Mr Bayly. The bottom line is you delivered zero lanes with Penlink. This Government is actually fronting up with the funding, and I look forward to Mr Mark Mitchell going to his constituents in Rodney and telling them that he doesn’t support the regional fuel tax and he doesn’t support the implementation of Penlink.

Here’s a really good one: the Mill Road corridor. Let’s wait to hear from the Hon Judith Collins about that one.

The one I want to end on is actually a very, very serious point, and that is the issue of road safety, because over the last six years, we have had an increase in the road toll of 78 percent in Auckland—78 percent more people dying because of a failure to invest in road safety initiatives in our city. Real lives on the line. This plan delivers road safety initiatives that will save lives. I challenge that Opposition to say that they’re not going to front up and fund that through the regional fuel tax either.

I want to end on this great quote from the New Zealand Herald editorial—they’re full of crackers. “The country’s growth and productivity cannot continue to be held ransom”—

ASSISTANT SPEAKER (Adrian Rurawhe): Order! The member’s time has expired.

BRETT HUDSON (National): Thank you, Mr Assistant Speaker. Well, that was quite a revisionist approach from the Government on their bill. There must be another marked-up copy of the legislation here, because, hearing Mr Wood talk, it seems like he’s added some new amendments in the second reading speech that aren’t there in the report from the Finance and Expenditure Committee. One of them he says—when he’s contrasting with the road-user charge that Mr Carter suggested—is that this legislation will not see people around New Zealand faced with extra fuel taxes and not with taxes that’ll pay for Auckland roading and other transport infrastructure. Well, that’s patently wrong, unless he has actually amended the bill further. We’ll get to that.

I’d like to note Shane Jones made a comment in his contribution. He said, “This Government is not Scrooge-like.” Actually, I can agree with that—they’re not. They’re extremely fast and loose when it comes to spending other people’s money. They’re taxing like you wouldn’t believe, at a rate of new taxes and a level of new taxes I don’t think we’ve seen for an awful long time, and they’re very loose with where that money’s going. This regional fuel tax is a good case in point, because, already, other regions are looking to get their hands on that money, and they’re looking to spend it on very poorly economically performing proposals, such as in Wellington.

I sat on the select committee for part of the evidence hearing for this bill and I was fortunate to be there when the Greater Wellington Regional Council came to make their submission. So I asked the chair of that regional council, “Are you intending to apply for a regional fuel tax?” In a heartbeat, he said yes—in a heartbeat. We’ve seen reports since then that also Christchurch, Hamilton, Tauranga—apparently, the chair of Local Government New Zealand wants all councils to be able to get a piece of this.

So this is not just a regional fuel tax to help with Auckland transport needs. This is an additional tax on hard-working Kiwis, probably across most, if not all, of New Zealand, that will then be spent on transport whims of those regions—

Hon Julie Anne Genter: Ha, ha!

BRETT HUDSON: —many of which do not make good, sound sense. Wellington is a really good example—as Ms Genter laughs. Wellington’s a really good example. You see, Wellington regional councillors have been all excited since this legislation was introduced, as have many of the city councillors, because they see this as a way for them to fund their dream of light rail in Wellington from the city to the airport. Now, the estimates that have been made on that project have the cost at approximately $950 million and the total benefits over the lifetime of that project at $93 million. So, remarkably, these people want to use levers like this regional fuel tax to make an “investment” where it would actually be economically more sensible to have a bonfire of $800 million in the middle of Frank Kitts Park than actually build the light rail, which will burn 95c of every dollar spent. It has a benefit-cost ratio of 0.05. It is in the toilet when it comes to any sort of rational economic modelling.

But it’s worse. It’s worse, because it’s not just the regional fuel tax that would pay for that nightmare, or their dream—our nightmare, for the people who actually live in Wellington—because, as a public transport system, it will be subsidised by taxpayers all across New Zealand. So not only are they going to fleece motorists in Wellington 10c a litre, plus GST, but they’ll take money from hard-working New Zealanders in Timaru, in Kerikeri, in Invercargill, and they will spend it on an initiative that burns 95c of every dollar spent, and this Government is enabling that behaviour.

It’s enabling that thinking by putting in extra tax measures such as this regional fuel tax, which, as I say, is not limited to Auckland at all. They’ve spent almost all their time talking about the Auckland Transport Alignment Project and Auckland’s needs, but the reality is the regional fuel tax is a lever that is open for any regional council to apply for, and already they are lining up to do just that.

But still they think, and they want us to believe, that somehow this is good for New Zealand and it’s good for Aucklanders. Well, here’s a thing too I noted, as Mr Wood was speaking: they talk about how this is going to be good for people. Well, how is this going to be good for a family struggling to get by in Manukau, or down the line in Judith Collins’ electorate—Papakura? How’s it going to be good for people in Mr Twyford’s electorate of Te Atatū? These are not high-income earning and they’re not high socioeconomic areas of Auckland, and yet all of the evidence shows that it is more likely that the people who are lower-income earners, who will be more reliant of private transportation—on cars. They are less likely to be able to afford newer and more fuel-efficient cars and they are likely to have to travel further from home for both work and leisure, so they will consume more fuel. They will pay more. They will buy more litres; therefore, they will pay more tax. It is a deeply, deeply regressive approach to try to deal with funding for transport options. What’s more, it’s transport options that those very people who are going to hurt the most are least likely to get any benefit from.

You know, it occurred to me, particularly as Mr Wood was speaking, that this is a Labour Party that Michael Joseph Savage would not recognise. Now, it’s quite possible, because the man, as a Prime Minister, made some pretty big infrastructure investments. I couldn’t know for certain, but it’s quite possible that Michael Joseph Savage might have agreed that investment should be made into the transport system in Auckland, but he would absolutely not have agreed that it should be the lower-income earners of Auckland—the people in South Auckland and west Auckland, who are paying the most in terms of their disposable income—hurting the most to pay for it. It is not the Labour Party that he led. It’s not the legacy that he wanted to leave behind.

This is a Labour Party that has lost its roots. It’s lost its way. It was born of support for the working New Zealander and the lower-income New Zealanders, and with this very action, it is showing that it no longer cares about those members of our society, because if it was true, then they would look for means to fund these programmes which hurt those people least. They just don’t care.

Kieran McAnulty: Take some notes from Mr Carter. He can act. Take some notes from him.

BRETT HUDSON: We’ve got a visitor from Canberra here—that’s interesting! What are you doing in the New Zealand Parliament, sir?

So here they are, wanting to hurt those people most. Why would they do this? Why would they do this? You really have to wonder. Well, it’s because they are an extraordinarily patronising Government. Mr Twyford has made the comment—and, I believe, so too has the Prime Minister. What they said was that it will be good for them in the long term. So their answer to those poorer New Zealanders—those people who are struggling to get by—is “We know better than you. It’ll be good for you in the long term. Sit down and be quiet. We’re going to hurt you for a while, but in the long run you will thank us for it.” Well, that is an absolute disgrace—absolutely shocking.

This is a bad measure. It’s a bad measure also because it is absolutely not required. As Mr Ross pointed out, if the mayor of the Auckland super-city had actually done what he committed to do on the campaign trail when he was going for the mayoralty and had actually addressed the waste and addressed cost savings in the council, he could have saved more than this fuel tax will deliver his council—a lot more—but he hasn’t done that. So this fuel tax, in effect, lets him off the hook. It also lets every other regional mayor—and, to a degree, therefore, a local body mayor—off the hook as well, because they can now get some free money. They can all apply for this. They can all put up some transport plans. They can all get an amount of regional fuel tax—it’ll always be 10c plus GST—that they can levy, and because they can extract this from the back pockets of their local citizenry, then they will not have to have the same fiscal discipline on their spending.

It is disgraceful, and what’s more, it’s not just going to be people in their own regions paying for their own fuel tax, because competition will compete away the additional charge in, say, Auckland, and we’ll see, by default, that having to be spread across the country as participants—as fuel companies in Auckland—are meeting the local market price. But the cost of the product’s gone up, so they’ve then got to counter for that somewhere else, and that means that people from Timaru pay for Auckland’s transport worries. This is an atrocious bill from a very, very bad Government that’s lost its way.

Hon JULIE ANNE GENTER (Associate Minister of Transport): Tēnā koe, Mr Assistant Speaker. Tēnā koutou e Te Whare. I’m very proud to be part of this coalition Government that is finally listening to the people of Auckland, because it has been more than a decade that Auckland hasn’t been getting the investment in the public transport infrastructure that it desperately needs. During that time, Auckland has experienced very rapid growth, so there is an urgent need to catch up on the infrastructure deficit that was exacerbated by the last National Government, who cancelled the regional fuel tax which would have funded electrification two years earlier.

The last National Government dragged their feet on investment in the City Rail Link and claimed that we weren’t going to hit 20 million passenger trips by 2020. Guess when we got 20 million passenger trips on the rail line? Three years earlier than 2020—in 2017. So if that Government had been paying any attention to what was actually happening in Auckland and what was affecting ordinary people in Auckland, they would have gotten on to it and invested in electrification of the rail network. They wouldn’t have delayed it. They would have invested earlier in the City Rail Link and they wouldn’t have denied the need—the urgent need—to invest in other rapid transit lines all over Auckland.

I mean, it’s pretty hilarious listening to the Opposition members’ speeches. Brett Hudson, the member who spoke previously—I suppose he knows a lot about the economic evaluation of transport projects, because he was referring to benefit-cost ratios of light rail. But I can tell him that, in fact, he’s quite mistaken about the economic case. Now maybe he’s never been overseas to the literally hundreds of other cities in the world who benefit economically from investment in transport infrastructure like light rail.

Brett Hudson: Maybe the member should look at the data that’s in the book Keep Wellington Moving.

Hon JULIE ANNE GENTER: Hmm, well, actually, Mr Hudson, my Master’s degree with honours was on the economic evaluation of transport projects, and what I can tell you is that the economic evaluation method used by the New Zealand Transport Agency overstates the benefits of road projects and understates considerably the benefits—and, you know, I can give him reams and reams of papers written by a chief scientist at Transport for London that explain exactly why the economic evaluation understates significantly the benefits of light rail. But people in Wellington know, because they’ve been overseas and they know that if you invest in a rapid transit system and it takes cars off the roads, that’s the best way to reduce congestion in the city. It’s the best way to improve the amenity of the city. It attracts businesses. It attracts development in the city.

But, you know, OK—look, obviously, the National Party are living a little bit in the past, and are a little bit unaware of what’s going on. But, you know, it’s amazing how they were willing to tax future New Zealanders all across the country to pay for some of their pet projects that had considerably worse economic cases than what this Government is doing, which is listening to the people of the local areas and saying, yes, we are going to empower you to allow your locally elected officials to determine the transport projects that the community actually wants and to raise that revenue locally, rather than putting a hold on the projects that people want to have funded.

Brett Hudson: Tax and spend.

Hon JULIE ANNE GENTER: Now this is the amazing thing. Somehow this Government is tax and spend, and yet the National Government raised petrol tax across the country, took it out of the regions, spent less money in the regions, and spent it on incredibly poor-value, short links of motorway that didn’t do anything to reduce congestion—of course it didn’t, because all the data shows that urban highways don’t help people get around. At the same time, they had the incredibly regressive move of cutting income tax for the highest income earners and putting up GST. Now, if the National Party actually cared about the lowest-income New Zealanders, they wouldn’t have put up GST and cut income tax.

But let me just say—because I know that they suddenly, in Opposition, are very concerned about the lowest-income New Zealanders. Well, if we look at how the regional fuel tax is going to affect, say, a decile 2 household in Auckland based on actual data of how much petrol they consume, it’s going to be about $2.80 a week for decile 2. That is what the data says—$145 per year—and, as a percentage of the income, that’s 0.5 percent. So a 0.5 percent increase in petrol tax. Of course, at the same time, we are looking after those low-income households by benefiting them with a Families Package to a much greater extent.

Brett Hudson: Then you take it off them with a fuel tax. That’s disgraceful.

Hon JULIE ANNE GENTER: Now, for a decile 9 household—so that would be one of the richer households that Mr Hudson’s not concerned about at all—they might be spending about 0.25 percent of their income. So that’s the difference—that’s the regressive difference: 0.25 percent of their income versus 0.5 percent.

So what I would say is that if we want to address the problem of access to opportunities and employment—

Brett Hudson: No, no, no. I think the member underestimates her costs on lower-income earners.

Hon Members: What’s your Master’s in?

ASSISTANT SPEAKER (Adrian Rurawhe): Order! Please don’t bring the Speaker into the debate, even in your comments. Sorry for interrupting.

Hon JULIE ANNE GENTER: The best way to do that is to actually invest in both housing and transport infrastructure that enables people to access those opportunities, and that is clearly what this Government is doing. So with rapid transit across Auckland, safe walking and cycling across Auckland, and improvement to bus services, reducing fares, all of that is going to massively benefit everyone—everyone—in Auckland, but particularly the lowest-income households will benefit from this investment. South Auckland—well, actually, the Māngere light rail is all about South Auckland and it’s just one part of what we’re doing there. Puhinui to the airport is giving people access to a major employment area. It will go right up into east Auckland. And then, of course, Te Atatū—well, that’s where the north-western light rail’s going, Mr Hudson.

So this Government has a very practical, evidence-based vision and is going to invest in the infrastructure that I know New Zealanders have wanted for decades, and that party, the National Party, when they were in Government, refused to invest in the infrastructure that was desperately needed. But yet they did raise taxes—oh yes, oh yes. They raised fuel taxes, they spent them on about seven projects, which were in Auckland, Wellington, Christchurch, Hamilton, and Tauranga. There was a promise of some roads in Northland, but it was going to be about 30 years before they actually reached Northland, and, even then, they weren’t going to actually make it easier for people to reduce the amount that they spent on transport.

So it’s hard not to spend your entire speech responding to completely bizarre, other worlds that the Opposition seems to live in, where on the one hand they’re going to cut tax and not raise tax, and on the other hand they’re going to invest in roads, and somehow that’s going to help people, but the roads weren’t actually in the regions you guys were talking about. So look, I know that you in your little groupthink get very carried away, but let me just assure you that your constituents in Auckland are going to be extremely pleased with this Government for finally showing some leadership and enabling the local councils to raise revenue in a way that is fair and that enables the investment in the infrastructure that we need so that communities can be connected, so that kids can walk and cycle safely to school, so that everyone has access to frequent, affordable, reliable, modern public transport, and that those decisions can actually be made at a local level, not entirely dictated by central government, as the previous National Government did. Their approach to transport was very much about dictating to local government: raising taxes across the country, dictating to local government what the money would be spent on, and some eye-wateringly expensive and poor-value-for-money roading projects that did nothing to reduce the road toll, that did nothing to reduce congestion, and that did nothing to reduce pollution.

So I am very proud and pleased to support this bill. I don’t doubt that we can come up with even better ways and fairer ways of raising revenue for transport infrastructure in the future, but this is actually quite a good fix and is going to be very much supported by people in Auckland.

ANDREW BAYLY (National—Hunua): It’s a pleasure to be talking on the Land Transport Management (Regional Fuel Tax) Amendment Bill, and particularly just to listen to that previous speaker, Julie Anne Genter, who I heard was an expert in transport matters—something I never heard before. She did make the point that we all have to go back to our Auckland constituencies—and, of course, I am an Auckland MP—and tell them about this issue and tell them why we’re not supporting this bill.

So I was just looking at the public opinion results. Back in May, we had the One News Colmar Brunton poll—58 percent opposed. Another one in May: final consultation on draft proposal for regional fuel tax, Auckland Council, 51 percent did not support; May, Auckland Council Facebook, 74 percent against; May, select committee, 89 percent of the 500 submissions opposed; April, 10-year budget plan, 48 percent opposed; and the Colmar Brunton poll—another one, in April—52 percent opposed. So I’m going to talk about my electorate soon, because I can assure you that many of my constituents are very unhappy with this bill.

I think we have to ask ourselves: why is the Government pursuing this agenda? As we all know, the National Government worked closely with Auckland Council to develop a $28 billion plan over the next 30 years to deal with a scheduled, planned, well-considered transport plan for the Auckland area. Of course, that was called the Auckland Transport Alignment Project, or what people referred to as ATAP. Now, out of that $28 billion, all of it was funded except for $4 billion. When you talk about $4 billion, it sounds like a lot over 10 years, but, in fact, every time you talk about a brand new motorway, it’s basically a billion-odd dollars.

So, in context, Mill Road, which the National Government committed to just before the election, is a billion-dollar project if it was to be done. So, actually, the essence of the regional fuel tax is about making up that shortfall of the $4 billion over 10 years. And, of course, we have tried regional fuel taxes before and they have shown to be not a great mechanism. In fact, last time they were tried was back in 1990. Of course, where we were trying to go, as the former Government, was actually to look at congestion pricing, and I think there is a great deal of support for congestion pricing in Auckland, and I’ve been in many seminars. As a Government we were trying to do it, and I know the deputy mayor and a number of councillors and people from Auckland Transport went to places like Singapore and looked at congestion pricing. Now, the issue with congestion pricing, of course, is that it’s going to take a little while to implement. But we have heard from many of the submitters that this should be the key priority if you are to put in this type of funding. The emphasis and the incentive to put in congestion pricing should be of paramount concern.

The third option that the Government may have considered was charging at Marsden Point, and one of the submitters—Mr Ken Shirley made a very good submission, the very first one we heard in Auckland—said if you’re going to charge a fuel tax make it easy, do it at Marsden Point. Really easy.

Or the fourth option was you could’ve put pressure on Auckland Council. As we all know, Auckland Council costs have gone up dramatically over the years since it got formed, and, of course, this regional fuel tax puts no further pressure on the council to do that.

The fifth option was for the Government to take over the funding of key projects. Of course, that’s where the central government was under National. Increasingly, we were looking at major roads in Auckland where we would take them over as the Government, which gave us the advantage of being able to consent them in a short time period of up to six months or nine months, depending on their priority, and actually get them built—and actually get them built—rather than talk about getting the council to work through their own processes. That, in my view, was the most important option that should’ve been considered in terms of looking at this issue.

But what did we end up with? We ended up with this fuel tax proposal, which is collected at the distribution level, which means if fuel is imported at Tauranga, as an example, it is a distribution company that then accounts for it. That fuel may end up in a petrol station or it may end up in a farmer’s tank. Consequently, it is quite complicated.

The second thing is we’ve now ended up with two fuel taxes, which I think the Government hasn’t really been that clear about. We’ve got the 11.5c that this Auckland fuel tax will generate, on top of the new tax of 12.5c—on the fuel tax increase that has been implemented by this new Government—making a total of 25.3c per litre. Every time you go to the pump in Auckland, you will be paying on average, depending on the size of your car, about $15 extra per tank load. I put it to you that this is quite a significant cost—$15 every time you fill up the tank.

The third thing we’ve ended up with is a bill that promotes a 10-year window with a right to the council to actually extend it beyond that. So if you are saying “Let’s have the incentive to put in place a much fairer system around congestion pricing.”, you wouldn’t put a 10-year time frame, and a number of the submitters suggested that we should put in a much shorter time frame. But, of course, that was overruled, and we actually made it even more permissive in the sense that Auckland Council, prior to the end of the 10-year period, do a review and it can be extended. Of course, in the Act, which wasn’t—what was partly talked about in the election, but has now been incorporated in the bill, is it expands this legislation to all other regions. So, of course, we had Hamilton City Council turn up in Auckland and they were saying, “Yes, we want to do it too.” When we asked them how much that would raise they said, “$15 million a year.”—$15 million a year. Then we had a whole raft of other councils talking to us about raising money. Of course this is going to proliferate around New Zealand.

So we ended up receiving 520 submissions, 20 of which we heard. To be honest, I have been a member of the Finance and Expenditure Committee now for five years and I found it quite embarrassing to listen to the submitters coming in thrashing the committee about this bill. Of particular concern to my electorate in Hunua—south of Auckland, a farming and large horticulture industry—was we had one of the submitters, Horticulture New Zealand, come and talk about the implications this will mean for the many, many horticulturalists who drive their tractors, trucks, loaders, and fork hoists in their factories. A large number of equipment all running on diesel power will now be caught under these arrangements. We talked about a dispensation, but, of course, that was overruled. I think it adds an incredible amount of complication to an industry that is incredibly productive and helpful to the New Zealand economy.

The second thing we heard about, and we’re already seeing the impacts of, is price spreading. This occurred in 1990, when a fuel tax was in place. We are now seeing that—and we talked about the boundary of Auckland stops at, basically, the Bombay Hills and cuts down through my electorate on the other side at Pōkeno. We had a number of the fuel companies turning up talking about the issue of price spreading, and, of course, we now have seen that in evidence happening.

But the worst thing about this bill, in my mind, is the regressive nature of this bill and how it will hurt the poorer members of New Zealand. I know that the Labour Government like to say “Well, our tax proposals are going to deal with them.”, but, unfortunately, their tax proposals that they ripped off average New Zealanders are being directed to those families with children. What does it mean for young adults who are going to university? What does it mean for those couples that don’t yet have children but are busy buying for their house? What does it mean for the superannuitants who are out there driving around, going to their bowling club—all that sort of stuff? All those categories are not going to have any benefit by the tax reforms that this Labour Government has put through. What it’s going to mean is that these guys will be paying $15 every time they fill up their car. I think that is the worst aspect of it.

So, in my area, I just want to deal with this issue around Mill Road. The Minister of Transport keeps saying that he’s going to deliver Mill Road. Well, let me be clear, I’ve been, since this announcement has been made, trying to educate my constituency because they’ve been, in my view, misled to the extent that they believe that they are getting the entire Mill Road, $1 billion project that the Hon Judith Collins and I were successful in getting the National Government to commit to. They’re not. They’re only going to get the first stage: Redoubt Road—Redoubt Road, which will stop at Alfriston School. It will be a road to nowhere—a road to nowhere. It does nothing for my constituency.

ASSISTANT SPEAKER (Adrian Rurawhe): This is a split call—five minutes.

Dr DUNCAN WEBB (Labour—Christchurch Central): Tēnā koe, e Te Mana Whakawā. Noisy, directionless, polluting, stop-start—that was Mr Bayly’s contribution. And here we have the member for Hunua, as you would expect, listening to Mr Shirley, lobbying for the Road Transport Forum, who would have every other citizen in New Zealand pay for the woes that that Government left us with.

One of the many things that is good about this excellent piece of legislation is that it has an Auckland solution to an Auckland problem—as it should. The deficit in the infrastructure there is enormous. We are, as Minister Genter pointed out, taking an innovative approach, not one based on cars. There’s $28-billion-worth of works to be done to solve this problem.

This regional tax framework will allow the raising of around $4 billion. That’s not to say it will raise $4 billion, but leveraged off this tax will come $4 billion—a modest contribution to that, and here, the tax itself, a little over $1 billion. So, look, it’s not too much to ask to say to the people of Auckland “Can you chip in?” There’s still a lot of central government money going to this and a lot of ratepayer money.

But in terms of a regional fuel tax, it’s minor, it’s minuscule—as we’ve heard before, it’s around $5 a week. But, let’s be clear, for a lot of people $5 a week is important; it’s not trivial. Five dollars a week counts. I’ll tell you what else counts: $75 a week for Working for Families counts; $31 a week in the winter energy payment counts; $20 cheaper doctors’ fees, that counts; $30 a week rise in the minimum wage, that counts—

ASSISTANT SPEAKER (Adrian Rurawhe): Order! Sorry to interrupt the member but the time has come for me to leave the chair for the dinner break.

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

Dr DUNCAN WEBB: Tēnā koe, Madam Deputy Speaker. Before dinner, I had pointed out that Auckland has a problem, left to it by the National Government, and Auckland has a solution. I’ll tell you what that solution is: under this bill, under the transport plan proposed by Auckland City, it’s a plan around public transport. It’s public transport, public transport, and public transport—not more roads, not encouraging people to get back in their cars and create more congestion, a failed plan that the Opposition would have us go back to. Well, no. We have rail, enhanced cycling routes, park-and-ride, walking, safety—this is a Government that will look after people, not like the Opposition, who would simply build motorways to nowhere and have safety issues falling over themselves—a rail-bus interchange, integrating a public transport network. What we have here is an actual plan that looks forward, that doesn’t look based on old ideas, old technologies, and a solution that doesn’t work. You know, I’ll tell you who a car-centric city hurts: a car-centric city hurts people who can’t afford two cars. What this will do is turn Auckland into a city where people can have low-cost transport solutions. These are the very people this Government stands for.

Andrew Bayly: There are no options in Waiuku.

Dr DUNCAN WEBB: There are no options, Mr Bayly, because your lot left Auckland in a debacle, an absolute mess, and it’s time for a change—and change is here. And you know what? Auckland is happy about that. Auckland is relieved that, at last, there’s a plan. There’s not some $11 billion hole in the transport network; there’s a plan to fund it. The solution is not encouraging more cars on the road. But, look, Mr Bayly’s there yapping away, as he is wont to do, and I’m surprised about that because, in fact, in select committee he’s much more intelligent, you know. He’s not the imbecile he makes himself out as here; he has some quite good ideas. I’m grateful not only to the great leadership of the chair, Michael Wood, but also to the National members for pointing out ways in which the bill could be improved, because it is absolutely right that we don’t want to tax people who are using their fuel off-road. Regional fuel tax—it’s a complicated tax. It has regional boundaries; it’s about taxing fuel within that region for road use, because this is about funding the deficit in roads, and that’s what we’re going to do.

SIMEON BROWN (National—Pakuranga): Thank you very much, Madam Deputy Speaker. It’s a pleasure to be able to take a call on the Land Transport Management (Regional Fuel Tax) Amendment Bill. The speaker who’s just sat down, Duncan Webb, is another example of someone in Christchurch trying to tell Aucklanders what’s best for them, and this is what this Government is doing: telling Auckland what they want. They have come to the House this afternoon, and we’ve all heard all the rhetoric. We’ve heard the rhetoric about how this is an investment in Auckland, a down payment by Aucklanders. They’ve said, “Help is on the way.” Well, this is a tax, and this Government is taxing, taxing, and taxing.

I heard the member for Mt Roskill say this is the moment he has been most proud of in this Parliament. The moment he’s been most proud of is to tax people in his electorate and across Auckland. Well, this tax, as we know, is regressive in its nature, and it is going to hurt the people who will get the least benefit from it. Those lower family income households are the stakeholders who are most likely to hurt the most from this tax. They’re the ones with the less fuel-efficient cars, they’re the ones who have to travel further in their cars, and they’re the ones who vote for that crowd over on the other side of the House and now are going to get punished by them on one hand. They talk about what they’re giving them, but they give with one hand and take with the other, and they have no plan.

I would just like to quote the words of Sir John Walker, who was speaking around the governing body when he voted against—he represents the communities of Manurewa and Papakura. He said we give people a wage increase and we then take it away with another hand. Well, that’s what the people on the other side of this House are doing: giving with one hand and taking with another, with a fuel tax, and I find that to be reprehensible.

The real reason for this tax is to enable the funding of some tram up through the Prime Minister’s electorate, a tram which has a benefit-cost ratio of something which is uneconomical and which is displacing the funding from projects which we had funded on this side of the House—funding for projects like the East-West Link and Mill Road, funding for projects like the Eastern Busway—Auckland Manukau Eastern Transport Initiative. And now they’re going to fund them with a fuel tax. Well, those projects were funded under the regional land transport plan. They were funded under the Auckland Transport Alignment Project last year, which we, the National Government, put in place, and now they’re replacing that money with a regional fuel tax, going back to the community and saying, “Well, we’ll give you your projects back, but you have to pay again so that we can build a tram up through the Prime Minister’s electorate, all the way to the airport.” Well, that tram will take 60 minutes to get from the airport all the way to the city centre, and it will be easier to get an Uber—

Andrew Bayly: What? How long?

SIMEON BROWN: Sixty minutes. It’d be easier to get an Uber—easier to get an Uber, Mr Bailey. Just get an Uber into town. And we’ve got something called the Waterview Tunnel, which we are proud to have delivered when we were in Government and which has unlocked Auckland’s transport.

The point I’d like to finish on is the lack of consultation. I’d like to finish on the point that this Government has truncated the submission process. Right from the start, they haven’t wanted to listen. I heard the Minister Julie Anne Genter—she was saying that we wanted to give local communities the ability to have their say on the projects which they wanted to invest in. Well, they have not listened, every single step along the way. The first thing they did was truncate the select committee process. They gave submitters who were going to be impacted by this tax less time to be able to make submissions. Well, that was truncating the process and cutting out the people who are going to be impacted more.

Secondly, the people who have submitted through the Auckland Council process and through the submission process have said no, no, and no. They said no when they asked the people across Auckland—51 percent. And of the people in my electorate, in Howick, the electorate of Pakuranga and the Howick Local Board area, 62 percent did not support it—62 percent of the people in my part of Auckland did not support this.

I have just been up and I’ve just found a sign which was used by the Rt Hon Winston Peters a little while ago. He said “NO” then, and they should say no now. Thank you very much.

JAMIE STRANGE (Labour): Madam Deputy Speaker, thank you for the opportunity to contribute tonight. As somebody who lives in Hamilton, a list MP based in Hamilton, we love Aucklanders. You know, they drink their lattes, they’ve got their boats, they go out on the shore, they’ve got their terrible rugby team—you know, we get that. We love Aucklanders, but we don’t love them that much that we want to pay for all their infrastructure challenges. Why should us Hamiltonians have to pay for Auckland to fix some of their transport issues?

Matt Doocey: Good question! That’s what we say.

JAMIE STRANGE: Matt Doocey—he’s in the Waimakariri. Do your members want to pay for Auckland’s transport issues—sorry, Madam Deputy Speaker; not yours, but do the member’s people want to pay for Auckland? Stuart Smith, the member from Kaikōura—do members in Stuart’s electorate want to pay for Aucklanders’ issues? So here’s the point. Why should people in Masterton have to pay for Auckland? We’re talking about a system here of personal responsibility.

Now, I had nothing else to do before, so I just had a quick look on the National Party website. The National Party website talks about two things: loyalty to our country—OK, sure—its democratic principles and our sovereign principles and the Sovereign as head of State. Well, that’s debatable. But here’s one of the key values I saw on the National Party website: personal responsibility.

So my point is, why shouldn’t Aucklanders take personal responsibility for their transport challenges? They’re the ones that got themselves into this mess. So what the Opposition are saying is that the rest of the country should bail them out. What I’m saying is that the Aucklanders should take personal responsibility, and that they can pay for some of their challenges. Sure, we’ll help out, because we’re nice like that—us Hamiltonians are nice like that—but the point here is that we care about Aucklanders, but they need to look after some of their challenges. And that’s what this bill does. This bill says that Aucklanders will pay for their infrastructure. Yes, we’ll help out, but the Aucklanders will be paying for it.

Now, as some people may know, I tend to like to sometimes put a little lyric into my speeches.

Matt King: Please don’t.

JAMIE STRANGE: And tonight the lyric is—just for Matt King—Sterling Simms, and the lyric says, “I’m stuck in traffic, trying to get to you. I’m stuck in traffic, trying to get to you.” I’ve been up to Auckland a few times recently and I’ve been stuck in traffic. And where’s the singer trying to get to? Family, work, maybe for leisure, anywhere, but the productivity aspect—sitting in a car, on a motorway that’s gridlocked—is a big challenge. And members from this side of the House have made that quite clear, that there are huge challenges in Auckland around transport. This Government will address those issues, and this bill is the start of doing that.

So we talk about Auckland being a world class city, and there are many aspects of Auckland that are absolutely world class, and it’s a desirable place to live and we’re proud of it as a country, we’re proud of the city. But we’ve got a long way to go in terms of transport. When we look at cities like Canberra, who are just in the process of building light rail; Adelaide; some of the countries over in Asia; many of the countries over in Europe—some of these countries and these big cities that we look at—we haven’t kept up with population growth. The infrastructure hasn’t kept up.

So I’m excited that we’ve got a Government who will put their money where their mouth is. Because the previous Government talked about—let’s have a look at this. Back in 2005, the previous National Government said they’d put money aside for Penlink. In 2005, they said, “We’ll do Penlink—yes, we will.” It was an election promise. Did it happen? No. In 2017, they popped up again, “Oh yeah, that’s right, Penlink. Yep, we’re going to do it.” But they didn’t budget any money for it. Whereas this Government, we are putting our money where our mouth is. So yes, we are saying that we will fix the transport issues, but we will pay for it.

We heard from the Rt Hon David Carter earlier tonight with his contribution. And as an esteemed gentleman—a very intelligent gentleman—but I wonder what is his plan? He gave us a speech for 10 minutes which was full of excitement and rhetoric, but there was no plan. And that’s the point; this Government does have a plan. And I do wonder if the Rt Hon David Carter—maybe he might be looking to jump off a sinking ship, but that’s up to him. He mentioned the Northcote by-election. I was up at the Northcote by-election on the weekend, and when I was talking to people up there, the people up there were telling me, “We need a plan. We need a plan. We’ve heard for years that they’re going to fix these gridlocked streets, but we need a plan.”

Hon Member: And who did they vote for?

JAMIE STRANGE: In the Northcote by-election the majority was cut from 6,000 to 1,000. I would see that as a failure. If I had 6,000 and it dropped to 1,000, I’d be very disappointed with that result.

I’d like to speak for a moment about the Eastern Busway. So the Eastern Busway is one of the projects that this regional fuel tax will fund. The Eastern Busway will not happen without this policy—it will not happen. And the member for Botany who shares two-thirds of my name, he is against this policy, but when the Eastern Busway is built and Prime Minister Jacinda Ardern cuts the ribbon, the member for Botany will become very quiet because he knows that this was a good idea. And the reason this is a good idea is because Auckland is paying for Auckland’s infrastructure.

So just to summarise, we have huge issues in Auckland. It’s at a standstill. We understand the frustration of its ratepayers who are spending hours of their day stuck in traffic. There’s a huge loss of productivity when you’re sitting behind the wheel stuck in traffic. Maybe in a few years we might have driverless cars and people will be able to do some work on there, but at the moment, the reality is that productivity is being lost. And Aucklanders want action. They’ve been talking about this for years. They want action and they want it quickly. Congestion is a handbrake on the New Zealand economy.

So what’s the solution? This bill is the solution. This bill is about taking personal responsibility—which is something that I know the member’s opposite believe very strongly in. It’s about Aucklanders taking personal responsibility for their transport challenges, and for them paying for it. And people in Hamilton, people in Masterton, and people down in Southland—we’re going to chip in a little bit, OK? We’re going to chip in as well, but the Aucklanders should pay for their challenges. So, Madam Deputy Speaker, thank you for the opportunity to speak on this and I commend this bill to the House.

DENISE LEE (National—Maungakiekie): Thank you, Madam Deputy Speaker, for the opportunity to speak in the second reading. What can we say about the Government’s idea around a regional fuel tax, in cahoots with Auckland Council? First of all, the Government introduced this legislation before Auckland was consulted on it—strike one. Strike two: they shortened the committee process and designed the legislation to suit council’s proposal. This Government has moved heaven and earth to make Auckland pay more at the pump, and I know that it’s going to come back to haunt this Government.

Stuart Smith: And we’ll pay, too.

DENISE LEE: Yes, we all pay—that’s right. Thank you, Mr Stuart Smith.

Polling and consultation shows that Aucklanders do not want this tax.

Hon Willie Jackson: That’s not true.

DENISE LEE: It’s quite simple, it’s quite plain, and it’s quite clear. There have been at least six polls—thank you, Mr Jackson—and only one poll shows that there has been any result other than opposition to this fuel tax. That one poll was at the very beginning, from Auckland Council, and that one poll cost $200,000. It was designed and crafted by Auckland Council—a smaller sample—and before we knew that the Government was going to add on a national excise tax. A $200,000 poll by Auckland Council, and that’s the only poll that the Government can clutch on to, to prove that there is support when there isn’t support.

Back in May, at the select committee process here in Parliament, 89 percent of the 500 submissions were opposed. Also in May, in the draft proposal for the regional fuel tax—the consultation that Auckland Council undertook—51 percent did not support and only 42 percent did. Back in May, again, in the One News Colmar Brunton poll—there we go, Colmar Brunton, again, but this time a much bigger sample—58 percent were opposed. Here are the rock-solid results, and still the Government arrogantly pushes on with a tax that undermines the debate.

You see, the point of this debate is to make clear, I think, from the Government that this result’s inevitable. Well, it shouldn’t be inevitable—it shouldn’t be inevitable—that Aucklanders will end up paying more at the pump.

Now other cities and regions are lining up for this, and it’s really interesting to hear from a member who lives in Hamilton, because you too will be paying at the pump. Just wait, your council wants it, so do all the other councils in New Zealand, and Local Government New Zealand has confirmed this. It’s a matter of time.

We heard from Minister Genter earlier in the evening, when she said that the Government is listening to the people. Need I repeat those poll results? The Government is not listening to the people. The polls are showing what the people think, and how inconvenient that time after time, the more this debate has gone on and the more time has gone on, the more the poll results are getting clearer. It’s not going their way; it’s going by way of people speaking and trying to exercise their mandate on what they do and what they don’t want to do with their wallets.

The member Duncan Webb said earlier that this was an Auckland solution to an Auckland problem. Well, that’s not going to be the case if Mr Jamie Strange or your councils will want this solution for all of their problems. Again, that’ll be coming. Local Government New Zealand have confirmed that this is something that they want.

Now if we think that this bill’s about investing in transport projects, well, we were able to do that in our last Government—in the National Government. This bill is actually about Auckland looking to pass the burden of transport projects and funding to Aucklanders and their wallets. Is it right that soon the country will end up having to take on the same burden as well? I don’t think so. If councils were able to responsibly prioritise their spending, would this tax be needed?

Of course, I’m going to head on to Auckland Council very soon, having been an Auckland councillor myself for four years. There should be a higher bar in place for councils to justify the imposition of a new tax on ratepayers—simple as that. Councils should be required to demonstrate clearly that they’ve exhausted all avenues for funding before they get to this particular tool in the tool kit. Where are the clear benefit-cost ratio business cases for the projects that they’re proposing? How can they demonstrate where the revenue will go—to which projects—before they authorise and impose this sort of new regional fuel tax?

Speaking of new revenue, it wasn’t that long ago when I was on the council and the idea, the concept, of an interim transport levy came up. “Interim” ended up being three years. This has a theme and a feel to me like the interim transport levy, which I did not support when I was in council. Council went for Aucklanders’ wallets then, and they’re doing it again now, but this time you’ve got a Government that is supporting them to do it. That’s the difference right now. When it was the interim transport levy and I was around the council benches, that was an internal discussion and very much an eleventh-hour solution that I didn’t support. This time, you’ve got council and Crown in cahoots, working on this together.

There are unintended consequences for business—and I’m going to touch on that soon—but let me talk about the unintended consequences for council. Do the Government know what they’re about to set off in terms of trust ratings in Auckland Council? Do you even know or listen to what it’s like to be an Auckland councillor and to experience the level of low-trust environment that there is? They’ve quantified it in their own reports, and what the Government is doing is going to set it off one more time, in a new way and on a new angle. The Government is going to—well, perhaps it’s not unintended, I don’t know. But the Government is about to send Auckland Council and Aucklanders into another spiral of a low-trust vortex. It is simple and it is clear. I’ve been there before, and this is just going to do it again. Wait until 1 July.

You see, Councillor Mike Lee said in the debate, “The problem here”—and I’m quoting—“is the lack of trust in the way Auckland Council spends its money, to be frank.” Other speakers said the same thing. The Government is contributing to the problem. Trust is low, they’re doing a hand-holding initiative with the Crown, and the consequences will be dire for our biggest, most prosperous, and bustling city.

Now, I just want to talk a little bit on some of those unintended consequences for business. As we know, the cost of shipping—that’ll just simply be passed on to consumers through higher prices. Shipping costs, food costs, clothing, household goods—those are the unintended consequences of this.

We also know about family impact. How many times does the Government have to hear from economists, from the New Zealand Initiative, and from speakers from their own ministries around the impact on low-income families and on those who can least afford to pay more dollars every time they fill up their petrol tank? It was actually another councillor, Fa’anana Efeso Collins from Manukau, who said in his speech, and I think he was very eloquent, that he could not in good conscience—this is a Labour councillor—vote for the tax that would hit the poorest families the most. “The tax is taking food off the table.”—that’s what he said. How does the Government answer that?

I want to finish in my last seconds by strongly objecting to the argument from the other side that you either do the fuel tax or you get congestion, that you either have a regional fuel tax or you do nothing, or that you have less revenue, and if we get less revenue, we’ll have to cancel all the projects. That’s rubbish. It’s a funding question. The projects are going to happen. In fact, they were all outlined in the Auckland Transport Alignment Project when we were there. It’s about the funding—about how you get the funding.

Now I know—and I’m going to finish in just a very short amount of time. Here’s some funding options for you from a former city councillor. Non-strategic assets—Auckland Council, take a look at those. Procurement strategy, a whole-of-Government strategy—which doesn’t happen at Auckland Council—take a look at that. Staffing levels—take a look at that too. We oppose this and we will repeal it.

Hon WILLIE JACKSON (Minister of Employment): Thank you, Madam Deputy Speaker. Well, that was a shocking speech—shocking speech—and Denise, go back to council now. Go back to council now. First of all, I want to congratulate Phil Twyford. What a brave and courageous Minister. Against all the silly and poor and pathetic attacks from the Opposition, we had him here standing brave today, courageous, talking about congestion—something the Opposition would have no idea about.

Simon O’Connor: Indigestion.

Hon WILLIE JACKSON: Well no, indigestion for some of them. The problem is if you don’t live in Auckland, particularly in South Auckland, you wouldn’t know. It is terrible, and so you have to do something. The Opposition did nothing over their nine years—

DEPUTY SPEAKER: I didn’t do it.

Hon WILLIE JACKSON: Nothing. All they did—of course, not yourself, Madam Deputy Speaker, but your mates—was invest in their rich friends; tax cuts for their mates. They forgot about the infrastructure, forgot about the basics, forgot about Middlemore Hospital, forgot about the roads, the streets—it was shocking, shocking what you did.

And here, we are always thinking about the poor people, the working-class people. I want to be a little bit humble today because I believe myself and my friend Anahila over here have represented more poor people than the whole National caucus combined. I sincerely believe that and I say that very humbly. The National caucus has no idea about poor people’s needs. And here’s the crunch: not one—not one—poor person has said anything to me about the tax. Not one word, not one line, and the same with Anahila. We live in South Auckland; we don’t live in east Auckland. We don’t live where a lot of the National Party live. We live in South Auckland, and not one poor person has said anything about what the National Party’s talking about tonight, basically, because they don’t care. All of a sudden, the National Party cares. Why do you care? Why does the National Party care so much now for poor people? Poor people don’t give a stuff about this—not one person.

The only time I’ve been attacked—and I need to say this—was in Northcote. In Northcote, I was attacked by a National Party supporter of Dan Bidois. It was clear as a bell. I thought there was going to be violence towards me over the tax. This is in Northcote where Shanan was—the fantastic Labour candidate who cut back that huge Northcote majority and made the National Party look stupid on Saturday night.

I have been to gang patches; I have been to Mongrel Mob patches, Black Power patches, done all the door-knocking, but over there in Northcote, knocking on a National Party supporter’s door, I was threatened. Of course, I backtracked because Labour Party people are peaceful people. We’re not going to engage in aggression or violence with National Party rabid, maniacal supporters. No, we’re not going to do that. I backtracked and I said, “You vote for Dan Bidois. You vote for Dan Bidois.”

I was attacked, but in South Auckland they all support this levy. They all support it. You know why? They want to get into the houses where all the people were kicked out by your Minister Paula Bennett, Judith Collins, and all of you, because you all thought that they were smoking meth. Do you remember that time? Then you invested $100 million in all your National Party mates so that they could all have jobs. We recall that time well, don’t we? Remember that time—$100 million being invested into National Party supporters and friends, while you kicked the poor and working class out. You kicked the poor and working class out, and made up stories, and you had Paula Bennett in cahoots with the Housing New Zealand Corporation. That’s what the National Party did. That’s how much the National Party cares about poor people. We all know this, thank you very much. That’s how the National Party looks after poor people.

So I want to say today that Twyford is leading the way—and it’s good to see you’re all silent now, because that proves to me that guilt has overwhelmed you in terms of this kaupapa. But we are brave; we are courageous. There is $28 billion going into this—more money than you could ever think of—and into fixing up roads, and fixing up what poor people want done, because poor people can’t operate on rotten, crummy roads that were laid out by the National Government. Kia ora tātau.

A party vote was called for on the question, That the amendments recommended by the Finance and Expenditure Committee by majority be agreed to.

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1.

Question agreed to.

Bill read a second time.

Bills

Taxation (Neutralising Base Erosion and Profit Shifting) Bill

In Committee

Part 1 Amendments to Income Tax Act 2007

Hon PAUL GOLDSMITH (National): Thank you very much, and thank you for the opportunity to say a few words on this Taxation (Neutralising Base Erosion and Profit Shifting) Bill. I think this is the stage where we try and delve into the nitty-gritty of the legislation. I think, just for the benefit of the viewers around the countryside trying to get their heads around what we’re trying to achieve with this legislation, it is trying to navigate that fine line between ensuring that the tax laws in place are fit for purpose when it comes to overseas investors and multinational companies operating in New Zealand, so that they pay their fair share of tax.

When you’re operating across different boundaries and jurisdictions, then there are ways in which the companies and their subsidiaries in New Zealand and the relationship with the companies that own them overseas are structured can have big influences on the taxes that are paid. One of the simplest ways to reduce tax paid in New Zealand is to price related party debt, which is to say that if you load up the New Zealand business with a large amount of debt, then that business has the debt servicing costs in New Zealand that can be offset against their income. Depending how expensive that debt is and how high the interest rate is, it lowers the effectual taxable income in New Zealand for that subsidiary.

So there’s all sorts of rules that have been developed over the years to ensure that overseas companies don’t charge excessive levels of interest and don’t have excessive levels of debt in their New Zealand company in order to avoid paying tax in New Zealand and to shift the profit offshore, perhaps to another country where there is a lower tax rate. So that’s what certain parts of this bill—and we’re dealing with Part 1 here at the moment, and I’m looking specifically at sections GC 15 to GC 19 in clause 37, which deal with these cross-party related debt issues.

So the fine line that we’ve got to navigate our way through is a desire for these rules to be effective in ensuring that excessive interest rates are not charged and excessive debt is not loaded into the New Zealand company, against wanting to ensure that by making those rules too tight we could have the consequence of actually increasing the overall effective tax rate that the overseas investor—or would-be overseas investor or multinational company—is actually paying. If the net outcome of it was that we had less foreign investment in New Zealand because we had, effectively, increased the effective tax rates, then that would not be a good outcome.

So the primary question that I have for the Minister—and I’d be very keen to have his view on this some time over the course of the evening—is to reassure us that he thinks we’ve got that balance right as to having the rules around related party debt sufficiently tight as to ensure that a sufficient amount of tax is paid in New Zealand, but not too tight that they are artificially increasing the effective tax rate that would-be foreign investors in New Zealand are looking at paying, and making us a relatively unattractive place in which to invest. That, I think, is the critical thing that I’d be very keen to hear from the Minister on.

But as we drill into the details, one of the matters that was discussed at great length during the select committee process was when a New Zealand borrower with an identifiable parent failed one of the three tests that we are introducing—and another one of my speeches will talk about doing away with one of those tests, because it was too high—it would have its credit rating restricted to one notch below its worldwide group credit rating. Now, what we’re getting at there is how you determine what is an appropriate—[Bell rung] Madam Chair, I might just keep going, if that’s all right.

CHAIRPERSON (Hon Anne Tolley): The Hon Paul Goldsmith—yes.

Hon PAUL GOLDSMITH: So what we’re trying to determine in the course of this legislation is what an appropriate rate of interest is for a New Zealand subsidiary to be paying back to its global parent. If it’s too high, that interest rate, then the New Zealand subsidiary won’t be paying much tax because all their profits will be eaten up with interest payments. If it’s too low, then the parent will feel like it’s an unfair transaction, and so a lot of the discussion and argumentation through the course of the select committee stage was about how we get that right.

I mean, for example, we had a submission from KPMG where they talked about the group credit rating approach not being a particularly fair one. Their concern, and the concern of a lot of people involved in this, was that the traditional global practice has been to have what’s called arms’-length interest rate payments. So it’s what you’d get on the global market for this particular business—its size, its risk, its security—and at a market rate then you can justify that. Now, we’re shifting away from that to this idea that the New Zealand subsidiary should actually pay the highest credit rating for the worldwide group, and then take one notch off that. So if the New Zealand company, however big it was, was operating and if it was owned by a multinational company, the highest credit rating that multinational company had—whether it was AA or A- or whatever it was—you’d take one notch off that and that would be the guide to the interest rate that would be appropriate for the purposes of this tax.

Rt Hon David Carter: So why one notch?

Hon PAUL GOLDSMITH: Well, see, that was what was suggested by officials, and the concern is that that was too tight. So our suggestion throughout the select committee process was to drop that to two notches, to make it a more reasonable approach. Many of the submitters were concerned that even that was too tight because the New Zealand subsidiary, you know, was obviously considerably smaller than the global entity. It may have a completely different risk profile. It may have a whole lot of particular circumstances that mean that it is a fundamentally riskier proposition, which would justify having a higher interest rate charged to it.

So that really is the second question that I have for the Minister, and I’d be very keen to get his view on that. Is he absolutely confident that we have got it right in terms of dropping two notches from that highest group credit rating as a guide for the interest rates that we’d apply?

I think we should still be worrying, I suppose, as to why New Zealand isn’t adopting what is pretty much the global practice around having an arm’s-length interest rate rather than this concoction that we’ve come up with here. So, you know, I’d be very keen just to get a sense of how comfortable the Minister is, and, secondly, whether he thinks two notches below the global highest group credit rating is sufficiently broad and capacious so as not to achieve what is—my main concern about all this is that what we don’t want to do is reduce the attractiveness of New Zealand as a place for international investors to invest. And that’s where the effective tax rate that they’ll be paying is so important, because, if I was to sort of make a broader point in conclusion, it is that this is a country that throughout its history has relied on foreign investment. Ultimately, if we want jobs and growth and opportunities for the next generation of New Zealanders, that depends on investment, and if we are to rely purely and simply on our domestic savings, that’s fine, but we will only grow relatively slowly.

CLAYTON MITCHELL (NZ First): Thank you, Madam Chair. I appreciate the call this evening. A great contribution there by the member “Mr Goldstein” and I have to also say that the one thing that he forgot to say in his contribution was that he did support the bill, and for all the right reasons.

CHAIRPERSON (Hon Anne Tolley): I think we use proper names—proper names, thank you.

CLAYTON MITCHELL: Sorry—Mr Goldsmith. That was a Freudian slip—my apologies. It wasn’t deliberate. I want to just add to the fact that I don’t think that there’s a person in this House—or even when we go around the country speaking about this base erosion and profit shifting legislation—not in support of it, because it makes sense for us. For two reasons, this bill is the right bill, because, one, it actually increases revenue for New Zealand, and therefore takes the tax burden away from New Zealanders, and, two, and equally as importantly, it actually brings multinational organisations on to a level playing field for New Zealand organisations, “New Zealand Inc.”, to actually work on.

Mr Goldsmith did actually get to a point of talking about how important it is to encourage foreign investment into New Zealand, and we certainly do not want to be discouraging that, but we also don’t want New Zealand to be the gold rush trading post that it has become over many years of these multinational organisations coming here and being able to get out of their moral and legal obligation by using base erosion and profit shifting methods to not pay their fair share of tax. In fact, just recently, we saw that the Google giant had a loss and paid no tax last year, which we, of course, know is not true. How could that possibly be true? So building an economy from the bottom up starts with making sure that everybody pays their fair share of tax, and this legislation starts that process off.

I think, conservatively, the numbers are around $275 million of extra revenue that this should generate, but on the far end of that we’ve actually seen and heard some people having estimates as high as $900 million to $1.2 billion of extra revenue, depending on how far this goes. My question to the Minister is: does he think this is going far enough, or is it a stepped approach to something that we should be looking at in the future for getting more out of these multinationals? This is a very lucrative country to operate in. Certainly, in enabling them to trade here, they should have their legal and moral obligation to ensure that they do pay their fair share of tax.

We understand the situation. It’s quite a simple process for multinationals: borrow money from their head office in another foreign country, loaned at exorbitant rates to their New Zealand counterpart to justify and write off their profits against the exorbitant rates that they’re doing. This legislation simply tightens that ability to loan at exorbitant rates from the mother ship to the subordinate company, which is a New Zealand - based company, to avoid their tax objectives, making sure they pay their fair share of that tax.

The other part is actually ensuring that the head office overseas doesn’t charge an exorbitant rate for the administration of their burden—on their obligations—to ensure that the trading of that organisation down under in New Zealand isn’t actually over the top. In Part 1 of this bill, that’s exactly what we’re looking at doing. In Part 1, the interest limitations rules around that clearly outline what those steps should be and what a reasonable and fair rate of interest should be for those mother ship lenders, and also it puts restrictions on the transfer pricing for those organisations. The bill, I think, as we’ve heard it go through the House, is supported by all members of the House. It is great to see that sort of collegial approach to this sort of legislation.

Part 2 gives the powers to the Inland Revenue Department—administrative powers to investigate—

CHAIRPERSON (Hon Anne Tolley): We’re actually on Part 1.

CLAYTON MITCHELL: I thought we were doing it as a whole?

CHAIRPERSON (Hon Anne Tolley): No, we’re on Part 1.

CLAYTON MITCHELL: My mistake. I was jumping ahead of myself. Oh, you guys didn’t want to do that—didn’t want to go there.

We certainly do support this. Our usual speaker on this bill is away and unable to attend to speak today. But it gives me great pleasure to support this through the committee process, and we certainly look forward to hearing the contributions from our coalition partner’s side as we progress through the evening. Thank you very much.

Hon STUART NASH (Minister of Revenue): Thank you very much, Madam Chair. There are a couple of questions that have been brought up that I’ll address straight away. The Hon Paul Goldsmith asked if we had the balance right. I think we do have the balance about right, keeping in mind that the genesis of this bill actually came from OECD rules. I will commend the officials here. We’re very lucky. We box way above our weight when it comes to this complex sort of legislation. Carmel Peters is often at the OECD. She’s acknowledged as one of the world’s experts in this area, and as a consequence—

Hon Ruth Dyson: You’re such a name-dropper.

Hon STUART NASH: Absolutely, and proudly so. We played quite a major role in developing the set of OECD rules that would prevent large, multinational organisations from literally not paying their fair share. So when we’re talking about base erosion and profit shifting, what this actually is is companies who earn money in one jurisdiction aggressively tax planning—I’m not saying “evasion” but “aggressive tax planning”—so they don’t end up paying tax in one jurisdiction. They transfer their payments to, perhaps, a tax haven and end up paying tax at a very low rate. Or, worse, what can happen is they end up paying no tax because of the complex arrangements that these very smart lawyers have determined. So this isn’t just New Zealand saying we need to do something about this; this is the whole of the OECD.

So what we have got here is a piece of legislation—and I’ll give credit where credit’s due; it was initially brought in by Judith Collins when she was a Minister of Revenue—supported across the House. I understand the Finance and Expenditure Committee worked very closely together to come up with solutions when there were a couple of issues, but this is a piece of legislation that we have to bring in under our obligations with the OECD that puts in a number of measures to ensure that multinationals do pay their fair share.

Answering the honourable Clayton Cosgrove’s question—“Is this all we’re going to do? Are we just going to pass this bill and then nothing more?”—no; no. I would say this is the first step, and there are already a number of measures that we are looking at, Mr Mitchell, that will take this to the next step. The thing we do know is that as smart as we are and as engaged and as proficient as the members on the select committee will be, as well as our drafters and our officials, multinational companies have lawyers that are just as smart. Well, they’re not quite as smart as Carmel, but they’re up there. So whenever you put a bit of legislation in, there are always people that are looking at doing things slightly differently.

Mr Mitchell talked about transfer pricing. We know this is a big problem—we really do—and when companies like Apple and Google don’t pay any tax in New Zealand, we know there is something going on here that’s not quite right. I mean, I don’t know how many iPhones are sold in New Zealand, or how many iPads or Apple Watches are sold in New Zealand, but it is a substantial number. These companies are making a profit in New Zealand, but the way that they have managed to structure their affairs means they avoid paying their fair share, and the people that miss out are actually us.

We don’t know how much money this will bring in. IRD has estimated it’s about $200 million. IRD tends to be quite conservative—I hope they’ve been too conservative here—but it’s around about $200 million. The reason I say it’s about $200 million and perhaps not the $500 million that’s been reported in the press is because IRD actually have a small compliance group that continually audit the largest companies in this country, so we know what the big companies are doing. But what we can’t do is go after these large multinationals that are using the law—I mean, I’m not saying they’re doing anything illegal, but they are very aggressive in their tax planning. Hence the reason for the legislation, hence the reason for the need to do this, and the only way this is going to work is if it is implemented across the OECD.

That is why we are just one small cog in a very big machine that is implementing this type of legislation that is going to ensure that multinationals pay their fair share and that we hold them to account. What we are seeing around the world is people like Mark Zuckerberg from Facebook and other large multinationals like Apple and Google actually saying, “Game’s up. We’re prepared to pay our fair share now.” And they are understanding that we don’t want to rip them off—just their fair share.

So to Mr Goldsmith, I would say that the measures we are putting in place we are not doing in isolation. I don’t think these are going to be seen by large multinationals or big companies as “New Zealand is doing something that will prevent us or disincentivise us from investing in this country.”

ANDREW BAYLY (National—Hunua): Thank you, Madam Chair. It’s a pleasure to be talking in this Taxation (Neutralising Base Erosion and Profit Shifting) Bill committee stage. I’ve got to start off by saying that I want to acknowledge the Minister of Revenue, Stuart Nash, for standing up and giving us some elucidation of some of those points already raised in this important debate, because, as you’d know, this is a very complicated bill—one of the most complicated bills, apparently, to come before the Finance and Expenditure Committee—and, of course, it will have significant taxation ramifications for New Zealand, for New Zealand companies, and particularly for those companies owned by foreign entities.

Of course we’ve got a big trade-off. The trade-off is we do want foreign investment here in New Zealand, contrary to a point I heard earlier from Mr Clayton Mitchell, but we want to make sure that they pay their fair share of tax. I just want to start off by saying one of the key parts of this bill is around restricted transfer pricing rules, which I know the Minister’s been following very carefully. Of course, what the transfer pricing rules are all about is making sure that when a foreign entity lends money to its New Zealand entity, whatever that might be—it might be a branch, it might be a subsidiary, it might be an agency, or it may even be sort of an office; a sales office, in effect—we have to work out the process for determining the interest rate that will be charged on any debt provided by the foreign parent.

We had a number of submissions—in fact, we had a stack of them—from a range of accounting firms, legal firms, chartered accountants, and even electricity firms saying that the proposed restricted transfer pricing rules mean that what we end up with is, basically, an arbitrary process for determining the interest rates on debt provided by foreign owners. Of course, the more you move away from the actual rate used or charged by the foreign parent to the New Zealand subsidiary or whatever, the more artificial, more academic it becomes. So what this bill is trying to do is to standardise that process and to make it one where it’s to some extent consistent but also defensible and also fair to New Zealand taxpayers.

But a large number of those people said as soon as you start putting those arbitrary academic approaches on assessing the interest cost, you then start to enter the realm of creating maybe a higher tax rate in New Zealand, that the foreign entity can’t claim back all the tax as a deduction in its own area—so you get a mismatch of interest rates and interest costs, and some are deductible and some are not. Normally, they would offset each other as they work their way through the process.

I know there’s a lot of discussion around this with the officials, but the officials’ view was that one of the things about the rules was we should be looking at the foreign parent and assuming that there is an implicit parental support. What that means is that for any loan there is an obligation or an expectation that the foreign parent will always stand behind that New Zealand entity, and therefore, on that basis, the interest rate that is charged on any loan should reflect, basically, that fact.

Now, with a New Zealand subsidiary, the issue is sometimes that the activities that the New Zealand subsidiary undertakes are totally different from the foreign parent’s activities. What this means is the assumption that you can take a certain debt and make it consistent doesn’t actually take into account both of those aspects. So my first question to the Minister tonight, which I’m hoping he might have an opportunity to address, is what happens if, in the documentation or the arrangement between the foreign parent and the New Zealand subsidiary, there is no documentation to underline, to underpin, and to evidence the issue of the implicit parental support or otherwise financial guarantee?

Now, one of the other issues I really wanted to talk about tonight is that in the group credit rating approach, a number of submitters also made a submission that it shouldn’t proceed in its current form. One of the most notable submitters, of course, was KPMG. I did work for them a long, long, long, long time ago.

Simon O’Connor: But you’re so young.

ANDREW BAYLY: Thank you, thank you.

Rt Hon David Carter: It was a secondary school project.

ANDREW BAYLY: Thank you. One of the issues that they raised is that if the restricted transfer pricing rule proceeds, the group credit rating approach should not be used instead. They talked about new section GC 16(7), in clause 37, and whether, in fact, the approach proposed in that section or the restricted credit rating approach in new section GC 16(8) is the most appropriate.

Using the parent’s ultimate credit rating to derive a starting point for the New Zealand one—as my good colleague the Hon Paul Goldsmith very well discussed in his speech—raises the issue: is this the right start point for assessing debt and credit ratings and, in a sense, the interest rate on that debt? Typically, New Zealand operations of foreign multinationals often have smaller ratings. So you can imagine, if you’ve got a large, multinational parent, heavily diversified, operating in 100 countries, and you’ve got a small New Zealand operation, which may only have three people doing sales functions, the attributes of that New Zealand subsidiary or operation are totally incompatible and inconsistent with the parent company, and therefore that’s why KPMG were actually raising this as a particular issue. I think this is a really important point. And I know the Minister sort of traversed some of this earlier in his response, but I think it is a fundamental aspect we need to sort of look further on.

The other thing is we actually had submissions, and one of them was: is it too premature for New Zealand to be diving into this form of calculating interest rates? In fact, it was noted the OECD research is under way on this very issue. Of course, New Zealand—as the Minister quite rightly pointed out—has been at the forefront of the development of these base erosion and profit shifting policies that encompass all the OECD countries around the world. It’s important that we play our part, but also what we don’t want to be seen as is actually ahead of the game.

I think the strength of the BEPS—if I can call it that; base erosion and profit shifting—system around the world is that there is a collegial grouping of countries that all start to apply the same policies with regard to foreign companies investing in domestic countries. I think if New Zealand steps outside the boundaries and is seen to be leading it—and I think it’s a very legitimate question that, particularly, the Corporate Taxpayers Group raised, which is whether, in fact, under action four of the OECD recommendation, we should be actually jumping ahead of the game.

The last bit I just want to turn my attention to in this segment is the Minister said it’s very important that we act very consistently with those other international jurisdictions, and I would say to you that probably the most important jurisdiction that we have compatibility with, of course, is Australia—Australia being our main trading partner. Again, I think it’s very important that we note that PricewaterhouseCoopers, the accounting firm, made this very, very point. It said the Government had noted the importance that New Zealand transfer pricing rules are aligned with Australia.

However, we do have some differences already in this bill. For instance, if I can just highlight a couple of those, the first one is we have a maximum debt loading, if I could use that term—the normal term is leverage. We allow businesses with up to a maximum of 40 percent debt loading to be deemed to be low-risk companies and therefore outside of the BEPS regime. In Australia, for instance, they allow a higher leverage ratio of 60 percent, so already we’ve got a mismatch.

The other thing is in Australia they don’t allow for credit ratings to be prescribed. So they have a more flexible approach to the way they do. I just ask the Minister to turn his mind to some of those issues—particularly Australia.

Rt Hon DAVID CARTER (National): Thank you very much for the opportunity to speak on this particularly challenging piece of legislation. If I could make some general comments first before I raise some direct questions with the Minister. First of all, I came into the select committee process later in the piece. I’ve been on the Finance and Expenditure Committee many years ago, so I’ve done a lot of tax legislation. This would be the toughest one that I’ve ever been involved with, and, listening to my senior colleague the Hon Paul Goldsmith—if it was confusing before his contribution, I think I was more confused by the time he’d finished.

But, having said that, we then had the excellent contribution from whom the Minister referred to as “the honourable Clayton Mitchell”—well, he actually referred to him as “the Hon Clayton Cosgrove”. No, Clayton Cosgrove has left the Parliament. I saw him in the street today. He’s fantastically busy—very grateful, in fact, that there’s a Labour-led Government giving him many, many opportunities. And if Clayton Mitchell’s not yet “the honourable”, then he’s an endangered species within the New Zealand First caucus, because most of them are. But, of course, his opportunity could come within the next six weeks—his opportunity could come within the next six weeks.

Can I take the opportunity in making my general comments to thank the quality of the submissions that we received. So we had the Chartered Accountants of Australia and New Zealand, we had Deloitte, we had Chapman Tripp, we had PricewaterhouseCoopers (PWC), and KPMG all giving some very valuable ideas and causing the select committee, and, I know, the officials themselves to reflect on the quality of those submissions, to the extent I think we’ve got better legislation now before the committee with the amendments coming through from the select committee.

I want to also acknowledge the very useful contributions from businesses. Businesses, collectively, said, “There is an issue. We want to work with you. We’re not here to dodge our tax or to make suggestions to make it easier to dodge tax. We recognise, as indeed the OECD work has demonstrated, that there is a responsibility on any company—international or not—upon being here in New Zealand and doing business, to make a fair contribution in their taxation.”

Finally, I want to take this opportunity of thanking the officials, because this isn’t easy work. They were at all stages very diligent to our requests.

If I can now move to the specific questions that I’ve got, Minister, because it’s our duty over the next couple of hours to test that the new Minister of Revenue really does understand and has his head around the complexity of this legislation. So the first one I’m worried about comes from a submission from PWC arguing around the effective implementation of the legislation. So, as the Minister will know—I certainly hope he knows—it’s 1 July 2018. But, of course, PWC point out to us that most of these companies who will be now affected by the legislation have a tax law that runs from 1 April to the end of March each year. Their suggestion, therefore, was wouldn’t we be better to implement this legislation from 1 April 2019 rather than 1 July 2018. So I’d like the Minister—and I know he’s busy there, beavering away thinking of an answer to that—to just give it some thought, because we want it to be enacted at a date when it’s, effectively, easy for companies to comply.

The second issue I want to touch on—and the Minister will be aware of the commentary in the report—is the grandparenting of advance pricing agreements (APAs). Now, as I understand—and we’ve made a number of changes that affect clauses 35(7), 36(6), 37(2), 42B(3), 44(3), 46(2), and 47(2). Advance pricing agreements, as I’m sure the Minister knows, are where those agreements have been entered into so that a corporate can go to the IRD and get an understanding or an agreement around rules, transfer pricing, etc., so they know their commitment to taxation from the very start. The last time I was involved in the select committee, we had a similar issue around binding rulings, whereby any taxpayer could go to the IRD and get a binding ruling, which seemed to me to be pretty much the same thing. So I’m interested in the Minister explaining in some detail, for the benefit of the committee, the difference between an APA—an advance pricing arrangement—and, of course, a binding ruling.

The second thing that I think’s relevant here is how frequently have these APAs—the advance pricing agreements—been established? How many are there? The other one that concerns me is: has the IRD investigated the content of some of these advance pricing agreements to make sure they don’t have rollover clauses that, in fact, could allow the arrangement to then persist long after the initiation of the Taxation (Neutralising Base Erosion and Profit Shifting) Bill?

The very final point that I’d be really grateful for the Minister to explain to the committee and expand on his earlier comments is around the expected revenue from the enactment of this legislation. He used the figure, when he stood to his feet earlier, around it being $200 million. Now is that $200 million a year or is it $200 million over the next four years, and how has that figure been arrived at? It seems to me it’s relatively difficult, despite our acknowledged expertise within IRD and the work done by the OECD, to actually get a handle on the amount of revenue that will be received by Government once this legislation is enacted. It is a relatively challenging piece of work for IRD.

So I won’t take any further point because I think I’ve raised there three very valuable points for the Minister to cogitate on. I’m looking forward to his answers, which I think he’s about to give to me now.

Hon STUART NASH (Minister of Revenue): Some very important questions have been raised, and I feel as if I should stand and answer them because, you know, it’s important that we all understand this. It’s a bit of a shame that after being on the select committee, Mr Carter, you maybe haven’t got the knowledge of the answers, but let me help you out. But, first of all, Mr Andrew Bayly. There’s a reasonably—

Andrew Bayly: I’m over here.

Hon STUART NASH: —oh, Andrew Bayly—famous case of those who were involved in this sort of business, and it’s Chevron Australia and the Australian Tax Office. What happened there was Chevron’s parent company borrowed money at 2 percent and it lent it to Chevron Australia—its subsidiary—at 9 percent. So this went to court, obviously, and the court found that, in fact, there was a level of transfer of pricing and this was not fair. Now Australia provides a little bit of a different test than ours—theirs isn’t as arbitrary as ours—but what we do know is the transfer pricing of this scale is the classic way to avoid paying your fair share, so we do want to cut down on this. As you know, the officials’ initial recommendation was one notch below the global interest rate, and after consultation and submissions and hearings, they moved it down to two notches because they thought that was fairer.

Now, like any piece of tax legislation, if it’s not working at two notches—if we find that, in fact, there is a fairer way to address this, or a more objective way to ensure that companies are allowed to borrow at whatever rate they can but, however, are not ripping off the system—then I’m sure that we will look to change this. You know, with any tax legislation, it’s always quite fluid, but we think we’ve got it right at this point in time. After consultation with the OECD and after submissions from the big end of town, we think we’ve pretty much got it right, but let’s wait and see.

The former speaker, Mr Carter, actually raised some very interesting points. Income year—now it was a good point. It does apply to income years after 1 July 2018, but a business with a 31 March balance date won’t apply these rules until 1 April 2019. So we think that we actually have made it very easy to comply with, and that’s what it’s about. What we don’t want to do is put in place undue compliance for business, but we also want to ensure—obviously, what this bill’s about is that they do pay their fair share of tax, and we want to make it easy for them to pay their fair share of tax.

The figure of $200 million per year—it is very hard to model what we will end up getting. I mean, in terms of any tax it is very hard to model, and let me give you an example. Last year, when we put in the GST on online services, inland revenue (IR) believed they were going to pull in about $40 million a year. In the first year, it brought in $113 million a year. As mentioned, IR are inherently conservative in their estimations and they probably should be, and we don’t mind that. So it may be $200 million. That is their best estimate, using a whole lot of different models—well, modelling this legislation. It could be more. But, as mentioned, the reason we came up with this, and not the $500 million that you might’ve seen in the media, is because IR undertakes a very high level of compliance already with large companies. In fact, companies over a certain figure—and I think it might be $100 million in revenue—have their own individual agent who looks after their organisation. So IR understands and knows what is going on at the big end of town already.

Mr Carter, the other point you brought up about binding rulings from the commissioner—that isn’t going to change at all. A company can, no matter what their size—and we’ve made it easier for small to medium sized companies, actually, to seek a binding ruling. But a large company can still seek a binding ruling from the commissioner if they present to the commissioner any sorts of questions they may have around their tax obligations. So that isn’t going to change in any way, shape, or form. In fact, as the Minister of Revenue, I would encourage companies that are unclear about their tax obligations to go to the commissioner and seek a binding ruling so that at least they know—

Andrew Bayly: What’s the difference?

Hon STUART NASH: OK, a binding ruling means it binds the IR. Now a large company doesn’t have to follow that binding ruling, but if they don’t follow that binding ruling, then they do so at their own peril. But it does bind the Commissioner of Inland Revenue.

Also, Mr Bayly, you did talk about the taxpayer and whether there was any documentation around, you know, the global group. Well, it is actually up to the taxpayer to prove that they are doing the right thing.

Andrew Bayly: No, but it’s not the point.

Hon STUART NASH: No, it is the point. It is the point. The onus is always on the taxpayer to prove that they are complying with the rules, and that won’t change.

Andrew Bayly: So if they don’t have that in documentation, what happens to the parentals?

Hon STUART NASH: Well, if IR assume or if IR believe that there is a level of avoidance going on, then they will go to the New Zealand subsidiary and they will undertake an investigation. Within the bill, it outlines how an investigation could take place, who is liable, for example—and there were some changes made at the select committee about this, and I understand that. But if IR believes there is a level of avoidance going on, then they will approach the taxpayer, and it will be up to the taxpayer to prove that, in fact, they are complying with the law, and that hasn’t changed in any way, shape, or form.

I think those are the main points that were brought up by Mr Bayly and Mr Carter. But one thing I will say around the compliance date is the implementation date was actually—and I’ve given credit to Judith Collins because she did bring this forward and it was passed by the previous Cabinet, and we back it as well of course. The implementation date was actually prepared by the previous Government, but we have no problem with that. Thank you very much.

Hon AMY ADAMS (National—Selwyn): Thank you, Mr Chairman. I am looking forward to taking a call this evening on Part 1 of this taxation bill working on the neutralising of base erosion and profit shifting piece of work, which, as other speakers have acknowledged and the Minister in the chair has acknowledged, has been a piece of work that has spanned two Governments. But, more importantly than that, actually, it’s a piece of work that has international impetus. It is really New Zealand’s response to the OECD piece of work looking at how New Zealand’s rules need to be amended and adopted in concert with the rest of the world, so that we stop the actions of a number of multinationals who look to gain relative tax jurisdictions for tax advantage. What we see most commonly, of course, is using inter-party - related transactions offshore to move money, effectively, to a tax jurisdiction that’s more efficient for them, to artificially play with where they would otherwise have a place of operation.

The work of the Finance and Expenditure Committee on this piece of work has been very good, has been very constructive—as you would expect from a bill like this that has cross-party support in its broad parameters. I came into the consideration of the bill part-way through, and so it’s certainly been very interesting to hear the contributions from my colleagues Paul Goldsmith and Andrew Bayly and David Carter, and others who are still to speak.

I want to thank the Minister for making genuine attempts to address the questions that are raised—[Interruption]—no, no, I mean that very genuinely. I wasn’t trying to have a dig, Mr Nash. It is very helpful when we see a Minister in the chair who is clearly keeping track of the questions that are asked and is trying to address them, and I think Mr Nash will take some comfort in the fact that, similarly, on this side of the House, we want to see this legislation simply in as good a shape as it can be. It started as our legislation, it’s now yours—not yours, Mr Chairman, of course—but there is a genuine interest in making sure we have it right.

The part of the bill that I wanted to focus on in this first call is around another aspect of the transfer pricing rules, and Mr Carter, obviously, has made some comments around the grandparenting arrangements that are part of that and also the operation of the advance pricing arrangements. The piece that I particularly wanted to talk about is the change that the select committee was quite interested in, and I personally had quite a lot of interest in, which was around the time bar for bringing actions under the transfer pricing mechanisms. For the hundreds of thousands of people who I’m sure are listening away at home, what we’re talking about here is exactly the situation I described earlier where related parties are using the ability to set the cost of arrangements between them in a way that, effectively, allows them to move profits offshore. So that might be—obviously, it could be a debt instrument, which is the most obvious one, where interest rates are set. But, equally, it can be things like management fees between related parties, it can be royalties arrangements—there can be any number of ways in which this is done.

The IRD, of course, have a very genuine interest in making sure that there is adequate time for them to understand and drill into what are very complex arrangements between very highly lawyered up—to use a technical term!—firms who have access to a wide range of accountancy advice and legal advice to help them make these transactions look as legitimate as possible. We all acknowledge that there’s quite a piece of work in that. No one is, by any stretch of the imagination, suggesting that that is an easy or a non-complex piece of work and that they are not dealing with some very, very able and adept and well-resourced combatants. So there’s no question, I think, between us on the nature of the mischief to be solved.

So where we start: transfer pricing arrangements have been in place in New Zealand, obviously, before this legislation. In this legislation, we’re making some tweaks around the way they apply to when a number of foreign investors work together as a controlling bloc to control a New Zealand company—all of which is very sensible, subject to the comments my colleagues have made. But, previously, the time bar for the IRD to bring and complete an investigation and issue a notice of a changed tax liability was four years—four years from the end of the tax year in which the alleged behaviour occurred. Under this piece of legislation, the IRD wanted, of course, to extend that out to seven years.

Now, there was quite a wave of submission opposed to this change from the major taxpayer groups—you know, there was Chapman Tripp, the Corporate Taxpayers Group, EY, Russell McVeagh, PricewaterhouseCoopers, KPMG, ASB, Powerco. There was quite a long list, and so it was an issue that really concerned taxpayers in New Zealand. I don’t think any of them, certainly, disputed the fact that the IRD needed to look into these and have a complex and effective way of going about it, and, as I say, neither did the committee. But we really drilled quite hard with the officials, saying, “Look, do you really need seven years? Is there not something in what the submitters said where they’re right?”—that, actually, these are complex, detailed transactions. They’re not one-off; they’re year-on-year transactions and, actually, taxpayers do need the certainty of knowing what their tax position is.

The position that the committee got to was a bit of hybrid. We took the officials at their word that four years wasn’t going to be long enough for those taxpayers who are playing a bit of cat and mouse and not being as forthcoming as they could, and we certainly don’t want people to be able to avoid IRD scrutiny through being non-compliant. In the same way, though, we also took from the submitters that, actually, to leave every taxpayer exposed for up to seven years where there could be a review is an extraordinary imposition. It doesn’t provide the sort of certainty that taxpayers want, and it puts a huge amount of more cost and complexity into both the prosecution of the behaviour but also the defence of it.

So where the select committee got to was to say that the IRD should be able to extend to seven years only if they have commenced an investigation during the four years and have notified the taxpayer that it would be seven. You know, we can argue whether that was the right balance, but that’s where the committee got, and I’m comfortable with that.

Where I’m concerned, though, Mr Nash, is that the way the bill has actually landed in front of the House—and I’ll refer you to where clause 36(4), inserting new section GC 13(6) in the Income Tax Act, provides the assessment—it doesn’t actually do what the select committee thought it was doing, and it certainly doesn’t do what the select committee commentary says it is doing. The select committee commentary makes it quite clear that the select committee wanted the change to say that the time period could only be extended if an investigation had been commenced and the taxpayers were notified. The change in the bill in clause 36(4) simply requires the IRD to notify that they’re extending the time. That’s not what the select committee agreed at all.

The select committee did not sign up for a situation in which the IRD could potentially, under this legislation, serve as a matter of course on every taxpayer a notice that they’re extending the time period and it would automatically become seven years. We went through this in quite some detail, and in a very collegial and bipartisan way, to try and get that right balance between fairness to the officials and fairness to the taxpayers. And where we landed—you can check for yourself; the select committee commentary is very clear on this—is that the IRD would be required to have commenced an investigation and to have advised the taxpayer of that.

Hon Stuart Nash: That’s still the case.

Hon AMY ADAMS: The legislation, the way it’s written—and I can read it out for the Minister, who’s saying that’s still the case. The legislation, as it’s written, makes it very clear that the only thing required for the IRD to extend the time is if, at any time during four years, “the Commissioner notifies the taxpayer that this subsection applies.” That means, Mr Nash, that in every case, potentially, the IRD could issue a form letter to every taxpayer saying they were extending it.

Now that is not what the select committee said, so I really want to hear from the Minister in the chair. He’s just indicated verbally that that’s still the case. I can utterly assure you, on the reading of that legislation, it is not the case, and if the Minister is not able to point me to the provision in the bill that says the IRD may only extend it where an investigation has been commenced and is under way, then we’re going to have to come up with a tabled amendment to make sure that the bill, as in front of this committee, reflects what the select committee instructed to be in the bill and what the select committee said in their report was the intention of the amendments. I can assure you right now that is not what was said, and it is very, very far from what the committee intended.

Look, it might seem like a small point. But, actually, this is a change that is—not only does it speak to whether the bill in front of us reflects the direction that the select committee gave it and the select committee report, but it’s also a very important point in getting that balance right between the reach and power of the State and the right of taxpayers to have certainty and have some conclusion to their legitimate affairs, to know when they can put these issues to bed, and, when they do come up, to have the resources and ability to look into them and defend them and for the IRD simply to address them.

So these are important points, Mr Nash, and I make them very genuinely. I really do think this committee now needs not simply a statement that it’s all fine; I think this committee needs quite specific reference to the line item in the bill that makes it clear that there is something required of the IRD beyond simply saying “Well, we’re extending the time period.”, because that is not enough.

Hon STUART NASH (Minister of Revenue): Thank you very much. There are two points that I would like to address, and very briefly. First of all, it was a question asked by Andrew Bayly, and I didn’t address this, and I do apologise. Mr Bayly asked if we were ahead of the pack, and if, in fact, we are ahead of the pack, does this create a disincentive for large multinationals to invest or do business in New Zealand? But I would argue—no I wouldn’t argue; the point is, we’re not ahead of the pack. We’re actually doing what is our fair share in meeting our global obligations. As mentioned, we have worked very closely with the OECD. We’re rolling out legislation that meets our obligations, and I believe it would actually do more harm to our global reputation if, in fact, we were seen as a laggard as opposed to just meeting our obligations in a good, judicious way.

The reason I say that is, as we all know, New Zealand is ranked No. 1 in the world in terms of transparency by Transparency International. I think if we were seen as a soft touch or if we were seen as not complying with our global obligations around profit shifting and base erosion, then it could do more harm than good. So I am very comfortable, and, in fact, I think everyone—the select committee and the previous Minister of Revenue, Judith Collins—is very comfortable, with the way that this is progressing. My understanding is this will not provide a disincentive in any way, shape, or form for any multinational to do business in New Zealand. In fact, the only ones that may have a concern—and it certainly hasn’t been signalled to me at all or, I understand, the select committee at all—are those who would look to use the old rules to avoid paying tax. Of course, this is what this whole bill is about, to ensure that we close down the loopholes that stop multinationals from paying tax.

To the Hon Amy Adams, there is actually no legal concept of an investigation. What I would say—and what was agreed at select committee, what is in the bill—is that an investigation can start within a four-year time period but must be completed within that seven-year time period. This is what was agreed at the select committee, it is what is in the bill, and so nothing has changed in that respect. So what actually is the case is IRD can start an investigation within that four-year period.

In fact, if you look at—not you, Mr Assistant Chair. If members understand tax rules, four years tends to be a general rule of thumb for tax. If you want to claim tax back, you’ve got to do it within four years, for example, so it’s a standard sort of time frame. However, as has been alluded to by a number of members, this is a complex piece of legislation and the law in itself was complex, and by the very nature of the law and the mischief it’s seeking to address, often the investigation will take a length of time, but it has to be completed within seven years.

So, Hon Amy Adams, nothing has changed from what was agreed to or discussed at select committee. That is my understanding, it was my understanding when the bill was introduced, and that certainly hasn’t changed, and the officials have informed me that, in fact, that is still the case. Thank you very much.

Hon RUTH DYSON (Senior Whip—Labour): I move, That the question be now put.

ALASTAIR SCOTT (National—Wairarapa): Thank you, Mr Chair. There’s plenty to talk about in this part of the bill, that’s for sure. I’d like to first acknowledge some of the comments that the Minister in the chair, Stuart Nash, has said, when he said that this is a complex piece of legislation. It’s a progressive and evolutionary tax legislation that will continue to be developed. I’m just reflecting on what the situation was 10 years ago when the global financial crisis hit the globe. Some of that was down to the fact that there were losses sitting in jurisdictions that people were not aware of, where derivatives played a major part in the bankruptcy, essentially, of banks and financial institutions across the globe, because one party could deal with another without the relevant IRDs knowing what was happening in those derivative and credit derivative markets.

So we have come a long way. We have come a long way legislatively to ensure that profit sharing and base erosion particularly is less than it was then. But I do acknowledge that this is not going to stop it. This is not going to eliminate it. I acknowledge the Minister’s comments when he said this is an evolutionary process, because you close one loophole and, essentially, you will end up creating another or a number of them—perhaps smaller—but you can’t eliminate these loopholes.

So I commend both sides of the House and the Finance and Expenditure Committee for doing a lot of work in what’s been produced here, but I do have a couple of questions. The first does relate to those exotics. I’m just unsure or uncomfortable that the select committee has dealt with the type of exotic derivative, credit derivative, and over-the-counter derivative product that may not be known to any inland revenue department of a particular country. So those exotics—I heard some comment in the select committee, but I wasn’t especially satisfied. As the Minister says, there are some smart people out there, a lot of smart people, and I just want to be comfortable that all the effort and time and energy has been put into that particular sector, that particular group of people, who are moving or, historically, have moved profits from country to country without any real underlying business—without any underlying business.

The second point I would like to clarify to the Minister is around the “beeps”, and this—

Dr Deborah Russell: BEPS.

ALASTAIR SCOTT: —the “beeps”; B-E-P-S—risk, and the high leverage ratio of 40 percent. I’m asking the Minister: what determined the 40 percent? What determined the 40 percent? What’s so important about the 40 percent?

A subsidiary in New Zealand will quite likely have a very different risk profile to its parent, whether the parent’s offshore or even onshore. So, for example, you might have—and it doesn’t have to be cross-border. You’ll have an owner of a portfolio, and that owner might put a—well, we know that, say, for example, the dairy industry is a very highly leveraged industry, so that might have a leverage appropriate and bankable of, say, 80 percent. Then we have another type of business that wouldn’t be quite so bankable at that rate, and maybe you wouldn’t want to put too much debt across it at all to make it a very high-risk investment. Perhaps, you know, goldmining, for example, or gas and oil exploration even. So you may not want to put a lot of debt across that—two quite different businesses.

So by putting the 40 percent blanket across both potential subsidiaries of a parent who will have its own risk for debt and risk rating, but to transfer and assume I think is a simple—very simple; it’s an easy manageable thing to do—but a potentially unfair measure and methodology, and the same can apply to the 15 percent tax rate that is determined to be a low tax rate. So how did the 15 percent tax rate be determined?

Dr DEBORAH RUSSELL (Labour—New Lynn): Thank you, Mr Chair. This is a fascinating and an interesting bill. It has been a very complex bill to get to grips with, I think, as we’ve seen from some of the speeches this evening.

I want to start by thinking about the nature of tax avoidance in general because this is an anti-avoidance bill. You might think we already had enough anti-avoidance measures in our legislation already. To start off with I want to go back to a very, very famous judgment in tax law, it’s the Commissioners of Inland Revenue v Duke of Westminster in the UK. It’s a 1936 judgment: “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.” It’s a very, very famous judgment. What it is saying is that if anyone can order—in this case—his affairs so that they pay less tax and it’s all done perfectly within the letter of the law, then, actually, you’re entitled to do that because that’s what the law says you’ll do. So it’s very broad. It gives people a huge permission to structure their affairs in order to pay less tax.

Actually, if you look at tax legislation over the years, what you’ll see is that legislators have successively cut away at that principle. In fact, we’ve got a general anti-avoidance provision sitting in our own tax legislation already. It’s section BG 1 and what it says is—paraphrasing just a little—“A tax avoidance arrangement is void … for income tax purposes.” What that means is that the commissioner can set that arrangement aside and assess the tax as though the arrangement had not been in place. But, of course, in order to do that, you need to know what a tax avoidance arrangement is. What it is is an arrangement that directly or indirectly has tax avoidance as its purpose or effect, or as one of its purposes or effects. So then you get down to what tax avoidance is. Well, it’s directly or indirectly altering the incidence of the income tax. What’s fascinating about this particular bill that’s in front of us is that it’s all about companies—multinational companies—that are trying to directly or indirectly alter the incidence of any income tax.

So, in a sense, this is a belt and braces bill. All right, the belt is already there, with section BG 1, and by the time you follow it through the definitions it’s already there. But, as we know, corporate lawyers are very, very clever. Tax legislation is very complex, and clever, clever tax lawyers take every advantage of it they can. So what this legislation does is it bolsters section BG 1 with respect to multinationals. It says, yes, we’ve got this general anti-avoidance provision, but we’re bolstering it. We’re giving it more strength by having these very specific rules for multinationals. And they are indeed very specific—you know, they actually only apply to a small number of companies.

Just for the reassurance of Mr Alastair Scott, there is some reason for that 40 percent rule. Look, that 40 percent rule comes in where we’re trying to identify which companies in New Zealand we think are base erosion and profit shifting (BEPS) risks, which companies we think, or the Inland Revenue thinks, it ought to be investigating. There are a couple of tests that have to be fulfilled.

Now, the legislation as drafted had three tests in it. One of them was an EBITDA rule. Very roughly, if your interest was about a third, I think, of your EBITDA, then you were considered to be at risk. Now, for people who don’t know what EBITDA is—

Hon Gerry Brownlee: Seek an extension of time.

Dr DEBORAH RUSSELL: —it’s an accounting measure called earnings before interest, taxation, depreciation, and amortisation. I do know my tax rules, Mr Brownlee. When it comes to EBITDA—so that particular rule was found to be too harsh. Submitters said, “No, that rule is too harsh.”, and they asked us if we could in fact take it out, so we’ve done that.

Then there are two other bits—and I just want to answer this, Mr Chair—[Bell rung]—to carry on to answer Mr Scott. I just do want to answer Mr Scott here. There are two tests left there, and you have to fulfil both of them. Now, so whatever our dairy companies do or our dairy farms do, it doesn’t really matter, Mr Scott. What matters is what multinationals do, OK? If a New Zealand company has a high debt-equity ratio, and that’s 40 percent—now, we think that’s pretty high in New Zealand—

Alastair Scott: No, it’s not.

Dr DEBORAH RUSSELL: —and if it is also borrowing from a parent in a low tax—but it is for multinationals, and let’s just distinguish them from farming companies. So if it’s fulfilling both those, then IRD considers them a BEPS risk, but it’s still only a risk. It’s not saying they’re doing it; they are a BEPS risk, and they might consider doing an investigation. And there’s a de minimis there—all right—a level of protection there so that if there is $10 million or less of borrowing, then they’re not going to be investigated as a BEPS risk. So there’s quite a stringent set of criteria in there, and I hope that reassures you, Mr Scott, as to what might be going on with dairy companies.

So I think what you’ll find with this legislation—that was worked on very, very hard by many people in this House, both in the previous Government and this current Government; the people who’ve sat on this select committee right throughout and the people who have joined the select committee recently—is that we’ve worked really hard to get this right. It is complicated, it is difficult, it is hard to understand, it is highly technical, and we are very, very grateful to our excellent officials and to our excellent official adviser, Therese Turner, for the work they have done to help us to understand what’s going on and to help us to really think through the implications.

I think we’ll need to keep on working at this. I think we will find, perhaps, some things that could be done a little bit better. That’s the nature of ground-breaking legislation. But I think we’ve made a jolly good fist at getting this legislation right, and that is why I recommend this legislation to the committee.

Rt Hon DAVID CARTER (National): Thank you, Mr Chair. I wanted to first of all acknowledge the contribution we’ve had from Dr Deborah Russell. She does understand tax, and she does acknowledge that it’s a very complex piece of legislation.

I also want to acknowledge Minister Stuart Nash. There have been a large number of questions raised, and I think on this occasion the committee of the whole House is working well, with the Minister making every effort to answer the questions that have been raised.

There’s one that I raised earlier which he hasn’t addressed, and I just wanted the opportunity to raise that again. I was raising questions about the advance pricing agreements, and I asked could he explain the difference between an APA—an advance pricing agreement—and a binding ruling. He certainly then gave us an explanation of a binding ruling, and I think in giving that explanation, he might want to just seek some advice from officials as well, because in giving that explanation, he said a taxpayer enters into a discussion with the Inland Revenue Department and they agree an arrangement as to how tax might lie that is binding on IRD, but then the Minister said it’s not binding on the taxpayer. I don’t think that’s right, and I think he just needs to check that through, because my understanding of a binding ruling is it binds both the IRD and the taxpayer. So I’d be grateful for clarification on that.

But the second issue I raised was with the advance pricing agreements—if he could explain the difference between those and a binding ruling—and then the question is how many APAs are there. How frequently does IRD enter into substantial discussions with, obviously, larger corporate taxpayers and determine these advance pricing arrangements? How frequent are they? How many are there in existence?

The second point I just wanted to pick up on was raised by the Hon Amy Adams with regards to the extending of the time bar and the work the Finance and Expenditure Committee did on that. IRD came to us and said it needed seven years because of the complexity of these issues. The select committee worked hard and said, “Listen, it’s currently four. You want to extend it to seven. We can understand why, but hang on. That’s a bit tough on any corporate that only finds out that it might be under investigation after, say, 6½ years.” So we’ve made a modification in the select committee—a recommendation to this committee of the whole House—that the initiation of discussion between IRD, or perhaps their difference of agreement with the taxpayer, must be started within the four-year period. But then the Minister, in addressing the Hon Amy Adams’ point, said, “But the investigation must conclude by seven years.”

I want the Minister give me some information as to how an investigation concludes. It seems to me that the IRD could indeed start a discussion with a taxpayer around that four-year period, then spend the next three years arguing with that taxpayer and not actually finalising things, and then, suddenly realising there’s a time constraint against them right on the eve of the seven years, it could just say, “Investigation finished. Here’s your tax liability.”, with no further discussion at all.

So I’d just be grateful if the Minister could give some answers to those two queries. The first one is about the APAs—the advance pricing agreements—and the second one is around just how an investigation that’s up against a time line of seven years has to be concluded by the IRD and in a reasonable way to the taxpayer, so that the corporate taxpayer then has the ability to know that it’s been finalised in a fair and consistent way.

Hon STUART NASH (Minister of Revenue): Thank you very much. Just to very quickly answer the right honourable member, a binding ruling is actually binding only on the commissioner; it is not binding on the taxpayer. As mentioned, the taxpayer can ignore the binding ruling at their own peril, but it is not binding. An advance pricing agreement (APA) is actually a type of binding ruling. Again, it’s not binding, but an APA is factually based, and it’s undertaken with full taxpayer cooperation. So, again, like a binding ruling, a taxpayer will go to the commissioner. If they have concerns about their tax position or if they have a question about their tax liabilities or the tax position, the commissioner will issue a binding ruling. The taxpayer can then determine whether they take the commissioner’s advice or not. The commissioner, of course, can then not change their advice, but the taxpayer can seek other advice. So it’s binding only on the commissioner.

In terms of the four years versus seven years, I completely agree with you: it would be unfair for inland revenue (IR) to draw out investigations simply because it felt like it. I’m being a little bit glib here, but what I do mean is that I very much believe that IR undertakes investigations in a timely manner, and it does so because it is actually in the best interests of IR as well as the taxpayer itself. The reason for the four-year / seven-year split? I’m the first to admit that if they’ve started an investigation within four years and they’ve got another three years to complete it, that is a long time to complete an investigation. But the reason it is the seven-year deadline is because this is complex—this really is complex. Often you’re not only dealing with an organisation or a multinational subsidiary based in this country but also dealing with complex tax legislation and maybe a group head office in their home country, and that could be anywhere from the Bahamas to goodness knows where.

So I do not think that IR will use seven years as a target—i.e., let’s draw them all out for seven years—but that is there just to ensure that they can undertake these complex tax investigations and fulfil obligations and conclude them in a timely manner. But, like you, I would be very disappointed if IR drew them out just because they could, and I have absolutely never seen any evidence that that is the way IR actually undertakes investigations or that that is the IR’s attitude towards investigations.

Hon RUTH DYSON (Senior Whip—Labour): I move, That the question be now put.

Hon AMY ADAMS (National—Selwyn): Thank you, Mr Chair. I want to come back to the point I was raising in my last contribution, because I invited Minister Stuart Nash to address it, and he certainly got to his feet and spoke to it, but I’m far from satisfied that his contribution resolves the issue. What I have done instead, and in light of that response—because the Minister was unable to point to the provision in the bill which requires that the investigation be commenced within the four years, which is what the Finance and Expenditure Committee required—is I have taken the liberty of putting a handwritten amendment on the Table to make exactly that provision in the bill.

Just before we start discussing it, I just want to quote for the committee the part from the select committee report that talks about this, because it’s very, very clear. Mr Nash, in his contribution, said, “This does exactly what the select committee said.”—which I don’t agree with—and he also talked about the fact that the IRD can start an investigation with employers. Well, we know they can; this is a question of whether we’re obliging them to, which is what was the select committee recommendation. So the select committee said, “We recommend amending this provision”—so this is clause 36(4), amending section GC 13—“to extend the time bar to seven years only”—and that’s the critical word—“in cases where Inland Revenue has begun a transfer pricing tax investigation within four years of the relevant tax return being filed, and has notified the taxpayer”. So not to labour the point, but, very clearly, it’s only to be extended when there has been a tax investigation commenced and notification.

Now, what clause 36(4) does is only provide for the notification requirement. Now, I certainly wouldn’t want to imply that there’s been any improper motivation here, but remember we started with a provision where IRD wanted a blanket seven years and the select committee said no. That’s our proper role. The select committee said no to the IRD having a blanket seven years, or seven years at their discretion, and the select committee very clearly, in that passage I’ve just quoted from, said, “We were only happy with IRD being able to extend it to seven years if they had commenced an investigation”—only if they’d done that, not “they could have”, “they might have”, “they’re entitled to”. They must have, and with notification. This actually really does matter, Minister, and it is very concerning to me to find that that obligation—or that they must have commenced an investigation—is not there.

Now, in select committee, I remember specifically asking the officials—some of whom are with us—whether commencing a tax investigation was a definitive thing that taxpayers and tax lawyers could understand and look to, because it sounded to me a little bit amorphous. How do you know whether an investigation has been commenced? And I was reassured that “No, no, commencing a tax investigation is quite a definitive process step that’s well-understood, and it’s clearly signalled, and there’s a framework they go through.” If records of the meeting are kept, I’m sure that would be recorded. I was concerned that if you’re going to put something in law, it has to be a definitive step that we can say, “Yes, that has happened, and so, therefore, the extension applies.” We were absolutely assured that commencing a tax investigation is a very defined thing. There are steps that have to happen, and it will be very clear whether or not that has happened in the time frame.

So I don’t accept the advice that I imagine was passed to the Minister, where he said, “Well, it’s just one of those things and it can happen at any time.” This is a very clear-cut line in the sand, and if the Minister takes the opportunity—if his officials pass it to him—to read that passage in the select committee report, which I’ve quoted faithfully, but if he wants to reassure himself. We were very clear there was a two-legged requirement to extending it. It had to have commenced a tax investigation of the transfer pricing within four years, and it had to have notified.

What we’ve got in the bill at the moment is only a notification requirement. That would give IRD what they started with, which is the ability to have a blanket extension to seven years in all cases. That is not what the select committee agreed to, that is not what we wanted to see back in front of the House, and if the Minister is going to be true to the select committee view—and it was a cross-party view; it wasn’t a split view—then I would encourage him to support the amendment. There’s nothing particularly positional in it. It’s not a point-scoring exercise; it is a genuine intent to see the wording of the select committee report, which is very clear, reflected in the legislation in the House.

Now, in my last contribution, I asked the Minister, if I had missed it, to point me to the requirement where they had to have commenced a transfer pricing investigation in order to extend the time bar. He wasn’t able to do so, and I don’t criticise him for it. He would have received advice, but the advice that he reflected back to us in no way addressed that. And I think, Mr Nash, to be absolutely clear about this, if we’re going to give effect to what the select committee said, there must be a two-legged requirement to extending it. It is not enough that the IRD simply chooses to advise the taxpayer that they want longer. That is not what we agreed to. That is not what the select committee report talks about.

I would urge you to support the amendment in my name. There’s no press release around it, there’s no positioning; it’s just to get what the select committee said right, and, at the very least, to put it in the Hansard that that is absolutely the requirement in this bill. I can’t see it; I encourage you to point to it. But for the sake of getting the legislation clear, so the taxpayers can understand their obligations with utter clarity and to have the obligations that this Parliament—[Time expired]

Hon STUART NASH (Minister of Revenue): I will take time to address the honourable member Amy Adam’s concerns, but first of all I must correct something I said to the Rt Hon David Carter. A binding ruling is binding on the commissioner but not binding on the taxpayer. However, I made a mistake when I said an advance pricing agreement (APA) is not binding on the taxpayer. An APA is actually binding on the taxpayer. So I do apologise to the member for that.

In terms of the Hon Amy Adams, officials do consider the current drafting in the bill achieves the policy that was recommended by the Finance and Expenditure Committee. Keeping in mind that this bill has been gone over with a fine-tooth comb, as has every tax bill, but simply because of the complexity of this, the thing is that there is actually no—and this is, again, we’re getting into the nitty-gritty of this—legal existing definition of a tax investigation, so adding a reference to a tax investigation could lead to uncertainty and disputes about what qualifies as a tax investigation.

So if a commissioner hadn’t notified the taxpayer within four years, then the tax position is final. So the company puts in a return—if the commissioner has not started an investigation within four years, then the tax position is final.

Hon Amy Adams: But the bill doesn’t say that.

Hon STUART NASH: But that is just the law.

Hon Amy Adams: But it’s not the law.

Hon STUART NASH: It is the law.

Hon Amy Adams: Where? Where in the law does it say that?

Hon STUART NASH: The current provision is certain that the commissioner needs to explicitly notify the taxpayer that they are applying the provision.

Hon Amy Adams: They could do that in every case.

Hon STUART NASH: And you’re dead right, and the thing is that we can clarify this position by using the inland revenue’s administrative guidance, but not every detail of every tax rule is included in the legislation, especially administrative rules.

But let me make one thing clear—let me make one thing clear. So a taxpayer puts in a return. If the inland revenue (IR) or the Commissioner of Inland Revenue has not queried that within a four-year period, then the tax position is final. Then the tax position is final—that is the law.

Hon Amy Adams: No, it’s not the law.

Hon STUART NASH: No, what it says here—

Hon Amy Adams: It doesn’t say that in the bill.

Hon STUART NASH: No, what it does say here is if, however, this is queried within that four-year period, then the commissioner has the ability to extend that for seven years. I quote new section GC 13(6), set out in clause 36(4), “Despite the time bar, the Commissioner may amend an assessment for a tax year (the assessed year)”—I’m not going to read it all—“in order to give effect to this section and to sections [blah, blah, blah] … in which a return of income is made for the assessed year if, at any time in the period of 4 tax years after the return year, the Commissioner notifies the taxpayer that this subsection applies.”

Now, I believe—having read and gone over these as our revenue spokesperson and now our revenue Minister for about seven of my nearly nine years in this place, I think this is clear. The officials believe this is clear, so in that case—[Interruption] No, no—read this section again and I think that you’ll find that it is clear. And just to clarify one last time, a company puts in a return. If the IR has not queried that return within four years, there is no problem—OK? There is no problem whatsoever—the tax position is final. If within that four-year period—and it states it here—IR queries the return, if “a return of income is made for … assessed [period] if, at any time in the period of 4 tax years after the return year, the Commissioner notifies the taxpayer that this subsection applies.”

What that actually means within that four-year period—[Interruption] Well, I’m just quoting it again. If the commissioner notifies it, then the commissioner may amend the assessment in order to give effect to the section. I believe this is clear, and I wrote—you know, I did a Master’s in law on this sort of stuff. To me, this is clear, and I’ll leave it at that.

CHRIS PENK (National—Helensville): Thank you, Mr Chair. It’s a pleasure to speak on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill at this, the committee stage. I didn’t have the benefit of—

Hon Ruth Dyson: Committee of the whole House. Select committees are in the morning.

CHRIS PENK: Excuse me—committee of the whole House. I thank the Hon Ruth Dyson for her intervention, which is assisting my deliberation and, indeed, my timekeeping. Not having spent the time in the select committee, I feel I know enough to speak to the bill but not so much that I have no questions of the Minister, so perhaps he will allow me to pose some slight queries that I have. He might be able to gain some guidance from either the officials or perhaps Dr Deborah Russell, or indeed himself—an expert in his own right, of course.

My focus has been very much the banking groups’ role within the regime. It seems to me an important one, given that banking groups themselves might be entities that have parent bodies and, obviously, exist and operate within New Zealand. Of course, those are also gatekeepers to some extent in that they manage, in a certain meaning of that phrase, the tax or, indeed, the financial affairs of other entities, again, overseas and within New Zealand.

So within Part 1, therefore, I’ve been interested, in particular, in clauses 29B and 29C. Taking the first of those first, I note that the bill will amend section FE 21(3) in the parent Act the definition of “equity value”, so that whereas the Act currently states that “ ‘Equity value’ is the total financial value” of some five different criteria, a sixth is now being added, of course, at new paragraph (f). I won’t read the entire thing—

Dr Deborah Russell: Oh, go on.

CHRIS PENK: —much as I would be encouraged by members opposite to do so, but it seems that it’s a pretty clear invitation to add into that calculation of value, or indeed that definition of “value”, financial arrangements that are not included in paragraphs (a) to (e). In other words, to that which has not already been contemplated and captured in the first five criteria, a sixth is to be inserted by way of a catch-all type of provision.

So then, the proportion of the financial value of such an arrangement—again, as not already previously included—as the proportion of the total interest expenditure under the arrangement in the income year is denied in one of three ways. I won’t spell them out in detail, to the relief, no doubt, of all members of this committee, including myself. But suffice it to say that it’s a pretty comprehensive part of the section, I believe, and, certainly, that will have been the intent.

The overall flavour of the Act—and, indeed, this bill to amend the Act—essentially, is to be comprehensive. It is to capture those arrangements which have not already been contemplated and, indeed, caught by our existing tax regimes—of course, specifically in the context of overseas parent entities operating in New Zealand under some part. So my question then, Minister, is whether you are confident now with the insertion of that point that the definition of “equity value” is going to be sufficiently comprehensive, or if something even broader, even more generic, might be added to that section.

I won’t dwell on the fact that a third subsection relates to the timing of the commencement—1 July 2018, which feels like it might arrive before the end of my time speaking. That may or may not be just myself who feels that way, but that’s been noted by fellow members of the House as well as by submitters—the very short period of time that there will be for compliance and arrangement of affairs that would be appropriate so that entities can meet their obligations under this Act. So that’s one of the two sections that I’ve been focusing on in relation to the rights and responsibilities of banking groups, with the other being section 29C, which amends in section FE 23(2) the formula for the funding debt that is to be made by a reporting bank, which, as I understand it, is the broader entity which might have an overseas element.

Hon KRIS FAAFOI (Minister of Civil Defence): I move, That the question be now put.

CHAIRPERSON (Adrian Rurawhe): I call the Hon Paul Goldsmith.

Hon PAUL GOLDSMITH (National): Oh, so very kind of you, Mr Chair. Look, I am a little concerned that people listening into this debate might be a little bit flummoxed by some of the details that are being discussed, and I’m very keen to try and lay out, in the simplest terms possible, some of the issues that we’re trying to address with this legislation.

Fundamentally, it’s in relation to how non-residents can reduce their tax that they pay in New Zealand by capitalising their investment with debt instead of equity. So if we took one example of, say, an Australian investor putting $100 million of capital into a New Zealand company as equity, and that company earns $10 million a year from sales and pays $2.8 million in tax—so 28 percent of $10 million is $2.8 million in tax. Now, if the company pays the rest of the profits as a dividend—$7.2 million—it’s earning $10 million and paying $2.8 million as tax.

Now, another company could invest in the same business, and instead of putting $100 million in capital into the business, it puts it in as debt with an interest rate of 10 percent. If that’s the case, the same company would earn the $10 million, but it has to pay $10 million of tax-deductible interest back to its parent company, and so the taxable income, as a result, is zero. So no tax is paid by the company, and the only tax that is paid is a 10 percent interest withholding tax on the $10 million of interest it’s paid. So the net result of that is that only $1 million is paid in tax to New Zealand.

So the difference between the two ways of capitalising that investment in New Zealand, of $100 million, is the difference between $2.8 million in tax and $1 million in tax—or an effective tax rate of 28 percent and an effective tax rate of 10 percent. So, obviously, that’s a big difference and has a very big impact on investment decisions. So what we’re doing with this legislation is to say, “Well, actually, we’re not going to let you do it”—as that second investor had—“with putting in 100 percent debt and charging 10 percent interest in order to reduce your taxable income to zero.” So what we’re saying here is that the debt can’t be more than 60 percent of the assets. So it’s an arbitrary figure, and I’d be interested in getting a sense from the Minister whether we’ve got that arbitrary level right.

Then we have this strong view on what the appropriate interest rate should be. As we’ve been discussing, the rule that’s been set out is that rather than just letting them dream up whatever interest rate they want, the pattern through most of the world is to have an arm’s-length interest rate, which is, effectively, what the market would sustain, but we’re not happy with that either. We’re going to now suggest that it should be the interest rate that’s determined by the credit rating of the parent company. If it’s a multinational company based in Germany, for example, with a high credit rating, then that would lead to a low interest rate. So what we’re saying in that example is that rather than borrowing it at a 10 percent interest rate, they might have to borrow it at a 4 percent interest rate, which is much lower and might not relate to the risk profile of the company involved. So the net outcome of that—the combination of not allowing them to put as much debt in and not allowing them to charge as high an interest rate—is that they will pay more tax in New Zealand, and that effective tax rate will go up from, say, 10 percent, in the example that I used at the start, to maybe something closer to 28 percent.

Now, the concern, of course—and I’m holding the disclosure statement and regulatory impact statement—is that if you over-egg it, you could have the impact of reducing the amount of investment coming into New Zealand. So getting that balance right is the critical thing, and I go back to raising the question with the Minister: how confident is he that the decision that we’ve landed on, with two notches below the credit rating—[Time expired]

Hon MICHAEL WOODHOUSE (National): Thank you, Mr Chair. It’s always a risk for a former Minister of Revenue to be speaking on a bill like this—particularly one where he wasn’t on the select committee—but I’m going to give it a go nevertheless and try not to sound like the grumpy uncle at the family reunion.

I do want to acknowledge the Minister in the chair, Stuart Nash, and his efforts to address the technical questions that the committee has put to him, because I think it is a credit to him and to the process of the committee of the whole House that we don’t always see in this Chamber, which is a preface for a relitigation of an answer that he gave. I do so because I think it is fundamental to the powers that we are trying to give—and the curbs on the powers that we’re trying to give—inland revenue in respect of the seven-year limitation on the transfer pricing arrangements.

Now, there was a very good exchange, I think, between the Hon Amy Adams and the Hon Stuart Nash in respect of that point, and I want to come back to it because I believe there is a risk in not carefully wording the intention that the Finance and Expenditure Committee and the Government have in respect of this clause—I think it’s clause 36(4), amending section GC 13. I know some very good tax accountants and lawyers in the market, and we now have on record the Government’s intent, but I don’t believe that we have it in the words that will end up in the Act if the bill is passed as it is now. Essentially, we can break down clause 36(4) this way: there is a time bar; there is an exception to it. An amendment can be made for up to seven years, if, in the first four years—and these are the key words—“the Commissioner notifies the taxpayer that this subsection applies.”

Hon Ruth Dyson: We’ve heard all this.

Hon MICHAEL WOODHOUSE: That’s right, but here is the point. What we risk if this amendment is not approved is that every single decision inland revenue make to extend the time bar will have challenges brought to it, probably into the courts, by very, very good lawyers and accountants who are working for large companies that will want to reduce the time bar to the shortest period possible. Now, it may well be that there is a legitimate investigation under way, but the law doesn’t require that to be the case, except we now have the select committee report and the Hansard of this debate where the Minister himself, as well as the shadow Minister of Finance, have accepted that the intention of this was for an investigation to have started. And if the law doesn’t say that, then my concern is that the decision will be challenged in the court and set aside, and the taxpayers will be the worse for the fact that if the transfer pricing arrangements were found to be unlawful or incorrect in law, then that cannot be properly challenged.

It’s no surprise that the IRD would like to take a longer time. I think that’s understandable. Indeed, these arrangements can be notoriously complex, and if they are not subject to advance pricing arrangements, as the law allows, and they are not well-known to inland revenue, then it is possible that they don’t come to the department’s attention until quite late in that four-year period. But the expectation that the committee had was that an investigation should have commenced.

Now, I was fascinated at the Minister’s comment that the term “investigation” is not defined. I’m not a lawyer, but I would have thought that in policing, in commissions of inquiry, and in tax law, “investigation” has a nomenclature and is an understood term that is more than just kicking the tyres on a tax return—that something has to have happened. I go back to what I believe is a very well-worded, handwritten amendment by the Hon Amy Adams, and I would implore the Minister to rethink whether or not, for the avoidance of any doubt—he has given us his assurance that he thinks the words in clause 36(4) are OK, and I don’t want to challenge that. But, for the avoidance of doubt, there is no harm in considering this amendment.

Hon STUART NASH (Minister of Revenue): After listening to the Hon Amy Adams, I was not convinced in any way, shape, or form there needs to be an amendment, but after listening to the former revenue Minister Michael Woodhouse, he does make a good point. My personal view is that it is clear. However, in order to avoid any doubt whatsoever—because if doubt exists in the mind of the former revenue Minister, then I’ll take that on board—what I will propose is an amendment to clause 36(4), new section GC 13(6). So after, and I quote—you may want to follow this—“notifies the taxpayer that”—so this is in new section GC 13(6)—I will insert “a tax audit or investigation has commenced, and”—

Andrew Bayly: “And applies”?

Hon Michael Woodhouse: That would be perfectly appropriate.

Hon STUART NASH: —no—and then “this subsection applies”. Will that satisfy the former Minister of Revenue?

Hon Michael Woodhouse: Absolutely.

Hon STUART NASH: So I do thank the former Minister of Revenue, because he makes the point much clearer than his colleague, and as a consequence of that I will table that amendment. Thank you very much.

ANDREW BAYLY (National—Hunua): Thank you, Mr Chair. First of all, I just want to acknowledge Minister Nash. This is how good laws are made—when we have an interactive situation in committee of the whole House where we have a Minister who’s engaged, knows his topic, and actually wants to respond. So I do want to commend him.

One of the issues we haven’t discussed tonight—we’ve been talking a lot about interest rates, a lot about interest rates, and, of course, by lowering interest rates or making them high, that’s how you can reduce tax that a New Zealand subsidiary, branch, associate, or whatever will pay to its foreign parent. The other side of the coin is around thin capitalisation rules. I’m sure that Mr Chair is an expert in this topic. But I just thought I would just highlight some of the issues around that.

Before I do that, I think it’s useful just to explain to some of us—perhaps for people listening—what we mean about “thin capitalisation”. In essence, if you have a company, you might have a very low ownership share—or what’s called equity—and shove in a whole lot of debt. So your debt to equity ratio is very high. That’s obviously a way to reduce the tax burden, because if you’ve got a high amount of debt and charge interest on it, then, as my colleague the Hon Paul Goldsmith said, you can reduce the profits of the company, and that’s what we’re trying to stop with this base erosion and profit shifting (BEPS) bill tonight. Normally, it’s expressed as debt to equity or debt to assets.

So, just to put it another way, if we have a debt to equity ratio of 1.5 to 1, that means we’ve got debt of 1.5 to 1 of equity, or, basically, for every $3 of debt, we’ve got $2 of equity. Or, turning it around another way, that’s 67 percent gearing. Of course, in this bill the maximum permitted debt is set at least than 40 percent, as my good colleagues over here know very clearly. In Australia, as I said before, it’s set at 60 percent, and we’ve already got that inconsistency.

So there are five things I want to say about thin capitalisation. The first one is something that was raised by Chapman Tripp and Chartered Accountants Australia and New Zealand, and that is the issue around the subtraction of value of non-debt liabilities from a firm’s asset base for the purposes of determining thin capitalisation rules. Of course, their view was that this actually shouldn’t occur under the BEPS rule, as it does not currently result in taxpayers exceeding commercial levels of debt. The officials’ response to this, actually, was that the submitters are correct and that this proposition is not part of the OECD’s BEPS recommendation. However, the officials added that ever since the inception of Australia’s thin capitalisation rules, those rules have subtracted non-debt liabilities in the same way that is being proposed in this bill.

I just think we’ve talked earlier about principles about making sure that we have the same sort of approach as all the other countries that are going to adopt the BEPS arrangement around the world, because that is the strongest way of making it happen. The most important trading partner, of course, is Australia, and already we’ve got a little bit of difference showing up in that. So I would appreciate some views from the Minister around the issue of non-debt liabilities being subtracted.

The second issue is how they’re treated, and PricewaterhouseCoopers submitted that the treatment of non-debt liability proposals should better reflect how the company uses them. So for some companies, they will have a different approach than others. If you’re a trading company, the way you approach your assets will be different from a mining company. I’ll tell you what, it’s very interesting looking at the mining arrangements, which is that the lenders may want to take into account the deferred tax liabilities—or DTLs as they’re referred to—or perhaps remediation provisions. So if you’re doing mining activities—let’s say oil—

Alastair Scott: Oil and gas.

ANDREW BAYLY: —oh!—in those extractive industries there is always a requirement that at the end of the working period of that mine, you actually pick up the liability for what goes on—[Time expired]

MICHAEL WOOD (Labour—Mt Roskill): I move, That the question be now put.

LAWRENCE YULE (National—Tukituki): My apologies, Mr Bayly. Thank you, Mr Chair.

Rt Hon David Carter: You’ve waited all night for this

LAWRENCE YULE: Yes, I have waited all night, in the depths of winter. I want to acknowledge the Hon Stuart Nash for the way in which he’s answered the questions on this Part 1 of the bill. I imagine this might be the last speech of the evening, so in this I’m going talk about, actually, the fact that this is a bill that had a genesis with the Hon Judith Collins. It’s been through a process, it’s been through a select committee process, and—as a new person to Parliament and as a new person to this—it’s actually a pretty complicated bill.

It is projected to produce $270 million of extra revenue, and there are lots of rorts that have been going on around interest rates, valuations, costs, and all the rest of it.

House resumed.

Progress reported.

Report adopted.

The House adjourned at 9.56 p.m.