Thursday, 14 June 2018

THURSDAY, 14 JUNE 2018

THURSDAY, 14 JUNE 2018

The Speaker took the Chair at 2 p.m.

Prayers.

Business Statement

Business Statement

Hon CHRIS HIPKINS (Leader of the House): Next week, the House will complete the remaining stages of the Land Transport Management (Regional Fuel Tax) Amendment Bill, the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, and the Appropriation—

SPEAKER: Order! I think we might just be having a slight problem with the microphones, and I am going to ask the Minister to start again and we’ll see if they’re working now.

Hon CHRIS HIPKINS: Thank you, Mr Speaker. Next week, the House will complete the remaining stages of the Land Transport Management (Regional Fuel Tax) Amendment Bill, the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, and the Appropriation (2017/18 Supplementary Estimates) Bill, and associated Imprest Supply Bill. On Thursday 21 June, the Heretaunga Tamatea Claims Settlement Bill will receive its third reading. Other business for the week will include the second reading of the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Amendment Bill.

Hon GERRY BROWNLEE (National—Ilam): In the context of that last bill that the Leader of the House just mentioned, will it also be the Government’s intention to parallel the effects of that bill by moving the Kermadec Ocean Sanctuary Bill at the same time?

Business of the House

Business of the House

Hon CHRIS HIPKINS (Leader of the House): No. Following discussion at the Business Committee, I seek leave for the Subordinate Legislation Confirmation Bill to be set down for second reading forthwith after its first reading, and for the third reading forthwith following its second reading.

SPEAKER: Is there any objection to that course of action being followed? There appears to be none.

Oral Questions

Questions to Ministers

Economy—GDP Growth, Wage Gap with Australia, and Prison Public-private Partnerships

1. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Does he stand by all his statements and policies?

Hon Dr DAVID CLARK (Associate Minister of Finance) on behalf of the Minister of Finance: Yes, in the context in which they were given and undertaken. However, I would like to correct a statement the Minister made yesterday regarding the household living cost price indexes. Due to a transcription error, he referred to the increase in living costs since June 2008, when in fact the numbers used were for September 2008.

Hon Amy Adams: Does he stand by his statement that he plans to grow New Zealand’s prosperity when forecast average GDP growth over the next two years has been revised downward, from 3.5 percent in Pre-election Economic and Fiscal Update 2017 to just 3 percent in Budget 2018, and ANZ Bank today is saying that growth momentum has clearly slowed?

Hon Dr DAVID CLARK: As with any growth forecast, there are a range of views out there. Treasury is historically one of the best forecasters, and I am confident in their Budget Economic and Fiscal Update projections of continued solid growth. The Government does not believe that buying and selling houses to each other until we can’t afford them any more is a sustainable economic strategy. For too many New Zealanders, we’ve seen that this kind of growth has not actually translated into improved living standards. We’ve got a plan—

SPEAKER: Order! Order!

Hon Amy Adams: How can he be so dismissive of these significant growth revisions when a 0.5 percent decline in average GDP growth over the next 2 years is equivalent to around $2.3 billion in lost income for the economy, at approximately $500 per New Zealander?

Hon Dr DAVID CLARK: I repeat that Treasury projections are for solid economic growth. We enjoy good forecasts and we have good times ahead. I think the Minister should stop trying to talk the economy down.

Hon Amy Adams: Has he now given up all hope of continuing to close New Zealand’s after-tax wage gap with Australia, that reduced by a third over the past decade, with the removal of National’s tax bracket adjustments, imminent further tax reductions in Australia, and the slowing domestic real and per capita GDP growth trajectory under this Government?

Hon Dr DAVID CLARK: We are planning to transition to an economy that’s more productive, more sustainable, and more inclusive. We want to see New Zealanders prosper socially and economically. This Government has a plan and we’re sticking with it.

Hon Amy Adams: I raise a point of order, Mr Speaker. The question was very much around closing the wage gap—the after-tax wage gap with Australia. He didn’t even reference that in his answer.

SPEAKER: Well, I think the member’s problem is that she had a list of other things added on to it. There was certainly an attempt to answer at least one of those.

Hon Amy Adams: Does the Minister agree with Jacinda Ardern when she said that public-private partnerships (PPPs) in corrections “just don’t work and on that we’ve been very clear”, and Phil Twyford, who said that PPPs for prisons would be “a no-go for this Government”?

Hon Dr DAVID CLARK: There is clear evidence around the Government’s prior experimentation with PPPs that they did not work. There are a number of perverse outcomes, and this Government has steered clear thus far of any such foolishness.

Hon Amy Adams: So why is a PPP now being used to fund Waikeria Prison when the use of PPPs for prisons has been clearly and repeatedly ruled out?

Hon Dr DAVID CLARK: Well, I don’t have the detail on that in front of me. But I understand they sold the contract—

Hon Andrew Little: They signed it and it cost $34 million.

Hon Dr DAVID CLARK: They signed the contract and it cost $34 million.

Hon Chris Hipkins: Can the Minister of Finance confirm that there’s a difference between honouring a PPP agreement entered by the previous Government to build a new prison versus having a PPP for the operation of a new prison?

Hon Dr DAVID CLARK: I’m absolutely delighted to confirm that. There’s a huge difference between honouring contracts and creating a stable environment for the country, and entering into agreements which have a whole lot of fish-hooks attached, which that prior Government was prone to doing.

Tourism, Minister—Statements on Funding and Freedom Camping

2. Hon TODD McCLAY (National—Rotorua) to the Minister of Tourism: Does he stand by all the statements he made to the Economic Development, Science and Innovation Committee last week?

Hon KELVIN DAVIS (Minister of Tourism): I stand by the statements I made regarding the tourism portfolio.

Hon Todd McClay: Following his statements at the committee last week, what does he say to taxpayers who expect him to be on top of the detail of the $170 million allocated to tourism in this year’s Budget, or would he rather continue to be known as the “vacant” tourism Minister?

SPEAKER: Order! That’s not a properly worded question. The member knows that.

Hon Todd McClay: I raise a point of order, Mr Speaker. That’s been widely reported in newspapers—

SPEAKER: Well, the member should know that there is more than a slight difference in the standards required in newspapers and the standards required in this House.

Hon Todd McClay: What does he say to tourism operators who have seen his select committee comments that his $75 million of new money previously promised for tourism for this year’s Budget has, in fact, been replaced by a $6 million cut—that’s an $81 million tourism broken promise?

Hon KELVIN DAVIS: The member is sort of fudging the figures there. The advice that I received from the Ministry of Business, Innovation and Employment (MBIE) was that the 5 percent cut in funding to Tourism New Zealand would have no discernible impact on tourism numbers. In fact, by 2024, we’re going to have 1.4 million extra visitors to New Zealand. So I’m not concerned about tourism destination marketing per se. It’s more about destination management now.

Hon Jacqui Dean: How many meetings did he have with the Hon Nanaia Mahuta where freedom camping was discussed, when he said at the Estimates hearing that “We talk about the issue all the time.”?

Hon KELVIN DAVIS: My colleague the Hon Nanaia Mahuta and I have a number of meetings, both formally and informally. In fact, that’s what happens, actually, when you’re related. We actually also talk as cousins, for the member’s information. So colleagues and I—all of us colleagues—discuss a whole heap of issues all the time.

Hon Jacqui Dean: When he said at the Estimates that he “Just took the local government portfolio responsibility for dealing with freedom camping work off the Hon Nanaia Mahuta”, did he tell her first?

Hon KELVIN DAVIS: If I recall the conversation correctly, the member asked me, “Who is responsible for freedom camping?”, and I said, “Myself.” And she said, “Why isn’t the Minister of Local Government in charge of freedom camping?”, and I said, “Because I am.” Now, I can’t be any more straightforward than that.

Prisons—Waikeria Prison and Bed Space

3. Hon DAVID BENNETT (National—Hamilton East) to the Minister of Corrections: Does he stand by all of his statements and actions in relation to Waikeria Prison?

Hon KELVIN DAVIS (Minister of Corrections): Yes, in the context they were made.

Hon David Bennett: If he stands by his statement that New Zealand prisons are super-sized factories for low-level criminals, what is his definition of a low-level criminal?

Hon KELVIN DAVIS: The member is right that our prisons are factories for criminals. In fact, that party’s plans for a mega-prison are, quite frankly, wrong. American-style mega-prisons swallow up young people and churn out hardened criminals. That’s the matter here. That party there, even though they had access to all the research and the best evidence—

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. I’m sure the Minister’s opinions about the previous Government are interesting to him, but they aren’t particularly apposite to the question that he’s been asked, which was—

SPEAKER: That is a matter for my responsibility, Mr Brownlee, and I’m waiting to see if he gets to it.

Hon KELVIN DAVIS: I’ll give an actual case. There is a person who is in prison for stealing a $1,000 cellphone. That person was in prison on remand at Waikeria for a matter of days before he started self-harming by stabbing himself in the groin and was sent to the at-risk unit. Those are low-level criminals who should never ever be in prison in the first place simply for shoplifting a cellphone.

Hon David Bennett: If he stands by his statement that the 1,500 bed build at Waikeria is an American-style mega-prison, what is the biggest American prison by bed count?

Hon KELVIN DAVIS: I have no responsibility for American prisons.

Hon David Bennett: If he stands by that previous statement, then what is the average size of an American prison?

SPEAKER: Order! The Minister said it before and probably anticipated the ruling that I should have made. This Minister has no responsibility for American prisons.

Hon David Bennett: I raise a point of order, Mr Speaker.

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

SPEAKER: Which one?

Hon Gerry Brownlee: Mr Speaker, while he may have no responsibility for any prison system in the United States, he most certainly has responsibility for his own statements, and for a Minister to make a comparative statement about an American prison, he must of course know exactly what he was comparing, otherwise it’s just one of those in-the-wind statements that means nothing.

SPEAKER: Well, Mr Brownlee, I heard quotes made about mega-prisons; I’ve heard nothing quoted from this Minister about average American prisons, and it certainly wasn’t in the question.

Hon David Bennett: I raise a point of order, Mr Speaker.

SPEAKER: It’s not going to be relitigating that again, is it?

Hon David Bennett: No, in the Minister’s first answer he mentioned American-style prisons—

SPEAKER: Mega-prisons. He didn’t say average prisons.

Hon David Bennett: —and so I’m asking him to reflect on that and define that.

SPEAKER: What’s the member asking me to do?

Hon David Bennett: Well, to get the member to answer the question, because he referred to American-style prisons in his first response—

SPEAKER: So the member’s now relitigating my ruling—is that right?

Hon David Bennett: No, I’m seeking for the Minister to answer his question.

SPEAKER: I think I’m going to be kind to the member and let him continue to have a supplementary—not an extra one; just his next one.

Hon David Bennett: How does his claim that his Government is focused on rehabilitation match up with the fact that he admitted yesterday that prisoners will have to sleep on mattresses on the ground because the Government haven’t built enough beds to keep up with demand?

Hon KELVIN DAVIS: The member’s misquoting me. I was asked the question “What happens if there is a lack of bed space?”, and I said, “Well, every corrections system in the world has a contingency plan for just that event.” So if there was an earthquake today and we had to move prisoners into another prison and there weren’t enough spare beds, they have to have a contingency plan. That contingency plan is the very same contingency plan that the previous Government had, and now they’re criticising us for having a contingency plan—the very same one.

Hon David Bennett: I raise a point of order, Mr Speaker. I asked the member about rehabilitation. He never mentioned rehabilitation once in that answer.

SPEAKER: Order! The member should—I mean, I think he even read the question. He should think about what he said.

Hon David Bennett: I raise a point of order, Mr Speaker. The Minister was asked about—

SPEAKER: No. If the member argues again, he’s going to be terminated from asking supplementaries. If he wants a further supplementary, he can ask one. He doesn’t—all right.

Education—Māori Achievement and Partnership Schools

4. Hon NIKKI KAYE (National—Auckland Central) to the Associate Minister of Education (Māori Education): What progress has he made to strengthen the capability of the education system to raise educational achievement for young Māori?

Hon KELVIN DAVIS (Associate Minister of Education): Nā Te Kāwanatanga i whakapaohotia tētahi hōtaka mahi nui ki te whakapakari i te ao mātauranga mō te rautau rua tekau mā tahi. Kei roto i tēnei hōtaka e whakapakari ana i a Ka Hikitia me Te Tau Mai Te Reo. Nā mātau hoki i mea me āta tirohia ngā take mō ngā akonga Māori. Kai te haere tonu ngā hōtaka hou pērā i Te Ahu o Te Reo, Te Kawa mā Te Kura, me Te Whakapakaritanga o Te Kotahitanga.

[The Government announced a programme of huge significance to strengthen the education system for the 21st century. Within this programme is the refinement of Accelerating Success and the Māori Language in Education strategy. We also advocated that matters related to the teaching of Māori students must be examined carefully. Programmes like Te Ahu o Te Reo, Te Kawa Mā Te Kura, and Te Whakapakaritanga o Te Kotahitanga continue.]

SPEAKER: I am now going to ask the Minister to repeat his comments and to speak a little bit more slowly so I can either keep up with it personally or through interpretation. So the Minister can choose either to translate or to repeat.

Hon KELVIN DAVIS: Repeat. Nā Te Kāwanatanga i whakapaohotia tētahi hōtaka mahi nui ki te whakapakari i te ao mātauranga mō te rautau rua tekau mā tahi. Kei roto i tēnei hōtaka e whakapakari ana i a Ka Hikitia me Te Tau Mai Te Reo.

[The Government announced a programme of huge significance to strengthen the education system for the 21st century. Within this programme is the refinement of Accelerating Success and the Māori Language in Education strategy.]

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. A number of desks on this side of the House don’t have earpieces to be able to hear the interpretation.

SPEAKER: Well, that is the members’ responsibility. If they’ve lost their ear—[Interruption]. Well, every—

Hon Gerry Brownlee: Mr Speaker, it is not a member’s responsibility to provide the facilities in here. That’s a ridiculous thing to say.

SPEAKER: The member will resume his seat. Every member at the beginning of the Parliament was provided with an earpiece which plugs in to the thing between himself and the honourable QC beside him, and it is the members’ responsibility—

Hon Christopher Finlayson: No need to be a smart alec. That’s totally offensive in the tone in which you used it.

SPEAKER: The honourable member beside him. And it is a matter of plugging it in and using it.

Hon Gerry Brownlee: We don’t have them. They’re not here.

SPEAKER: Well, I mean, is it my responsibility for members losing them out of their desks?

Hon Members: Yes.

Rt Hon Winston Peters: Stop taking them home!

SPEAKER: Right. Right, I just want to say to the Deputy Prime Minister, that is not helpful, and I think he should practise being kind for when he is the Acting Prime Minister. We’re now going to go back and I’m going to ask Mr Davis to start again, and I’m going to say to members that it is their responsibility either to leave the things plugged in, as members always used to do, so that they can use them immediately, or to keep them—

Hon Gerry Brownlee: It was here yesterday, it’s not today—simple.

SPEAKER: Order! It’s a matter of turning it on.

Hon KELVIN DAVIS: Ā, hei tīmatanga mehemea ka ako rātau ki te kōrero i Te Reo Māori, horekau tēnei raruraru e pā mai, nā reira, nā Te Kāwanatanga i whakapaohotia tētahi hōtaka mahi nui ki te whakapakari i te ao mātauranga mō te rautau rua tekau mā tahi. Kei roto i tēnei hōtaka e whakapakari ana i a Ka Hikitia me Te Tau Mai Te Reo, nā mātau hoki i mea me āta tirohia ngā take mō ngā akonga Māori. Kai te haere tonu ngā hōtaka hou pērā i Te Ahu o Te Reo, Te Kawa mā Te Kura, me Te Whakapakaritanga o Te Kotahitanga.

[And so, as a beginning, if they had learnt to speak the Māori language this problem would not have occurred, therefore the Government announced a programme of huge significance to strengthen the education system for the 21st century. Within this is the refinement of Accelerating Success and the Māori Language in Education strategy. We also advocated that matters related to the teaching of Māori students must be examined carefully. Programmes like Te Ahu o Te Reo, Te Kawa Mā Te Kura, and Te Whakapakaritanga o Te Kotahitanga continue.]

Hon Nikki Kaye: What is the number of young Māori in the 10 partnership schools whose contracts have been terminated by this Government?

Hon KELVIN DAVIS: Horekau he mana nōku mō ngā kura hourua.

[I have no mandate in regard to partnership schools.]

Hon Nikki Kaye: I raise a point of order, Mr Speaker. In the member’s delegation, he is certainly responsible for lifting achievement of young Māori, and so he should know what is the number of young Māori that have no certain future in terms of partnership schools whose contracts have been terminated?

SPEAKER: The Minister answered the question. He answered it absolutely.

Hon Nikki Kaye: No, he didn’t. He said he has no responsibility. That’s what he said.

SPEAKER: That’s right. That is an answer.

Hon Nikki Kaye: He has responsibility for young Māori.

SPEAKER: Order! The member’s been a Minister. She knows that responsibilities within the education portfolio are divided, and, in this particular case, it’s been made very clear in the House this Minister does not have responsibility for decisions around partnership schools. And the idea that any Minister should have the list of ethnicities of children in particular schools is—well, some people might know, but it’s not a reasonable expectation on a Minister. Now, does the member have a further supplementary?

Hon Nikki Kaye: I raise a point of order, Mr Speaker. The Speaker knows that the reality is there may be specific responsibility around decisions on partnership schools, but this Minister has a specific delegation around the achievement of young Māori and what’s happening with young Māori in State schools in New Zealand. It’s written into the delegation. This is a situation whereby—

SPEAKER: Sorry, Ms Kaye, I have had enough now. I have ruled on this matter. If the member wanted that specific information as it related to Māori children, she may have been able to develop a primary question within the Minister’s responsibilities. She’s not getting it this way.

Hon Nikki Kaye: What has he done to ensure the welfare of the more than 800 young Māori that he is responsible for that have had their school closure confirmed and have no clarity as to what school they’ll be attending next year?

Hon KELVIN DAVIS: I have said in this House that I have a conflict of interest around charter schools and I also have no responsibility for charter schools. She is referring to students of charter schools.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. Quite apart from the extraordinary situation of a Minister with a delegation laid on the Table of the Parliament to have some responsibility for young Māori students’ educational achievement stating in the House today that he has no responsibility for that, he certainly, surely, has some idea to be able to indicate to the House what will happen to young Māori students who are unable to attend their schools currently or from the end of this year, and what is his plan to assist them, given his specific delegation to be responsible for their educational achievement, stated in the document laid on the Table of the House.

Hon Chris Hipkins: Even in areas where Ministers have ministerial responsibility, where they have a conflict, it is not unusual—and, in fact, it’s expected—that Ministers will declare that and not comment on the matter, because they have declared a conflict. I am the Minister responsible for partnership schools. I’m happy to answer any question on it.

Hon Nikki Kaye: I raise a point of order, Mr Speaker. It’s not actually been public, because I have asked a range of parliamentary questions—written—around whether Ministers have declared conflicts. This is the first time that we’ve heard this. Am I able—that’s the question I have for you, as Speaker—to ask the Minister to table the conflict? Because it’s not public information at the moment. It’s with the Cabinet Office, but if he’s declared a conflict, then I think that should be available to this Parliament if I can’t ask questions about it.

SPEAKER: If the Minister wants to table the conflict, he certainly can. If the member wants to ask the Prime Minister about conflicts that have been declared to the Cabinet Office, that can also be the subject of parliamentary questions.

Hon Nikki Kaye: I raise a point of order, Mr Speaker. I’ve actually already asked that question of the Prime Minister in written questions, and I haven’t been able to get this information. So I seek leave for the Minister to table his conflict.

SPEAKER: You can’t seek leave for another member.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. That member and her colleagues have been repeatedly alleging that my colleague has a conflict of interest. Now she doesn’t know about it.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. It was not an allegation made by this side of the House; it was accepting the word of the Associate Minister of Education by this side of the House. You just said there is a conflict of interest and, therefore, he has the delegation. I know that the Deputy Prime Minister—soon to be Acting Prime Minister—has got a lot on his plate, but try and keep up with it.

SPEAKER: Order! [Interruption] Order! Now, can I say to the Deputy Prime Minister that through that point of order, he repeatedly interjected. Can I say to the Opposition that twice when I’ve been on my feet, there’s been raucous behaviour. My view is that we should move on to see if Nikki Kaye has a further supplementary that she would like to ask. But we also—I make it very clear—have to take the word of Ministers when they indicate that they do have a conflict, and I will also say that it is not the first time in this House that I’ve heard the suggestion that Mr Davis had a conflict. I think it might have come from my left in the past.

Hon Nikki Kaye: What is his conflict of interest that means that he does not feel that he can answer whether he has done anything to support the 800 young Māori whose future is uncertain because of contract termination in partnership schools?

SPEAKER: Before the Minister answers the question, I actually need to ask the Clerk.

Hon KELVIN DAVIS: I believe I recall that it was actually the member over there that claimed that I had a conflict of interest earlier in the year, but let me just reassure her that if any Māori student in the State system will benefit from Te Ahu o Te Reo.

SPEAKER: No. Order! Order! This is very specific question that was asked by the Hon Nikki Kaye, and it goes to a very clear answer that the Minister had given previously. I want him to answer it.

Hon Chris Hipkins: I raise a point of order, Mr Speaker. I know that this is a matter that you just clarified with the Clerk, because I could read your lips while you were doing it. Once a Minister has declared a conflict of interest, surely it is then up to the Prime Minister to answer questions on that conflict. Otherwise, a Minister declaring a conflict is put in this position where they have to talk about it and explain it, which partly defeats the point of declaring the conflict in the first place.

SPEAKER: Yeah, and I understand the point that’s made, but—

Hon Nikki Kaye: But, Mr Speaker, speaking to the—

SPEAKER: No, sorry. I’m going to rule, if the member doesn’t mind. There are two sets of responsibilities here. There’s the responsibility on the part of the Prime Minister to receive and be involved in the management of conflicts. The other part is a responsibility on individual Ministers where there are conflicts within their portfolios or delegations to declare them. I have just ruled, by asking the Hon Kelvin Davis to respond, that if he has made a declaration that precludes him from doing some of the work that might otherwise be part of his delegation, then it is appropriate for that to be—at least, in summary—made public. It’s something that I myself did on one occasion as Associate Minister of Finance where there was a familial conflict.

Hon KELVIN DAVIS: To answer, the accusation was made that I had a conflict of interest because I know the leaders of the charter school Te Kāpehu Whetū in Whangarei. As a result, I thought it was best just to step back from any decisions, any commenting, on charter schools in total, because of those allegations.

Hon Nikki Kaye: I seek leave to table a document. It’s by the Auditor-General, but it actually has a paragraph in there that confirms that it is the Minister’s responsibility to declare conflicts in this area. But supplementary—

SPEAKER: Sorry, which document is it?

Hon Nikki Kaye: It’s the Auditor-General’s letter to me on these particular issues.

SPEAKER: So it’s a personal letter to the member?

Hon Nikki Kaye: It’s a personal letter to me. I’m not sure how publicly available it is, but it’s a personal letter to me.

SPEAKER: Well, I—the member seeks leave for that document to be tabled. Is there any objection? No, there’s not. It may be tabled.

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

Hon Nikki Kaye: On what date did he declare the conflict of interest, ruling himself out of supporting young Māori in partnership schools?

Hon KELVIN DAVIS: When it was discussed. To be honest, if she had wanted that information directly, she could have asked a written—

Hon Amy Adams: We didn’t know until now.

Hon KELVIN DAVIS: No, I can reply in written form, Mr Speaker.

SPEAKER: Sure. I mean there’s—well, I don’t. No one can be expected to know the exact—carry around the exact date of something like that.

Hon Nikki Kaye: I raise a point of order, Mr Speaker.

SPEAKER: Oh—

Hon Nikki Kaye: Well no, this cuts to the heart of whether the Minister was acting inappropriately on the time line as to when he declared that conflict of interest, and the date really matters. So if he doesn’t know—

SPEAKER: Well, if the date matters, then—if the date is really important, the member, I’m sure, will put down a question.

Prisons—Waikeria Prison Announcement and Reoffending Rates

5. GREG O’CONNOR (Labour—Ōhāriu) to the Minister of Corrections: What recent announcements has he made to address the growing prison population?

Hon KELVIN DAVIS (Minister of Corrections): Good news. Yesterday, I was proud to announce that this Government is setting a new direction for prisons in New Zealand. We are building a 500-bed, high-security replacement prison at Waikeria and, alongside it, we will be building a 100-bed mental health facility, which will be the first of its kind—adding an extra 1,500 beds to the system. Our commitment to reform our broken justice system and this Government’s commitment to social investment will help to stop the growing number of people entering through our prison gates.

Greg O’Connor: Why did he decide to build a small-scale prison over a mega-prison?

Hon KELVIN DAVIS: American-style mega-prisons are crime-breeding factories. They swallow up young offenders and spit out hardened criminals—sometimes a fully patched gang member. They do not keep communities safe. We have chosen to build a smaller prison because international evidence shows smaller prisons work, while mega-prisons—

Hon David Bennett: How much protection does he need?

Hon KELVIN DAVIS: —favoured by the Opposition—create better criminals, not better people.

SPEAKER: Order! The member will resume his seat. David Bennett will stand, withdraw, and apologise.

Hon David Bennett: I withdraw and apologise.

Greg O’Connor: How will his recent announcement address reoffending rates?

Hon KELVIN DAVIS: We know smaller prisons are more effective in providing real rehabilitation, and the 500-bed facility at Waikeria will be one of the smallest prisons in New Zealand. From the outset, it was blindingly obvious that there is a massive problem with mental health issues in our prisons. What I can’t understand is why no Government took serious action to address this until now. We need to address the underlying issues facing prisoners, like mental health, through the specialised mental health facility. Otherwise, we will always struggle to address reoffending.

Prisons—Definition of Low-level Offenders

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

Hon ANDREW LITTLE (Minister of Justice): Yes.

Hon Mark Mitchell: Does the Minister still agree with the Prime Minister’s comments that we’re filling our prisons with low-level criminals?

Hon ANDREW LITTLE: Yes.

Hon Mark Mitchell: How many people are in prison for possession of cannabis?

Hon ANDREW LITTLE: I don’t have that particular figure on me. What I can say is that we know that more than 50 percent of those who enter the prison system in any one year are convicted of crimes that do not entail violence or are not otherwise serious.

Hon Mark Mitchell: What is an example of a non-violent assault?

Hon ANDREW LITTLE: The member may well be aware that earlier this year, a High Court judge in Auckland was dealing with an offender charged with indecent assault—in fact, convicted of indecent assault. The actions comprising that offence were pinching the bottom of a prison officer, and the judge was having to face the fact that the prisoner, because of the operation of other law, was facing a mandatory maximum sentence of seven years. The judge said he was not going to sentence anybody to seven years for pinching somebody else’s bottom.

Hon Mark Mitchell: Could the Minister just clarify for me that he just stood in the House and told us that an indecent assault is an example of a non-violent assault?

Hon ANDREW LITTLE: No, that member is deliberately misrepresenting what was said—

SPEAKER: Order! Order! [Interruption] Order! The Minister should know that he cannot make that accusation, which is, effectively, a breach of privilege. The Minister will withdraw and apologise.

Hon ANDREW LITTLE: I withdraw and apologise. The member has misunderstood what I have said. The charge that that particular offender faced was one of indecent assault—that was the name of the charge. The action which that charge related to was pinching a prison officer’s bottom. Now, that is a world of difference from other actions that result in a charge of indecent assault—that are genuinely more offensive, are violent—and that is why the High Court judge grappled with the idea that he should sentence that offender to seven years, and he declined to do so.

Hon Mark Mitchell: How many people, under your definition of non-violent assaults—

SPEAKER: Order! Order!

Hon Mark Mitchell: —sorry, the Minister’s definition of non-violent assaults—are currently in prison?

Hon ANDREW LITTLE: Again, I don’t have that detailed figure, but I repeat: what we do know is that 50 percent of offenders entering the prison system in any one year are convicted of offences that do not entail violence and are not otherwise serious offences. That member will know that we have a sentencing Act and a sentencing regime that distinguishes between different categories of offence. There is more serious offending and there is less serious offending.

Hon Mark Mitchell: Does he stand by the definition of a low-level criminal, as given to the House yesterday, as “not committing violent crimes … [only] committing … ‘street crimes’, … younger offenders, young male offenders, those with mental health issues, those with addiction issues, those with literacy problems—[actually] all people who have problems”?

Hon ANDREW LITTLE: That is one of the more ridiculous questions asked in this House for a long period of time. The—

Hon Mark Mitchell: Point of order, Mr Speaker.

SPEAKER: I can’t at the moment see what the question can be. The member’s asked does he stand by his statement made in the House yesterday, and I think what we’re going to do is we’re going to hear the Minister’s reply.

Hon ANDREW LITTLE: I did not define less serious offending in those terms. That member has taken a number of statements made at different times in the House yesterday to—

Hon Mark Mitchell: I raise a point of order, Mr Speaker. I need to address that because—

SPEAKER: No—is the member disagreeing with the answer?

Hon Mark Mitchell: I am. I’ve got the Hansard here—

SPEAKER: Well, the member can’t.

Hon ANDREW LITTLE: As I said before, our criminal justice regime recognises a difference between more serious offending and less serious offending. That’s why we have a sentencing Act. That’s why we have different lengths of custodial sentence prescribed for different crimes—

Hon David Bennett: I’d hate to see if someone pinched you, whether they’d get in prison.

Hon ANDREW LITTLE: —and, in fact, we have sentencing that doesn’t even involve custodial sentences because the offending is at the less serious end and can be dealt with by non-custodial sentences, including with fines and other financial penalties.

SPEAKER: I just want to deal with Mr Bennett now. Mr Bennett, can you just please hold your tongue, and especially not refer to people pinching me while that happens. It hasn’t happened for a very long time and it certainly shouldn’t result in a prison sentence.

Hon Mark Mitchell: I raise a point of order, Mr Speaker. Can I just bring to your attention that the Minister just intentionally misled the House in that answer?

SPEAKER: If you think that, then there’s an appropriate action to take, and that wasn’t it.

Transport Infrastructure—Ōtaki to Levin Expressway and Light Rail

7. JAMI-LEE ROSS (National—Botany) to the Minister of Transport: Does he stand by all his statements and actions?

Hon PHIL TWYFORD (Minister of Transport): Yes, including my action of putting before the House the Land Transport Management (Regional Fuel Tax) Amendment Bill, which passed its second reading in the House unanimously.

SPEAKER: Order! That’s enough. The question is well and truly answered.

Jami-Lee Ross: Did he advise the Prime Minister to assure the public that the Ōtaki to Levin expressway would continue as planned—a statement which is now false?

Hon PHIL TWYFORD: I advised the Prime Minister to say that—at the time she was asked that question—nothing had changed in relation to that highway project.

Jami-Lee Ross: Does he agree with the Prime Minister when she stated in relation to Labour’s Government policy statement that “Ōtaki is continuing in the same way. If we hadn’t done anything last week, Ōtaki would be in exactly the same position as it is now and will continue to be.”?

Hon PHIL TWYFORD: At the time the Prime Minister made that statement, the exploratory work, the public consultation around the future alignment of that roading project, was continuing. The Prime Minister was correct.

Jami-Lee Ross: When will he tell the Prime Minister that her statement in April is now false, given that the New Zealand Transport Agency (NZTA) is re-evaluating the Ōtaki to Levin expressway?

Hon PHIL TWYFORD: The NZTA is now re-evaluating that expressway. It’s re-evaluating and rescoping dozens and dozens of roading projects around the country. In light of the Government policy statement on land transport, which prioritises safety and which prioritises access, reducing carbon emissions, and resilience, it’s a great transport policy and it’s going to deliver a fantastic transport system.

Jamie Strange: How has the Government updated its policy on light rail?

Hon PHIL TWYFORD: Both this Government and the previous one had plans for light rail. The previous Government began work on route protection, but wanted to wait to start construction until 2047. This Government believes that three decades is a little too long to leave Aucklanders stuck in worsening congestion, so we’ve made light rail a priority and we’ve begun the process to start building it.

Jami-Lee Ross: Does he agree with the NZTA representative who said in the Dominion Post this morning that the Ōtaki to Levin expressway was being re-evaluated “to better align with the new Labour-led Government’s transport policy”—something the Prime Minister said would not happen?

Hon PHIL TWYFORD: I do agree with that NZTA staffer because she just articulated something that’s almost exactly the same as the answer I just gave in the House.

Rt Hon Winston Peters: Could I ask the Minister as to whether or not the successful passage of his bill through the House with the support of all sides of Parliament is an example of being a lion in the electorate and a lamb in Parliament?

SPEAKER: Order!

Rt Hon Winston Peters: What’s wrong with that?

SPEAKER: Well, the Minister has no responsibility for other members’ behaviour inside or outside of the Parliament.

Health Services—Funding for Drug and Alcohol Treatment

8. ANAHILA KANONGATA’A-SUISUIKI (Labour) to the Minister of Health: What is the Government doing to increase the number of alcohol and drug detoxification beds in Auckland?

Hon Dr DAVID CLARK (Minister of Health): Yesterday, the Government announced a one-off $16.7 million investment to build two floors at the Auckland City Mission’s new HomeGround facility. When construction is complete in two years’ time, it will house 30 studio units for alcohol and drug detoxification. It’s a 50 percent increase on the current 20 beds that are funded in Auckland.

Anahila Kanongata’a-Suisuiki: How is this investment being funded?

Hon Dr DAVID CLARK: The funding will be drawn from funding recovered under the Criminal Proceeds (Recovery) Act. As the Prime Minister said, it feels entirely appropriate that we use the money that has been accumulated through misery to end misery.

Anahila Kanongata’a-Suisuiki: Why is this investment important?

Hon Dr DAVID CLARK: We know that demand for detox and treatment programmes is high. Too often, people are waiting too long to get the help they need. Programmes like the one at Auckland City Mission make a significant difference—it is tried and true. This investment will help turn lives around.

Regional Economic Development, Minister—Statements

9. Hon PAUL GOLDSMITH (National) to the Minister for Regional Economic Development: Does he stand by his reported statement that “as the CEO leaves Fonterra, the chairman should in quick order catch the next cab out of town”?

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

Hon Paul Goldsmith: Did he accept the Prime Minister’s judgment the last time he called for the sacking or resignation of a board member of a company: “Calling for the sacking of any board member is a step too far, and I have told him that.”?

Hon SHANE JONES: A little bit of context around this issue: I originally gave those remarks in the context of an event that was bound by Chatham House Rules. Members in that audience—either with Fonterra or a National Party member—chose to leak them, so I simply stood up and have got no compunction to repeat what I said to the face of so-said man, the soon to be departed leader of Fonterra.

Hon Paul Goldsmith: Then why is he defying the Prime Minister by doing it again?

Hon SHANE JONES: The Prime Minister and I have a very warm and respectful relationship and I have an extraordinarily high level of admiration, and that admiration will stretch even to a higher level in several weeks’ time. There has been nothing said by me, there has been nothing articulated in this small episode, other than to stand up and show that whilst I am a friend of business, unlike that member, I am no sycophant.

Hon Paul Goldsmith: Since making those comments, what has the Prime Minister or her office said to him about his comments?

Hon SHANE JONES: I don’t have much to do with the Prime Minister’s office; I have a great deal to do with the Deputy Prime Minister’s office. In terms of what remarks may have passed between my good self and the Prime Minister, they lie within the context of our relationship. But I can assure you, I stand by my remarks in terms of accountability that should be shown by a failing corporate governance culture at the highest levels of our largest company—and if a cab doesn’t suit, then shanks’s pony is just as good.

Rt Hon Winston Peters: Is the Minister saying that if the farmers of this country have, sadly and alas, taken a haircut of over $700 million, no one in politics should respond to that?

Hon SHANE JONES: I have been overwhelmed by the number of responses supporting my overdue criticism of so-said company and its corporate culture. Many of the farmers have said to me that at long last we’ve got someone who will speak truth to corporate power and who will show that that particular corporate emperor definitely has no clothes.

Hon Paul Goldsmith: When he accused the leadership of Fonterra of being full of their own importance, did he look into his own heart and acknowledge his own failings in that area?

Hon SHANE JONES: I think the whole House knows that I am a very hearty politician, and any suggestion that those comments directed at that particular board do not enjoy support amongst the hoi polloi of the provincial community shows how out of contact that particular member is. And look, Fonterra cannot wander around making advertisements, such as they did this year, drawing on the countryside and the personalities of country people and not expect the “Champion of the Country” to hold them accountable.

Rt Hon Winston Peters: In other words, is the Minister saying that someone from the provinces should be defending the farmers of this country and not somebody from Epsom?

SPEAKER: Order! Order! It’s not an area for which Mr Jones has responsibility.

Energy and Resources—Security of Electricity Supply and Renewable Energy Investment

10. JONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and Resources: Has she developed comprehensive and tested contingencies to replace gas’s role in New Zealand’s total energy demand, with MBIE having recently downgraded the reserves of the country’s largest gas field, Pohokura, by 27.2 percent?

Hon CHRIS HIPKINS (Leader of the House) on behalf of the Minister of Energy and Resources: The Government has set itself the goal—

SPEAKER: On behalf of.

Hon CHRIS HIPKINS: Oh, sorry. On behalf of the Minister, the Government has set itself a goal of having 100 percent renewable electricity in a normal hydrological year by 2035, and the Interim Climate Change Committee has been given the task of planning for that transition. Officials across a range of agencies are working at wider energy demand issues. The Ministry of Business, Innovation and Employment’s latest gas reserve figures also noted that Mangahewa reserves have increased 44.5 percent. The important point to note here is that these figures do fluctuate year to year, and we currently have 10.5 years of reserves remaining, which is broadly in line with the figures published every year for the past decade. Finally, it’s important to point out that the Government has not ended exploration for gas—31 exploration permits, covering 100,000 square kilometres, remain active—and we’ve also announced that a block offer for further onshore acreage in Taranaki is proceeding.

Jonathan Young: Considering that those gas reserves are the lowest they have been in 15 years, what is her plan for security of electricity supply for retail customers and commercial users as domestic gas supply does run out?

Hon CHRIS HIPKINS: I’ve been very clear in my original answer—in my primary answer—that we still have 10.5 years of reserves remaining, which is broadly in line with the figures published every year for the past decade. That situation was not changed from the day before the Government made the announcement to the day after.

Jonathan Young: Considering the Minister has created a potential end date for exploration, knowing that there’s no new offshore permits and it’s going to be reviewed for onshore in three years’ time, can she be more specific, please, about what her plan for security of electricity supply will be for those users of domestic gas when that supply does run out?

Hon CHRIS HIPKINS: I reject the assertion in the first part of the member’s question. The Government has a clear plan to ensure that we have a diversified electricity supply network. Just over 82 percent of our electricity currently comes from renewable sources, and, of course, we want to do better than that.

Jonathan Young: Will she guarantee that during her Government’s transition to 100 percent renewable electricity, New Zealand will at no time burn more coal than it presently does to ensure security of electricity supply?

Hon CHRIS HIPKINS: No Government can give that guarantee, because we can’t control how much it rains.

Jonathan Young: Will wind play a significant role in the transition to 100 percent renewable energy; and, if so, how much more investment will be required, given that this past Sunday evening, the country’s 17 wind farms contributed only 1/100th of 1 percent of New Zealand’s electricity?

Hon CHRIS HIPKINS: Yes, wind will continue to play an important role in the future security of New Zealand’s electricity supply, as will geothermal, as will hydro, as will a number of other potential sources—solar is another one. More distributed generation is another potential source to secure greater security of supply.

Jonathan Young: I raise a point of order, Mr Speaker. I asked the question how much more investment would be required, and if the Minister could elaborate on that, that would be appreciated.

Hon CHRIS HIPKINS: The first part of the member’s question asked whether or not wind would continue to be a part of the security of supply, and I said yes.

Drugs, Illegal—Methamphetamine Smuggling

11. RINO TIRIKATENE (Labour—Te Tai Tonga) to the Minister of Customs: What initiatives has the Government taken to curb the smuggling of methamphetamines into New Zealand?

Hon MEKA WHAITIRI (Minister of Customs): This coalition Government is committed to stopping meth and other illegal drugs from coming across our borders. In Budget 2018, I secured an additional $58.1 million to help protect our borders, which includes an extra 127 customs staff over the next few years.

Rino Tirikatene: Why is the Government spending so much money on stopping the smuggling of meth?

Hon MEKA WHAITIRI: The damage to our communities and our whānau is immense. The use of illicit drugs costs us $1.8 billion in social harm every single year. It impacts on our employment and our productivity, and weakens the fabric of our society across all our regions. The extra $58.1 million will go a long way to addressing this matter.

Rino Tirikatene: Is the Minister taking a cross-agency approach to preventing the importation of meth into New Zealand; and, if so, why?

Hon MEKA WHAITIRI: Yes, absolutely. We will continue building on the success of our joint work with police, immigration, and other agencies across Government and overseas by enhancing outreach campaigns, sharing intelligence, and increasing community engagement. Why? Because it’s the smart thing to do.

Health Services—Conflicts of Interest and National Oracle Solution Programme

12. Dr SHANE RETI (National—Whangarei) to the Minister of Health: Does he stand by all his decisions and actions regarding the National Oracle Solution (NOS) programme?

Hon Dr DAVID CLARK (Minister of Health): Yes, in their context.

Dr Shane Reti: Why did the ministry proceed with commissioning Deloitte as independent reviewers, when Official Information Act (OIA) documents show the first words of Deloitte’s own conflict of interest declaration state “Deloitte has been involved in the National Oracle Solution”, meaning they will be reviewing their own work?

Hon Dr DAVID CLARK: I can’t speak for why the ministry made that decision. The procurement process originally was done under the Government procurement rules that that Government set up, and the conflicts, perceived or real, were declared in that piece of work, as the member knows—the member’s got the OIA release now. The ministry did, though, subsequently commission Audit New Zealand to undertake an assurance process on the process followed by the ministry in its engagement of a consultant to review the National Oracle Solution programme.

Dr Shane Reti: Why did the ministry proceed with commissioning Deloitte as independent reviewers, when OIA documents now show Deloitte and Deloitte-related entities provided 28 consultation services to the project from 2011 to 2017?

Hon Dr DAVID CLARK: The project didn’t exist in 2011.

Dr Shane Reti: When was the Minister made aware that Deloitte or Deloitte-related entities have been “materially involved” in the majority of their services provided to the project since 2013, and what steps did he take?

Hon Dr DAVID CLARK: I haven’t been advised of that.

Dr Shane Reti: Why did the Minister deny reviewer Thorsten Engel’s 2011 conflict of interest in oral question No. 9 yesterday, when it is now clear that Deloitte were providing significant services to the project in 2011?

Hon Dr DAVID CLARK: The project didn’t exist in 2011.

Dr Shane Reti: I seek leave to table Deloitte’s conflict of interest declaration for the independent NOS review and Deloitte’s additional conflict of information statement for the independent review.

SPEAKER: Is there any objection to that? There appears to be none. They can be tabled.

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

Dr Shane Reti: I seek leave to table a 4 April 2017 email from Deloitte confirming that they have been materially involved in the project. It comes to me as an OIA.

SPEAKER: Is there any objection to that document being tabled? There is an objection.

Hon Dr DAVID CLARK: I seek leave to table all of the OIA correspondence received by Mr Reti to provide the full context for all of those things and to provide a clear view of the history of this issue. There’s one from 23 May—

SPEAKER: No, no—is there any objection to those documents being tabled? There appears to be none.

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

Urgent Debates Declined

Waikeria Prison—Government Announcement

SPEAKER: I have received a letter from the Hon Paula Bennett seeking to debate under Standing Order 389 the announcement of the Government’s plan to build a new prison at Waikeria. This is a particular case of recent occurrence and it does involve ministerial responsibility.

Urgent debates are held on matters that require the immediate attention of the House. It is incumbent on the applicant to make out a case for an urgent debate, including reasons why the matter must be debated immediately. It is not for the Speaker to discover one—Speakers’ ruling 190/3 refers.

On the information presented to me, I am not persuaded that the matter requires the urgent attention of the House. It could be addressed in the upcoming Estimates debate. The application is therefore declined.

Bills

Appropriation (2017/18 Supplementary Estimates) Bill

First Reading

Hon CHRIS HIPKINS (Leader of the House) on behalf of the Minister of Finance: I move, That the Appropriation (2017/18 Supplementary Estimates) Bill be now read a first time.

A party vote was called for on the question, That the Appropriation (2017/18 Supplementary Estimates) Bill be now read a first 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 first time.

Bills

Subordinate Legislation Confirmation Bill

First Reading

Hon CHRIS HIPKINS (Leader of the House): I move, That the Subordinate Legislation Confirmation Bill be now read a first time.

Motion agreed to.

Bill read a first time.

Second Reading

Hon CHRIS HIPKINS (Leader of the House): I move, That the Subordinate Legislation Confirmation Bill be now read a second time.

Subordinate Legislation Confirmation Bills are passed by the House each year so as to validate confirmable instruments—the category of secondary legislation that requires annual approval by the House to remain in force. These bills are typically pretty uncontroversial, and they’re reflected in the fact that the Standing Orders only provide for their second readings to be debated, although they do normally have a select committee hearing in the intervening period.

The purpose of this bill is to confirm the Civil Aviation (Safety) Levies Amendment Order 2017, confirmation of which should have been included in the Subordinate Legislation Confirmation Bill (No 3), which was introduced in May 2017 and reported to the House by the Regulations Review Committee just before the election. The order will be revoked on 30 June unless it is confirmed by an Act of Parliament before then.

The Civil Aviation (Safety) Levies Amendment Order 2017 changed the basis on which levies are recovered from the aviation industry to pay for the functions of the Civil Aviation Authority (CAA). It implemented the outcome of the funding review, and focused on recovering the CAA’s funding more appropriately from the people who benefit from their services and those whose actions give rise to it. The revocation of the order would create considerable administrative difficulties for the Civil Aviation Authority, given that systems and processes have been set up for the new scheme, and would create significant confusion for operators in the aviation industry, which is why I have agreed to set aside House time for the bill to be passed.

Hon GERRY BROWNLEE (National—Ilam): Thank you, Madam Deputy Speaker. I think the Leader of the House has well outlined the purpose of having a bill like this. It contains a number of other things that are sort of interesting but not quite so pressing as the aviation fee structure.

I think it’s worth noting that a lot of that fee structure is not just about commercial aircraft that cart people from one end of the country to the other, or from our shores to other destinations; it’s also about all of the categories of aviation—adventure tourism, various commercial activities like top-dressing or aerial photography, or whatever it might be. Of course, we know—as I mentioned with adventure tourism—there are a range of things that people now engage in because of their desire to have the adrenaline rush, I suppose, that require aircraft to be involved. So the main reason for the confirmation is it should have been included earlier—that’s acknowledged—but it would be unfortunate if we went through a stage where there was no oversight of some of that activity, which, of course, is very visible because of the requirement that they pay their fees and, therefore, come under the purview of the Civil Aviation Authority.

Bills like this don’t come before the House very frequently, and I think it’s important to recognise that when they do, there is generally a large amount of goodwill expressed from both sides of the House, generally. There are moments, of course, when that looks like it’s waning, but I think we can all get over that and move forward.

The bill, of course, in this case has got that, you would say, catch-up position in it, but one that I think is necessary. I wouldn’t want anyone to think that there hadn’t been appropriate scrutiny of that. It’s interesting, actually, that the levies have been subject to a complaint that’s been brought to the Regulations Review Committee, and that the committee has considered a lot of that and will be shortly engaging with those people who brought along that concern, about where to progress from here. But what was interesting in that was the recognition by all of those people that these regimes are necessary, although no one likes to think that there is unreasonable impost being put into the economy by way of these sorts of fees. I think most of those who are operators recognise that there is surety in their organisation or in their activity when it comes to public scrutiny of that activity, which can be encapsulated in their being able to point to a particular authority that sits on the wall of the office, or wherever they might like to keep it.

So this legislation, the Subordinate Legislation Confirmation Bill, is one that we do support on this side of the House.

Bill read a second time.

Third Reading

Hon CHRIS HIPKINS (Leader of the House): I move, That the Subordinate Legislation Confirmation Bill be now read a third time.

Motion agreed to.

Bill read a third time.

Debate on International Treaties

Debate on International Treaties

Simon O’Connor (Chairperson of the Foreign Affairs, Defence and Trade Committee): I move, That the House take note of the report of the Foreign Affairs, Defence and Trade Committee on the International treaty examination of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership.

This is not the first time as chair of the committee that I’ve stood to speak on this somewhat revised version of the Trans-Pacific Partnership (TPP), nor is it the first time to speak on the Foreign Affairs, Defence and Trade Committee’s work around various treaties. Look, overall, I am pleased that we are seeing some progression of the TPP and I’ll talk to it a little bit in terms of how, effectively, there isn’t much change. But I think it goes without saying, particularly as a member of the National Party, that we are pleased to see this free-trade agreement proceeding. So I do acknowledge the Minister who is leading it at the moment, and for his efforts, but, importantly too, the efforts of many trade Ministers prior to that, and I’m sure we’re going to be hearing from the likes of Todd McClay and also other foreign Ministers like Gerry Brownlee later in this discussion.

The committee has been undertaking a treaty examination. It’s fairly important to understand—probably more for the interest of the public than the House—that a treaty examination is not a moment where the select committee outlines massive changes. So you’ll notice that the recommendations of the committee are really for the House to take note, and note that the Government also is intending to bring in some domestic legislation to bring this about. It’s something that—and those sitting on the select committee know, because we had to explain it many times to the public: we examine the treaty. Obviously, the committee itself can raise matters of concern, but the Foreign Affairs, Defence and Trade Committee understands that the negotiations have already been done and it’s in the prerogative of the executive to ultimately sign these agreements. But it is important that our select committees, such as the Foreign Affairs, Defence and Trade Committee, look at a treaty like this, have a fuller understanding of the national interest assessment, have a good talk to the ministry involved—in this case, of course, the Ministry of Foreign Affairs and Trade—and then engage with the public and report back what they’ve heard.

Obviously, if this agreement continues—and in this particular case it’s up to the Government and the Minister responsible to table a piece of legislation, to take what is an international trade treaty and bring it into New Zealand’s domestic law. So it’s called the Comprehensive and Progressive TPP. Speaking more personally as the chair, I have, well, serious concerns about those two words, or rather the addition of them. I haven’t really seen much evidence of it being any more comprehensive or progressive. I suppose if I had to be completely generous it is progressive in so far as it is moving forward, but it’s moving forward in the same guise that it was. I say that mainly to echo just about every person who came before our select committee.

So we had a number of people write in, nowhere near as many people writing in as when this side was in Government. That itself raised a number of queries. One can theorise about why there may be a fundamental difference—in this case, so few people writing in. But to those who did, my thanks, and to those who came to speak before the committee here in Wellington, and the committee also made time to go to Auckland.

Look, the fundamental message we got back from business—so think of those in the areas of, say, agriculture, for example, but right across the spectrum. Business was incredibly supportive of this agreement. They explained the reasons why from what they see of the anticipation of the growth in their industries—jobs, of course. Better jobs—that was importantly stressed. So New Zealand businesses are very much behind this. They themselves did note, though, that very little had changed. And the individuals that came before the committee as well, and very notable opponents of the bill, the likes of Professor Jane Kelsey, amongst others, not to take away from those other people who spoke—but almost to the person, people noted that nothing really has changed here. I’m sure there’ll be remonstrations from other speakers that it has been a comprehensive and progressive change. Again, there’s no evidence of that. In fact, those who have long supported the TPP continue their support and say, effectively, it is what it is. Those who are opposed have continued to oppose this bill on the basis that nothing has changed.

A number did raise why a particular political party that had championed—or champed at the bit—to not vote for the TPP are now voting for it. There was a lot of confusion, if you will—it’s probably the generous way to put it—from the public of why, in this case New Zealand First, and I’m sure there’ll be a contribution, had very vociferously spoken against the bill, saying they would—sorry, not the bill; the agreement, the international treaty.

Rt Hon Winston Peters: Just like Donald Trump.

SIMON O’CONNOR: They are going to—well, it’s interesting that a member cries out “Just like Donald Trump.”. Actually, yes, it’s been very interesting that the number of parties now in Government have been well-aligned to Hillary Clinton and Donald Trump’s position of being anti-trade—talking a very big game until they got the Treasury benches, and then all of a sudden had an about-face.

Rt Hon Winston Peters: Because we fixed it.

SIMON O’CONNOR: I’m now hearing, too—I’m not sure where, but I’m hearing words about “fixing it”. As I’ve laboured the point—all puns intended—those presenting to the select committee had noted there are no effective changes in this agreement, and I for one am quite relaxed for that.

Rt Hon Winston Peters: Twenty-two massive changes.

SIMON O’CONNOR: There are, they say, 22 items which are, effectively, nonconsequential. It’s a bit akin—I’d better be clear, Madam Deputy Speaker; I’m not saying this is literally what’s happened. But, simply, if by analogy, removing a comma and a full stop makes a change, then you could begin to add that up.

One of the ones that’s often mentioned is around the investor-State dispute settlement (ISDS)—that’s the dispute settlements scheme. I think it’s one of those cases where acronyms sort of freak people out. In effect, very little change there. There’s a lot of talk about side letters. Smarter people than me in the area of foreign affairs and trade—the likes of Gerry Brownlee and Todd McClay—I’m sure will talk to that. There has been a little bit of change around the copyright provisions—

DEPUTY SPEAKER: I’ll just remind the member he is reporting from the select committee as a select committee chair.

SIMON O’CONNOR: Indeed. Fortunately, Madam Deputy Speaker, I am reading here from the report. The report itself also indicates a change between 50 to 70 years—a point of discussion, and one I suspect is going to be ongoing—and then a reaffirmation, which is one of the changes, again. It led the committee to be somewhat confused, but a reaffirmation that the purchasing model of Pharmac will continue to be protected. So one of the changes is to continue an element that’s already there.

So this was being brought home often and clearly by submitters, and it was actually well appreciated. Importantly now, with the committee having reported back, this debate will occur. I am hoping it will be quite comprehensive, unlike the agreement. But it will be quite comprehensive, and that then will lead to a moment—and I’m sure the Minister will elucidate more on that when a bill will be put before the Parliament, and that will be debated. It will be important to note that the committee will, once again I suspect, have to go out and engage the public, probably in a shortened process. I don’t want to presume that; it’s not my role—but a somewhat shortened process. I certainly encourage those people who wish to have their voice heard again that they may do so. But I think, as I was noting at the start, the committee is very clear on this: it is in the prerogative of Government or the executive to pass these. But the committee was very pleased to go through the process, to engage and hear from people.

As I say, the public itself, and the committee I think as a whole—not representative of all parties; sadly, that’s just the nature of who can get on the committee—remain very supportive of free trade. We were, as a committee, interested in how we may further engage with America. I mean, it’s one of the elements we’re very aware of—that America is not part of this deal. We’ll be very interested to see whether they can come on board. There was a mixture of opinion, as the Minister I’m sure knows, of whether America would be interested or not, but of course it’s up to them to make those decisions. What we’re seeing at the moment, with some of the tensions around the North America Free Trade Agreement—so that in North America, it will be interesting to see whether that flows over as well into the engagement with the revised TPP.

New Zealand remains, as we understand it, keen to be at the forefront of this. I think—and I hope it’s not pre-empting another person’s speech—New Zealand is keen to be the first, or at least one of the first to bring this treaty into its domestic laws. Importantly, New Zealand is what they call the depository. We are the central nexus for all the others to inform us when they have signed it. When I think it’s at least six people have signed—or six countries, rather, not six people. When six countries have signed, the bill and the treaty begin to take effect.

So that was a very quick summation of what was an incredibly large treaty, but I think that the major take-out from the committee was continued opposition in some circles, great support, but a feeling that, really, the treaty has remained as it is, and at which point I commend this to the House.

Hon DAVID PARKER (Minister for Trade and Export Growth): Can I begin by thanking the Foreign Affairs, Defence and Trade Committee for their efforts. They received 427 written submissions and heard from 69 submitters. There’s a lot of work in that, and I thank them for doing that work. The national interest analysis which was being considered by the committee runs to over 240 pages long. It’s annexed to the report back from the select committee, and it’s a very thorough analysis of the costs and benefits of the agreement to New Zealand.

Can I just deal with the assertion that is made by the member who’s just resumed his seat, Simon O’Connor, that there’s nothing different, in effect, between where we sit now and where we sat under the original Trans-Pacific Partnership (TPP) agreement. National still does not understand that the reason that support for trade eroded under their watch was, (1), that they refused to properly engage with the people, and, (2), that they were selling New Zealanders down the land in respect of their ability to control who owns New Zealand homes.

If the TPP had proceeded as had been legislated by the last Government, against the opposition from other parties including Labour—because these land issues and some other issues had not been resolved—and had come into effect, New Zealand by now would have lost for ever, in practice, the right to control foreign buyers of New Zealand homes.

Hon Gerry Brownlee: What a load of bollocks.

Hon DAVID PARKER: Now, Gerry Brownlee says, “What a load of rubbish.” The Hon Gerry Brownlee is absolutely wrong—

Hon Gerry Brownlee: I’m correct.

Hon DAVID PARKER: No, you’re not, I say to the Hon Gerry Brownlee. You’re absolutely wrong, because the provisions of the TPP agreement, as he signed, prevented New Zealand, after that agreement came into effect, adding any new class of investment to be screened in our overseas investment screening regime. It would have prevented New Zealand from doing it in respect of the TPP, and the effect of that would have flowed through to earlier trade agreements, including with China. So of course New Zealanders were railing against the fact that National was selling out their interests, preventing future Governments acting in the interests of New Zealand to ban foreign buyers if they wanted. I would hope, as we slowly return to this bipartisan approach that we’ve largely had across the two main parties in Parliament on trade, that National reflects upon the fact that even if they might not want to do something, the policy space should be preserved to protect the sovereignty of a future Parliament of a different viewpoint being able to do that.

And, of course, we did find a solution to this. In advance of the election, voters were told by the Hon Todd McClay that we had to choose between breaching our free-trade agreements—lots of them, we were told—and banning foreign buyers; that we couldn’t do both. Well, they were scaremongering—scaremongering. They also said we could have imposed a stamp duty if we wanted. They were wrong on both counts. We could not impose a stamp duty targeted on foreign buyers without breaching our free-trade agreements—earlier free-trade agreements—but we could ban foreign buyers of residential homes, with a complication relating to one trade agreement, which is with Singapore, and they’re small buyers in New Zealand.

Hon Gerry Brownlee: Ooh! Ooh!

Hon DAVID PARKER: “Ooh!”, says Gerry Brownlee. “Ooh!”, says Gerry. That’s a more intelligent contribution than his first one.

The other thing I’m sure that we’ll hear from subsequent speakers—they love to stand up—is that the Labour Party people used to go along to these rallies and they would be there with the people protesting against some of the provisions in the Trans-Pacific Partnership agreement. And it’s true. I did. I went to one. Do you know what I did? I outlined the five bottom lines of the Labour Party. They were to make sure we had Treaty protection, that we protected the Pharmac model, that we had decent gains for our exporters in terms of market access, that we protected the right to regulate—and within that came up these investor-State dispute settlement clauses, which I’ll come back to—and, finally, that we would protect the right of New Zealand to control who owns our land. Some people, they’d ask me, “Oh, look, if those five bottom lines are met, will you sign up?” And I said yes, and quite a few of the crowd said, “Fair enough.” Some of the other crowd said, “Boo.”—that’s their right. But to present us as being hypocritical is just incorrect. We set out our five bottom lines before the election, and we met four and a half.

Hon Gerry Brownlee: Rewriting history.

Hon DAVID PARKER: Rewriting history? We actually have rewritten history. We got to an agreement which gives us most of the trade benefits—obviously, the US isn’t in it—on terms that also have enabled us to do better in respect of other issues and protect New Zealanders from the influence of those wealthy overseas people: 1 percenters from overseas coming and outbidding New Zealanders for our homes. Now, the other side, they say, “Oh, it’s not happening.” What happened last week? We had some more data on it and it showed that 20 percent or 18 percent of central Auckland homes were sold to foreign buyers in the last quarter, excluding homes purchased through corporate vehicles—18 percent; a fifth. It’s a lot. In Queenstown: 10 percent across the Wakatipu—one in 10. One in ten houses, and these are the most expensive—expensive housing markets—excuse me, Madam Deputy Speaker, I’ve got a tickle in my tonsil.

Hon Gerry Brownlee: He’s choking on ill facts.

Matt Doocey: Freudian cough.

Hon DAVID PARKER: Actually, I picked up some lurgy when I was in Japan, where we’ve just referred to, but I’ll come back to that.

We have now proof. National only used to release the national average. We could never get to regional data. Now, I’ve got no doubt that in earlier times, when capital controls out of China were freer, the percentage of sales into Auckland was even higher than the current one in five that we’re seeing in central Auckland. And, indeed, there’s been magazine articles in North & South and the like to prove that.

Having said that, it’s also proved true that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is more important than it was a couple of years ago. We have rising protectionism around the world. We have attacks on the World Trade Organization, which is the international rule of law relating to trade. And we have the appellant body, which is, effectively, the enforcement body for the World Trade Organization (WTO) rules, which stops functioning in about a year if the United States continues to block new appointees to it. They won’t specify with any particularity their concerns. Therefore, the rest of the world can’t address those concerns, despite a willingness to do so, and it may well be that this is a disruptive attempt to stop the appellate body functioning. In that case, small countries like New Zealand are more reliant on these plurilateral agreements than they would have been had the WTO still been working.

One of the other points I would make is that, in terms of the balance between who prospers under this, there’s an analysis of the economic effects of this that shows that this agreement is actually better for people who work for a living—earn wages and salary—than it is for capital. The gain that’s predicted in respect of this agreement has a greater gain to labour than capital. It’s unusual, but it actually relates to the better access that we’re getting in Japan for a lot of our agricultural products.

Can I pay some credit to the Hon Todd McClay, because although I criticised the prior National Government’s disengagement with the public, it is true that he began that re-engagement process that had been let go by prior Ministers of trade.

But we’ve continued with that, and we’ve been dealing with all of our critics, we’ve been providing far more information, and we’ve been prepared in writing to show the provisions in the agreement that protect the interests that they’re worried about. We’ve done a number of iterations of that. This is available on the web. It’s been presented at meetings up and down the country. As a consequence of being open, more people trust us. We’ve actually rebuilt trust in government. That is a very good thing to do, given the importance of trade and the fact that this rising anti-trade rhetoric around the world is dangerous. We have to separate it from the effects of digitalisation of economies disrupting jobs and from the effects of 1 percenters that are buying land.

I think that this agreement is a good one and that New Zealand will be more prosperous as a consequence, and I’m sure that my colleague the Rt Hon Winston Peters will detail some of the very important changes that we managed to secure to the agreement before we signed it.

Hon TODD McCLAY (National—Rotorua): Thank you very much. May I start by thanking the Hon David Parker for his praise of me. Now, I’m going to move quickly on to say that the only thing longer and more boring than that speech is the renamed, revised Trans-Pacific Partnership (TPP) when you put “Comprehensive and Progressive” in front of it, because, largely, the only real difference between the original TPP and this revised agreement is, number one, the US is not there, and, number two, two parties opposite are now supporting it because they are in Government. We need to be very clear, and their supporters need to be very clear, and the very people that Mr Peters and Mr Parker, and their colleagues, protested with against the original deal on many, many occasions need to be very clear—Mr Parker’s list of one to five priorities; what he forgot to tell them was number six: “But if we’re in Government, of course we are going to support it, and we will end up supporting it, no matter what.”

Now, the largest issue that Mr Parker had, he said, was around this Parliament’s ability to pass regulation, and we can’t be sued by these very, very bad multinationals from all around the world. He’s come up with a novel solution. It wasn’t to get rid of it, as he said that he would, from the revised agreement; it was to sign side letters with a number of countries. You may remember the Minister and the new Prime Minister in Vietnam making a very bold claim that they had fixed the investor-State dispute settlement (ISDS) so that 80 percent of foreign direct investment into New Zealand was no longer covered and the Government couldn’t be sued because of a side letter with Australia. What they wouldn’t tell you until pressed was that, actually, it was exactly the same side letter with exactly the same words, but just a different date on it, as what had been signed originally.

So when we look at the original TPP, Labour and New Zealand First and the Greens strongly opposed it—in fact, voted against it in this House—because foreign companies could sue us, sue the New Zealand Government, and take away their democratic right. When they marched up and down in New Zealand, they joined them in Queen Street against that. Actually, what they’ve said is they’ve fixed it with a side letter that was also there originally, so nothing changed.

But I will give Mr Parker credit. He did get our officials to go and talk to every single other country that was a member of TPP and say to them, “We want to sign a side letter with you, as well, to exempt New Zealand from the ability to be sued.”, and he was successful. He got five other countries to join them. What he didn’t tell you was that’s about 0.2 percent of 1 percent of all foreign direct investment in New Zealand. So you’ve been able to find the countries whose companies invest the least in New Zealand—the very least in New Zealand—and get them to sign that letter.

What he’s also then gone on and said is, actually, Canada—who are a very big investor here—have also signed a letter of good intention that says, “One day we should do something together.” But I ask a question of Mr Parker: can Canadian companies sue the New Zealand Government under the ISDS? We don’t need to wait for his answer, because it won’t come, but the answer to that is yes.

So what about Mexico? Can Mexican companies who invest here sue us? And the list is very, very long. What about Singapore? Did they sign one of those letters? Well, they didn’t.

Now, what Mr Parker also said was, actually, there are some challenges around, supposedly, some foreigners that are coming in here and buying houses that he probably wanted to buy, and he said that, actually, he was misled before the election. Well, that’s not correct, and the reason it’s not correct is if he has a look at the bill before the Parliament, it is not a ban.

What the bill before Parliament says is that there are more criteria under the Overseas Investment Act about who can buy what, and every single house in New Zealand is now a sensitive asset. So what he’s done is he’s taken a sledgehammer to a problem that he’s blown to the size that he’s said it needs a sledgehammer, but, actually, every single house in New Zealand is now a sensitive asset. That means that for every single house sale where a foreigner—one of these bad, bad people that Mr Parker has protested against—wants to buy a house in New Zealand, it actually comes down to a ministerial decision as to whether that will happen.

So, again, a question for him: if somebody from Singapore wants to buy a house in Queenstown—let’s say they want to buy a $10 million house in Queenstown, because I assume there’s a lot of the people that he was protesting with lined up in Queenstown to buy that $10 million house—can they still do it? The answer to that is—we don’t need to wait—yes, they can enter into a purchase agreement. They can go and put in an application to the Overseas Investment Office, and it will go through a process. It will then come to the Minister, and the Minister will have to say yes or no to that. Now I assume what he’s saying is a Minister’s going to say no every single time. But that’s not a ban; that’s more bureaucracy.

Hon Gerry Brownlee: Like the water.

Hon TODD McCLAY: That’s more process. It’s a little bit like the promise that we heard before the election, certainly, from Mr Peters—and Labour were at the front of it and, certainly, the Green Party—that there would be a moratorium, there would be a tax, and there would be restriction. No foreign enterprises or interests would buy water rights in New Zealand any more. I’ve got to say—

Hon Ruth Dyson: Yep, that’s what we’ve done.

Hon TODD McCLAY: Well, we hear Ruth Dyson say they’ve done it. Well, actually, not this week, you haven’t, Ms Dyson. You want to put that bottle down—of water. I’m coming to a point. You want to put that bottle down, of water, and the reason for that is that what we’ve seen is another broken promise but also a fudging of statistics and a way forward, because we’ve seen in the Bay of Plenty the Green Party Minister sign off, with a Labour Minister, an Overseas Investment Office request about water. [Deputy Speaker gestures] Well, actually, it has the same thing, Madam Deputy Speaker. It is within scope, because what they’re saying here is they’ve banned something over foreigners being able to purchase property here, but it’s not a ban.

The reason it’s not a ban is that it’s just more process. Just as they said they were going to ban foreigners from buying water interests in New Zealand to bottle water and send it overseas—and, along the way, put a levy or a tax on them—they’ve failed in that this week, as well.

Chlöe Swarbrick: What would you have done?

Hon TODD McCLAY: What I would have done is what we promised that we would do, and that’s not what the Green Party have done. That’s why they’re ripping themselves apart at the moment. So, actually, what the parties in Government are going to find is it’s very easy in Opposition to say one thing and very difficult—very difficult—to deliver in practice.

Now, I want to say, finally, to Mr Parker: of his list of five things, actually, virtually all of those, bar this little fudge he’s talking about at the end, are identical to what happened in the original TPP, because the market access for the remaining countries has not changed—nothing at all. The labour protection hasn’t changed at all. The environment chapter hasn’t changed, although, on the side, there is a little bit around fisheries, which is work that New Zealand started in the World Trade Organization with others and had under way for a number of years. It’s good that it’s in there, but it is not material to New Zealand. It makes no difference at all. If he’s hanging his hat on supporting this agreement because it has the highest environment standards in the world, as his Prime Minister said, of any agreement, it’s what was negotiated originally when David Parker, Winston Peters, and Jacinda Ardern voted against that original agreement.

I started by saying—and I repeat it—the only substantive change is that they are now enlightened. They want to be a comprehensive and progressive Government. If they weren’t in Government, they wouldn’t be voting for this; they would be voting against it. They would fight any reason. I think that New Zealanders understand that, and the New Zealand business community.

Mr Parker spoke a lot about how, actually, there wasn’t a consensus for trade and New Zealanders were very unhappy about it. Well, that’s because he kept protesting against it all of the time with all of his colleagues. You know, trade spokesman after trade spokesman on that side of the House were against it. So, largely, what you have is all but one party in Parliament now supporting a deal that was very good when it was the original deal; it remains a very good deal as the revised deal, and the change in attitude of New Zealanders is around the complaint from New Zealand First, and the Labour Party has stopped, because all of a sudden they’ve seen the light—they are free traders. Well, I congratulate them for that, but, as with many things that we are seeing, there are others outside of this House who voted for them, supported them, that see that as hypocrisy.

Now, he says, actually, there are some people that are unhappy with him, and it’s the work that we did to rark them up. Well, I sat in the committee when the submitters came before us, and the businesses of New Zealand, of course, came and supported it. They, virtually to a word, as his department, his ministry, said, there is virtually no change here at all. Actually, it can go through the House very, very quickly. You’ve already had a vote on it. You know, vote on it again; it’s the same thing.

But where he hasn’t provided a correct account of what happened with the committee to this House today is that there are many people who are former Labour Party MPs, Labour Party members, supporters, and co-protesters who came, and they said they are disillusioned by what the Government is doing. They believed them when they said they would oppose this deal and that it was bad. They believed them when they said that, actually, it would ruin the Pharmac model, even though there is no change at all in the language he and his Prime Minister are using around Pharmac being protected. It’s identical to what it was before, and if you go and look at the impact assessment that’s been put together by the Ministry of Foreign Affairs and Trade, they too say it’s the same. It was a good deal before, and it’s a good deal now. We proudly voted for it in the last Parliament; we will this time. I’m sorry that they have to be hypocritical about supporting it too.

Rt Hon WINSTON PETERS (Deputy Prime Minister): The National Party used to be great once, but now it’s spelt with a small “n”, because they are globalists. They believe in supporting their multinational mates. The speaker who just got to his feet, Todd McClay, said that the US was not there. Well, the US wasn’t there at the end of 2016, the moment the Trump campaign won, backed, of course, on this issue by Hillary Clinton and Bernie Sanders. They left because it was, they perceived, a challenge to their sovereignty, in the same way as the Labour Party and New Zealand First believe it was a challenge to ours. And we went out and fixed it up—

Hon Gerry Brownlee: What?

Rt Hon WINSTON PETERS: See, this is about—Mr Brownlee, it’s not about standing at the wood lathe trying to learn how to turn wood; it’s about finishing the job. It’s not about being at the bottom of Everest; it’s climbing to the top, and that’s what we’ve done.

I want to commend my colleague David Parker for the superb job he did. He went to Da Nang, and from way behind the eight ball—because of the nefarious, deceitful behaviour of the National Party—he managed to rescue us from this dire situation of being in the control of some other economy. We are about free and fair trade, not the kind of multinational humbug and neoliberal “twit-twat” stuff that you hear from the party over there—just rubbish. You know, they don’t even know what liberalism is or what “neo” means, but, somehow, they’ve got together a terrible construction—and Gerry looks like it.

Hon Gerry Brownlee: I raise a point of order, Madam Speaker. Madam Deputy Speaker, you were signalling to the last speaker that he needed to confine himself to the select committee report. I think that same restraint should apply to the Deputy Prime Minister.

DEPUTY SPEAKER: Yeah, well, I am giving a bit of licence at the beginning of the speech, as I have done with all speakers.

Rt Hon WINSTON PETERS: As we came to the campaign, they were running around New Zealand saying, “If you vote for them, you won’t get a free-trade deal with the rest of the world.” Now, we proved that to be demonstrably, palpably false, and that’s a fact. So when we had the power to do the job—[Interruption] And it’s no use these old, failed MPs over there screaming in their anger at having lost the last election. Look, you lost, and you lost badly, and you didn’t have any leadership, and you’ve got worse now—

DEPUTY SPEAKER: Actually, don’t bring me into this.

Rt Hon WINSTON PETERS: No, not you, particularly—not you, Madam Deputy Speaker. No, no—I’m talking about those ones over there. Ha, ha! They were so embittered because they haven’t got the cars and limousines anymore, all the baubles of office which they so much love—

DEPUTY SPEAKER: We’re actually—now we’re going to come to the report.

Rt Hon WINSTON PETERS: I want to say that’s very, very clear.

The Comprehensive and Progressive Trans-Pacific Partnership is a monumental free-trade agreement that spans 11 countries in the Asia-Pacific region.

Rt Hon David Carter: Read your notes.

Rt Hon WINSTON PETERS: Yeah, well, unlike that member, I’m able to prepare them properly as well. I don’t have them done by research unit. Now, can I just say—[Interruption]—able to write my own notes, able to read them out, and able to comprehend what they say. Now, see, that’s what’s happened. I don’t know whether the public back in New Zealand watching the TV can see what’s going on here, but they are standing here, this embittered party, shouting and screaming, vituperating—rant and tirade every day. And question time today was appalling—it was a disgrace. They need leadership.

Can I just say those countries are the destination of 31 percent of New Zealand’s goods exports—that’s $15 billion—and 31 percent of New Zealand’s services exports—that’s $6.8 billion annually. That’s well above $22 million. Can I just say, also, those markets have a combined population of 480 million consumers, and they include four of New Zealand’s top 10 trading partners: Australia, Japan, Singapore, and Malaysia. These are the facts that members need to remember and understand as to why we decided that we could fix this deal and fix it properly. What we did was ensure that 22 fundamental, egregious mistakes made by the previous Government were stopped. For example, we were appalled—I saw Mr Parker in Da Nang, and he was ashen because he’d learnt that they hadn’t even raised the issue of house sales in our country. He couldn’t believe it. They hadn’t even raised the issue of house sales during the negotiations.

Hon Member: Unbelievable.

Rt Hon WINSTON PETERS: Unbelievable. Even worse, they told their caucus over there that they weren’t allowed to. This is amazing. Not only trying to deceive the country, they deceived their own mates, their own caucus mates, but, then again, some of them, like the member from Epsom—he’s all for this sort of sell-out, so he’s not really concerned.

We said no to an economy shaped by investor rights; instead, we put New Zealand first. It is abundantly clear that this is not the objective of the National Party, who were determined to place our economy further in the hands of international globalist interests, and, thank heavens, the people, just in time, stopped them.

Can I just say that it is comprehensive and progressive because it goes beyond reducing costs for businesses. And, you know, the most amazing thing was we’d hardly got it fixed up when Donald Trump’s team started saying, “Well, maybe we’d like to be back in.”, because the sovereignty issues, so critical to a party with a philosophy like New Zealand First’s and Labour’s, were now being dealt to in a way that the National Party paid no attention to whatsoever.

It will support job creation and give us a better standard of living. At the same time, our people will be protected from globalist predation. And that’s what it is—globalist predation. These people, you know, these people offshore, multinationals, weren’t paying any tax at all. For example, some of these offshore multinationals were paying tax of less than one-third of 1 percent. And what did that Government do about it? Absolutely nothing. It refused to raise a finger—not a mutter, not a murmur, not a syllable, not a sound from members like Mr Bennett, who spends all his time with his five farms seeking not to advance the farming industry in this country, never raising a question about the incompetence of Fonterra—no, not a word about them, even though they’ve lost over $1.3 billion. Not a word from Mr Carter, former farming Minister; not a word from Mr Bennett—

Hon David Bennett: How much have they made?

Rt Hon WINSTON PETERS: Oh, “How much have they made?”, he says. They’ve lost $1.3 billion. Fonterra—

DEPUTY SPEAKER: Can we come back to the report, please?

Rt Hon WINSTON PETERS: Well, this is all about—

DEPUTY SPEAKER: No, this isn’t the report; this is not about the report.

Rt Hon WINSTON PETERS: This is all about trade.

Hon Member: Keep reading your notes.

Rt Hon WINSTON PETERS: No, that part’s not part of my notes. I just noticed you there, and that’s why I decided to make very sure that everybody found out how incompetent and culpable that member is.

Can I just say that one in every four New Zealanders in work today depends on exports for their livelihoods—one in four. Those workers’ rights are also protected in the agreement. They safeguard hired labour and environmental standards and the Asia-Pacific region. [Interruption] Now, there’s no use those three members there screaming and shouting. I mean, everybody knows they’re illiterate. They can’t even string one word together, or two together, or any coherent sentence. And as for the woodwork teacher—that’s that man over there—he’s the least qualified to raise any issue.

Hon Gerry Brownlee: Oh! They hate the workers.

Rt Hon WINSTON PETERS: Oh—hate the workers! Hates the workers—that man and work are strangers.

Hon Paul Goldsmith: I raise a point of order, Madam Speaker. I wasn’t under the impression that this was a general debate, but it seems to have descended into that, and I wondered if you might be able to—

Clayton Mitchell: Speaking to the point of order, Madam Deputy Speaker.

DEPUTY SPEAKER: I don’t actually need any help, thank you. I am the judge of the content of the speech. I do agree that the speaker is continually straying from the report, and I ask him to please continue his speech, but will he please focus on what is actually before the House.

Clayton Mitchell: I raise a point of order, Madam Speaker.

DEPUTY SPEAKER: I hope you’re not going to question my ruling.

Clayton Mitchell: No, I’m not questioning your ruling at all, Madam Deputy Speaker. I would just like to bring your attention to the constant barrage, which is over what I would consider, or anybody would consider, a reasonable barrage, which is actually stopping the flow of the debate, which may need to be addressed.

DEPUTY SPEAKER: I’ve never noticed, I have to say, in all my time in the House that that has actually deterred the speaker who has been on his feet. In fact, I have noticed that that encourages him.

Rt Hon WINSTON PETERS: Can I just say—

DEPUTY SPEAKER: No, could you please just talk to what is in front of the House, and let’s get on with it.

Rt Hon WINSTON PETERS: Talking about this report, they object simply because of its lexiconic similarity. Now, that means the words they say are the same, but, no, they’re not. There are 22 fundamental things that were in the old agreement that are not in this one. They have been suspended—22 undesirable provisions suspended in favour of a comprehensive and progressive outcome. Tariffs will be eliminated on all New Zealand’s exports to Comprehensive and Progressive Trans-Pacific Partnership economies, with the exception of beef in Japan and a number of dairy products from Japan, Canada, and Mexico, where access is nevertheless improved through partial tariff reductions.

Can I just say that this was not the easiest deal to turn around, because of the distance of danger down which path the former—

Hon David Bennett: Did you set up the North Korea deal as well, mate?

Rt Hon WINSTON PETERS: —Government had travelled. But—I beg your pardon?

Hon David Bennett: Did you sort out the North Korea situation as well? You told us you would.

Rt Hon WINSTON PETERS: Well, actually, unlike that member, I’ve been invited to North Korea, yes. In fact, there are very few Western politicians that have ever been to North Korea, and the reason why we were engaged is that they perceived, around the world, that maybe, just maybe, we knew what we were talking about—unlike this bunch of pretenders over there who keep on screaming out with no idea where they are taking their country, if they were ever empowered again to do so.

Can I make it very, very clear that the Comprehensive and Progressive Trans-Pacific Partnership will mean our exporters are not disadvantaged in important high-value markets like Japan, compared with competitors such as Australia, Chile, and soon the European Union, all of which have agreed free-trade agreements with Japan.

In my closing ten seconds, I want to make it very clear that New Zealand First believes that we can stand behind this deal, because it puts New Zealanders—as it should have from the very beginning—first.

Hon Dr DAVID CLARK (Minister of Health): What a pleasure to follow that experienced member, Winston Peters, in this House and the view that he’s presented, with which I greatly concur. He has clearly delivered a lecture to the members on that side of the House, reminding them of what their party once stood for, but appeared to have sold out on on so many fronts—on so many fronts—over the years.

Sadly, one of the key things we know about the prior agreement, the Trans-Pacific Partnership (TPP) as it was, was that it was proposed that non-resident foreign buyers could buy out New Zealand’s houses for ever—for ever. That was becoming a major problem in New Zealand. That was evident to New Zealanders up and down the country as they saw and met those people at housing auctions who were from overseas who could outbid them every time. That was clear across New Zealand, but that prior Government was so out of touch—was so out of touch—with where ordinary New Zealanders were, with those New Zealanders who were struggling to afford a home; those New Zealanders who one generation ago would have been able to buy their own home but a generation on were now locked out of the housing market.

What we discovered, subsequently, of course, is that the previous trade Minister had not even asked for an exemption in the trade agreement—not even asked. He hadn’t even said, “Could we please have a protection so that in future if it becomes a bigger problem for New Zealand, we could place a ban on non-resident foreign speculators operating in this country.” No. It had not occurred to him to even ask for it. And, what is more, even under the old agreement, several countries had secured precisely that provision. So other countries had asked for an exemption so that they in future could ban non-resident foreign buyers and they had secured it. But our former trade Minister and that party sitting opposite had decided that was not within their ken; they would not even ask; they were not concerned about the bipartisan nature of the agreement or the future benefits that might be taken away from New Zealanders by those with deeper pockets from overseas buying up all the houses in New Zealand and locking New Zealanders out of the market so that they would become tenants in their own land—that is clear. Fortunately, though—fortunately—the Government changed. The Government changed and the Minister David Parker and the foreign Minister Winston Peters were able to negotiate 22 suspensions to the text of the original TPP.

Hon Nanaia Mahuta: How many?

Hon Dr DAVID CLARK: Twenty-two suspensions on issues of concern to New Zealanders. From a very difficult starting point, they were able to negotiate a far better agreement for New Zealanders—an agreement that will see New Zealanders’ protections being retained that would otherwise have been sold down the river by the previous Government. So the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) is a much better agreement for New Zealand than the earlier Trans-Pacific Partnership negotiated by the previous Government.

I want to cover a couple of those things in more detail because I was briefly the trade spokesperson when Labour was in Opposition. What we saw was that the Pharmac model was under threat. The Pharmac model was under threat. There were a number of little provisions in there that would have given those drug companies wanting to negotiate more information so they could have leveraged more profit out and put that Pharmac model under pressure. And they know that across the House. They know that to be true, and yet they will try to defend the previous model as though it somehow was the perfect protection for the Pharmac model. Well, on this side of the House we’re proud that we’ve protected the Pharmac model.

We’re also proud that we have preserved the Government’s inherent right to regulate in the public interest, including for the Treaty of Waitangi. As with all of New Zealand’s contemporary trade agreements, there is a provision in the comprehensive trade agreement that preserves the pre-eminence of the Treaty of Waitangi in New Zealand. Importantly—very importantly—that right to ban non-resident foreign buyers, speculators, from the New Zealand housing market and using the Overseas Investment Act is compliant with the new CPTPP. The previous Government, of course, said banning foreign buyers was impossible, even though Australia and Singapore before them had achieved that and signed the CPTPP. National was wrong, and we’ve proven that with this agreement.

So that is one of the key things that I think New Zealanders will see. As we are getting reports now that nearly 20 percent of the buyers in the Auckland market are non-resident foreign buyers currently in central Auckland, and as we’ve seen one in 10 of the buyers in the Wakatipu Basin—the two most expensive areas in New Zealand—are non-resident foreign buyers, we can see that this problem is becoming a bigger one. It’s one that’s affecting New Zealanders. I’m told that New Zealanders aged 25 to 40 a generation ago—roughly half of them owned their own home.

Hon Ruth Dyson: Well, what is it now?

Hon Dr DAVID CLARK: Just one generation ago—and now that number has halved. That number has halved. So in one generation the homeownership rate amongst that age group—where people are having children, are trying to set up their lives, are needing that stability—has halved, in just one generation. The inequality that would have continued to eventuate if those settings were allowed to continue will be stopped by this Government. This Government is determined—absolutely determined—to protect the interests of New Zealanders, because we do not want to sell the country out. We want to make sure that we benefit from trade as a country, as a whole, not just an elite few, not just the 1 percent. We don’t want to see those people benefit at the expense of ordinary New Zealanders and at the expense of middle New Zealand and those who are harder up. This Government is determined that we share the benefits of trade across our society.

Under the last Government, interestingly, exports as a proportion of the economy dropped from 30 percent down to 27 percent. Exports as a proportion of the economy actually dropped under the previous Government. This Government is determined that we should grow exports, because we believe in a productive economy.

DEPUTY SPEAKER: This isn’t a general debate. Could you come to the topic. Thank you.

Hon Dr DAVID CLARK: Madam Deputy Speaker, yes. To come back to the point, the impact—the impact—of this particular agreement will see a whole lot more jobs created, because we know that exports are the mainstay of so many regions across New Zealand. We know even in the towns and cities that exports are incredibly important, but, particularly, in provincial New Zealand. The export sector sustains more than half a million New Zealand jobs, or, to put it another way, one in four New Zealanders today depends on exports for their livelihoods. That is something that we on this side of the House value and want to grow. We want to grow exports. We want to see regions grow. We want to see our economy grow, and that’s what we believe. That’s why the Labour Party has always supported trade agreements. The TPP was the first one that we actually raised resistance to, because we could see it was going down the wrong track.

But we’ve been able to bring it right, and when Mr Brownlee rises to his feet he’ll acknowledge that this is a different agreement to the previous agreement. He’ll acknowledge that those 22 suspensions in the text in the original TPP do address the concerns of New Zealanders, because he’s a man of courage and intellectual confidence. He will explain to New Zealanders that that is, in fact, true that the areas of investment, intellectual property, and health—which would have otherwise faced restrictions—because of the interventions of the current Government, will lead to a better outcome for New Zealanders.

The investor-State dispute settlement provisions have been wound back where it suits the partner countries to do that. The Pharmac purchasing model remains protected where it would have been sold away under the previous Government’s agreement. And we are preserving the Government’s inherent right to regulate in the public interest. This is a Government that is concerned to preserve New Zealanders’ sovereignty and to make sure that we don’t bring distortionary effects into our housing market. We can’t get rich by selling houses to one another. That is not a road to prosperity. It’s not a road to prosperity to get to the point where we can’t even afford to buy the houses from one another—where the overseas foreign speculators with deeper pockets come in to buy out their housing stock and make us tenants in our own land.

So this Government is putting a stop to that. We are going to ban foreign buyers. We are going to do what other countries have done around the world. We’re going to see more than $1.2 billion worth of GDP increase—$1.2 billion worth of GDP increase—perhaps up to $4 billion in some of the modelling. We are progressive, we believe in trade, but we believe in sharing the benefits of trade across the whole population, not just the 1 percent. We don’t just represent the 1 percent, the really elite, well-off ones who benefit from trade agreements that don’t protect the interests of ordinary New Zealanders. On this side of the House we believe in making sure that prosperity is shared, that we have social prosperity, economic prosperity, where every New Zealander has an opportunity to gain from trade agreements, not where they’re locked out of the housing market by non-resident foreign buyers.

Their track record is terrible. Regarding GDP and growth, exports as a proportion of GDP dropped under their watch from 30 percent down to 27 percent. That’s actually a 10 percent drop under their watch. We intend to grow GDP. We intend to share the results of that prosperity and protect New Zealanders’ interests.

Hon MARK MITCHELL (National—Rodney): Thank you, Madam Assistant Speaker. It’s a pleasure to take a call on this—the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). I chaired the Foreign Affairs, Defence and Trade Committee for most of the process through hearing the submissions when it was the Trans-Pacific Partnership (TPP). I want to acknowledge the Hon Todd McClay, because there’s 6,000 pages of text, and, actually, he’s the guy that did all the heavy lifting along with the Ministry of Foreign Affairs and Trade and our great trade negotiators, in delivering for this country what is an outstanding free-trade agreement. The incoming Government was lucky enough to pick that up and sail in on his coat-tails.

I find it very hard in the House to stand here and to listen to the Government speakers get up and criticise the TPP and remind us of how much they stood against it—and they did. Through the select committee process we had the New Zealand First member and the Labour member David Clark, the previous speaker, make it clear at every single point—they were very clear about the fact that they did not support, nor would they support, the progression of the TPP. They would not support the Government.

The reality of it is that this Government would not be passing CPTPP in this House if they did not have the support of the National Party. This Government does not have the numbers. It would not have the mandate, as a coalition Government, to be able to pass this legislation through this House and to enact the CPTPP. You needed the National Party—

Hon Ruth Dyson: No, the Assistant Speaker does not need the National Party. She sure does not.

Hon MARK MITCHELL: OK, so I’m just hearing from a Government member stating in the House—do you not need the National Party to pass this legislation?

ASSISTANT SPEAKER (Poto Williams): Order!

Hon Ruth Dyson: No I didn’t say that. That’s not what I said at all.

Hon MARK MITCHELL: Does the Government not need the National Party to pass this legislation?

Hon Ruth Dyson: Try being a bit more accurate.

Hon MARK MITCHELL: Pardon?

Hon Ruth Dyson: Clean your ears out.

Hon Gerry Brownlee: No, Ruth said “They’re on their own. They’re on their own.” The Greens have rolled over.

Hon MARK MITCHELL: They’re on their own? They don’t need us? They don’t need us. OK. We’ll have to have a chat about that in caucus. But the reality is this: I sat on that committee, and I want to acknowledge the Hon Todd McClay, because, actually, through the country there was quite a bit of concern initially around the agreement. When he became Minister he embarked on a dedicated programme of public meetings. And he was supported by his officials and by our trade negotiators. They went around the country and they ran a huge public education programme where they did public meetings for people to come along and they could discuss the concerns and issues that they had. And over time we slowly saw a massive reduction in the amount of negative emails that the committee may receive, submitters that were a lot more comfortable and understood exactly what the TPP was all about. And, actually, there was a huge change in the way that the country viewed this free-trade agreement, because, fundamentally, as a small trading nation down the bottom of the world, these high-quality free-trade agreements are extremely important for us.

And the previous speaker, David Clark, was talking about a drop in GDP and chucking all these numbers out there. Let me give you some numbers, and these numbers were given to us by our officials on the committee, and they were very clear. They said, “Countries that we have high-quality free-trade agreements with, our annual trade increases by about 10 percent; the countries that we don’t have free-trade agreements with, it’s quite the reverse—they decline by about 10 percent.” So it was very, very clear—the message that was being given to the committee was that high-quality free-trade agreements are good for the country. We need them.

My own caucus would ask me and say, “Where is this going to land? Surely, New Zealand First has seen the benefit in this trade agreement. Surely they’re going to get behind it.” And I’d have to tell them no. They’re low-level flies. They’re not interested. They’re going to continue to take a position against the free-trade agreement. There’s going to be no movement on it. What about Labour? The Hon Phil Goff—when he was in Government—put together a free-trade agreement with China. And I want to acknowledge him and the work that he did on that. And, actually, that proved to be an extremely important free-trade agreement for us. When there was a global recession, that free-trade agreement was a big part of being able to hold up and carry our economy through those big challenges and those issues.

So we thought that Labour might actually start to see the light, they might start to come around as well. No, they didn’t. They continued to take a strong position against the TPP. They come into Government—what happens? Overnight, poor old Professor Jane Kelsey—Professor Jane Kelsey, who’s an expert. She lectures at university. We had a—

Hon Aupito William Sio: She’s not old!

Hon Gerry Brownlee: Expert in what?

Hon MARK MITCHELL: Well, she’s meant to be an expert in free-trade agreements. Did I say “old”? Well, I’ll retract that. Poor Professor Jane Kelsey. She’d come along to the committee. She was against it, she was against the TPP, and she’d come along to our select committee. She was very respectful in the way she made her submissions. In fact, I even held a meeting in my office for her with the other members of the select committee, and the Labour members, they were all over her. They were making her cucumber sandwiches and making her a cup of tea—God, they couldn’t do enough for her. They’d escort her into the select committee room and make sure that she was comfortable—

Hon Gerry Brownlee: Pōwhiri?

Hon MARK MITCHELL: The whole lot. The whole kit and caboodle. And then all of a sudden they go into Government, Professor Jane Kelsey comes out against the CPTPP, and it’s all over. She’s dropped like a hot coal. They don’t want to know. There’s no more cups of tea, there’s no more cucumber sandwiches. All of a sudden they don’t want to know and they don’t want to listen. They don’t want to listen to Professor Jane Kelsey.

What happened? What changed? It was because she still had some major issues around the CPTPP. I’m not saying I agree with those, but I just think it was a bit rough how in Opposition—

Hon Member: She was used.

Hon MARK MITCHELL: She was used. That’s a very good way of putting it. So that was a very, very interesting change in position by the Government on coming in.

The Government has not negotiated a single change to the market access provisions to the markets of the other members of the CPTPP. They were envisaged, when it was in the TPP or the Trans-Pacific Partnership 11, so there’s been no fundamental change to this agreement. You’ll hear people get up and say, “Oh, there’s been changes to foreign buyers.” They can’t give us one example. We asked the Rt Hon Winston Peters, “Give us an example.” There was no example. He was more passionate about David Bennett in referring to him—

Hon Gerry Brownlee: That’s a long-time romance!

Hon MARK MITCHELL: You’re right. That’s true. Ha!

The Government is naturally defensive, because they spent so much time telling the public the TPP was a bad free-trade agreement. I’ll come back to the size of the TPP: 6,000 pages. How many pages do you think they needed to capture the minor changes?

Hon Gerry Brownlee: Two.

Hon MARK MITCHELL: Two pages. Two pages of changes.

Hon Gerry Brownlee: Well, they were just suspensions.

Hon MARK MITCHELL: Well, they were suspensions and, actually, one of those pages was something that we’d already done, that we’d already put in place. So, really, let’s call it one page. Of a 6,000-page document, there was one page of changes, so whoever the next speaker is, I’d invite them to get to their feet and to run us through the one page of changes, so the House can understand exactly what the changes were.

I’m going to finish now and I’m going to come back to my original point. The reason why we’re supporting the agreement is because from day one we are a free-trade party. We believe in it, we understand that it’s important for us as a nation. It’s important for us to continue to engage in trade with the rest of the world. Without good free-trade agreements, without the ability for our companies to be able to do that, without the ability for us to get our products and services into the global market, then we would have massive problems. Our standard of living would begin to drop. We wouldn’t have the money that we’d need to invest into our health system, our education system, our infrastructure.

So we’ve always been big supporters of free-trade agreements, and that is why the Labour Government—the Labour-led Government or this coalition Government—is fortunate that the National Party will make a decision, not a political decision. We could create a massive political blow to the Government if we chose to. We’ll be driven by a decision that’s right for the country, that’s right for our nation, and that is why we will support the CPTPP, and that is the only reason why. That’s the only reason why this Government is going to be able to pass this legislation. Thank you, Madam Assistant Speaker.

GOLRIZ GHAHRAMAN (Green): Yes, it was in late February this year, just two weeks before this agreement was set to be signed without any further input or amendments possible, that I last rose to speak about it in this House. I said on that occasion that this agreement undermines our democracy in a multitude of ways, not least of all in the complete lack of input—meaningful input—or consultation possible by the public on the secret text, until very recently before that debate.

The select committee process that we’ve just gone through echoed those words. Submitters came one after the other and expressed total disillusionment. They had come before the last Foreign Affairs, Defence and Trade Committee, chaired by the Hon Mark Mitchell, as he’s just alluded to. They had said the same things, and as the text of this agreement had become public and they had scrambled to look at these changes that were promised—this revolutionary change that the coalition told us had come about to justify its sudden turnabout on position—these changes just weren’t there. The submitters were forced to repeat themselves, were forced to keep talking about the lack of democracy, the secrecy, and lament the lack of consultation.

Most of all—worst of all—we found that the heart of the opposition in this agreement was still there. Our democracy was mostly under threat not just by the process but by the fact that the investor-State dispute settlement (ISDS) clauses remained, essentially, the same. Foreign investors, multinational corporations, can still sue our Government for future change that would regulate in the public interest in a system that sits above ours. It sits above our courts and above our Parliament. This House is being bound to look out for their profits above the interests of ordinary Kiwis—above our human rights, environmental protection, our workers’ rights, and the founding constitutional document of this country, the Treaty of Waitangi. Those concerns were repeated over and over again by submitters.

So we heard about this and we learnt that, actually, there’s good reason that we don’t allow Kiwi businesses to sue Parliament or our Government for their profits. Why are we giving this away to foreign investors? This Government has talked about stopping foreign investment in terms of residential housing but we’re about to give away far more rights to foreign corporates to do this in a multitude of other areas. In fact, we learned, as the submitters pointed out again and again, the 6,000 pages of this document aren’t all that much about trade at all. Of the overwhelming majority of submitters who opposed this deal, nobody came along to say that they opposed trade. Nobody opposes free trade or international trade. We are a small nation, and they all recognised, as does the Green Party, that we need trade. We’re not against trade, but this agreement is blatantly not all that much about trade. It is, in fact, about corporate privilege—privileges that are set out in great detail in every single area of our lives: privacy rights, rights to technology that ordinary people don’t have but that we are about to give away to foreign investors.

Hon Gerry Brownlee: Explain that!

GOLRIZ GHAHRAMAN: I will explain that. So in terms of privacy in this data-driven economy, in this data-driven world, where Facebook privacy breaches are determining the outcomes of elections in the leading nation of the free world, we’re about to allow foreign corporates to keep their data offshore to avoid our Privacy Act protections. We have promised to refrain from regulating all future unknown technologies. Who does that benefit, and what does it have to do with trade?

We asked again and again—and I’ll quote, actually, from Dr Robin Gwynn, a submitter who said, “We already know the disproportionate fighting power of Apple, Google, Facebook, and the like. Do we really want to give them more power? Do we want to take away the power of our own Government, our future Governments, to regulate them?” Apparently. How much is that worth? Well, apparently, not all that much, as the select committee report points out. We’re not actually guaranteed all that much.

The doctors came along—there were quite a few of them. We’ve got the New Zealand Medical Association talking about two basic examples that they wanted to give of the types of regulation that they’ve been lobbying for that won’t come about under the TPP. The two regulations that they are prioritising, that they know will be threatened by the TPP, that they noted, was warning labels on alcohol packaging to warn pregnant mothers against foetal alcohol syndrome. Now that won’t be possible. It’ll be possible on New Zealand wine bottles, they said, but not on foreign imported ones. We’ve excluded cigarette labelling and regulation from this deal, rightly, because we recognised that that would be terrible—imagine if our Government couldn’t regulate for public health in terms of warnings on packaging. “Well, what about alcohol?”, the doctors asked.

The other thing that they noted was that they are fighting for an introduction of a sugar tax. Now, our Government, I think we can all agree, should assess public health issues like that based on merit, based on science, based on what is in the best interests of us all, of New Zealand, and not based on some agreement that was sold to us as a trade deal but that actually just gives away those types of rights, those democratic rights of this House. Even just the threat of that litigation hanging over this House is obscene. It’s a perversion of our democracy, and submitters pointed that out over and over again. It is tying us to an old world order that has failed, that was the cause of the very recent global financial crisis.

Another submitter, with great wit, Genevieve de Spa, called the TPP—or “CPTPP”, she said, or whatever you call it—“neoliberalism in globalism’s clothing.” We’re not against globalism but we are against the old economic order that we all suffered under, that gave away everybody else’s rights to the 1 percent, and nothing trickled down, and this is more of the same.

So we are disappointed. We are disappointed that spin was sold to us and that nothing much has, in fact, changed, and I am sad to be agreeing with this side of the House on that one. It is the same deal. We have signed on to it without consultation and without effective input.

We have heard from our Waitangi Tribunal that, actually, the treaty protections don’t really go far enough to protect the full Treaty relationship. They don’t, in fact, protect future law or regulation being passed to comply with the Treaty of Waitangi. And we put that aside—our own expert body on this issue. We put that opinion aside, we didn’t order an independent analysis, and this was the overwhelming vein of submissions.

Where is the independent analysis on health, on environmental issues? There isn’t even mention of climate change. Why set out with all the force of law, all the detail in the world, the privileges and rights of foreign corporates but not mention—not a single mention—our obligations pursuant to treaties like the Paris Agreement on climate change? If this is our generation’s nuclear-free moment, then where is that in this agreement, in this future-looking agreement that’s going to govern every aspect of our lives, every aspect of issues that this House will consider in future on healthcare, on environmental issues, on human rights? There is not a mention of those in any kind of binding language in the investment chapter that not only sets out those obligations, not only binds this House, but makes us susceptible to litigation and a body that sits above our own law.

So, as I said on that first occasion, I am sad to say that with this free-trade agreement—that’s not all that much about trade—we haven’t just signed on to a treaty; we have ceased sovereignty. Thank you.

Hon GERRY BROWNLEE (National—Ilam): I’m sure that there would have been some point in history where a speech similar to the one we’ve just heard was impassionedly imploring not to sail too far to the east, for fear that they would fall off the earth. This claim by the Green Party that this bill is a complete loss of our sovereignty; that this bill, or the proposed bill, is somehow an affront to our democracy is actually to argue that the Paris climate change agreement is equally an affront to our democracy and an end to our sovereignty. It is an utterly rubbish position that should not be listened to by sane New Zealanders. One of the interesting and most important parts of this agreement is the provision that preserves New Zealand’s rights to regulate for legitimate public policy purposes.

Now, in this sense, regulate means legislate. There is no exclusion on our being able to set up law inside this country that others have to follow. And some of the scaremongering that’s been going on for a long time—a lot of it, I have to say, fuelled by the Labour Party; fuelled by David Parker; fuelled by others from the Labour Party who spoke so passionately against the previous agreement—is completely wrong. It’s worth nothing, I think that New Zealand is a country that has prospered through trade from its post-European times. That is even pre-1840. We are a country that cannot afford to live the lifestyle we do with just a domestic economy. We must trade.

I am heartened by people on the other side of the House saying, “Well, we’re all in favour of trade. We want it and we support it.”, but going along with that means that there needs to be some frameworks that provide protection and, most importantly, opportunity for New Zealand traders. And that is what this deal does. But I have to say, putting the words “Comprehensive and Progressive” in front of it—not actually inserted by New Zealand or any New Zealand intervention at the conference that put it together; rather it was, I think, Canada who came up with those extra names—and then being carried along with a group that said, “Let’s suspend 22 provisions of the TPP agreement and call it completely new and say, ‘It’s all wonderful, all of our concerns have been solved, no problem.’ ”

Well, it’s worth noting, a suspension is just that: it lasts for as long as the parties to the agreement are happy to have that provision suspended. So, there’s no great achievement here—no great achievement at all. And I don’t doubt that when the United States finally gets a position that recognises that trade is actually probably their most important vehicle for influence around the world, and comes back to the table, many of those suspensions will be back up for negotiation. At that point, we’re in. So I want to make it abundantly clear that there was nothing in those suspensions that would cause us a problem if they were to be reintroduced.

That takes me to the issue of Pharmac. Well, what a load of rubbish we’ve heard in here this afternoon: David Clark saying that Pharmac’s future was threatened; David Parker saying Pharmac’s future was threatened. Far from it—far from it. The institution of Pharmac is unique to New Zealand. It’s something that we’re all really proud of. It works extremely well. Where there was a concern—seized upon by the likes of the people that Golriz Ghahraman was just speaking about—it was around the issue of copyright and patenting of particular drugs. The exercise was done by Treasury, who we heard today from the finance Minister is the most reliable analytical group in the country—something that I have up to this point not actually agreed with. But none the less, I’ll take his word for it. They said the maximum cost should this reach its full effect would be only some, I think, about $50 million a year. Now we might say, “Well, gosh that’s a lot of money.”, but the reality is that would have ensured that we get a massive amount of extra revenue coming into this country from the hugely expanded trading opportunities that will come from this agreement.

So, I think what I’m trying to say is that it is very difficult to sit here in the House this afternoon and listen to the embarrassment-filled, vitriolic speeches from the other side of the House attacking us when they know full well that the only way they can get this bill eventually passed is with the National Party’s vote, because we have a Government that does not in its entirety agree with this measure. So it seems to be somewhat odd that there would be such an extraordinary amount of attack on the current Opposition.

What I can say too is it was also very evident, as we went through the select committee process, just how much work the Hon Todd McClay and, before him, the Hon Tim Groser had done on this particular proposal. New Zealand was the driving force that started it, along with the P4 group, and then when it sort of started to fall apart, it was New Zealand, again, who got the teams together, and ultimately it was the Japanese who said, “This is too big an opportunity for all of us.” And remember that there are massive costs to their economy. All the barriers that we’ve got to getting produce into their country are going to be dismantled, and they’ve agreed to that. And they’re saying simply, “Well, we can accommodate the needs of a small country like New Zealand because we’re a very big economy and we get the opportunity to expand our influence and our trade and our economic benefit through the other countries that are part of this as well.” So it is a very, very good agreement.

Anyone who would listen, as I did, to Professor Kelsey who came to a select committee some time ago with her very genuinely heartfelt concerns—I don’t doubt that—but when you boil them down and ask the question “What’s wrong with trade?”, it keeps coming back to all these other bits inside here that are about the nuts and bolts of how countries should reasonably deal with one another. And the terrible scaremongering over the investor-State dispute settlement (ISDS) propositions. That is where you have the investor-State dispute resolution process that protects as many New Zealand exporters as it will any importers into New Zealand.

And you can understand, I think, the need for that when you see the just unilateral, no consideration, no Cabinet papers—good idea, wake up in the morning, have to have a photoshoot on Friday, let’s do an announcement, get all the TV cameras there—end of oil and gas exploration in New Zealand. Well, there will be hundreds of millions of dollars lost by companies in that. I don’t want to stray into that territory, but the extraordinary claim then that the company that is going to benefit the most—because they’ve now got, effectively, a monopoly on that—supporting them is utterly ridiculous.

So why shouldn’t our exporters have our Government backing them in the markets they go into, to make sure that they’re not poorly treated or unfairly dealt to in those markets? I think it’s a reasonable thing, and I think many of the concerns that have been expressed about it are just that—scaremongering. There’s actually never been a case brought in New Zealand as a result of that provision, which has existed in other trade agreements for quite some time.

This deal gives huge amounts of access to our New Zealand producers, effectively. We know that our productive base is something the Government has said they want to improve. Well, the only way that will improve is if there are markets to move into, if there are opportunities to sell the things we are good at producing to other countries. This is a document, an agreement, and a commitment to trade that will see that and will see our country prosper.

It’s not easy just to generate exports. I heard Dr Clark say that the volume of exports relative to GDP had fallen by about 3 percent over the last wee while. Well, look, it’s a lot like all the other stats that you can measure around the nine months now of this Government—on the wrong track. So this is a very good opportunity to try and reverse that. And no one should think that there are people on that side of the House so good at this no one else knows about it. I recall 2007—Winston Peters export—

ASSISTANT SPEAKER (Poto Williams): I apologise to the member. Sorry, your time has expired. I understand this is a split call—the Hon Stuart Nash.

Hon STUART NASH (Minister of Police): Madam Assistant Speaker, if you’ve been listening to the debate over the last 20 minutes you would have seen two polar opposite sides of the argument here; both, I think, a little bit out of balance. You heard Mr Brownlee talk about the fact that this was the best thing since sliced bread—it was going to deliver in a way that nothing ever could possibly deliver for New Zealand. Then, on the other side, you heard from Golriz Ghahraman, who basically said that we’re ceding our sovereignty, that this isn’t about trade, and that this is going to be the death knell of the New Zealand economy and democracy.

My view is that neither of those represents the really true situation. However, as someone who used to engage in international trade, this is a document and this is an agreement that I think we need to support. The Prime Minister herself has said, and the Minister for Trade and Export Growth himself has said, that this is not the perfect agreement but we do need to be part of it—of that there is no doubt.

If we have a look at the report of the Foreign Affairs, Defence and Trade Committee and go through the points that they noted, I think it’s worth having a look at those. There are strategic reasons for signing the Trans-Pacific Partnership (TPP), and these are important reasons. We had a choice to make. We had a choice about whether we were inside the tent and could influence global trade and decisions going forward, certainly in our sphere of influence; or we could be outside the tent. To be outside the tent would be absolutely purely idealistic, and you know what, in the end I just don’t think it would have been the right thing for us to do. I think it’s better for us to have an agreement like this, be inside the tent, and actually play an active role in changing things that we don’t necessarily agree with. I think that this is what the report says and I absolutely agree with that.

There are commercial interests in respect of signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Again, we are a trading nation. We have acknowledged that. I think every speaker has spoken about that. This is how we are going to grow our economy. One of the problems—if it is a problem; and I’m the Minister for Small Business—of the New Zealand economy is that we’ve got a population of 4½ million people. You can only get so big if you’re operating inside New Zealand, and for those with aspirations, we know you’ve got to be able to export. We know you’ve got to be able to export on the same footing as those from competitor nations.

I would have the concern that as trade develops—and it is developing at a great rate of knots. It’s moving from being large multinationals only, with platforms that are operating these days, like Alibaba and eBay; and it’s moving towards being small organisations, and small to medium sized enterprises that actually operate from places like Napier or Gore or New Plymouth or wherever. You don’t have to be a massive multinational to be able to export.

I think the commercial reasons are very sound for us to be in this. I don’t think it reduces tariffs fast enough—let’s be honest about this. But, again, what negotiations are about is compromise. I don’t think in my time of doing this I’ve ever entered into a negotiation and got absolutely everything I wanted. That’s what free-trade agreements are about: it’s about putting down a set of principles and it’s about going out there, and it is about negotiation. That’s why it’s called a negotiation: there’s a little bit of give; there’s a little bit of take. We ceded sovereignty when we signed the anti-whaling convention. It means that as a nation we are now no longer allowed to whale. Well, that’s fair enough and we agree with that. But I’m just saying: don’t say that because a free-trade agreement erodes a little part of sovereignty, that that is necessarily bad.

When we come to ISDS, or the investor-State dispute settlement clauses, I don’t want to say that Sandra Kelsey’s wrong, but I think that she takes a different view than I take—

Louisa Wall: Jane.

Hon STUART NASH: —having had a look at it. Jane Kelsey, sorry—Jane Kelsey.

You know, in order for ISDS clauses to kick in, there has to be egregious harm. The test for that is incredibly high. One thing I would say about ISDS clauses or arbitration is they have sort of moved away from where they were originally supposed to be. It was supposed to be a quick and relatively inexpensive way to sort out dispute settlements. Now they take a long time and they cost millions of dollars. But as Mr Brownlee highlighted, and I have to agree with him on this point, this also benefits New Zealand exporters as well. But I don’t think the ISDS clauses are the big bogeymen that everyone paints them out to be.

I just want to reiterate: this is not the perfect agreement. This is not nirvana, but it is an agreement that I think we need to be part of, and I’m proud of the fact that David Parker did such a good job to get us there.

CHRIS PENK (National—Helensville): Thank you, Madam Assistant Speaker. It’s a pleasure to speak on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The theme of my remarks will be letters. Today’s debate is brought to you by the letters “C”, “P”, “T”, “P”, and “P”, but it is not Sesame Street that we will need advice on how to get to; it’s Damascus, because it’s a road to Damascus conversion that members opposite have, clearly, experienced—or at least some of them; others, not so much, and fair enough too. The point that we seem to be hearing from the other side of the House, depending on which party you listen to, is either that it was bad before and it’s bad now, or that it was bad before but it’s good now. But I’m here to tell you and tell all in the House that it was good before, it’s good now, and it will still be good. It is a good deal for New Zealand.

Remaining on the theme of letters, I want to talk about side letters, because we’ve heard, in relation to the ISDS, or investor-State disputes settlement, provisions that some exceptions have been made that, supposedly, are going to be very helpful and beneficial to New Zealand. But the truth of the matter is that there are exceptions to the exceptions. There are carve-outs of the carve-out. These are extremely limited in scope, and, when added to the fact that there are considerable suspensions beyond even the suspension of disbelief that one must have to listen to and understand and agree and trust the words of the members of the House opposite, those things taken as a whole—the suspensions and the fact that the side letters are themselves exceptional and not comprehensive—mean that, in fact, what we are looking at is a trade agreement now that is good, and a trade agreement that before was good. And, indeed, in the words of the Green Party speaker on the bill, Golriz Ghahraman—and heaven forbid that I should be quoting her with approval—reflecting her position, her party’s position, and the position of many submitters to the Foreign Affairs, Defence and Trade Committee, there has not been much change to this proposed agreement during the time that it has transitioned from the previous Government to the Government that is now unexpectedly supporting it, albeit with our support being required along the way.

Now, the agreement previously contained many provisions that were broader merely than just trade, and that remains the case. But, at its heart, there is much to like about it for those within New Zealand who trade overseas, and, of course, New Zealand consumers will benefit from the fact that those who trade with us will be able to do so in a way that doesn’t reflect the impediments and obstructions of tariff and also non-tariff barriers.

So some of the advantages for the nation, and if I might add on a parochial note, for the electorate of Helensville—for those within the electorate who do export overseas and, indeed, enjoy the fruits of imports—include, for example, wine. All tariffs on New Zealand wine will be eliminated, including immediate duty-free access to Canada, which is New Zealand’s fourth largest wine market. That’s very relevant to my part of the world, I’m pleased to say. Similarly, nearly all tariffs on New Zealand sheep meat will be eliminated upon entry into force, including locking in preferential rates to Canada, which is New Zealand’s seventh largest sheep meat market. So, again, the benefits to the country overall, and indeed to the area that I represent, will be considerable.

On a similar and final note, the CPTPP—just as the Trans-Pacific Partnership did—includes useful improvements for New Zealand’s dairy exporters. So there will be a huge overall tariff reduction, and that will be via preferential access to new quotas into various countries. For that, we can all be thankful.

Finally, if I may finish on my themes of letters: one more letter, and it’s the letter “U”. It stands for U-turn, which has been the change of heart, the road to Damascus conversion that has been experienced by some members opposite. They now understand the benefits that we have been talking about for some time now. They will need to convince their former supporters—and, I emphasise, former supporters—and, indeed, their current colleagues of the merits of this trade deal. We remain convinced. We will continue to support it for the benefit of the country, and, for that reason, it’s a pleasure to stand with the colleagues on this side of the House and maintain our principled and consistent position—

ASSISTANT SPEAKER (Poto Williams): Thank you. I apologise—thank you—your time’s expired.

LOUISA WALL (Labour—Manurewa): Tēnā koe e Te Māngai o Te Whare. Tēnā koutou katoa. This is a new area for me, and I get to participate in this debate this afternoon as a member of the Foreign Affairs, Defence and Trade Committee. We are discussing today the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, and, prior to this iteration, it was called the Trans-Pacific Partnership (TPP). I want to take the opportunity to acknowledge our current Minister, David Parker, for a successful negotiation that means New Zealand is part of the CPTPP, and I would like to acknowledge Minister McClay, who got us to a point where we were part of the TPP negotiations.

And now we have an agreement that—and I agree with my colleague Stuart Nash—some people think is hugely different. “There’s a huge difference between CPTPP and TPP.”; “There is no difference.” And, actually, if you read our select committee report, in fact, that is what is highlighted: that variance of opinion. So I’m here to talk about, from my perspective I guess, the differences, but also the benefit to the country of this specific trade agreement.

Firstly, I can say that the major differences between CPTPP and TPP are the 22 suspended provisions. What I want to highlight the most in terms of those suspended provisions is that—and this is from the Ministry of Foreign Affairs and Trade website—“Agreement of all CPTPP members would be needed for these provisions to take effect in the future.” Now, I think that’s really important, because—I will highlight two now. The first is that there was a big issue—and particularly amongst all our medical sector—about the impact of the CPTPP on Pharmac and Pharmac’s ability to procure drugs. It was expected to cost us, actually, initially $4.5 million and then $2.2 million per year thereafter. So that is no longer an issue; so that is a difference.

And then the other one I want to highlight was that businesses cannot sue the Government for investment contract breaches. Now, that’s incredibly important because that was one of the issues that people had with the investor-State dispute settlement provisions: that we, in fact, could be sued. So they are a couple of differences, and there are 20 others, but what we all should be reassured about is that unless we agree in the future, those 22 suspended provisions can never re-enter this agreement.

So the CPTPP: here is a bit of a summary about what it represents. It represents 13.5 percent of global GDP. That’s 480 million consumers, that’s 30 percent of New Zealand’s export goods, that’s 31 percent of New Zealand’s export services, and that’s 64 percent of foreign direct inward investment and 56 percent of total outward investment, and what are the benefits to us? The benefits to us and our sectors are increased market access and decreased costs because of increased speed to conduct business. So this CPTPP trade agreement will create a regulatory environment that increases our trade in goods and services to ensure that our economy is sustainable, inclusive, and focuses on economic growth. The net benefit to us by 2030 is a $1.2 billion increase in GDP. So that’s the guts of it. That’s what the agreement is going to do.

When you look at different submitters—and I particularly want to focus at the moment on the New Zealand International Business Forum. Their assessment of the CPTPP was that currently, this trade in New Zealand has created 625,000 jobs. So there’s an expectation, or an anticipation, that because of the increased volumes in goods and services that will be traded, there will be more jobs that will benefit our economy. The interesting thing about their submission to the select committee, however, was that they couldn’t quantify it, which I found quite interesting. But what they could quantify was the tariff savings, and those tariff savings were $220 million, basically, which affects 92 percent of our current exports. The industries that are going to benefit the most are horticulture, wine, forestry, seafood, textiles, and manufactured products. The new markets that will be open to us through the CPTPP are Canada, Japan, Mexico, and Peru. So from the New Zealand International Business Forum’s perspective, they were 100 percent supportive of our signing the CPTPP.

The Ministry of Foreign Affairs and Trade did their own national interest analysis, and, actually, that point needs to be highlighted, because one of the issues from many submitters was: where’s the independent national interest analysis, and how can the ministry who’s been vested with the responsibility to create the agreement then be the ones who say, “This is what we get out of it.”? So I do want to highlight it, but what I want to highlight in their submission to the select committee was that of those 625,000 jobs, that’s a quarter of New Zealanders whose work and incomes depend on export.

There was a discussion paper from the Reserve Bank entitled Exporting and Performance, and, essentially, what it said is that if you work in the export sector, worker productivity increases by 36 percent, employment growth in that sector increases by between 7 percent and 12 percent, and wages are 6 percent higher. So for people who doubt how valuable increasing our exports can be, I think I’m convinced by that evidence, and it was that evidence that we needed to see before the select committee to feel reassured that the CPTPP is actually going to add value and benefit our economy.

From the unions’ perspective and from civil society’s perspective, can I say that that actually was their biggest concern. It was that it wasn’t going to create more jobs and, in fact, those jobs weren’t going to be high-quality, well-paid jobs. So they highlighted issues specifically for women and for indigenous peoples, and there was actually a distrust between civil society and big business, because they just fundamentally do not believe that business works in the interests of workers and marginalised and minority groups. The other thing that they were really clear about was that big business does not look after the environment. So, in a nutshell, the people who came and supported it were the exporters, and the people who came and opposed it were those who weren’t exporters, but they advocated on behalf of those that they think are most affected.

Now, I do want to talk in just my last couple of minutes about the Treaty clause. The most interesting thing about the Treaty clause, from my perspective, is that we found out that the Treaty clause actually ended up in the New Zealand - Singapore closer economic partnership agreement signed in 2000 because of the Hon Parekura Horomia and also because of the Hon Jim Sutton. They, in fact, did consult on the Treaty clause. In fact, there were hui held in Christchurch, Rotorua, South Auckland, and Whangarei.

The interesting thing about the Treaty clause is that we expanded the Treaty clause—and when I say “we”, I say Labour. I’ve got a letter here from the then Leader of the Opposition, the Rt Hon Jenny Shipley, and I’ll read it. It says, “As a result of the outreach we have conducted with Māori on the CEP with Singapore, our MFAT view is that the proposed article on the Treaty of Waitangi needs to be broadened to make it clear that it is not just actions taken to fulfil Treaty obligations that would be exempted from the agreement but also affirmative action programmes for Māori—e.g., closing the gaps—which may not be directly linked to a specific Treaty obligation.”

The National Party nearly voted against that agreement because of our expansion of that Treaty exemption, and I find it incredibly interesting, the ignorance that people had about where that Treaty clause came from.

Now, is it fit for purpose today? The Waitangi Tribunal says yes: “There may be a chilling effect of the Government”—but that’s us, and I have confidence that our Government will not be compromised—

CHAIRPERSON (Poto Williams): I apologise to the member. Your time has expired.

Hon TIM MACINDOE (National—Hamilton West): Kia orana, Madam Assistant Speaker. Tēnā tātou e Te Whare. I think I’m the penultimate speaker in this debate, and I have to say I’ve thoroughly enjoyed it at this late stage on a Thursday afternoon. Could I acknowledge in particular the member for Manurewa, Louisa Wall. I always enjoy listening to her. I want to thank her for another thoughtful contribution, and I also enjoyed the contribution from the Hon Stuart Nash before.

All the contributions on this side of the House have been outstanding. I particularly enjoyed the member for Helensville bringing it to us in the letters—the new letters, of course, are “CTP”. After listening to him, I decided those letters stand for “Chris the Penk”, because everything else about the agreement is pretty much the way it was, but it was good that he managed to bring an original flavour to it.

At the outset, it is appropriate for me to acknowledge, as others have done, the former and current trade Ministers for the great work that they have done, and also the trade negotiators who worked so hard over so many years—both on the original Trans-Pacific Partnership agreement (TPPA) and on this revised version of that agreement—to bring us something that just about everyone who has spoken today has acknowledged is very important for our country. To the Hon Tim Groser, who was the Minister of Trade for most of the time under the Rt Hon Sir John Key—he is now, of course, our ambassador in Washington, but the work began in his time—to the Hon Todd McClay, who was described by one of the previous speakers as having done much of the heavy lifting in this particular agreement and in having brought the TPPA to its conclusion; and to the Hon David Parker, who has been the Minister since the change from the TPPA to this revised version, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), I congratulate all of them and thank them for the work that they’ve done in our interests—

Hon Andrew Little: You’ve diminished Mr Parker.

Hon TIM MACINDOE: —because this is a very important achievement for New Zealand. I assume that even Mr Little thinks that, although his incoherent contribution a moment ago leaves me wondering.

In this morning’s Foreign Affairs, Defence and Trade Committee Estimates hearing, where, of course, both trade and foreign policy issues were on the agenda, we had the dubious pleasure of hearing from the current Foreign Minister. I made the point to him when I was raising some questions after his initial opening remarks that his repeated flip-flops and inconsistent positions on matters of policy relating to his current portfolio have not only undermined the traditionally bipartisan approach that New Zealand MPs have brought to foreign policy—and he reminded us that this is, I think, the 75th anniversary of the creation of the Ministry of Foreign Affairs and Trade—but it has also done considerable damage to our standing in the international community. We have looked a bit of a laughing stock under his tenure, on this particular issue and many others.

I have to say, not surprisingly, the Foreign Minister wasn’t overly delighted with my assessment, and he demanded evidence to back up the claim that I’d made. So I was only too happy to do that, and, in fact—thoughtlessly—some of the other members of the committee thought that they had a right to ask some questions as well, and I ran out of time before I could give him all nine that I’d jotted down. But I did make the point that one of the things that he had insisted upon—and that became apparent when the coalition agreement was released in October of last year—was a commitment to restarting negotiations for a free-trade agreement with Russia. Now, of course, he denies that he ever did that, but that’s there in the coalition agreement.

He also was not particularly pleased by the evidence that I presented of his claim in a TV interview just a few months ago—in fact, in March—that there was no evidence of Russian involvement in the shooting down of the Malaysian airliner MH17 over Ukraine. Now, of course, he’s confronted with the fact that there’s a very credible international report that shows that that is exactly what has happened.

I went through his position on the Skripal father and daughter and the nerve agent attack, but the point I’m making is that I would have liked also to have been able to get to his total about-face on this CPTPP agreement, which was previously known as the TPPA, because an about-face it most definitely is. For no matter how many times Ministers Parker and Peters have tried to argue before today, and again in the House this afternoon—and methinks they doth protest too much—nevertheless, this is the revised TPPA agreement with just a few minor changes, which the vast majority of people will never notice and never be aware of, and which certainly do not satisfy those who opposed the original TPPA. And, as Golriz Ghahraman rightly pointed out when she spoke earlier, they came back to the committee to protest against this time, as well. They—led by Professor Jane Kelsey and others—without exception all made the point that there are no significant changes and that the reasons for their opposition to the TPPA remain in their opposition to the CPTPP.

Well, I congratulate the Greens for at least remaining consistent in that, because when Mr Parker’s supporters and Mr Peters’ supporters and some of the Greens were protesting outside my electorate office in Te Rapa about a year ago, and they left a little bit of graffiti and some documents and possibly didn’t notice that I wasn’t there at the time—there can’t have been very many of them—all of them, Labour, the Greens, and New Zealand First, were all in there together opposing this agreement. Now, we find that suddenly it’s wonderful because Labour and New Zealand First are in Government and it’s a great thing, and yet none of the protesters see any material difference in the agreement at all. But I have to say we do welcome the change of heart by Labour and New Zealand First, because this agreement is—as Mr Penk said a moment ago—something that was good for New Zealand when it was the TPPA and it’s good for New Zealand now, and I’m delighted to see that it’s there.

So today, when Mr Peters, who, frankly, is neither right nor honourable, departed quickly from the facts and resorted to his customary abuse, particularly of me—and that’s his standard tactic whenever he’s confronted with the inconsistency of his positions. Today, we’ve had him in the House insulting all of my colleagues—

Hon Phil Twyford: I raise a point of order, Madam Speaker. Can I just ask if it is within the Standing Orders for the member to say that another member of this House is not honourable.

ASSISTANT SPEAKER (Poto Williams): Well, I would say that would tend to lead to disorder, so I would encourage the member not to do that again. Perhaps a first warning—a first and only warning—given that it is Thursday afternoon.

Hon TIM MACINDOE: Thank you, Madam Assistant Speaker. How very kind of you. The point I’m making is that that Minister was insulting all of our colleagues, and I think he did have a go at everyone who had spoken. He insulted just about all of Fonterra. He insulted, frankly, the intelligence of everybody who was listening to him in his incoherent rant, and the only thing that I could discern from it was that he resorted to his old chestnut about the baubles of office and fancy limousines. Well, in the brief time I was a Minister, I never rode in a limousine, but that’s beside the point.

He went all over the traps. The one thing he didn’t do was talk at all about the agreement. So let me just bring to his attention what I think he would have liked to have said, had he not thought of talking about its benefits only 13 seconds before his time finished.

If you look at the document that Louisa Wall has just brought to our attention, this excellent national interest analysis of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, it makes the point that international trade stimulates individual productivity, employment growth, and higher wages in New Zealand. It acknowledges the tremendous advocacy of the Hon Todd McClay, which was integral to the formulation of the CPTPP. It makes the point that internationally, tariffs are escalating on such products as steel, aluminium, alcohol, and soya beans.

So when you get to the section—and I’ll cut to the chase—on what’s in the CPTPP for New Zealand, it makes the point that, strategically, the CPTPP promotes New Zealand’s voice in shaping the dynamics of the regional economy. Commercially, the CPTPP will increase New Zealand’s export trade agreement coverage by 9 percent—that’s phenomenal. The CPTPP delivers new free-trade agreements for New Zealand with Canada, Japan, Mexico, and Peru, and greater benefit for our existing agreements with the other parties to the agreement. The CPTPP will facilitate a minimum $222.4 million annually in tariff savings. What a fantastic thing that is for our primary producers. The CPTPP gives New Zealand exporters equal trade power to Australia and Chile, with markets like Japan, one of the world’s biggest economies and one of the hardest to get an agreement with.

So key outcomes include removal of tariffs from kiwifruit, wine, lamb, forestry, apples, beef, and fish. In various partner countries, it reduces dairy export tariffs, boosts horticultural sector profits, and reduces non-tariff barriers. These are all vitally important for New Zealand.

So I encourage every New Zealander who has an interest in this to get hold of the national interest analysis, because I couldn’t possibly do justice to it in this brief contribution. But I conclude it as I commenced—this is another compelling example of the flip-flops that are typical of the current Minister. I’m just delighted that we’ve got to this point. Let’s get on with it now and make the legislative changes that are needed before he has another flip-flop and we find ourselves back to the position he held about 20 minutes ago.

ASSISTANT SPEAKER (Poto Williams): I thank the member. Your time has expired. Before I call the member, I just need to remind the House that this is actually a time-limited debate, limited to two hours. The member will have approximately just over seven minutes to speak, and I’ll set the timer for five minutes.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Madam Assistant Speaker, tēnā koe. There’s been a lot of talk and a lot of to-ing and fro-ing about U-turns and what have you, and I was glad to see Mr Macindoe get his hurt feelings off his chest, from earlier this morning. I hope he’s feeling a lot better.

But you know what I did, and you might think I’m a sucker for punishment? I got this document—it doesn’t seem to be 6,000 pages—and I read it. What I want to speak about today really is two things. There’s two things I want to do: one is to talk about why we need to enter into this agreement and the other is to touch on some aspects of this agreement, which haven’t really been mentioned but are probably the greatest merits of it. Because it is a detailed document—that is why it’s called comprehensive. And there are some really fantastic clauses in there, which we absolutely need as a trading framework.

That brings me to my first point, which is that at this time we absolutely need to have a trading framework which isn’t based on whim, it isn’t based on knee-jerk reactions; it’s based on rules, because we can see not too far away what happens if we have a trading framework based on whim. People enter into trade wars. They enter into discussions. They get hurt feelings, and all of a sudden we have tariffs going up around the world. So what we need is a comprehensive and progressive trade framework, and that’s what we have.

We also need multilateralism. We need to make sure we bring in as many people as we can into this because one-on-one arrangements don’t work in the long run. We’ve got to have a comprehensive approach to it. Bring in as many people, as many State parties, as we can, because unless we do that, we’ll have a plethora of agreements which may or may not be consistent and we’ll be doing it for ever and a day. That’s why we need to do this.

Now, this document has been pitched largely as a tariff reduction measure. To my mind, that’s one of the least important aspects of it. It’s true that tariffs will reduce and that will increase our national income, but what it also does is put a rule-based framework around how we trade and what we trade in. And once we get an even playing field, I am confident that New Zealand can compete on the international stage. All we need is for equal treatment. Ms Ghahraman talked about ceding sovereignty. I don’t see it that way. Having an international agreement, an agreement where State parties agree on a common framework, has been with us for hundreds of years. That is what international relations and international law is based upon, and that’s what we’re doing here.

If you go through the agreement, as I have, you’ll see a whole lot of really useful and important rules there. One that sprung to mind was the rules of origin, where State parties have agreed that we need clear rules of origin—that when we send our goods overseas, we want to be able to say that this product is made in New Zealand. And we want to do that on an even footing, so that if someone wants to buy our product because it’s from New Zealand, there’s not some deceptive Kiwi cuvée that looks like it’s come from New Zealand and puts itself out there as if it’s come from New Zealand but, in fact, hasn’t. So rules of origin is just one of those things.

The other thing that this comprehensive agreement addresses is non-trade barriers, customs cooperation. What I’m going to go to, in fact, because this is a time-limited debate, is focus on chapter 23 on development, because this is what is progressive about this agreement. It recognises that it’s not all about income. It’s not all about cash flow. And if you look at this chapter—chapter 23—it recognises the importance of trade to foster development. So chapter 23.1 clause 2: we need more inclusive economic growth, and that includes a broad-based distribution of the benefits of economic growth to the expansion of business and industry, the creation of jobs, and the alleviation of poverty. That is a real step forward in international trade, and if you look over the page, to article 23.4, that clause deals with women in economic growth. The parties recognise that enhancing opportunities for women in their territories, including women workers and business owners to participate, is important. That is something you wouldn’t expect to see in a trade agreement, but here we have State parties around the Pacific committing to this kind of progressive approach to trade, and I applaud it.

We can look at the environment chapter, recognising the role of State parties within trade to protect the environment and, what’s more, explicitly the conservation and sustainable use of fisheries. So, again, something that is absolutely critical to New Zealand—we now have Pacific nations coming along with us in the preservation of our fisheries.

Chapter 26 deals with anti-corruption. Chapter 29 deals with labour, including the recognition and preservation of the right to collective bargaining. That’s progressive. So we heard a lot of submissions, and one of the reasons I read this document was because I was concerned I was missing something. So many people were coming out—and I accept the Green Party’s point that many people came and turned up to select committee and opposed it. So I read it, and most people hadn’t. And they were wrong in many of their assertions.

So I commend this bill to the House. I thank the members of the public who made those submissions, and I recognise the work that was done by the National Party, and now what we have is a truly comprehensive—

ASSISTANT SPEAKER (Poto Williams): Order! I apologise to the member. The time for this debate has expired.

Motion agreed to.

Bills

Taxation (Neutralising Base Erosion and Profit Shifting) Bill

In Committee

Debate resumed from 12 June.

Part 1 Amendments to Income Tax Act 2007 (continued)

ANDREW BAYLY (National—Hunua): Thank you, Mr Chair. Yes, so continuing this discussion around this base erosion profit shifting bill—very good bill, very complicated, as we talked last time. It’s great to see the Minister in the chair, Stuart Nash, because I think this is an important bill—that everyone understands it. One of the areas we were talking a little bit about last time, although I’ve got to say I was cut off at the knees—I was rapt because I was talking about thin capitalisation rules, which I know that the Minister in the chair is a fan of and understands well. That’s why it’s also good to have the Minister, because I wanted to ask some questions about thin capitalisation.

Perhaps it’s just worthwhile, just for a sec, just to recap: what do we mean by thin capitalisation? Well, thin capitalisation, basically, means is there enough ownership equity or shareholders’ funds in a business to make sure that the business is well capitalised and can meet its future liabilities? Now, when you look at a balance sheet of a company, on one side you have capital—shareholders and assets—and on the other side you have liabilities—

Hon David Bennett: Like the New Zealand First Party?

ANDREW BAYLY: That’s right, Mr Bennett. And so the importance of thin capitalisation—what that refers to is that some companies, if they want to reduce their profits, what they will do is increase their debt as much as possible and, therefore, the interest cost on that debt is higher than what it might otherwise be and therefore the interest deduction comes off the profit and therefore the profit is minimised and, consequently, the tax payable by that entity is minimised. That is, basically, what BEPS is all about—base erosion and profit shifting. In many cases involves using either high interest rates—and we covered that previously to some extent—or a high amount of debt. And the thin capitalisation rules are about actually making sure that the debt levels—that component—is reasonable and fair.

Now, last time I was talking, and there are a number of submissions, but particularly there’s a very good submission from PricewaterhouseCoopers (PwC). They said that the treatment of non-debt liabilities should actually not be included in how you assess your liabilities, but specifically went on to say that if you are going to look at them, they need to better reflect how those liabilities are viewed. Now, there are a whole lot of different liabilities, and most people think about liabilities—if you’re Mr Twyford thinking about his housing situation: lots of liability.

There are other types. There are contingent liabilities that may not represent a real debt at this moment, or there are other aspects of the operation. The one that is most pertinent, I think, is the mining industry—the extractive industry—and I was just touching on this when I was, unfortunately, stopped last time. When you think about an extractive industry, where you’re mining a quarry or oil or whatever, at some stage at the end of that project you will have an obligation, a liability, to remediate that situation. It may be a quarry, or it may be some other area that you’ve exploited. That needs to be bought back, and it might be either to decontaminate it or it might be around how that quarry is brought back into an environmental shape.

Of course, what the argument of PwC was is if this non-debt component was being excluded, well, in some cases actually it should be included, because it’s actually a very relevant thing, and that’s something I think I’d like to hear the Minister’s view on. Of course, we had the officials’ view on it. They said that they’d work through this issue, and the standardisation approach that they are talking about allowed a New Zealand group to deduct up to 110 percent of the worldwide group debt within the context of a safe harbour—and that’s an area that we actually haven’t discussed previously—but that part of it was covered. I’m not so sure in terms of some of those specific entities, and particularly in relation to mining.

The other area is around thin capitalisation, and particularly deferred tax liabilities, and whether these should be included in non-debt liabilities. Again, we had a host of submissions on them from very reputable firms: Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group, Ernst & Young, KPMG, Powerco, PwC—

NICOLA WILLIS (National): I rise to take a call on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. I want to dwell in my contribution on the permanent establishment rules. These are outlined, particularly in clauses 4, 34, 43—the definitions—and clauses 44 to 48.

Now, of course, the permanent establishment rules propose a new anti-avoidance rule for large multinationals that structure to avoid having permanent establishment and therefore a taxable presence in New Zealand. So the new rules that are proposed here both simplify the test for determining whether an item of income has a source in New Zealand and ensure that all items of income New Zealand is entitled to tax under a double tax agreement (DTA) will be taxable under domestic law.

Now, what I want to raise some questions for the Minister this evening about are some comments that have been made by officials, in particular, because while submitters were generally supportive of the proposed anti-avoidance rule—and while National shares that support—there were some aspects where concerns were outlined, and I just want to take a few of those this evening. So in particular, we had the concern raised that the proposed rules would have a detrimental effect on foreign direct investment. Of course, foreign direct investment is very important to the growth of New Zealand businesses, the provision of jobs, and income, and that is something that we want to ensure can happen in the proper manner.

So, in particular, there were submissions from Deloitte, the Corporate Taxpayers Group, PricewaterhouseCoopers (PwC), and the Chartered Accountants Australia and New Zealand noting that if other countries adopted similar positions in their domestic legislation, many New Zealand exporters could find themselves with permanent establishments (PE) overseas that they don’t currently have. Now, officials have of course responded to that concern, saying that New Zealand is undertaking these base erosion and profit shifting (BEPS) measures in line with most other OECD countries and that the expected tax revenue increase is expected to be relatively small.

So I just wondered, for one thing, whether the Minister would indulge us by commenting on whether or not he can update the House on the expected tax revenue increases as a result of this, and, secondly, whether he can give us any update on the progress of other OECD countries in undertaking these BEPS measures. Those would be useful things to have an update on.

Now, the second issue I want to comment on this evening was from a submission from KPMG, where they raised the important issue of the need for clear guidance in the officials’ report. Of course, members in this House know that the officials’ report has no official standing when it comes to interpretation of this legislation, so I want to raise two particular issues: one which was around determining whether an activity is sufficiently connected to a sale in New Zealand, and, if so, determining whether that activity is preparatory or auxiliary. What officials have said is that this information, this guidance, would be provided in a tax information bulletin on enactment of the bill. So I’m just wondering if the Minister, this evening, can confirm that that bulletin is in fact under preparation, and whether he can confirm in fact when that bulletin will be provided.

Another issue that I would like to comment on is this question of treaty override. So the proposed PE anti-avoidance rules—as members who have clearly read this bill in detail understand—is overriding some of New Zealand’s DTAs. Now, we had a number of submitters from Chapman Tripp, Chartered Accountants Australia and New Zealand, the Corporate Taxpayers Group, KPMG, the New Zealand Law Society, and Russell McVeagh raise a concern that this was a unilateral override. What officials have outlined is that this anti-avoidance rule is a measure that only applies if there is a more than merely incidental purpose of tax avoidance and, accordingly, it should not conflict with New Zealand’s DTAs in the vast majority of cases. I wondered whether it would give comfort to those submitters and to those looking at this legislation—because this House is supporting it—if the Minister was able to detail in fact the small number of cases where it would actually have any override, because I think what officials are saying here is that it would be a very small number of cases. It would probably be useful to outline what those are, if the Minister could do that.

It’s also noted that the wider PE definition will be added to the OECD model convention and so represents what the OECD considers to be the current best practice. Again, I ask you: has this happened yet? Has this wider PE definition—[Bell rung] Can I continue, Mr Chair?

CHAIRPERSON (Adrian Rurawhe): Nicola Willis.

NICOLA WILLIS: So what I ask is simply—the member wishes to be better informed and I’m sure the Minister can inform her whether that widened PE definition will, in fact, be added to the OECD model convention, and so whether we have, in fact, had that representation of what the OECD considers to be best practice.

I now want to move to the issue of royalties and the deemed PE source rule. This is an issue that KPMG and PwC, in particular, raised a broader concern—that the proposed changes increased the risk of unintended consequences such as double taxation, and, of course, members of this House don’t want double taxation to be something that occurs incidentally. So what officials have told us in this regard is that the risk of double taxation can be seen as a disincentive to entering into PE avoidance arrangements, which they note are typically designed to achieve double non-taxation. So, essentially, officials have said that they don’t think the risk of double taxation exists because of the nature of current arrangements. I wonder whether the Minister can enlighten the committee a bit further by detailing evidence for the claim that the risk of double taxation is actually seen as a disincentive to entering those PE avoidance arrangements in the first place.

I think it’s interesting to note the submission from the Corporate Taxpayers Group on the scope of the PE anti-avoidance role. In terms of permanent establishment, they are very clear in reminding this House that we should be careful that the scope of the rule should not be widened in future. So they’re very careful that the scope as it currently stands is appropriate, but to widen it in future would not be appropriate. It has been heartening to have officials confirm that they have no intention of widening that anti-avoidance rule beyond its current scope, and it would be useful to have the Minister confirm that that is the Government’s intention with this part of the legislation.

I now want to move to the issue of the application of the permanent establishment rule—in particular, as it relates to the threshold that may still result in the rule applying to smaller New Zealand resident entities. So what Chartered Accountants Australia and New Zealand raised as an issue was the idea that the EU has estimated that there are about 6,000 multinationals that fit the definition in the bill around the threshold of turnover of €750 million, but officials note that the rule only applies if the non-resident has a related party in New Zealand that carries on sales-related activities. So it’s actually a two-part test: one, do they meet that EU turnover threshold, and, two, do they have a related party that carries on sales-related activities in New Zealand? So my question is: do we have an estimate from officials, or does the Minister have information, that can tell us actually how many entities in New Zealand we think this rule might apply to? I suggest it would give submitters a lot of comfort to know it’s a lot fewer than the 6,000 that meet the first test, once we think of that second test in terms of sales-related activities. So it would be useful to have that number.

I now move to the issue of the proposed application dates, because some submitters, of course, were clear that they didn’t think they allowed sufficient time for multinationals to restructure. Of course this is a legitimate concern, because what this is about is multinationals saying “Yes, we do want to meet the law as it stands. It is appropriate that we do so.” but acknowledging that in some cases, it takes some time to rearrange tax affairs to meet the law. So again, officials have considered that and have given some comfort by saying that inland revenue will take any current restructuring process into account when it investigates or assesses a multinational following the introduction of the proposed rule. I think it would be very useful for the Minister to put on the record of this House in the Hansard that, in fact, that is the approach that inland revenue will take. Furthermore, I would be very interested to understand what conversations the Minister has had with the IRD about this and whether any directions have been given or whether he intends to give the IRD any directions on this in the future.

I now turn to the issue of the facilitator rule and the matters that it may cover—

Andrew Bayly: Ah, the facilitator rule.

NICOLA WILLIS: That’s right. So the chartered accountants—again, they’ve been heavy submitters obviously on this bill, as you would expect, and clearly play a very important role in ensuring that this legislation be interpreted well by businesses and by those operating in New Zealand. What they have iterated is that they believe that it should cover sales only, and not extend to activities that don’t relate to a specific sale, such as warehousing, marketing, and advertising. Now, of course, in the commentary to the bill, those preparatory or auxiliary activities are—

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

Hon DAVID BENNETT (National—Hamilton East): Thank you, Mr Chair. It’s great to be able to talk on this bill as well, and I just want to focus on one part of it, and that is the hybrid and branch mismatch arrangements.

Hon Member: I’m looking forward to this.

Hon DAVID BENNETT: You should be looking forward to it. A hybrid or branch mismatch arrangement can result in a deduction with no corresponding taxable income for the Government, or it could result in a double deduction, so, in both cases, the Government could lose out on revenue. So of course in this legislation, which is there to increase Government revenue, it has sought to deliver a solution in regard to these issues. Now, the solution that’s been proposed in the original bill was a very comprehensive solution that is based on the OECD approach and is very generalistic. The submissions were to have a much more specific regime that took into account the New Zealand environment and how things operate here and how our commercial arrangements are structured. It is good that the committee has taken on board those submissions, in many cases, and delivered some good outcomes that actually have a much more rational approach that takes into account how New Zealand commercial affairs operate, rather than seeking to have a comprehensive approach just because it is easier to do so.

So let’s have a definition of a hybrid and branch mismatch arrangement. That’s a cross-border arrangement that exploits the “differences in the tax treatment of an instrument, entity, or branch under the laws of two or more countries.” I remember doing a member’s bill, which was very similar to this, that looked at the international treatment under the different laws. It was a bill that the Hon Chris Finlayson took great delight in as well, because he was very much involved in that in his legal practice. So, as I say, that can actually potentially lead to a deduction without any corresponding taxable income to the Government, or even in the case of a double deduction, which is even less income coming to the Government.

So let’s have a look at some of these changes that were proposed by submitters and were taken on by the committee and actually accepted—and that’s a rare thing in our select committee process to actually see, but actually it did happen in this case. So the first one that we’ll look at—and this is probably one of the smaller ones—is the transitional period. In this case, this was a submission of the Chartered Accountants Australia and New Zealand and the Corporate Taxpayers Group, and was accepted in part, subject to officials’ comments. The officials agree that a transitional period would help taxpayers comply with parts of the rules and situations where another country’s rules are implemented part-way through the taxation year, and that’s particularly relevant in the case of the entity-based rules due to possible interaction of other countries’ dual inclusion income rules and New Zealand’s surplus assessable income concept.

So that is very much taxation-speak, but, effectively, to actually see that the officials see that this should be accepted, in part, takes into account that there is a bit of an issue there, and that needs to be recognised and taken into account through this legislation. So a transitional period was submitted. It should be included in the measures in relation to other countries implementing hybrid and branch mismatch rules, particularly Australia—and our biggest trading partner is Australia, so that makes a lot of sense—and the advisers and the committee have come to a point that actually takes partly into account that request.

Another one was to widen the corresponding hybrid mismatch legislation. Now, that submission was accepted, and there was an appropriate change made to the definition of hybrid mismatch legislation to clarify that comprehensive anti-hybrid rules are not required. Another one where there has been a submission—in this case, it was a submission from KPMG—[Time expired]

Hon STUART NASH (Minister of Revenue): I will answer a couple of the questions that have been asked, but I would like to say that a number of the questions that have been asked this afternoon already I did actually answer on Tuesday night, and I’m not going to repeat those. The permanent establishment (PE) anti-avoidance rule is very similar to Australia’s multinational anti-avoidance law and one aspect of the UK’s diverted profits tax. It’s also based on a permanent establishment definition—the 2017 OECD model double tax agreement—and New Zealand would not look to widen the scope beyond the OECD definition.

Revenue from the PE anti-avoidance rule and changes from the transfer pricing rule would raise about $50 million per year once fully implemented. The Tax Information Bulletin—of course, the officials will publish administrative guidance in a tax information bill shortly after the legislation is enacted. They do this for every single piece of legislation.

Mr Bayly’s not here. Well, I will just mention—

Hon Andrew Little: Answer the question anyway.

Hon STUART NASH: Yeah, I’ll answer the question anyway. The amendment in the bill makes New Zealand’s thin capitalisation rules consistent with Australian rules, and, as we know, Australia has a major mining industry.

And I would just say to the member who spoke last David Bennett and the one before then, Nicola Willis, that to all questions that you asked about whether the officials were right in their advice, my answer to that is of course yes, they are. As we know, you had plenty of time in the Finance and Expenditure Committee to test the veracity of the officials’ advice. So please don’t expect any questions to be answered if you ask me “Are the officials right?”, because, as mentioned, this went through a long, involved select committee process. There were a number of highly complex submissions, which I think the officials did a brilliant job of distilling down into official reports—which I read and I know the members have read as well—and I think you’ve come to a very good spot in this bill. It is a piece of legislation that, obviously, we all support right across this House.

The officials, I think, have done a sterling job. I’ll reiterate something again that I said on Tuesday night, and that is that in terms of our contribution at the OECD around base erosion and profit shifting measures and legislation and guidance, we absolutely box above our weight. In fact, we are recognised as having experts in certain areas on this.

So I don’t think anyone can be concerned about the measures in this bill. They have been tested and tested again and—as mentioned—put in front of the select committee, and I know, from the chair of the select committee and also the members, that there were very robust discussions. Some of the parts of the bill were changed because of those discussions, but as a consequence of the select committee process, I think we’ve ended up exactly where we need to be, with a very good piece of legislation that will go a long way to mitigating avoidance by multinational organisations operating in this country. Thank you.

CHRIS PENK (National—Helensville): Thank you very much, Mr Chair, for the opportunity to speak to the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. I had such a good time—and I know that everyone who heard me would have also had such a good time—speaking to this the other night that I feel moved to do, again, likewise.

I’d like to focus on the implications of the mismatch situation that Mr Bennett has already given a pretty good dissertation on in relation to banking groups—so, specifically, clause 29C, which amends the formula for a banking group’s funding debt. The first part of that is simply to add into the formula the punctuation and then the word “mismatch”—so the punctuation is the “–”, meaning, of course, a minus. So what we have as the net effect of that is that the formula for a reporting bank to calculate the funding debt of its New Zealand banking group is as follows: the total interest plus interest deductions, minus shares, and, now—the new element—minus the mismatch, all divided by days in the quarter.

Of course, for that to be meaningful, we need to examine what the mismatch is. I won’t belabour that point because it’s already been covered in very good fashion, indeed, by Mr Bennett, but, essentially, as I understand it from reading the commentary on the bill, a mismatch situation is one that gives rise to a denial of a deduction or assessable income. So whether that’s, effectively, a plus or a minus, it will be factored into the equation—the formula, so-called—to work out the funding debt of a reporting bank as defined in the Act.

What then is a mismatch in this context, I hear you ask, Mr Chair, and, indeed, many others are asking that, no doubt. Well, the answer to that is provided in this amendment to the bill, helpfully, so that at subclause (2) we have a new provision, paragraph (cb), whereby “mismatch” is defined as being “the same proportion of the financial value of a debt or financial arrangement included in paragraph (a) or (b)”, which I will just note briefly is that total interest and also the interest deduction that I mentioned earlier. So, having taken that as “the proportion of the total interest expenditure under the debt or financial relationship in the income year that is denied”, then one of three scenarios applies. It is either “a deduction in the income year under section FH 3(2)”, which, broadly speaking, is “(Payments under financial instruments producing deduction without income)”, or is one of the other two scenarios, being “an unrecognised amount” or—broadly speaking, again—providing for the matching of deductions from multi-jurisdictional arrangements, which I think is pretty clear.

But none the less, I do have a couple of questions, and they, I suppose, at a reasonably high level, are seeking from the Minister—who I acknowledge has obviously put in a lot of care and attention and has some expertise in the area—just, essentially, an assurance that this particular mechanism, where we’re adding in a somewhat broad kind of addition to the formula whereby we’re trying to catch any kind of situation where a mismatch would otherwise occur, really fits the sort of comprehensive nature of the bill. Obviously, the whole purpose of the thing is to be as comprehensive as possible and to avoid missing out on any sorts of situations whereby, deliberately or otherwise, an entity or a group of entities with a parent overseas and a New Zealand operation as well might, again, deliberately or inadvertently avoid—not to say “evade”—their tax obligations. So the first question is whether that aids the comprehensive nature, and the second question goes to alignment.

So I just seek the assurance, really, that this will enable us to say that we have arrangements in this respect that are aligned with Australia and other overseas jurisdictions whom we seek to have similar arrangements to—again, for the clarity, for the certainty, and, indeed, for the overall international feeling that these kinds of arrangements should be avoided whereby those who can and should pay tax have been managing to avoid doing so. I think that probably concludes my current questions to the Minister, and I do look forward to the response.

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

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

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1.

Motion agreed to.

The question was put that the amendments set out on Supplementary Order Paper 38 in the name of the Hon Stuart Nash, and the following tabled amendment in his name to Part 1, be agreed to.

new section GC 13(6) in clause 36(4), after “notifies the taxpayer that”, insert “a tax audit or investigation has commenced and”.

Amendments agreed to.

Part 1 as amended agreed to.

Part 2 Amendments to Tax Administration Act 1994

ANDREW BAYLY (National—Hunua): Part 2 is a very important component. It really relates to amendments to the Tax Administration Act 1994 and the implications for the IRD. I think this was an area that occupied a lot of the committee’s time. I’m looking across at members of the committee on the other side as well as our own colleagues here. The issue around how the Inland Revenue Department goes about getting information from foreign investors who have money here—invested in companies doing work in New Zealand—was a crucial aspect. There were a number of submissions around it, and I think, of course, all of us accept there is a balance where if you want to operate in New Zealand, you need to comply with New Zealand rules. You need to comply with them in the sense of providing information and making sure that you’re operating appropriately. On the other side, we wanted to make sure that the Inland Revenue’s discretion and obligations and powers were also commensurate with what would be the normal course of action in these types of arrangements.

The bill has created an opportunity for the IRD to have greater powers. That was the subject of debate for much of the committee’s time. There were a number of components to that, but particularly in clause 50. We had a number of submissions, actually, a whole host of them, from ASB, BNZ, Chapman Tripp, corporate taxpayers, accounting, law firms—the whole works. Their main point was that in clause 50, which is “Section 17 amended (Information to be furnished on request of Commissioner)”, it talks about the requirements on a multinational to provide information.

The first point that these people made was that the proposal was a significant overreach and should not proceed. Of course, that was quite a strong statement. What some of the submitters were saying was that the amendments may be impossible to actually comply with and are not necessary, given existing powers. Another one was that a similar proposal had been rejected previously by another select committee that had looked at this issue and that there was no international precedent for the powers that were proposed in the bill.

The IRD had a slightly different perspective, as you’d imagine, because they needed the powers, in their view—and I agreed with this—to be able to properly investigate and challenge tax positions taken by multinationals with New Zealand operations. Of course, the issue was how they should go about getting that information. The point that the IRD made—and it’s true. It’s a fact that multinationals—if you conduct and manage your tax affairs outside of New Zealand, maybe in some tax haven or even in another jurisdiction entirely, that makes it much more difficult for the IRD to get and source that information when you’ve only got what may be a small branch or subsidiary or even just a sales office in New Zealand with just a few people, none of whom have got any accounting experience or tax experience or any tax responsibilities.

So the issue really for the IRD was: how do you get your hand on that relevant information with the tax position of the multinational, which may be held in another jurisdiction? Of course, on one side of it the IRD was suggesting, you know, a very heavy-handed approach, which was one where they could have powers to require that and to locate that information and bring it back, even though you may be talking to one salesperson in New Zealand, and that’s the difficulty. That was the difficulty with this issue.

Of course, if a multinational was trying to minimise tax—and, you know, we’ve got to be realistic that many multinationals do try and minimise tax, which is not illegal—then, if they’re slow in providing that information or just uncooperative, it makes it very difficult for New Zealand tax authorities. So for us as a committee we were, of course, very mindful that we should give adequate powers but not too much.

One of the proposals suggested was that we should rely on the international tax treaties that New Zealand has. I know many of you will know that we’ve got 72 tax treaties. Of course, most of those are with our good trading partners, but the IRD made a very compelling case to say that to rely on tax treaties to be able to compel foreign multinationals to provide the information is a long bow, because, in effect, we may have a treaty and the IRD, through the Government, may make a request for information on a multinational, but in some cases there is no obligation or ability of that international jurisdiction to require that multinational to comply with our tax treaties and our tax requests. Therefore, again, the hands of the IRD are constrained.

The other thing around the secrecy laws was that, in fact, in order to meet their new secrecy laws, many countries were establishing new rules around disclosure. It was something that was discussed at the Global Forum on Tax Administration over a long period of time. What the officials would recommend is an amendment to limit the provisions in the bill so it requires the requested information to relate to an investigation of the multinational’s tax position rather than relate to an investigation of a natural person. That’s an important nuance, and I’m not sure everyone might pick up on that nuance, but, from a tax perspective, making sure that it’s limited to the multinational’s tax position rather than a natural person is a very, very important sort of fundamental principle.

Similarly, section 17A of the Tax Administration Act 1994 states that a person cannot be excused from complying with a court order to provide information simply because providing the information would subject the taxpayer to a fine, penalty, or conviction, because in some cases, obviously, people want to hide behind rules and regulations or—even if they’re a listed company to say, as an example, “Look, we cannot comply with New Zealand’s request for information, because we’re operating under the London Stock Exchange rules and, therefore, to divulge that information would breach confidentiality.”, which will impinge on the rights of that company and the obligations on the directors of that company. So, again, the nuance around this was really important.

I think the other thing was that we just noted the practicality of trying to address this issue. I think inland revenue believes that where we ended up was a balancing act, and I’ve got to say I think it was to some extent shaped by the position of the select committee members. As I said before, a lot of these proposals around the heavy-handedness have been previously rejected by the Finance and Expenditure Committee. So I think the issue is: how do you do it in a way that’s appropriate and doesn’t overtly give the IRD too much power?

I think it raises the issue of criminal liability and civil liability and also the question of penalties. The Act actually now provides for penalties of $100,000, and the big issue is around criminal and civil liability. In that context, I think we also had quite a significant debate around that. So if we are talking in respect of the New Zealand representative, the idea is that if you are going to require a representative in New Zealand who represents a multinational, to what extent can you require them to actually make and facilitate their provision of that tax advice to the IRD? I think that is a fundamental issue, and when the bill was originally introduced, it included both criminal and civil liabilities.

Unfortunately, I’m going to run out of time on this, but I think that’s an issue that I really want to listen to the Minister’s view on because I think the issue around that is a very fundamental tenet of having a successful treaty and tax system that deals with our base erosion and profit shifting obligations.

Rt Hon DAVID CARTER (National): It’s a pleasure for me to take a brief call on Part 2 of the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. I want to talk specifically to two provisions, new section 78G, “Country-by-country report from large multinational group”, in clause 52, and new section 139AB, “Penalty for members of large multinational group failing to provide information”, in clause 53.

The reason I raise those two is I’ve been worried—very, very worried indeed—since we completed the select committee process, because, collectively, we put a lot of work into Part 1, and I’m just wondering now whether we did delve into Part 2 deeply enough to fully understand the implications. But I know that the Minister will give us some good answers, and I want to congratulate the Minister again for the way he handled his questions through Part 1 on Tuesday night.

The first one, new section 78G, talks about the requirement for a large multinational with an ultimate owner—that is, a New Zealand resident—to provide the commissioner a report on tax information etc., etc. So does this apply to the likes of Google and Facebook? I assume the answer to that is that it definitely does. Then I just want the Minister to think about what’s the likely reaction to a chief executive in Palo Alto, Silicon Valley, getting a letter from the Commissioner of Inland Revenue saying “Please supply us with this sort of information.”, which looks to me like it’s fairly broad-based. It could be information as to the tax structure they have established in any of the 50 or 100 other countries they operate in. What’s going to be the likely first response?

If he or she takes it seriously, he or she may get involved and make sure the answer’s given, but that leads me to the second point that’s raised—

CHAIRPERSON (Adrian Rurawhe): I’m sorry to interrupt the right honourable member, but it has come time for me to report progress.

House resumed.

The Chairperson reported progress on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill and no progress on the Social Security Legislation Rewrite Bill.

Report adopted.

The House adjourned at 5.56 p.m.