Tuesday, 26 June 2018

TUESDAY, 26 JUNE 2018

TUESDAY, 26 JUNE 2018

The Speaker took the Chair at 2 p.m.

Prayers.

Obituaries

Hon Koro Tainui Wētere, CBE

SPEAKER: I regret to inform the House of the death on 23 June 2018 of the Hon Koro Tainui Wētere, CBE, who represented the Western Maori electorate between 1969 and 1996. He was Minister of Māori Affairs from 1984 to 1990, and held a number of other ministerial portfolios during his parliamentary career, including Minister of Lands and Minister of Forests.

E hiahia ana ahau hei māngai mō Te Whare nei ki te whakapuaki nei o te mamae kua pā ki te ngākau, me te aroha ki te whānau pani o te mema o mua kua hinga nei. Kia inoi au kia tū wahangū tātou ko ngā mema o Te Whare ka tangi ki a ia.

[As the Speaker of this House, I would like to express the pain in our hearts, and our love to the bereaved family of the past member who has passed away. I request that all members of the House stand together in silence to mourn him.]

Members stood as a mark of respect.

By-Election

Northcote

SPEAKER: I have received from the Electoral Commission a writ declaring Daniel Michael Bidois to be elected to represent the electorate of Northcote.

Oral Questions

Questions to Ministers

Economy—Business Investment

1. KIRITAPU ALLAN (Labour) to the Minister of Finance: What reports has he seen on the level of business investment over the past year, and how does this compare to the previous year?

Hon GRANT ROBERTSON (Minister of Finance): GDP figures released by Statistics New Zealand last week showed economic growth in New Zealand continuing in line with economists’ expectations. In the March 2018 year, 14 of 16 industries in our economy grew. I am pleased to note that the figures show business investment grew by 5.5 percent in the year to March 2018, compared to an annual growth rate of 3.9 percent in the year to March 2017.

Kiritapu Allan: But what led the growth in business investment in the year to March 2018?

Hon GRANT ROBERTSON: The 5.5 percent business investment growth over the past year was led by a 13.2 percent increase in investment in plant, machinery, and equipment compared to zero percent growth in the year to March 2017. This indicates that businesses are investing in capital to become more productive, which will help them to lift the incomes of their workers. On this side of the House, we welcome this as we help the economy transition to being more productive, more sustainable, and more inclusive.

Kiritapu Allan: What other reports has he seen on business investment and how it is contributing to current economic conditions in New Zealand?

Hon GRANT ROBERTSON: Business investment and GDP are components of the Business New Zealand overall economic conditions index, which balances a number of economic indicators to give a measure of economic performance. Not only was the index positive in June but it has risen in each of the past three quarters in which this ambitious and transformative Government has been in place.

Prime Minister—Industrial Action and Te Ārai Development

2. Hon SIMON BRIDGES (Leader of the Opposition) to the Prime Minister: Does he stand by all of the Prime Minister’s statements and policies?

Rt Hon WINSTON PETERS (Acting Prime Minister): In their context, yes.

Hon Simon Bridges: Does he accept that more than 32,000 people have either gone on strike or have signalled they will go on strike this year and that this figure exceeds the number of people that went on strike in the last nine years?

SPEAKER: Order! Order! I’m going to ask the Leader of the Opposition to rephrase it so that it in some way relates to a statement or policy of the Government.

Hon Simon Bridges: Does he disagree, as he said this morning, with the statement that more than 32,000 people have either gone on strike or have signalled they’ll go on strike this year and that this figure exceeds the number of people that went on strike in the last nine years?

SPEAKER: No. Again, I want an assurance that—[Interruption] The Hon Paula Bennett—I’m very tempted to repeat a comment that she’s made earlier. I’m going to ask the Leader of the Opposition for an assurance that that statement was one that was made by the Prime Minister.

Hon Simon Bridges: Yes, this morning.

Rt Hon WINSTON PETERS: Can I say that when the Leader of the Opposition made the 32,000 statement, he did not distinguish between those who have gone on strike and those who might go on strike. He added them all up together, and, as a consequence, he was talking unadulterated drivel.

Hon Simon Bridges: Does he dispute that any of the nurses, midwives, Public Service Association, Premier Bacon, port workers in Lyttelton, Auckland bus drivers, Hastings Pak ’N Save, Hawkes Bay Silver Fern Farms, Burger King, Nelmac workers, bottled-water workers, or Event Cinema are going on strike?

Hon Grant Robertson: We’re not responsible for Premier Bacon—I know that.

Rt Hon WINSTON PETERS: Ha, ha! Apart from bringing home the bacon, we’re not responsible for bacon. And the other ones that he has set out are really a gloom list of where an Opposition is trying to run down the economy and the humanity of a very stable, sound Government.

Hon Simon Bridges: So does he now, for the record, at question time, accept that more than 32,000 people have either gone on strike or signalled they’ll go on strike this year?

Rt Hon WINSTON PETERS: Can I say that there are a number of negotiations going on, because this Government does not have a tin ear. We understand the conditions under which they have suffered after nine years of neglect where the whole intent of the Government was to govern for the few against the interests of the mass and the many. We intend to turn that around, and we expect no such hopeless prospect at all.

Hon Simon Bridges: Does he stand by the Prime Minister’s commitment when asked whether her Government’s industrial relations policy could mean we see nationwide strike action: “No, we will not.”?

Rt Hon WINSTON PETERS: Yes.

Hon Simon Bridges: Does he believe his Government is delivering on that commitment, given more people have indicated that they’ll go on strike this year than over the last nine years added together, including a nationwide nurses strike?

Rt Hon WINSTON PETERS: The reality is that if, for example—to use an analogy—there is a so-called bus stop where no bus bothers to turn up, then it’s quite likely no one actually goes to the bus stop. But we run transport services and we listen. And so a whole lot of people out there say, “Maybe we should approach the new Government and get a fairer deal.”, and we are saying to them, “You will get a fair deal, but we can’t turn around nine years of neglect in the space of one Budget.” But my colleague the Minister of Finance’s message to them is “Hang on because help’s on its way.”

Hon Simon Bridges: Well, is it the reality of bus stops and buses that this Government, with the way it’s talking down business confidence, the way vulnerable workers are going to find it harder to get a job, and all of the uncertainty, is taking New Zealanders for a ride?

Rt Hon WINSTON PETERS: I can say, personally, we had a meeting with the business community in Wellington the other night that got the biggest attendance in their history.

Hon Simon Bridges: Will critical public services be put on hold if the nurses go through with their signalled strike action next week?

Rt Hon WINSTON PETERS: Can I say that we don’t approach negotiations with an intention to fail. We think that logic and reasonableness will be the order of the day in these negotiations, and we are hopeful that they will see the massive task this Government’s got and how they can help us achieve all of our targets, altogether, over time.

Hon Simon Bridges: How will the bus turn up at the bus stop when all the drivers are on strike?

Rt Hon WINSTON PETERS: Well, the first thing that you’ve got to have, of course, is a bus for there to be drivers, and that’s where we’re different.

Hon Simon Bridges: Will the impending strike action, including 27,000 nurses and midwives and 4,000 IRD and Ministry of Business, Innovation and Employment staff, be good for business confidence?

Rt Hon WINSTON PETERS: Again, the member is reciting pessimistic prognostications, which will not happen, and I have to tell that member that I’m getting sick and tired of having a duel of wits with an unarmed opponent.

Hon Simon Bridges: If it came to light that David Parker has at any time provided legal advice to John Darby, would he expect Mr Parker to have sought Cabinet Office advice on managing the appearance of a conflict of interest over the proposal to exempt the Te Ārai development from the Overseas Investment Amendment Bill?

Rt Hon WINSTON PETERS: Could I tell that member, I know David Parker. I saw him lose his job when there were false allegations, and because the Companies Office, after nine years, had not destroyed the critical document, he got his job back, but he never got one apology from his opponents or, dare I say it, sadly, from the press gallery. I know Mr Parker. He’s a man of integrity and a man of honour. What he says is the truth.

Hon Simon Bridges: I raise a point of order, Mr Speaker. I asked the Acting Prime Minister, effectively, whether he would expect, if he had given legal advice to a certain person, that he would, given the situation with this Overseas Investment Amendment Bill—an exemption—advise—

SPEAKER: I’m going to ask the member to repeat his question, and I think what we’ll find is that it’s already been answered. But I will ask him to repeat the question as he asked it.

Hon Simon Bridges: If it came to light that David Parker has at any time provided legal advice to John Darby, would he expect Mr Parker to have sought Cabinet Office advice on managing the appearance of a conflict of interest over the proposal to exempt the Te Ārai development from the Overseas Investment Amendment Bill?

SPEAKER: No, no. The member will resume his seat. I have listened to the question again. It was very clearly covered by Speaker’s ruling 165/1, and was answered much more fully than the Prime Minister had to.

Hon Simon Bridges: Has he been told whether David Parker threatened to sue the New Zealand Herald if it didn’t remove a column published last week highlighting the close links David Parker has with John Darby, and doesn’t this show why the perceived conflict of interest is of critical importance?

Rt Hon WINSTON PETERS: Mr Parker has no close links with Mr Darby—end of story. And by the manner of his questions, which are, by impugning the character of Mr Parker, defamatory—and if he walked outside the House, he would deserve to be sued, and he will not—

Hon Simon Bridges: Oh, more threats.

Rt Hon WINSTON PETERS: No, no. Go outside and repeat your malicious slander, and you’re going to be in trouble.

SPEAKER: I’m taking it that the Prime Minister was referring to the Leader of the Opposition.

Rt Hon WINSTON PETERS: Oh, of course.

Overseas Ownership of New Zealand Property—Exemption for Te Ārai Development

3. Hon AMY ADAMS (National—Selwyn) to the Associate Minister of Finance: When was an exemption from the Overseas Investment Amendment Bill for the Te Ārai property development first proposed, and by whom?

Hon DAVID PARKER (Associate Minister of Finance): The issue was first raised by a submission to the Finance and Expenditure Committee on 15 February by Te Uri o Hau and Ngāti Manuhiri, and other parties in the development, who all expressed concerns about the impact of the bill on plans for the Te Ārai property developments in Mangawhai, north of Auckland. The iwi sought a broad and permanent exemption from the effect of the bill. I recommended, in a Cabinet paper dated 22 March, that all New Zealand land be covered by the bill, including land arising from Treaty settlements, but that a transitional period be provided in this instance. The transitional exemption was approved by Cabinet on 3 April.

Hon Amy Adams: Is the Minister saying that the submission to the Finance and Expenditure Committee was the first time that the impact on the legislation of the Te Ārai development was brought to the attention of his Government, himself, or his office?

Hon DAVID PARKER: In so far as I’m aware, yes. Certainly, in respect of me and my office, yes.

Hon Amy Adams: What was the process that led to Te Ārai being considered for an exemption from the Overseas Investment Amendment Bill, given that Te Ārai’s submission to the Finance and Expenditure Committee did not seek an exemption?

Hon DAVID PARKER: The submission to the select committee said that that class of land and other land like it should be for ever exempt from the effect of the bill.

Rt Hon Winston Peters: Could I ask Hon David Parker: on what basis did he describe the Te Ārai development as iwi-owned land?

Hon DAVID PARKER: The advice we received from Treasury, which was also provided to the select committee, that this development is of great significance to these iwis—it’s the largest asset they own. It’s also important to note that the National Party agrees that this is iwi land. In February 2017, Steven Joyce told this House—and this is in Hansard—“It is important to remember that this is iwi-owned land.”

Hon Amy Adams: Was the decision to include an exemption for the Te Ārai property development discussed at a Cabinet committee; if so, which one?

Hon DAVID PARKER: Yes. The Cabinet paper that I’ve already referred to went to, I think, the Cabinet economic development committee. It would have been discussed at that committee before being discussed at Cabinet, and there is a specific recommendation from Cabinet. So, you know, the member might be trying to create a conspiracy here of what’s actually completely normal Government practice. We put a bill out for consultation; we received public submissions; we considered via Cabinet committee, Cabinet, and select committee in the context of the bill’s intentions; and then we put the provision in black and white in the bill.

Hon Amy Adams: So on what date did Treasury provide him with the advice he cited in Parliament last week, which he said had “the intent of helping the iwi who had suffered long delays on the project.”?

Hon DAVID PARKER: The advice from Treasury was that we ought not to have an exemption for Treaty-based land, and they’re right. In some ways, it’s an article 1 - based right of the Crown to have provisions in law relating to the control of land to overseas persons, whether that is general land or Māori land or Māori land that Māori received under a Treaty settlement. The subsequent development of the particular exemption that was proposed but has now been ruled out was led by me in concert with Government officials, with the approval of Cabinet.

SPEAKER: Can I just—sorry, there was a very specific request around the date of the paper.

Hon DAVID PARKER: I can’t recall the exact date, sir.

Hon Amy Adams: So what’s so special about these landowners that he considered them to be the only landowners in New Zealand—iwi or otherwise—who shouldn’t suffer a loss of property value due to the passing of his legislation?

Hon DAVID PARKER: As was made clear in the submission that was only received from these and from no one in similar circumstances—

Hon Dr Nick Smith: Mates’ rates.

SPEAKER: Who said that?

Hon Dr Nick Smith: I did.

SPEAKER: Stand, withdraw, and apologise.

Hon Dr Nick Smith: I withdraw and apologise.

Hon DAVID PARKER: As I was saying, there was no other similar submission to the select committee and, as a consequence, the issue didn’t arise.

Hon Amy Adams: Will he immediately release all Treasury and any other official advice he has received in respect of the proposed exemption for the Te Ārai property development?

Hon DAVID PARKER: I’m happy to release the information in accordance with normal Government procedures.

KiwiBuild—Off-site Manufacturing

4. MARAMA DAVIDSON (Co-Leader—Green) to the Minister of Housing and Urban Development: Why is he looking to overseas companies to prefabricate KiwiBuild homes; and what is he doing to promote as much New Zealand - based manufacture as possible?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): The announcement I made on Saturday was that KiwiBuild will look to support the expansion of off-site manufacturing to supply the affordable homes that New Zealanders need. I’ve met with New Zealand companies involved in off-site manufacturing and PrefabNZ to discuss possibilities, and I’m confident that we will see more housing factories opening in New Zealand. This is not about importing prefab components wholesale. It is the overseas technology and investment that we’re interested in, and opportunities for companies here to partner with overseas firms to use that technology in factories here, as companies like Concision are already doing. We are going to use KiwiBuild to grow a more competitive and innovative construction industry.

Marama Davidson: What is the Minister doing to develop that technological capacity within New Zealand?

Hon PHIL TWYFORD: KiwiBuild offers a once-in-a-generation opportunity to aggregate the scale of housing orders that we’ve never, ever seen in New Zealand. It offers the potential for orders of several thousand homes per year, with multi-year contracts, so firms can then invest in the technology, the plant, and the workforce to do off-site manufacturing at scale.

Anahila Kanongata’a-Suisuiki: Supplementary? Tēnā koe, e Te Mana Whakawā.

SPEAKER: I actually didn’t call the member. When I call a member I use her name.

Marama Davidson: Will the Minister commit to prioritising local training and employment opportunities and supporting our own industry to deliver KiwiBuild homes in the future?

Hon PHIL TWYFORD: Yes, I’m happy to make that commitment. Apart from building large numbers of affordable, modest, starter homes for young families, one of the primary goals of the KiwiBuild policy is to actually build a more innovative and efficient construction industry. We want to grow the New Zealand construction industry and provide the jobs and opportunities that young Kiwis need, but we’re not averse to working with overseas investors and companies to partner with New Zealand firms to do that.

Anahila Kanongata’a-Suisuiki: Tēnā koe. Will the use of off-site manufacturing reduce the cost of KiwiBuild homes?

Hon PHIL TWYFORD: Yes, it will. The international benchmark for off-site manufacturing at scale is $1,200 a square metre, which is approximately half the typical build cost in New Zealand. Build costs have gone up 30 percent in New Zealand in the last decade and are running at three times the rate of inflation. Increased use of off-site manufacturing will help us make KiwiBuild homes cheaper, at high quality, and build them more quickly.

Marama Davidson: Is he committed to supporting local initiatives like Kāinga Ora, who are ready and waiting for the opportunity to provide training and employment for prefab manufacture in places like Kaikohe, Whanganui, and the East Coast but are waiting for Government support?

Hon PHIL TWYFORD: Yes, I welcome the enthusiasm that organisation has. I’ve also had very positive conversations with PrefabNZ; with the New Zealand Superannuation Fund, who are interested in investing in large-scale off-site manufacturing; and local entrepreneurs such as 2degree founder Tex Edwards. Rotorua-based timber processor Red Stag Timber recently announced ambitious plans for a cross-laminated timber factory, and Fletcher Building only last week announced plans for a housing factory because, in their own words, they are keen to supply KiwiBuild. I am confident that this initiative will provide substantial opportunities for local firms.

Economy—GDP Growth Per Capita

5. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Did real GDP per capita go up or down in dollar terms in the March 2018 quarter, and can he confirm that the March 2018 annual GDP per capita growth rate of 0.6 percent is the lowest annual rate since 2011?

Hon GRANT ROBERTSON (Minister of Finance): In the March 2018 quarter, using seasonally adjusted figures—

Hon Amy Adams: Ha, ha!

Hon GRANT ROBERTSON: —no, that’s actually what we do—real GDP per capita was $12,586. This compares with $12,507 in the March quarter in 2017, an increase of $79. If the member wishes to use a comparison with the previous quarter, which previous Ministers of Finance have cautioned against, real GDP per capita was $12,587 in the December quarter, a reduction of $1, or, in percentage terms, 7/1000ths of 1 percent—well spotted. In answer to the second part of the question, the annual GDP per capita growth rate of 0.6 percent was the lowest annual rate since September 2011, part of a downward trend that began at the end of 2016.

Hon Amy Adams: Why is he defending declining GDP per person growth of just 0.6 percent for the year when he has previously claimed that, per person, New Zealand is going backwards at a time when our growth rate was in fact growing at twice that amount?

Hon GRANT ROBERTSON: Actually, if we look at per-person growth since New Zealand exited the recession, it’s shrunk nearly a quarter of the time since the recession. So under the previous Government’s policies, it was actually going backwards. In this case, it’s not growing quite as fast as we would like, because it will take a little longer than one quarter of activity to correct the last nine years.

Hon Amy Adams: So does he realise that annual GDP growth per capita is now 50 percent higher in Australia than in New Zealand, and that’s the first time in six years that Australia has grown faster per person than us?

Hon GRANT ROBERTSON: I’ll take the member’s word for those numbers; I don’t have them in front of me. What I do know is that if we look at annual growth rates, we are tracking higher than Canada, the Euro area, Japan, and the UK, and we’re about the same as the OECD and the US. Of course we want to see that improve, but a transition of our economy away from one based on housing speculation and population growth will take some time.

Rt Hon Winston Peters: Is it a fact that there has been a slight regression in the quarterly growth rates for the last three quarters, of which, surely, two were under the influence of the previous administration?

Hon GRANT ROBERTSON: It is true, as I said earlier, that there has been a downward trend in growth rates that began at the end of 2016. What the forecasters are now telling us is that if we look at year-on-year growth, by the third quarter of this year it’ll be 3 percent, and we’ll average that over the rest of the forecast period. That is solid growth, and it’s part of a transition of our economy.

Hon Amy Adams: Does he agree with the Minister of Energy and Resources when she said that the Government was looking at businesses that can turn off or scale down production to meet energy supply constraints, and how does he think this would affect our per-person economic growth?

Hon GRANT ROBERTSON: Of course I agree with the Minister of Energy and Resources, who’s doing a fantastic job. From time to time in the economy, we have to deal with certain supply constraints. What I do know is that sticking our heads in the sand and ignoring issues like climate change isn’t going to deliver New Zealand a sustainable economy. We’re doing something about it after nine years of the previous Government doing nothing.

Hon Amy Adams: So does he now understand why it is that business confidence has plummeted and job creation has more than halved under his Government, when the policies, processes, and attitudes of this Government have already slowed down our economic growth?

Hon GRANT ROBERTSON: I completely reject various premises in that question.

Hon Chris Hipkins: What correlation is he aware of between real GDP growth and business confidence?

Hon GRANT ROBERTSON: Historical evidence would say almost none. In the period between 2000 and 2008, business confidence was pessimistic 82 of 99 months, but GDP growth averaged, per annum, 3.2 percent. In the period 2009 to 2017, business confidence was positive 87 of 95 months, but GDP growth, on average, was only 1.98 percent.

Hon Amy Adams: So will he agree with me that the best way to create jobs and lift New Zealand wages is by supporting our economy to be one in which businesses have the confidence and the ability to invest, employ, and to grow, and if so, when will this Government start to walk the talk?

Hon GRANT ROBERTSON: The member obviously didn’t hear my answer to the supplementary question from my colleague, Chris Hipkins. The correlation is not between business confidence and GDP growth. This Government will stand on our record once we’ve started the transition to a new economy that’s more sustainable and more productive. In the meantime, there will be a fiscal stimulus from our Families Package, which commentators are saying will lead to year-on-year growth of 3 percent by the September quarter. That starts on 1 July and we’re very proud to introduce it.

Hon Amy Adams: I raise a point of order, Mr Speaker. I didn’t ask at all in that question about the correlation between business confidence and economic growth. I asked him whether the way to create jobs and lift incomes was to grow the economy. He talked about the Families Package, he talked about Mr Hipkins’ question—he didn’t address that.

SPEAKER: Yes, well, unfortunately the member’s question was slightly longer than that, and I think it gave the Minister answering the question more latitude.

KiwiBuild—Off-site Manufacturing

6. PAUL EAGLE (Labour—Rongotai) to the Minister of Housing and Urban Development: Will the Government increase the capacity of the construction sector to build 1,000 KiwiBuild homes in 2018-19, 5,000 KiwiBuild homes in 2019-20, and 10,000 KiwiBuild homes in 2020-21; if so, how?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): Yes. After nine years of neglect, we can’t go from zero homes to 10,000 overnight, but we are making solid progress in increasing the capacity of the construction industry. This includes our Skills Strategy and two years’ fees free for apprentices and industry trainees, and working with off-site manufacturing firms to boost the number of homes that we can build in factories with the latest technology.

Paul Eagle: How is KiwiBuild proposing to work with the off-site manufacturing industry?

Hon PHIL TWYFORD: Shortly, we will be offering the off-site manufacturing industry here and abroad the opportunity to present their ideas for delivering KiwiBuild homes and to suggest how we can give the industry the confidence and the certainty it needs to expand its capacity. For instance, KiwiBuild could offer multi-year large-volume contracts to off-site manufacturers, giving them the ability to invest in more plant and hire more staff.

Paul Eagle: Is using off-site manufacturing as part of KiwiBuild a new idea?

Hon PHIL TWYFORD: No it’s not a new idea. We’ve always known that off-site manufacturing would be crucial to expanding building capacity given workforce constraints. I was talking about its use in KiwiBuild as early as 2014. And when I became the Minister, officials advised, “The KiwiBuild programme creates a unique opportunity to support transformative change in the construction sector by supporting off-site manufacturing, which is quicker, cheaper, better quality, and uses labour more efficiently.” This formal approach to manufacturers is the next step.

KiwiBuild—Overseas Investment and Affordability

7. Hon JUDITH COLLINS (National—Papakura) to the Minister of Housing and Urban Development: Does he stand by all his statements and actions regarding KiwiBuild?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): Yes, in particular I stand by my statement that we “can’t go from zero to 10,000 … overnight”, but we are making solid progress in creating a pipeline of affordable homes, and before the first anniversary of this Government families will be moving into KiwiBuild homes in Judith Collins’ electorate.

Hon Judith Collins: When he said that large-scale development with KiwiBuild homes could be supported by foreign direct investment, exactly what does he expect that support to look like?

Hon PHIL TWYFORD: Well, it’s always been our view that we welcome foreign direct investment in the building of new homes. We stand by our longstanding position that the domestic real-estate market for existing homes should be protected from unrestricted flows of foreign capital. We have always welcomed foreign investment in new builds. That is our policy, and we expect that foreign direct investment in new builds will continue, including in large-scale developments that are also supported by KiwiBuild.

Hon Judith Collins: If overseas investment in KiwiBuild is something he is very happy with, as he told The Nation this weekend, then why is he not also very happy with overseas investments in private developments?

Hon PHIL TWYFORD: The member is quite wrong; we are very happy with offshore investment in new builds. I don’t know how I can be any clearer about our position. Our position hasn’t changed in the last four years.

Hon Judith Collins: If the funding will come from overseas, the flat packs will come from overseas, and even the workers now look like they’re going to be coming from overseas, what part of KiwiBuild is Kiwi?

Hon PHIL TWYFORD: We are not anticipating bringing flat packs in from overseas. We are not planning on bringing workers in from overseas. The Kiwi element in KiwiBuild is young Kiwi families getting the opportunity to own their own home, after a decade of denial.

Virginia Andersen: What reports has the Minister seen on the number of Kiwi families who own their own home, and how will KiwiBuild increase this?

Hon PHIL TWYFORD: An increasing number of first-home buyers are locked out of homeownership. Between 2007 and 2017, homeownership declined for families in nine of the 10 deciles, including for families earning between $97,000 and $118,000, it fell by 13 percent; for $117,000 to $142,000 of household income, it fell by 7 percent; and even for families earning between $142,000 and $188,000, homeownership fell by over 8 percent. We will build modern starter family homes and allow young families to, at last, have the opportunity to own their own home.

Virginia Andersen: How will KiwiBuild making housing more affordable?

Hon PHIL TWYFORD: Through KiwiBuild, we’re building modest starter homes for families who are locked out of homeownership across New Zealand. By increasing the number of affordable starter homes, we will provide young Kiwi families with the first step on the ladder and the security that homeownership brings. By supporting off-site manufacturing, we will reduce the cost of building new homes and increase the numbers that we can build.

Hon Judith Collins: When he had a meeting on Thursday, 31 May with the director of China Development Bank, what did he discuss in relation to KiwiBuild?

Hon PHIL TWYFORD: I did not meet the director of the China Development Bank on 31 May, to the best of my recollection.

Hon Judith Collins: I raise a point of order, Mr Speaker. I have a written answer from the Minister saying he did on that date. What should I—

SPEAKER: Well, I think there was enough of a caveat around the Minister’s answer to let it be in order.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. I think, given that the Minister could not recall and we now have a parliamentary question which he must have recalled at the time that he answered it, could the question be asked in a different way?

SPEAKER: The answer is no, because it’s been answered. The Minister said that he couldn’t recall having the meeting. That is absolutely accurate. He can’t recall it. He might have had it, but he can’t recall it.

Hon Judith Collins: I raise a point of order, Mr Speaker. Given that the question answered, 12265, has not yet been published for other members of Parliament, could I seek leave to table this?

SPEAKER: Is there any objection to that being tabled? There appears to be none. It will be tabled.

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

National Health Targets—Removal

8. Hon MICHAEL WOODHOUSE (National) to the Minister of Health: Why does the Government intend to dispense with the national health targets?

Hon Dr DAVID CLARK (Minister of Health): The previous Government’s health target data has not been published since August 2017. I want a health system that has honest and transparent reporting.

Hon Michael Woodhouse: I raise a point of order, Mr Speaker. The question was why, and I didn’t get an answer; that was not addressed.

SPEAKER: Well, I think the member did get an answer.

Hon Michael Woodhouse: Does he stand by his statement that the targets create “perverse incentives”; if so, what is his definition of “perverse incentive”?

Hon Dr DAVID CLARK: A good example of a perverse incentive is to recall what happened toward the end of the previous Government’s tenure, when the overall statistics showed that the number of electives was going up, yet in centres like Northland, Auckland, Counties Manukau, Bay of Plenty, and Waikato, if Avastin injections and skin lesion removals were taken out of those pumped-up statistics, the actual number of surgeries was dropping. Despite a growing population, the actual number of surgeries was dropping. That Government should hang its head in shame. That is the result of nine years of underfunding.

Hon Michael Woodhouse: Given that, is it his view that eye procedures designed to save the sight of patients with macular degeneration, or skin procedures aimed at improving the prognosis of cancer patients, are not worthy of undertaking or counting?

Hon Dr DAVID CLARK: We know that skin lesion removals can be performed for roughly half the price in a primary care setting as compared to being performed in a hospital setting. So it doesn’t take a rocket scientist to work out that if you can afford to perform twice as many surgeries, more lives will be saved.

Hon Michael Woodhouse: Is it appropriate to describe the saving of more than 700 lives a year by implementing targets to improve emergency department waiting times, as reported in the New Zealand Medical Journal last year, as a perverse incentive?

Hon Dr DAVID CLARK: I don’t think anyone is saying that about that target. We will continue to monitor a range of measures, dozens of measures, through the Ministry of Health, and the district health boards will be held to account for improved performance.

Hon Michael Woodhouse: What possible benefit to New Zealanders can come from the dispensing with of publicly stated targets that improve surgery throughput, reduce waiting times, improve health, and quite literally save lives?

Hon Dr DAVID CLARK: I disagree with the member’s characterisation. What we know is that that set of targets was driving a set of behaviours which may have led to the public health dollar being more poorly spent, with health consequences for New Zealanders. By defending a set of targets with perverse outcomes in it, the actual fact is that that member and his former Government may well have been driving poorer health outcomes for New Zealanders.

School Buildings—New Classrooms

SPEAKER: I just want to say, as a former teacher and Minister of Education, this is a very unusual question.

9. JAMIE STRANGE (Labour) to the Minister of Education: What recent announcements has he made to deliver new classrooms for students in New Zealand?

Hon CHRIS HIPKINS (Minister of Education): Last week, I announced that 58 new classrooms will be built across the country, in 19 schools, from Christchurch to Mangawhai. This $48 million investment is vital in meeting school roll growth, and this announcement includes seven special school satellite units.

Jamie Strange: How many students will benefit from the Government’s announcement of new classrooms across the country this week?

Hon CHRIS HIPKINS: Around 1,000 students will benefit from the 58 new classrooms and 19 schools announced last week. Part of this announcement includes the expansion of Amesbury School in Wellington, with around 200 additional student spaces. This year’s budget increase, of $332 million in new capital for roll growth and new schools over the next four years, will deliver spaces for around 7,400 students.

Tertiary Education—Fees-free Policy

10. Hon PAULA BENNETT (Deputy Leader—National) to the Minister of Education: What is the percentage increase in student enrolments at tertiary institutions in April 2018 compared to April 2017, according to the most recent data released by the Tertiary Education Commission?

Hon CHRIS HIPKINS (Minister of Education): Declining tertiary enrolments have stabilised so far in 2018. Domestic EFTS, equivalent full-time students, in student achievement component - funded level 3 and above qualifications for the year to April 2018 were 0.2 percent below the previous year, compared to a decline of almost 6 percent between 2013 and 2017.

Hon Paula Bennett: Does he agree, then, with Universities New Zealand chair and University of Auckland vice-chancellor, Stuart McCutcheon, who said in regards to demographics and numbers, “wouldn’t have been down considerably because of demographics. The effect is quite small.”?

Hon CHRIS HIPKINS: I have about 20 years in disagreeing with Stuart McCutcheon, and his statements about the fees-free policy are no exception to that.

Hon Paula Bennett: How does he explain the number of students enrolling in polytechnics and institutes of technology decreasing by 3.2 percent?

Hon CHRIS HIPKINS: There’s a very strong labour market at the moment, and history will show that there is a very strong correlation between participation in vocational education and training and a strong labour market. The decline in that area has been significantly less than it had been in previous years, but, of course, we’ve still got more to do in that space.

Hon Paula Bennett: Does he believe that the spend of nearly $2 billion over five years will increase student numbers up to 15 percent, like he promised a year ago?

Hon CHRIS HIPKINS: That’s not what we promised. We budgeted very conservatively for the policy because behavioural change is very difficult to predict when you’re introducing a policy such as this. What we do know is that 25,000 fewer students have borrowed for their fees this year. That is a successful outcome. Student debt has gone—well, has not increased by $150 million that it otherwise would have increased by were it not for this policy.

Hon Paula Bennett: If the policy was to encourage low socio-economic students into tertiary education, does he agree with Stuart McCutcheon who said, “If the objective was to make it easier for students from disadvantaged parts of our society to go to university, then it absolutely hasn’t worked,”; if so, will he take Mr Whelan’s advice that “It’s probably a good time for the Government to stop and think what it’s trying to achieve from this policy?”

Hon CHRIS HIPKINS: As I indicated in my earlier answer, no, I don’t agree with Stuart McCutcheon on that. The Government has been very clear—and the fees-free policy was very clear from the beginning—that we want to reduce the level of debt New Zealanders are starting their working lives with. That will have a significant equity benefit, because those from lower incomes won’t be put off studying by the astronomical costs that they currently face, and they will be able to be debt-free faster following their study, and they will therefore be in a position to buy a first home, or start a family, or those other things that they have been put off doing by the high levels of debt they currently finish their study and training with. It’s also important to remember that the majority of people who benefit from fees free are not university students.

Hon Paula Bennett: Why is there no additional funding in Budget 2018 for universities or industry training organisations for apprenticeships?

Hon CHRIS HIPKINS: University funding and apprenticeship funding are demand-driven, so I don’t accept the member’s assertion.

Jo Luxton: Is the change in overall enrolments in line with officials’ estimates at the time the fees-free programme was developed?

Hon CHRIS HIPKINS: Yes. Prior to the fees-free policy being developed, we were forecasting significant declines. The previous Government had been forecasting significant declines in participation. As the Cabinet paper that I’ve put up made it very clear, we were anticipating—or hoping—that the fees-free policy would result in that situation stabilising, and that is exactly what has happened.

Sexual Harassment—Minister of Justice's Comments

11. Hon MARK MITCHELL (National—Rodney) to the Minister of Justice: Does he stand by his statement that “My track record on issues of sexual harassment and sexual violence is very clear”?

Hon ANDREW LITTLE (Minister of Justice): Yes.

Hon Mark Mitchell: Does he stand by his comments in relation to sexual harassment claims at Russell McVeagh that private organisations have to conduct themselves or manage themselves in a way that they see fit, and that it might not be right or appropriate for them to appoint their own independent reviewer?

Hon ANDREW LITTLE: Yes.

Hon Mark Mitchell: Does he think trivialising serious indecent assaults as merely a pinch on the bottom will encourage members of Parliament who know about other sexual assaults to take them seriously and report them?

Hon ANDREW LITTLE: I don’t accept the premise of that question. I am not the one trivialising sexual assault in this country; it is that member.

Hon Mark Mitchell: If issues of sexual harassment at Russell McVeagh were an outrage and totally unacceptable, does his outrage extend to indecent assaults on young vulnerable victims being taken advantage of at unsupervised events?

Hon ANDREW LITTLE: That question sounds like an allusion to a matter that is in the media today that involves charges being laid against an individual and currently before the courts.

Hon Mark Mitchell: I raise a point of order, Mr Speaker. It’s just a very clear question; it doesn’t—

SPEAKER: No, and it’s been very clearly answered. Does the member have further supplementaries?

Hon Mark Mitchell: I raise a point of order, Mr Speaker. It was a very clear question.

SPEAKER: Order! The member had a point of order. I’ve dealt with it. If he continues to argue the point, he is going to be disorderly. Does he have a further supplementary?

Hon Mark Mitchell: I do, thank you, Mr Speaker. Would the Minister, on reflection, change his characterisation of a serious indecent assault against a female corrections officer as a pinch on the bottom, if given the opportunity?

Hon ANDREW LITTLE: I maintain my position that indecent assault, sexual harassment, any sexual offending is insidious and totally unacceptable.

Mental Health Services—Pay Equity

12. ANGIE WARREN-CLARK (Labour) to the Minister of Health: What recent announcements has he made regarding pay equity for mental health and addiction support workers?

Hon Dr DAVID CLARK (Minister of Health): Last week I was delighted to announce that the Government has reached an agreement with unions and employers to extend the Care and Support Workers (Pay Equity) Settlement Act to include mental health and addiction support workers. Members of this House will remember that these workers were excluded from the settlement negotiations by the previous Government. We’re putting things right.

Angie Warren-Clark: How will this help mental health workers?

Hon Dr DAVID CLARK: This agreement will benefit an estimated 5,000 mental health and addiction support workers. Nearly half will get an increase of more than $3 an hour, which means full-time workers will be paid approximately an extra $120 a week before tax. One in five workers will get an increase of more than $5 an hour, or around an extra $200 a week for those working full-time.

Angie Warren-Clark: Why has the Government taken this decision?

Hon Dr DAVID CLARK: Extending the care and support workers settlement to include mental health and addiction workers is the right thing to do. People in this workforce support New Zealanders when they are most vulnerable, and they deserve a fair go. By taking this decision we are further demonstrating our commitment to pay equity and lifting wages, particularly of the lowest paid New Zealanders.

Points of Order—Personal Reflections and Unparliamentary Language, Use of “mates’ rates”

Hon Dr NICK SMITH (National—Nelson): I raise a point of order, Mr Speaker. Earlier in question time you required that I withdraw and apologise for using the phrase “mates’ rates”. I’ve checked in the Hansard, and that phrase has been used over a dozen times, including by yourself, sir.

SPEAKER: What I did doesn’t make it right.

Amended Answers to Written Questions

Question No. 12265 (2018)

Hon PHIL TWYFORD (Minister of Housing and Urban Development): I seek leave to make a—

Hon Gerry Brownlee: Mr Speaker.

SPEAKER: I have called the Hon Phil Twyford.

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

SPEAKER: Well, no, he’s on a point of order.

Hon Gerry Brownlee: Oh, is he?

SPEAKER: He is.

Hon PHIL TWYFORD: I seek leave to make a personal statement correcting an answer that I made to a written question that was quoted in question No. 7 today.

SPEAKER: The member seeks leave to make such a statement. Is there any objection? There appears to be none.

Hon PHIL TWYFORD: My written answer to question No. 12265 incorrectly stated that I had met with the director and president of the China Development Bank; in fact, I met with the director and president of another organisation who were acting as intermediaries for the China Development Bank, hence my answer to the oral question today.

Bills

Land Transport Management (Regional Fuel Tax) Amendment Bill

Third Reading

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

Thank you, Mr Speaker. When this Government came to office, we discovered that my predecessor as transport Minister, Simon Bridges, had left a multibillion-dollar hole in his Auckland transport plan—not a hole that had been concocted for political purposes but an actual fiscal hole that had been reported earlier last year as around $5 billion but, as we found out when we took office, it was in fact $9 billion. That meant that important transport projects that the former National Government had promised could not be funded nor built. They would have remained just promises on paper.

The regional fuel tax contained in this Land Transport Management (Regional Fuel Tax) Amendment Bill fixes that fiscal hole. It will mean that $4.3 billion of extra funding for Auckland transport over the next decade will be available, only $1.5 billion of which comes from the regional fuel tax itself. That means that we have been able to present a fully funded 10-year plan for Auckland Transport—a record investment in the transport system of our country’s biggest city.

We’ve just been through a nine-year experiment in underfunding Auckland transport, and the results are there for everyone to see. Road deaths and serious injuries have risen sharply, way beyond the increase in population or the number of vehicles on the roads. The roads are clogged, and congestion is costing Auckland $1.3 billion a year in lost productivity. Our public transport system is under strain and needs urgent upgrading.

Auckland is not the only region where there is a critical and urgent need for greater investment in transport infrastructure. The previous Government cut transport funding in regions right across New Zealand, and I hear the calls from other councils around this country for greater investment, but for this term of the Parliament the regional fuel tax will be limited to Auckland alone. That is what we campaigned on, and that’s what this Government will deliver. Other regions will benefit from our increased funding for regional and local roads and a much greater, new focus on safety.

For Auckland, only the regional fuel tax can deliver the level of investment needed to fund the infrastructure that the city so desperately needs. The Leader of the Opposition claims that we should fund this investment out of Government surpluses instead. When he was asked how he would fill the gap that would be left in Auckland’s transport plan by a hypothetical National Government cancelling the regional fuel tax, he said, “We would fund it from growth.” Well, there are a couple of big problems with that. The first is that it goes against this Government’s principle that Auckland should contribute its fair share to transport investment—not by putting the whole cost on the rest of the country. Secondly, smaller surpluses mean more debt, and the same person demanding that we spend more with no extra revenue is also demanding that we run less debt.

In contradiction to Simon Bridges, Jami-Lee Ross says that I should lean on Auckland Council to make them cut $150 million a year from their spending to replace the regional fuel tax revenue. Of course, I did discuss this with Mayor Phil Goff, but here’s the reality: most of any increase in Auckland Council spending in recent years has been on infrastructure—mostly transport and mostly roads. What road projects would National cancel in order to fund their transport plan, and what kind of a silly money-go-round would that policy be?

The reality is simple. If we’re to have less revenue to pay for transport, we would have to run more debt, cancel projects, or both. The Opposition is asking us to simultaneously have less revenue, less debt, and spend more. The maths don’t add up, and National needs to come clean and tell us which projects they would cut. Would they cut Penlink—would they cut Penlink? Would they cut Mill Road? Would they cut eight different park-and-rides that will be funded by the regional fuel tax?

Here’s a list of the $4.3 billion of projects that the regional fuel tax will fund: $898 million in roading improvements and new roads to meet population growth; $753 million for the Auckland-Manukau Eastern Transport Initiative busway, which will deliver a massive transport improvement in Botany, after nine years of no investment in that electorate; and $708 million for Mill Road and Penlink, two vital roading projects that National talked about but did nothing about for nine long years and then spread fake news that our Government was going to cancel those projects. There’s $552 million for road safety—targeted safety improvements in Auckland’s roading network, which are forecast to lead to a 60 percent drop in deaths and serious injuries. There’s $396 million for electric trains, including 20 more trains to keep up with surging demand; $342 million for walking and cycling, including 125 kilometres of new cycleways; $334 million for bus improvements and airport access, including 200 kilometres of bus priority improvements; and $299 million for public transport infrastructure, including more park-and-rides and ferry wharf development. This is a massive list of transport projects, none of which would happen without the regional fuel tax.

What the National Party doesn’t seem to understand is that there is no magic money tree to pay for these transport projects, and you’d think they’d know that, because they left a $9 billion hole in their transport plan that they had no explanation for.

Let’s be clear that Auckland Council will be accountable for how it uses this money. It’s important that Auckland Council doesn’t just start projects but it completes them, on time and on budget. For that reason, this bill provides for appropriate Crown oversight of any revenue raised, tight controls on the use of that revenue, a ministerial review procedure, and ongoing public reporting to provide transparency to the public. But let’s be clear about one more thing: take this regional fuel tax away, and Auckland would be back in the position of having empty promises of projects and no money to pay for them.

This Government could have followed in the path of the former National Government. We could have promised transport projects and never built them. We could have forced the rest of New Zealand to pay the full costs of Auckland’s growth. I could have copied Simon Bridges and presented an Auckland transport plan with a multibillion-dollar hole in the heart of it, and it would be easy to talk big with no money to pay for it and to put the vital infrastructure investments on hold, as the last Government did for nine years, holding back the growth and prosperity of our country’s biggest city. But I wanted to be honest with the public. This Government wants to actually build the infrastructure that our country’s biggest city needs. That costs money. It has to come from somewhere, and we are already paying the price of doing nothing in congestion, lost productivity, and lives.

Aucklanders want this problem fixed. They want a Government that will get on and fix the gridlock. They know that it can’t be done for free. They know the price of the last nine years of under-investment, because they pay it every day in the traffic. This regional fuel tax allows us to undertake the most ambitious transport construction plan in New Zealand history. It’s time to get on with it, time to stop talking about it—let’s do this.

JAMI-LEE ROSS (National—Botany): We know from Minister Twyford’s interjection, or explanation, a short time ago that we can’t actually believe much of what he says, and I think, looking back and listening to that speech from the Minister, I don’t believe much of what he says, either. The primary reason why this legislation is before the House—and I acknowledge we’re at the end of the road now, after a long, tortuous process where the Minister has actually ended up killing public support for fuel taxes. At the end of the road here, the reason why this House is passing this piece of legislation is because it lets the Auckland Council off the hook.

Phil Goff seems to think it’s bad for this side of the House to expect the Auckland Council to find savings. It was his own former colleague that went into an election saying that he would find 3 percent to 6 percent savings within the Auckland Council’s budget. It was his own colleague that said after the election, to the media, that that’s what would be happening. But it turns out that’s not possible, according to Phil Goff and the Auckland Council, and so Phil Twyford rode into town and said, “Hey, I’ve got an idea. Let’s go and tax people more, up to 11.5c a litre.”

But it doesn’t stop at that. It goes even further than that, because the reason why Phil Twyford has killed support for petrol taxes is because, on top of his 11.5c a litre for a regional fuel tax, he’s also proposing nationwide fuel tax increases. The total cumulative effect of what Phil Twyford has put on the table for Aucklanders and people around the country to pay is up to 25c a litre, and that’s why, when Auckland Council polled this issue of a regional fuel tax, they actually found a bit of support—52 percent were in support—but, since then, support’s been dropping. Since the Minister has been out there failing to promote and promise and do a good job of promoting his fuel taxes, now we see 58 percent of people are opposed to the regional fuel tax—

Hon Mark Mitchell: 58 percent?

JAMI-LEE ROSS: —58 percent opposed, from a poll from the very same company.

The fact of the matter too is that there is no single existence of there being public consultation where there’s been support for this regional fuel tax. The Auckland Council held a public consultation: more people opposed than in support. They held a second public consultation: a majority of people opposed. When the Finance and Expenditure Committee held a consultation on the bill, 89 percent of submissions were opposed to this.

That’s because the country does not want this Labour Government to tax people more when it’s not necessary. I say that the Government should hold the Auckland Council to account—do what we were doing and say to Auckland Council, “We’re not going to give you the ability to tax people more at the petrol pump until you get your own house in order.”

And we cannot believe what the Minister’s saying about roading projects. It’s laughable for him to come to this House and talk about Mill Road and Penlink. Our side of the House went into an election promising not only to bring those projects forward; we were going to designate Mill Road as a State highway and complete it. We also were ready to go on Penlink. Where’s Penlink sitting now? Mark Mitchell was ready to get out his diggers and get out his shovels in a year or so’s time. Penlink’s been pushed to the end of the decade. Marja Lubeck likes to go on about how they’re delivering Penlink. It’s at the end of the decade—she won’t even be here by that time.

This fuel tax does not have the support of Aucklanders, and the Minister cannot come into this House and claim that they’ve got some grand plan for Auckland that’s going to solve everything. The only real difference between what we were doing and what they’re proposing is they’re proposing $6 billion worth of trams that we wouldn’t fund because we don’t believe that they’re necessary or that they would deliver much in the way of benefits, and they’re cancelling the East-West Link. On top of that, they’re taxing people more.

The very reason why the Minister is talking about projects—“What would National kill? What would National get rid of?” Well, I tell you, the difference between our projects is very simple: we won’t be putting $6 billion into Auckland trams that are not necessary and don’t go down the corridors that actually are seeing growth. We would deliver a sensible transport plan that we’d already agreed with the council, that was already in place, and that he has, effectively, picked up—just, the difference is we won’t tax people more and we won’t be funding those trams.

We went into the election with nine years of track record of delivering projects for Auckland. The Waterview Connection: open because we were working on it. We had Steven Joyce, who ensured the tunnel was in place and was properly funded. We delivered Waterview Connection. The Victoria Park Tunnel—that went through under us. Motorway widening—that went through under us and was happening. [Interruption]

DEPUTY SPEAKER: Shh! Order!

JAMI-LEE ROSS: We were seeing projects around Auckland going through because the National-led Government was delivering on it.

But the Labour Party didn’t have a policy before the election; they gave that to Generation Zero—they contracted, effectively, Generation Zero to put in place their transport policy. They couldn’t come up with their own ideas. They uplifted Generation Zero’s plan, which is solely and ideologically focused on trams—yesterday’s technology—when he had advice that buses would be a far more effective way of delivering projects for Auckland and delivering congestion benefits. Phil Twyford should not be listened to on the issues of transport, and I don’t believe that he should be the one out there promoting new taxes for the Government, because he’s wholly failed to find support for this regional fuel tax.

It’s not just an Auckland issue, either. I think we need to be more honest in this House about what this bill actually would do. It’s not an Auckland regional fuel tax; the Minister is passing a bill that would allow fuel taxes to go up, as regional fuel taxes, around the rest of the country. There’s a caveat that it’s only for Auckland now, but if it was only for Auckland, why does this bill contain clauses that would allow regional fuel taxes around the rest of the country? It’s because that’s what their plan is. It’s because that’s what they want, and I think when the rest of the country sees what is happening to Auckland, they will be even more afraid of allowing Phil Twyford to continue with his transport plans.

The other thing about this bill which I find wholly inappropriate is the fact that inserted into the bill is regulation-making power that would allow the Minister, without any reference to Parliament and without any reference to the public, to increase regional fuel taxes as high as he wants. There is no upper limit, there is no maximum—it’s simply a regulation-making power that allows the Minister to increase regional fuel taxes as high as he desires. It’s not capped at 10c a litre in the bill; it’s not capped at 20c or 30c a litre in the bill. In fact, there is no legislative maximum in this bill as to how high regional fuel taxes can go. Using a “Henry VIII” clause, the regional fuel taxes can go as high as the Minister wants under a regulation-making power. No checks, no balances, and no reference back to Parliament; it’s simply there for the Minister to do at his own whim. I find a clause like that to be wholly inappropriate. I think that when it comes to a taxation-making power, there should be greater reference back to the Parliament and we should not have those clauses in there.

I’m also appalled that the Minister—and he admitted this in answers to select committee—has done no work on the issue of price spreading; no work on the issue of how an Auckland regional fuel tax would affect the rest of the country. We already know that other parts of the country are seeing fuel companies increasing the price of fuel in anticipation of the regional fuel tax. We know, through Ministry of Transport commentary, that there is an expectation that there will be price spreading. He did no analysis on it, though—didn’t ask any questions. And when I asked in the House whether he had read formal modelling, he said he had; when I asked whether it existed, he said it had; but when he fronted up to select committee and provided written answers to the select committee, his officials advised him to give the answer—which I believe was probably the accurate one—“No formal modelling existed.” So Phil Twyford’s putting in place a tax that he does not understand the impacts of, that isn’t necessary, and that he’s seen no formal modelling on—he can’t have seen it, because it doesn’t exist.

He hasn’t properly considered the impact on low-income New Zealanders, either. There were a few lines in select committee reports and a few lines in some advice, but the reality is that these taxes are regressive. They will ensure and see that the lowest-income New Zealanders living in South Auckland, Māori and Pacific families that they claim and purport to represent, will be the ones hit the hardest by this regional fuel tax. They also won’t see any benefits. They won’t see any trams going past their doors. They won’t see anything in the way of transport efficiency that the Minister claims is necessary and will exist.

This regional fuel tax is unnecessary and will be repealed in a few short years’ time. This regional fuel tax isn’t one that should exist, because the Mayor of Auckland should be held to his promises, and we don’t support regressive taxes where no real research has been done into their impacts, and we don’t support something that does not have any support from Aucklanders—in fact, a majority of people, time after time after time, have told Parliament and the council they don’t support it. The Labour Party should front up and do the right thing by New Zealanders and not support this bill. This side certainly won’t be.

MICHAEL WOOD (Labour—Mt Roskill): Well, that was a very, very negative speech, I feel, from the member for Botany. In my comments, I want to focus more on the positive pro-growth vision that this Government has for Auckland’s transport system and the plan and the funding that we are delivering through this very important piece of legislation—something that the former Government failed to do in its nine years of Government.

Just before moving on to that, I do want to reflect on the member for Botany’s comment that the previous National Government had a nine-year track record of delivering for transport in Auckland. I reflected on this a little bit and I thought, “Well, let’s see what the National Party’s friends thought of that. That’s always an interesting place to go—

DEPUTY SPEAKER: I’d really rather that the member focused on the bill. Third readings are—

MICHAEL WOOD: I’m about to launch into defining the problems that the bill is attempting to solve, and that’s by talking about the serious congestion that Auckland faces. I’m doing that by way of reference to a report that the Employers and Manufacturers Association (EMA) commissioned last year—an independent report produced by the New Zealand Institute of Economic Research which assessed the congestion crisis that Auckland faces. Here’s what it said. It said that 24 percent of the arterial network in Auckland was congested in the December 2016 quarter, up from 18 percent in the same period two years ago. Kim Campbell, the Chief Executive of the EMA said, “What business is telling us and what we’re seeing in the numbers is that congestion has worsened exponentially in the past three to five years.” He noted that businesses had hired 20 percent more staff to carry out the same work and trucking firms were making fewer runs and taking longer to do so, creating a 30 percent productivity loss.

The Chief Executive of the National Road Carriers association, David Aitken, said that the number of cross-town trips possible for transport firms in a working day had halved in that period to only slightly more than three, over the previous three years from 2014 to 2017. In the report, he noted that the journey from Pakuranga to the CBD had increased by 21 minutes, or 45 percent, and “it’s going to get worse.”

In the same report, the average speeds on Auckland’s arterial roads were: Tristram Ave in the Northcote electorate, 13 kilometres an hour at peak hour; Khyber Pass in the Auckland Central electorate, 18 kilometres an hour; Tiverton-Wolverton and Maioro Street in the New Lynn electorate, 20 kilometres an hour. Auckland is a wonderful, growing city, but it is choking on its growth, because of a failure to invest in the transport infrastructure that we need, and this Government says we need to keep looking forward. We heard, in the previous speaker’s comments, a lot about the Waterview tunnel. That was a project that was supported by all sides of the House, and it’s great. It’s made an improvement, but that simply doesn’t solve Auckland’s transport problems. We’ve had recent media reports that say that, by November of last year, we were already back to the same congestion that we had before the Waterview tunnel.

This bill is about a vision for finally unlocking Auckland. It’s about putting forward a clear plan, and it’s about actually funding it. You need all three of those things if we finally want to get Auckland moving. The vision that we have, as I said, is a pro-growth vision to get Auckland moving by giving Aucklanders real transport choice. What we know at the moment is that too many Aucklanders simply don’t have that choice. The previous speaker, Mr Jami-Lee Ross, quite incorrectly stated that the proposed light-rail plan from the city centre of Auckland through to the airport apparently magically won’t go through South Auckland. Well, the news for him is that it actually does. There’s a big part of South Auckland between the city centre and the airport, and the people of Māngere Bridge and Māngere currently do not have access to modern, high-quality mass transit in our city.

It is this 10-year plan that the Government is delivering, through the agreement that we have with Auckland Council, that will actually deliver people those choices in every single part of our city; whether it’s those people in Māngere and Māngere Bridge who will have access to light rail; whether it’s the fast-growing north-west of Auckland—massive growth happening in that area: tens of thousands of new properties planned, and we’re going to deliver the modern, high-quality light rail to give those people real transport choices; whether it’s the eastern suburbs of Auckland, the electorates of Pakuranga and Botany, currently the worst-served areas for quality public transport in the whole of our region. The plans that this Government has will open up options for high-quality public transport through dedicated busways into those communities and give those people real choices about how they move around, and it will free up our roads for the people that need to drive and the freight that needs to use those roads.

The other key part of the vison that we have here is a vision of safe and vibrant communities. Over the past five years, the number of serious injuries and deaths on Auckland’s roads has skyrocketed by 60 percent. That is a scandal. That is real people losing their lives; real people being injured because the previous Government forgot to invest in the safety that we need in a growing city. This plan, specifically funded from the regional fuel tax, puts the investment in to make sure we have safer streets for our communities, to make sure that our kids have the options to walk and cycle safely to school, as many of us did, but it’s simply not safe to do so these days because of the congestion, because of the traffic on our roads.

The plan that we are delivering, supported by this bill, supported by the $4.3 billion of extra transport investment this bill leverages, will make Auckland’s roads safer, it will make our communities more vibrant, it will make our businesses more efficient, and it will finally deal with that issue of congestion—the sheer frustration that 1.5 million Aucklanders face every single day on our roads: 1.5 million Aucklanders are crying out for a Government to finally do something about this problem.

Most importantly, this plan funds those projects, because it’s all very well to get up in this House and talk about what you’re going to do, to put some ideas down on a piece of paper, but unless you front up with the funding, it don’t count for anything. That is the status of the projects that were tabled by the previous Government in its dying days, in August of last year. This project funds the Auckland Transport Alignment Project—a $28 billion package—by leveraging the regional fuel tax.

It is time for some vision for Auckland. It is time to unclog our roads. It is time to give people real transport choices. After nine years of drift, this Government is taking action, and this bill is at the centre of it. I commend it to the House. Thank you, Madam Deputy Speaker.

Hon PAUL GOLDSMITH (National): Thank you, Madam Deputy Speaker. There’s no question that many Aucklanders are very concerned about traffic congestion. They’ve seen our city growing rapidly. It’s a dynamic, prosperous city, which is growing and becoming more and more like an international, first-class, multinational city, but, as a consequence of that, we have seen more congestion, and so everybody, I think, is conscious of the fact that we need more investment in transport right across the board, from roads through to public transport and also to cycling.

Now, the reasons for this are long standing. It never ceases to amaze me that people are surprised that there’s congestion on the Southern Motorway, when it was built with two lanes each way, in the late 1960s, and since then the population has probably quadrupled, even more in South Auckland, and yet there are parts where it’s still two lanes each way, and—surprise, surprise!—we have congestion. So, over many, many decades, we as a country have not kept up with the road investment that we needed to make.

The previous National Government, after a long period of neglect, really turned the taps on and started to do the work that needed to be done, as we saw with the Waterview tunnel, as we saw with the massive investment in, particularly, rail, public transport, the electrification of the trains, and the many roading projects—the Northern Busway; a whole lot of things that were done that have helped to alleviate the pressure, but the growing population has continued to add to it.

So I suppose the point I would be making is that, yes, this National Party agrees, and most Aucklanders would agree, that we need to continue to invest in transport infrastructure across Auckland to reflect the fast-growing nature of that city, which is something that, broadly speaking, we celebrate and that needs to be done. The question then is: how should it be paid for? I think the sense that most Aucklanders have is that they already pay enough taxes to deal with this issue, and if you look at the average litre of petrol that people buy at the pump, currently, there’s 66c of excise. Then, when you add the GST to that and then the GST to the whole thing, they’re getting close to $1—not far off $1—in taxes and excises, of the roughly $2 a litre that you’re paying already.

Now, this bill wants to crank even more on, and with this regional tax, in conjunction with the broader petrol taxes that are being proposed, we could be looking at an extra 25c a litre in terms of taxes. So, probably, at current prices, you’d be seeing that more than half of the cost of the petrol that goes into the pump is in taxes.

Hon Shane Jones: Scaremongering—scaremongering.

Hon PAUL GOLDSMITH: It’s not scaremongering; it’s the truth. So people are, naturally, concerned that this is just another way of getting more and more money out of their pockets, and there is a natural frustration given the fact that there are potential other sources of funding for the investment that’s required. The most obvious one that was referred to is that the $150 million that this extra regional fuel tax is supposed to bring in is about roughly the same amount that the Mayor of Auckland promised to find in savings in his rather bloated Auckland Council bureaucracy. He promised to do it; he hasn’t done it, and everybody who lives in Auckland and looks around at what Auckland Council is doing believes quite strongly that there is potential for significant savings there.

We are also frustrated by the ideological approach of this Government to not really looking at private-sector funding or co-funding or public-private partnerships in the roading network and being closed-minded to that in many respects—

Hon Phil Twyford: No, we’re very open to it—very open to it.

Hon PAUL GOLDSMITH: Well, let’s see—lots of talk, but we haven’t seen any evidence of it yet. And then there’s also a concern about the sort of ideological nature of the spending, and what we’ve seen is they’ve been very quick to shut down important roading projects such as the East-West Link, which was almost ready to go, and they’ve been replaced with—

Hon Phil Twyford: Most expensive road in human history.

Hon PAUL GOLDSMITH: And we would’ve been very impressed if you could’ve found a more effective way to do it, but it’s been replaced by other projects, such as trams down Dominion Road, which may or may not take effect in five or six years’ time, once they’ve figured out what the route is and where it’s going to go and how it’s going to help. So you’re taking away things that were ready to go now and are replacing them with things that may be ready to go in five or six years’ time—

DEPUTY SPEAKER: I’m not—I’m not.

Hon PAUL GOLDSMITH: Sorry; the Minister is. So people look at that and they wonder whether the Government is actually focused on them and their needs, which is the desire to reduce congestion. So there’s not a great deal of trust that’s emerging amongst the public, and particularly the people of Auckland, about the effectiveness with which this Government spends its money.

We’re also acutely aware that these extra petrol taxes will add to the cost of living, and Aucklanders in particular are nervous about that at an expensive time. They see their rents going up all the time because every week that passes, the Government passes some new way of putting up the price, making it more expensive for landlords to run their properties, and, eventually, that flows through to rents. Of course, all the other regions are looking at this and thinking, “Well, that’s nice to see Aucklanders paying more tax.”, but they worry, in the back of their minds, that it’ll be them next. Next, the knock on the door will happen to them, and they’ll be after their money as well. It all adds up, and it adds to the cost of business.

I suppose another aspect of this is that it is yet one more contributor to the plummeting or falling or collapsing—I don’t know what’s the best adjective—business confidence in this country, because we’ve seen survey after survey show that business confidence is falling in New Zealand, at a time when this economy should be growing rapidly. We’ve got high terms of trade, the global economy is picking up, we should be going gangbusters, and yet a crisis of confidence is starting to develop.

Hon Shane Jones: Fiction! Fiction!

Hon PAUL GOLDSMITH: Notwithstanding some Ministers saying they’re all junk. They’re not junk. Particularly where they relate to specific investment intentions of businesses over the next 12 months, they have actually proved to be very accurate over time. And one of the major concerns is the continual adding of costs to businesses. This petrol tax is one of them, and you can’t deny it. It’s going to be coming in in a few days’ time, and every courier pack, every truck, every concrete truck that’s delivering the concrete that’s needed to grow the houses—all these things—every gallon of milk that’s carried to the supermarket, everything that is transported physically has to be paid for in extra fuel prices, and that all adds to the cost of business. When you add that to all the uncertainty around industrial relations, around oil and gas, and around the general attitude of this Government towards business, the general attitude of them, which is to say—

Hon Phil Twyford: Oh, what a lot of scaremongering.

Hon PAUL GOLDSMITH: As the Minister’s colleague Mr Lees-Galloway said to businesses, if you don’t like it, well maybe you’re not resilient enough to be in business and maybe you should go and do something else. That sort of attitude is something that’s not helping.

So, yes, we agree absolutely with the Minister that we want to see more investment in transport infrastructure in Auckland. And we would hold hands and celebrate with him every advance he makes towards that goal if he made sensible and practical suggestions. But what we are questioning, and what we are not at all convinced by, and what most Aucklanders are not convinced by, is the fact that we need to dig even deeper into the pockets of Aucklanders to pay for this when we’ve already got our hands so far in their pockets that we should be able to get enough money already. And we want to have some level of confidence that the money that they’re collecting already is being spent wisely. And there has been nothing to indicate so far that that is the case. And so we oppose this bill, and we want Aucklanders to have the investment in transport that they need, and we know that they are having enough taxes and excise collected from them already, right now, here today, to be able to get the job done if the Government does it effectively and efficiently.

DEPUTY SPEAKER: Just before I call the next speaker, I was negligent—we don’t actually have a motion. So the question is that the motion be agreed to.

Hon SHANE JONES (Associate Minister of Transport): I just want listeners to be reminded that the name of this bill is the Land Transport Management (Regional Fuel Tax) Amendment Bill 2018, because what the House has been served up by the Opposition are a whole host of speeches that veer wildly into the territory of irrelevancy. Let’s just go back to basics. This is a Government that has striven to achieve sustainable growth and long-term investment in capital assets that will continue to generate public benefit, societal efficiency, and economic progress. But that cannot be done in the absence of access to capital.

Now, we can have all of the fables and the fairy stories from the other side of the House, but the deep reality is that this is a bill that enables the people of Auckland, now, to watch a pipeline of projects come into being. Let’s also remind ourselves about some of the arithmetic and not these fictitious stories about Manurewa and South Auckland—strange and alien territory to the other side of the House—not these fictitious stories about how this will disappear on pet projects. This contributes to the $28 billion which is an amalgam of funding between Auckland Council and central Government. It also enables Auckland’s projects to be expedited. In actual fact, the origins of the Waterview tunnel go a long way back before Steven Joyce. That was the subject of great debate. In fact, I think my ministerial colleague Mr Twyford would recall it was an item driven by a certain politician who had her office in Sandringham: her name was Helen Clark. She was unable, however, to secure any endorsement during that period of bleak history when Don Brash, for a mercifully short period of time, spread his baleful influence upon New Zealand society. Those days have long now since disappeared. The $28 billion—$150 million per year—enables the council to drive through projects that have followed an open, democratic, transparent process. Of course, my lament is that we need to see a similar level of lucidity in other regions around New Zealand, but I’ve been assured by the senior transport Minister such pleasure awaits us.

Let’s carry on, because it’s important that listeners realise we must not fall victim to scaremongering or half-baked truths. There is no way that Auckland can unlock its potential unless it can move goods and services and people around. As the projects grow in terms of public service transport, more people—indeed, like my good self for a period of time. When I wasn’t in the tropics, I was in Auckland. I was a regular user of the train service, and I abandoned the car. We need to see more of that. I mean, if it’s good enough for a 58-year-old Dalmatian Māori from Kaitāia to catch the train, I spread the pleasure, but that pleasure is not accessible in the absence of pūtea to actually fund these issues.

Now, let’s just continue. There have been some concerns amongst my friends out in Pukekohe, the market gardens, and my fellow hunters and gatherers of Tangaroa, the fishing industry both recreational and commercial, that the rebate system inside this proposed piece of legislation is not fit for task. That’s why we thoroughly endorse what the Minister said during the second stage when the House considered this bill. He is bringing forward, in short order, a body of work that will enable the inefficiencies and the areas that have to be refined in terms of a broad rebate system. It will deal to not only the challenges of implementing this particular impost but also the entirety of the country. So I say to the potato-growers and onion-growers that not only will I look forward to defending your elite soils, destroyed by Nick Smith under the last regime, but there will be an efficient process to ensure that people who feel that too much of the fuel that they’re purchasing with this impost they cannot claim back through a robust rebate system. So the bill does deal with that, and the Minister is going to go on to make further announcements.

Other specious remarks that have been made about this are that it’ll spread like some sort of uncontrollable weed, some sort of fiscal wisteria from Spirits Bay to Foveaux Strait. In actual fact, that is never going to happen in the short term, and there is a robust process before this regional impost can be spread into other regions, but this bill allows that decision to be made by the people of that region. What is wrong with that local democracy? What is wrong with that participatory democracy? I’ve no doubt that a whole host of members on the other side of the House—because they’re quietly telling business, as business goes to see them, “Can you give us your perspective?”—are already saying, “Oh, these changes that are being implemented by the Jacinda Ardern - led coalition Government, we’re not going to be able to unravel all of them, but we say the opposite in the House.” They’re saying that in Kaikohe, Whangarei, Eketahuna already—we know these things. So it is wrong for the myth to be perpetuated that this is an impost that will travel indiscriminately around the regions. There is a robust process for the current impost to be spread, and so it should be. It should be tested.

Let’s think about some of the projects that the Minister has identified that will capture the attention of the allocators of this pūtea. Number one, they have to be publicly acknowledged. They have to go through a robust process, and the process is going to test whether it is a quality and a quantity of development that would not already have happened—so that’s additionality. This is taking the way in which we fund and the way we can afford these additional developments in Auckland to another level, and that’s a hallmark of how transportation issues are being thought about by this Government. It’s a Government that’s willing, through this bill, to take a risk and make a bold decision—sure, and be socked on the chin once or thrice as a consequence of misinformation, but that’s politics. But no one will be able to say, come 2020, that this was not a Government that stood up, allocated a substantial amount of money out of the central government fund, augmented by local government funding in Auckland, and added, as a topping on top of this fine Betty Crocker cake recipe otherwise known as Auckland transport planning, this additional funding. It’s something worth fighting for.

This bill is going to be substantially supported by our party. We are a party that also wants to see the benefits spread to the more provincial aspects of the broader super-city region. Every time that I have been invited to speak about this, I have reminded not only my colleagues in the House but the leaders of local government in that area that you have areas such as Wellsford, Warkworth, right down into Tainui country. And I’ve absolute confidence that Mr Goff, as he wanders around planting his million trees in those areas—with some modest assistance from my good self, not exclusively rhetorical—will actually plant some of the fiscal seeds to improve bus services and to improve other services so that those areas feel connected to Auckland.

In the absence of pūtea, you don’t get connectivity. In the absence of pūtea, you can’t put down the transportation infrastructure to allow people to move into new areas around Auckland and enjoy the experience of owning an affordable property, because those properties cannot exist in the absence of up-to-date, extensive infrastructure. And this is a Government that is ambitious for infrastructure. This is a Government that is willing to boldly move into this territory. It was originally promoted by one of our finest parliamentarians: Michael Cullen. And then, in a spirit and an act of mean-spiritedness, it was struck down arbitrarily by a former transport Minister who was possessed of a vision that the country needed to be covered in four-lane tarmac. That man is gone. We have a new Minister. We support this bill.

ANDREW BAYLY (National—Hunua): Thank you, Madam Deputy Speaker. It’s a pleasure to be talking on the Land Transport Management (Regional Fuel Tax) Amendment Bill at its third reading. I think this bill is best characterised by the Hon Phil Twyford as opening up the floodgates for every council around the country to put this new tax in place and impose this new tax on everyone in New Zealand. But, of course, we know that, initially, it’s designated for only Auckland, which was, by the way, the original promise, but now has been granted, in the bill, as it’s worked its way through the Finance and Expenditure Committee, to give every council in New Zealand the right to be able to take this and put it in place in 2021. I think that is the first point to note: that this is a broken promise in the sense of its scope.

The other aspect I just want to talk about a little bit is that I think we just missed the context. The National Government, when it was in power, had set out and spent a lot of time with the Auckland Council agreeing what was called the Auckland Transport Alignment Project (ATAP), which was about setting out a 30-year vision for new infrastructure spend in Auckland. It covered all the types of different spending. It covered roads, it covered rail, it covered buses, it covered cycleways—the whole gambit. And the only aspect that was missing in that $28 billion was $4 billion of funding—i.e., $24 billion of it was funded and agreed how it was going to be funded and when it was going to be spent, and all the priority around it. So what we’re talking about is a $4 billion spend over a 30-year period. And what originally happened, and what mostly happened, and what was increasingly happening, was that our Government—the National Government—was stepping in and helping the Auckland Council to take over major roads of significance and consent them and put them in place much, much quicker than any council can ever do, because we had made changes to the Resource Management Act which meant that if a road was of national significance, it could be consented within a maximum of nine months and then built. And we saw some of those roads come to pass. In fact, the recent Ōtaki motorway that opened late last year was a prime example of that.

So the question is: how should we go about funding that $4 billion? And the best answer that Mr Twyford could come up with was, in agreement with Auckland Transport, the imposition of a regional fuel tax. And, of course, we’ve all heard that regional fuel taxes have been in place previously—they were in the 1990s—but, largely, have been discarded because they’re a fairly inefficient way to fund infrastructure spend.

So then there was the big focus around congestion charging, and I’ve spoken about this previously—that the deputy mayor and a whole group have been over to places like Singapore. Congestion charging: I think, if you had a clean slate, you would always—everyone in this House, and even the council—agree that congestion charging is the way to go. And, in fact, that should be the way to go, and that should be the incentive to go. And, in fact, any structure that is put in place as a temporary measure should actually still have that as its objective. But the worst thing about this bill that’s come to the House is that it’s been given a 10-year time frame and, at the 10-year time frame, Auckland Council may, after going through a little bit of deliberation, agree to extend it. And so there is no incentive to actually put in place some congestion charging, which is the ideal form.

There were other mechanisms that Mr Twyford could have considered, and, of course, we never heard any of these. There were ones about just making the system simpler. At the moment, what the system is about means that the distributor—for instance, if you get fuel at the Tauranga port—picks it up from the port and distributes it. Whether it’s to a farmer or whether it’s to a fishing company or whether it is to a fuel company, they are the ones who are now going to have to account for where it’s distributed and also, in effect, for collecting some of that tax, in terms of making sure the administration around that is right. And there are much clearer and easier ways to do it. And if you are going to do New Zealand’s system, which is what the intent of the bill is now, why wouldn’t you just put a tax on any petrol or diesel coming into New Zealand at the port, and it would be done and dusted and it would be very clear and no administration charge for anyone.

A couple of speakers—and Mr Twyford talked about it right at the beginning—said it was to put pressure on Auckland Council. And he said he’d had a bit of a conversation with the mayor. Well, the issue is that the mayor said that he was going to achieve 3 to 4 percent savings on a budget of, roughly, $3.2 billion of rates that the council take. They take in another billion dollars of income. And if Mr Twyford had actually sat down and worked out some of the numbers, if the mayor had actually achieved his objective—what he said to the constituency when he got voted in as mayor—he would, actually, more than offset this $150 million that’s going to come from this regional fuel tax.

And the last way—and probably the best way, in my view—was for the central government to take over key roading projects. Every new motorway, basically, costs a million dollars, and that’s why the National Government had committed, at the last election, that they were going to fund the entire Mill Road - Redoubt Road extension round from Manukau, round the back of Papakura, to Drury as one road, and we would consent it, which means we could have done it in nine months, and we would actually have had this thing built probably by the time Auckland Council is even starting to get to the stage where they might be calling for tenders. And I think that’s the travesty in it. So what I’m saying to you is that there are much, much simpler ways to go about this.

The one area I do want to think about—and I’ve just heard the very modest Hon Shane Jones speaking; a very modest man, the champion of New Zealand, the champion of the country, as I heard him talk about last week.

Matt King: Provincial champion.

ANDREW BAYLY: No, he’s moved from the champion of the regions to the champion of the country. That’s what he claimed. So what does it mean for the growers? And, of course, I represent Hunua, which includes the area of Pukekohe, which he was talking about—I’ve got to say to you that the onion-growers, the potato-growers, and the lettuce and the fresh vegetable - growers are all particularly concerned about this bill. It is an imposition on them and their operations. They are key to supplying food for not only Auckland but the rest of the country, and this fuel arrangement, in terms of how they have to account for it, is going to bedevil them in detail. We had one of the key growers from Pukekohe, Brendan Balle, come to the committee—did a great job—with Horticulture New Zealand Inc. They are implacably opposed to this because they know what this is going to mean for their operation.

They also know what it’s going to mean for the cost of food, because, sure as eggs, the price of food is going to go up because of the cost of the fuel—the 25.3c a litre for petrol that every person is going to be paying when they go to the pump from 1 July next week. Also, there’s a whole imposition around transport and everything that goes with it and what that will mean for inflationary pressures for New Zealand and also what it means for the poorer people of New Zealand, particularly people in parts of my area like Waiuku.

It’s interesting, looking at the regulatory impact statement. It states, and I’m quoting, “lower income households tend to live further away”—such as Waiuku, in my area, or Kawakawa Bay or Ōrere Point—“from the central city and have to travel further to get into the CBD or to the opposite side of the region … This results in higher fuel consumption by these households than those living closer to the centre.”, because in many cases not only do they live further away but they have older cars.

This is an incredibly regressive tax, and I am particularly concerned about people in my electorate. You say, “Well, they’re going to get all these benefits.”, and I’ll say to you: in the ATAP plan that’s now been announced, what are we going to get? Well, we’re not going to get Mill Road, which is, in my view, misleadingly described; we’re going to get Redoubt Road in the first part of that extension, from Manukau to Alfriston School—a road to nowhere. Secondly, we thought we were going to get a whole lot of ferry services; well, it’s silent on that, so people in Waiuku won’t be able to get there. We’re going to get some rail stations apparently—well, we’d committed to that. But I think, most of all, it just means that my people have to spend longer on the motorway without good access going up the Southern Motorway and with very, very little benefit. I therefore terribly and significantly oppose this bill.

JAN LOGIE (Green): Thank you, Madam Deputy Speaker. It’s with great pleasure that I rise to take a call, on behalf of the Green Party, in the third reading of the Land Transport Management (Regional Fuel Tax) Amendment Bill 2018.

This is the first step in tackling Auckland’s congestion crisis. Every time I go up to Auckland, which is quite often, I have a conversation with somebody who is complaining about the traffic—and it’s not me that initiates those conversations, might I say. People in Auckland are frustrated. They are spending so much of their lives stuck in cars. That’s time they could be spending with their families or out in nature or doing something that feeds their soul. That’s time and money that they could be using on other things. So the Greens welcome this bill as the first step to be able to return to those people their time and their money.

As we all know, Auckland is at a standstill, and we really get the frustration of the ratepayers and citizens who are spending all those hours stuck in traffic. The Aucklanders I talk to want action, and they want it quickly. Yes, they’ve been hearing for years the acknowledgment that there might be a problem, but they haven’t seen any action to solve that problem until this Government. This is one of those things that, in terms of congestion, affect so many things. We know that binding people to cars to get around has a really significant and negative impact on people’s health—their physical and their mental health. It contributes to air pollution, it ruins people’s work-life balance and family time, and it’s a significant drain on productivity, as well. So it could even be described as a handbrake on the New Zealand economy when it is so bad in our major city.

The Employers and Manufacturers Association, Auckland International Airport, Infrastructure New Zealand, Ports of Auckland Ltd, and the National Road Carriers association all got together to look at this, and they commissioned New Zealand Institute of Economic Research to conduct a report into the costs of congestion, to try and really make that case for Government to act. They found that congestion in the city, between 2015 and 2017, is estimated to have cost the economy $1.3 billion a year in lost productivity. I’ll just repeat that again: $1.3 billion a year in lost productivity. It’s a lot of money. If Auckland traffic could move, on average, from 50.5 and 56.8 kilometres an hour during weekdays, it would benefit the Auckland economy by nearly $3.5 million a day. If we can get our largest city moving, there is very, very real return for all of us in doing that.

We just can’t afford to continue to waste this amount of money each and every year. The cost of doing nothing has been incurred for too long. This bill is a down payment on our Government’s commitment to building a modern transport system and backing it with funding. I’ve heard discussion from the other side of the House, in these speeches this evening, about “But what about the roads? What about the roads?” I really just want to say that that is the 1950s solution to congestion. The contemporary solution is public transport, walking, and cycling, and that is what this Government has as a vision and that this bill is part of enabling.

One of the biggest challenges our country faces is to help our high-growth cities, particularly Auckland, to be able to deal with the increased population. Without much greater investment in good forms of transport, which help drive the form of a city, we will never reduce the crippling effects of chronic congestion. When I heard from those other speakers, “But the roads, but the roads, but the roads …”, I did want to call to them the saying, “Build it and they will come.” That is what tends to happen, and we want those people to come on to the public transport and on to their bikes and on to their feet in a safe way. We don’t want them to come in more numbers in their cars on to our roads—and that is the typical pattern: you build the roads and people come, and those roads congest all over again. We’ve surely, surely learnt that lesson from years of experience.

Now is the time for a modern vision that encompasses well-being and health, and strong communities, and time with families, and improved productivity—the vision supported by public transport, walking, and cycling. We know that we can’t invest at the level needed if we’re going to rely on this year’s tax take through the National Land Transport Programme; there isn’t enough money in the fund. Even if there were, there wouldn’t be anything left over for the rest of the country. So, while there are benefits for the whole country, the primary benefit is to Auckland, and it does seem appropriate for that to be funded through a regional fuel tax.

We need to lift our level of ambition and invest in transport infrastructure to get ahead, and this bill enables a region or unitary council to seek funding for specific transport-related capital projects. The Government has indicated that, at this stage, only Auckland will be able to apply to set a regional fuel tax, and Aucklanders know they must contribute and pay their fair share if we’re to tackle this problem.

I would also just like to touch on some of the arguments that I’ve heard from the other side, about this being regressive and being really tough for people with the lowest incomes. Well, congestion costs are also regressive, and we know that people in the south and in the west are spending a lot of time in their cars, and that the best way to deal with the regressive cost of congestion is to invest in rapid transit. And this regional fuel tax will fund those projects across Auckland, enabling people on low incomes to get around faster and quicker and in a more affordable way. So we’re committed to striking the balance between affordability and taking urgent action on the transport infrastructure deficit that we’ve inherited.

The combined effect of the Auckland regional fuel tax and the proposed increases for the fuel excise duty will cost the average family about $5 a week. That’s more than supported by the, on average, $75 a week that most low-income families are going to get as part of the Families Package. So it’s not like we’re adding a cost and not ensuring that people get the money to be able to fund that cost. But we have to recognise that people, in the way that the transport system is set up in Auckland at the moment, are vulnerable. There have been studies done that show that areas without public transport are the most likely to have mortgagee sales. People’s funding and house costs and ability to pay their rent and their mortgage are too reliant on the cost of petrol at the moment. We have to provide people with an alternative to be able to easily budget to be able to get around, and that needs public transport. Making people car dependent actually builds the precariousness of their situation, and we want to support security and health and well-being for all of our communities in Auckland, so the Green Party supports this bill wholeheartedly as the first step to getting people, communities, and Auckland moving.

DENISE LEE (National—Maungakiekie): It’s been a short journey and a short battle and, unfortunately, we’ve gotten to the point where here we are at the third and final reading before this looks likely to pass and we head into an activation this Sunday—today’s Tuesday; this Sunday, 1 July. It’ll be D-Day. There’s something very ironic, is there not, and almost poetic about how this bill has gone through its final stages in Parliament, because it’s the perfect representation of the shoddy process that has surrounded this tax throughout its development and throughout its life here in the halls of Parliament. Last week, we had the committee stage. It was incredibly vigorous. As you’ll know on the other side of the House, it was vigorous because we were all up on our feet on this side of the House. In fact, at one point, Madam Assistant Speaker, I was up on my feet for 2½ hours trying to get a call and didn’t get one—next time, next time.

It’s the perfect representation of what we’ve had going on, because we tried to scrutinise it part by part in that committee stage; but what actually happened in that committee stage? We found so many flaws, so many amendments to put forward, that it wasn’t just about the principle of the tax and it wasn’t just about technically how it could be implemented and the flaws around that; it was just that the Government wanted to pass it—the Government voted for urgency so that they could pass it really quickly. It’s very representative of how shoddy this whole process has been. We had to go into urgency last week and then, on top of that, they tried to block any more debate on it—unheard of, unprecedented moves—and this is why we have some serious issues about its passage and where we find ourselves late this afternoon.

The Government is putting in so much effort—an incredible amount of effort—and is willing to sacrifice some of those democratic processes and responsibilities that we have as a Parliament, so that they can give the Mayor of Auckland what he wants: a new tax by this Sunday. Either that, or possibly the shortened process is because Phil Twyford had enough of sitting in the chair in front of the committee for nearly 10 hours while we had to debate what the flaws were, and he was possibly just desperate to get out of the chair; hence the shortened process. I’m not sure.

As I said, this has been a perfect representation of the entire process that this fuel tax has been through. Since it was first proposed, both the council and the Government have arrogantly pushed it through step by step. They’ve forgone convention, forgone process, and the public consultation itself, of course, was shortened. The select committee process was shortened. Each new round showed that the majority of public opposition was strengthening; it was building. As people began to understand what was happening, that opposition strengthened and it built. The only poll that was used as a mandate by both the Government and the council to ram this through was a poll—this is so ironic—that was used before we knew what the national tax fuel increases would be. They used a poll from before everyone knew what the extra excise nationwide taxes would be on top of this. We know that it seems, and it appears to us, that the two Phils know best. But there are some things that they don’t know, or maybe they’ve just decided to deliberately ignore, and one is, of course—and it was raised by many speakers on our side of the House—the cost of living. This is a significant issue and one which members of the Government’s own team back in council-land have raised. It’s obviously not a priority, because the bill’s being pushed through despite these concerns being highlighted.

The Ministry of Transport itself had very little time and capacity to do research on what the impact of this particular new tax would be. We heard submission after submission in select committee—the shortened select committee process—that highlighted the concerns around this very issue. It seems to me that this should be counter to general Labour Party policy—that you could ram through a tax that impacts those who are struggling in Auckland and not pay any attention to it, not have any regard for those who are struggling in society. I saw an article yesterday from the manager of Gull, where he said he expects he’ll be seeing queues at the petrol stations this Saturday before what he described as, and I’m quoting here, “one helluva tax”. It starts on Sunday and he said that Gull would pass the entire 11.5c per litre on to consumers. BP have also confirmed the same thing: that they’ll pass on the cost come 1 July. And I expect it will be standard practice around the country. But it’s not just at the pump, as I was saying before, where people and families will be paying; it’s the increased expenditure to other parts of households and the impact that they will face.

Now, a colleague on the other side of the House, Michael Wood, from Mt Roskill, quoted a friend of the National Party. He referred to the Employers and Manufacturers Association and a quote that he had come across. How about the other side of the House quoting their own party representatives—not just friends of the Labour Party; members of the Labour Party? And I refer, of course, to Labour Party councillor Fa’anana Efeso Collins. He was one of four councillors from the old Manukau City Council ward—so, South Auckland councillors—who voted against the fuel tax. Not for it; against it. And I quote from Efeso: “This tax is taking food off people’s tables.” You can’t get any more straightforward than that. “Our people,” he said, “have been paying our rates and they never, never push back. Well, it’s time to push back.”

Unfortunately, that memo didn’t pass over to his colleagues here in the halls of Parliament. Alf Filipaina said, even though he voted for the tax, that his people were unanimous in their opposition to the tax. That’s incredibly telling. Both councillors know that, in the last few rate rounds in South Auckland, South Aucklanders have been hit hard. Capital values have gone up and rates have gone up in South Auckland; so they’re very aware of the impact of this particular bill. I seriously question whether Government MPs would vote for this and back this if it wasn’t for their colleagues, the two Phils, saying that, from their perspectives, from their desks, this is what they need to do, because this seems to me very counterintuitive to what we’d expect from standard Labour Party policy.

The last think I want to touch on is what, I think, is a deliberate skewing of what the debate is and what the debate should be about from the very get-go. What I really strongly object to is the idea that the debate is about “This or that?” The debate is: do this, do the tax, or you won’t get the solutions. “Do the tax. You won’t get the projects fixed.” Phil Goff used the term “Our city will grind to a halt.” He also said, “If you don’t have this, it won’t even be business as usual.” Really? The idea that you install a tax or you get no projects? The idea that the Government says “Pay this or live with congestion.”? That is not what the issue is, and we all know it. We all know it. The Government has turned this into a debate about projects—which ones are in, which ones are out—but it’s not that; it’s a funding debate. We had the Auckland Transport Alignment Project projects listed, and so does the Government. So this is not about whether you have the projects or whether you don’t. I heard from the Minister earlier on the list of all the projects that are in and that are out. We have some questions around that. For instance, we’d love to know when Penlink starts. We’re hearing now that it’s in about 10 years, a decade; not tomorrow, like the inference that has been made. So if it is a funding debate and not a debate about projects, then why is it that they’ve just gone for the easy “tax, tax, tax” option? Well, it’s because that’s the standard Labour Party knee-jerk reaction: let’s get to the “tax, tax, tax” option.

In my final seconds, as I did when I last spoke on this, if you’re looking for solutions and you’re looking for solutions on funding, which is what this should be about, not an erroneous “tax or have no project” debate, if you’re looking for solutions—and the Green Party member before I spoke said, “Let’s help our largest city deal with congestion.”—let’s help them by bringing on staffing, procurement—

ASSISTANT SPEAKER (Poto Williams): Order! I apologise to the member. Your time has expired. Marja Lubeck, I understand this is a split call.

MARJA LUBECK (Labour): Tēnā koe, Madam Assistant Speaker, and thank you. I am very happy to take a call on this Land Transport Management (Regional Fuel Tax) Amendment Bill. It’s a much-needed bill, and it’s the first step in tackling the congestion—that we need to address—that Auckland is facing. Most arguments on why it’s so desperately needed have been put very eloquently by members of this side of the House, so I’ll keep mine fairly short.

I’d just like to point out that it seems very clear that both sides of the House are actually both convinced, and we agree that we need to get Auckland moving again. The difference here is that this Government has a plan that’s fully funded. The other side of the House has talked about their wish list of projects that they announced prior to the election, and that’s exactly what it was—it was a wish list without funding allocated to it. A $9 billion hole, so those projects would never have seen the light of day. So ours are fully funded.

Basically, what is going to happen is that we’re going to get this legislation in place, get the money in place, and finally—

Simeon Brown: Is Penlink fully funded?

MARJA LUBECK: —put our money where our mouth is. Yes, and I will talk about Penlink. Mr Mitchell and I have been having a bit of social media banter on Penlink. After he spoke in the House, for the first time I believe since his maiden speech, he spoke about this local project called Penlink. I had the privilege, only a few months into my new role, to talk for the people of Rodney about this local project. What confuses me is that Mr Mitchell is voting against this bill, because it means that Penlink would never be built. It would basically mean that Penlink would go back to the promise it was back in 2006, when National said, “We promise to build Penlink within 10 years of becoming Government.”—2006. But they never did.

Now what I will want to ask the Minister, because I am disappointed with the initial time line put on this project—I’d like to add my support to the local boards who have strongly advocated for Penlink to be brought forward, and I urge the Minister to do what he can to get Penlink brought forward from the initial time line, prove that member of Botany wrong, and get that spade into the ground and get Penlink going. Thank you. I commend this bill to the House.

SIMEON BROWN (National—Pakuranga): Thank you very much, Madam Assistant Speaker, for the opportunity to speak on this piece of legislation. It’s a sad day down here in the House where we’re passing—well, this Government wants to pass another tax for New Zealanders. We’ve just heard from one of the members of the Government, and we had a simple question for her, which is: when is Penlink going to start. Well, Penlink is a wish list under this project. It’s a wish list because they don’t have a public-private partnership partner, and here’s what’s news, for the people of Rodney who are listening—they’re going to have to pay three times: one, through their petrol excise; two, through this fuel tax; and three, through a toll road which they’ll be putting on board. That’s something which I’m sure they will be not very happy about.

This new tax which is getting put on all Aucklanders is not just for Aucklanders. That’s the first point I’d like to make this afternoon. This fuel tax is not a regional fuel tax; it is a fuel tax which will be applied to Auckland from this Sunday, and it is a fuel tax which will be able to be applied by all councils from 2021. We’ve already seen reports of 11 other councils lining up—can’t wait to get their hands on some of this cash. This fuel tax is not regional.

The second point is that this tax will hurt all New Zealanders through the increased costs that it will impose, because this fuel tax will have a huge impact on not just the back pockets of people who fill up their cars to take their kids to school, to go and pick up the groceries, but it will have a flow-on effect into the cost of literally everything that is purchased. The fruit and veges, taking children to school, going to the shops—everything will increase in cost. I’m not sure what the Green Party’s thinking today, but they’re even increasing the fuel on all the vegetables which they want people to eat. This is a “vegetable tax”, and they’re supporting that to go through.

This tax is also a tax which isn’t wanted. Aucklanders have had a truncated process of consultation imposed upon them. Isn’t it shameful that here in this House the democratic process gets truncated when it comes to this tax. Yes, they signalled it as a tax they were going to be putting through if they came into Government, but they have truncated the process and they have ignored the people who have been part of the consultation. The best support they can find for their tax is a poll which came out before the details were released—before the fact that 12c extra was going to be imposed upon people, and increase excise levies as well.

The shameful fact is that ever since this legislation has come to the House, consultation has been consistently opposed to this tax. Over 50 percent of Aucklanders said no. Over 80 percent of those who submitted to Parliament’s Finance and Expenditure Committee said no. This Government is ignoring the people of Auckland and the people of this country at their peril. As my good friend and colleague Denise Lee said, they will feel the pain this Sunday. They will feel the pain as Aucklanders go down and fill up their car, and then the cost of everything will go up.

This is also a tax which isn’t needed. We’ve heard lots of arguments around why the Government’s decided to impose this tax against the will of people up and down this country. They’ve talked about all these great projects. Yes, there’s a great project out in my part of Auckland called the Auckland-Manukau Eastern Transport Initiative Eastern Busway. That project was already funded under the previous regional land transport plan. That was fully funded by the previous National Government. Guess what, Madam Assistant Speaker and everyone listening at home—that project was funded without the need of an additional fuel tax.

The real reason why Phil Goff and Phil Twyford want this tax is so they can build a tram up through the Prime Minister’s electorate, up through Dominion Road, down to the airport—I’m still waiting to know what the benefit-cost ratio of that project is going to be. What’s the commercial viability of that project? When is it going to be delivered? This is about letting the council off the hook, letting the Government off the hook so they can build a tramline up through the Prime Minister’s electorate and not invest in the projects which we had already funded. They’re getting Aucklanders to pay twice, with the benefit being taken away.

This tax is not needed. This tax is not wanted. This tax is not regional. On this side of the House we are proud to vote against this tax, and we will repeal this legislation if we come into power in 2020. Thank you very much, Madam Assistant Speaker.

KIRITAPU ALLAN (Labour): What an extraordinary time to be in the House and have this really odd debate, because it does appear that the Opposition is, (a), factually incorrect about—the last member who spoke was just factually incorrect about a range of different matters in regard to the bill. I might step through a couple of those issues shortly. But it’s almost like the Opposition is, (a), anti-Auckland, and, (b), anti-progress, because the only reason that we’re having this debate right now is that Auckland City is at a standstill.

It’s at a standstill because the previous Government failed year upon year upon year upon year to invest in the necessary infrastructure to enable New Zealand’s largest city to get ahead. Now, I find myself in this really odd position where I’m flabbergasted because I don’t understand the principal proposition of the Opposition to this very hard-fought bill, that the Hon Phil Twyford has been going like the clappers to try and find cash for the much-needed infrastructure in Auckland City.

Now, I have listened for hours upon hours through the committee stage and now again reiterated in this third reading—the Opposition seems to be very concerned about the fact that “Democracy has gone awry in New Zealand.” They call it “the peril of New Zealand” and so on and so forth. But I actually want to talk about the collegiality that the members of the Finance and Expenditure Committee had with members of the Opposition to come to a point where we could have a rational debate about this tax. Now, it was at the request of the Hon Amy Adams, who, rightly, raised the issue: “Actually, you know what, there’s going to be some concern from constituents in Auckland. I think we should take the select committee up there, have a debate, and enable participants from up in Auckland, who will be the most impacted by this regional fuel proposal, to have that debate up in Auckland.” So what did we do? We sat around and we found time and said, “Yep. Anywhere you guys want to take this, let’s do it.” Because we, on this side of the House, are genuinely concerned about how to tackle the hard issues of how you, (a), enable people just to engage with us. We’re not trying to, like, ram home taxes that nobody wants.

Now, I know the member opposite, old Matty King, he mentioned a Facebook poll—

ASSISTANT SPEAKER (Poto Williams): Order! Order! Order!

KIRITAPU ALLAN: Matthew King, from Northland, mentioned a Facebook poll which said heaps of people were opposed to the tax. But the reality is that Aucklanders actually want solutions for the standstill that they’re in. Now, the reality is that there’s a $1.3 billion deficit—per annum—as a result of the congestion issues up in Auckland. I don’t understand the Opposition’s opposition to this very pragmatic solution, and I want to commend this bill to the House and commend the work of the Hon Phil Twyford for coming up with a plan and coming up with solutions, which is something the Opposition failed to do for nine long years.

CHRIS PENK (National—Helensville): Madam Assistant Speaker, thank you for the opportunity to speak on the Land Transport Management (Regional Fuel Tax) Amendment Bill. My theme of these remarks will be opposites, because we oppose this bill vigorously. A series of opposites, I will explore, including the following: pragmatism versus ideology, legislation versus regulation, promise versus reality, long-term planning versus a rushed process, dollars versus kilometres, and Auckland versus other regions.

The first of those is pragmatism versus ideology. On this side of the House, we ask ourselves what is the best and quickest and fairest way to get things done, but on the other side of the House—on the Government benches, as they now are—they believe, simply, in taxation. And so it is that they are able to reach into the tool bag and find the very first—and, indeed, only—tool available at their disposal that they are prepared to pick up, and it is taxation. Public-private partnerships (PPPs) can achieve so much. If we were in Government now—and when we are in Government in the future—we would be much more willing to reach into a tool bag that includes a vast array of different tools, of which public-private partnerships, or PPPs, will be one.

So too, on the ideology front: this current obsession with light rail, as distinct, even, from heavy rail, despite much having been said about that during the election campaign up and down this country, including in my own electorate of Helensville, where a rail line available for passenger rail lies disused beyond the Swanson rail station, not to Huapai-Kūmeu, let alone further afield—again, despite numerous promises and much noise having been made in the election campaign on that.

My next distinction—my next set of opposites—is regulation versus legislation. Of course, by definition, this House is passing legislation, but we’re doing something else: we’re also providing a regulatory framework such that taxes under this bill can be increased in the future, and that goes in two directions. The direction is across—so it’s across from Auckland to other regions—and it’s also up, because you can bet your bottom dollar that the direction of travel for these taxes will not be down. Previous speakers on my side of the House have noted that there is nothing to stop higher rates of tax that are currently envisaged—a tax on a tax, I might note in parenthesis—“Henry VIII” provisions, so called. Henry VIII would be turning in his grave right now if he knew what the New Zealand Parliament was about to do, and the founding fathers of America, who brought about the phrase “taxation without representation”, would also be turning in their respective graves.

My third set of opposites is promise versus reality—promise versus reality. The Government came in and claimed to be a Government of promise. In fact, they are merely a Government of promises. My favourite syllogism—and I’m conscious that some members opposite may not even have a favourite syllogism—“We must do something. This is something, therefore we must do it.” That seems to be the extent of the logic being applied to this, and to hear the Minister of Transport saying that this is something that we’ve simply got to crack on with because there is no choice, there is no other way, is simply untrue, because, as I have explained, there is more than one way to skin the funding cat, including, for example, public-private partnerships. The lack of imagination on the other side—the lack of imagination as well as education on the other side—is woeful and dangerous for New Zealand.

I’m reminded of Voltaire’s famous rebuke to the Holy Roman Empire that it was neither holy nor Roman nor empire when I reflect on the failure to deliver, of the Government, in relation to another policy matter—and I will speak only briefly on that, for the purposes of relevance. The KiwiBuild policy is neither Kiwi nor build, nor is it a policy that’s coherent. So that brings me to my next set of opposites, which is the difference between promise and reality.

If the Government side could be trusted to deliver on the promises that they’re making in relation to the things that they say will be able to be funded by the fuel tax, if the New Zealand public had confidence that they would be able to deliver on such promises, they might be more willing to accept the tax that will be coming their way to fund them. However, a certain scepticism that has been building ever since that Government was sworn in is relevant to note in this debate, because the appetite of Aucklanders and, indeed, the whole country, in due course, to pay for that which they will not receive any time soon and perhaps not at all—the patience on that score will surely wear thin very, very soon. And so we hear about pipelines. We hear from the Hon Shane Jones that there is a pipeline of projects. But I think a pipe dream of projects is a more relevant way to characterise the promises that we have heard opposite us today.

My next set of opposites is the difference between long-term planning and a rushed process. We hear that the long-term needs of Auckland, and, indeed, again, I say, the whole country, are dictating this measure. A necessary evil, they tell us, although for them it’s not so much an evil as a good; an opportunity, not a challenge of taxation—an opportunity to reach into the pockets of Aucklanders and all New Zealanders. They talk about the long-term needs of Auckland and beyond, but it’s a rushed process that has brought in this new taxation, a point underlined by the fact that it will be later this week—this week—that the effect of the pernicious legislation will be felt. Barely will the ink have dried on the legislation—the Royal assent will barely have been scrawled on the legislative documents—that the pump will be flowing and the dollars will be flowing even more.

And so, with my remaining time, I’d like to focus on a couple more opposites. One is dollars versus kilometres. Much of the discussion opposite has been about the need to pay a bit more to get some things done. Well, I’ve already talked, and my various colleagues have already talked, about the fact that there is more than one way of getting things done, but, actually, I’d like to turn it around and challenge the other side to realise that in many cases, for Aucklanders and, again, I emphasise, all New Zealanders, the disposable income for purposes of transportation is fixed. So the question is not whether they will be paying more to get the same amount of travel, the same amount of distance, and the same amount of petrol, but rather that they will have only the same amount of money available to spend, and they will not be able to go as far. Their opportunities will be limited by the fact of this legislation coming in to introduce a taxation which is at a certain level now and will almost certainly be higher later. The principle of a ratchet applies in relation to taxation—it only ever seems to go up and not down. The reverse gravity that seems to apply to taxation policy of left-wing Governments will apply all too certainly, I am sure of that.

Finally, “Auckland versus other regions” is my opposite that I wish to finish on, because much has been made of the fact that it was designed and intended and advertised and campaigned to be in Auckland—the regional fuel tax. We’ve heard on this side—and it’s not denied by the other side, and how could it be; it’s in black and white—that this will be a regional fuel tax that does, surely, in time, apply to other regions, but it’s interesting to note that for the purposes of taxation, Auckland is a region, and yet for the so-called regional development fund, Auckland is not a region. So for the areas of Auckland that are neither fish nor fowl—or rather, they’re one and not the other, depending on whether the Government is proposing to give or take away—it’s a bit ironic. In particular, for the rural parts of Auckland, like my constituency of Helensville, there will be much scepticism about a Government which continues to say that “The regions are important, but, by the way, Auckland, you’re not one of them.”, until it comes time to apply and impose a tax, at which point: “Yes, indeed, you are a region, and we’ll have your extra money, plus some extra taxation on the tax, besides.”

Hon Members: What a joke.

CHRIS PENK: So, for all these reasons, it’s a joke, but not a funny one. The people of Auckland are unimpressed. The people of New Zealand are unimpressed. We’re unimpressed, and hence we oppose this bill vigorously.

WILLOW-JEAN PRIME (Labour): It is an honour to be the final speaker in the debate on the third reading of the Land Transport Management (Regional Fuel Tax) Amendment Bill. In that last speech, I think that is exactly the reason why when I was at the Kaitāia market on the weekend, one of Matt King’s constituents came up to me and said, “We don’t want to pay for Auckland’s roads.” I said to him, “Guess what? You’re not going to have to pay for Auckland’s roads if we are able to get this legislation through.” He told me he voted for you.

The other reason why he got so frustrated was for that comment that we just heard then—“Auckland’s a region, so why can’t we also have you pay for our roads, Northland and everywhere else, and get that provincial growth funding?” No, it’s coming to the regions like Northland—thank you to that Minister of the regions over there, Shane Jones.

Now I want to also just take this opportunity to talk about the poll that my opponent Matt King apparently spoke about on Facebook. Well, I just did a quick search of the things I’ve been tagged in, and there are three comments that I want to read because it goes to the absolute frustration of people who are living in Auckland. Here is one mum. I can’t read the first three words because they are inappropriate in this House, but it follows on and says, “Two hours to get home from work with my babies in tow.” I feel for that mama, who has similar-aged children to me. Two hours in the car—the levels of frustration of the mum and those children build and build and build.

Here’s another one: “People are leaving because of the traffic.” Another person said on my page, “Stuck in traffic. Now I know why I left Auckland.”, and we welcome them home. It’s absolutely wonderful to have our whanaunga home, but the fact is that they’ve been driven out of Auckland because of this problem.

The last one—back to 2013, this comment I was tagged in—“Wow, no Facebook-suitable words for Auckland traffic when you’ve got places to be.” I think that was in reference to going to the Beyoncé concert and not even being able to make it there on time because of the traffic in Auckland.

Auckland is at a standstill and we understand the frustration of its ratepayers, who are spending hours stuck in traffic every day. We have a plan. We have a plan and, as our Minister Phil Twyford said, let’s do this. So I want to thank the Minister for his leadership, I want to thank the Finance and Expenditure Committee, and I want to acknowledge all of the submitters, for and against, who submitted on this legislation. 1 July is an important day in this calendar for us getting on with the plan to address these issues. I commend the bill to the House.

A party votewas called for on the question, That the Land Transport Management (Regional Fuel Tax) Amendment Bill be now read a third 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 third time.

Bills

Taxation (Neutralising Base Erosion and Profit Shifting) Bill

Third Reading

ASSISTANT SPEAKER (Poto Williams): Order! Just before I call the Minister, can I have order when votes are being taken and when the Clerk is speaking. There’s just a bit of unruliness creeping into the House this afternoon.

Hon Stuart Nash: Madam Assistant Speaker, I move—

ASSISTANT SPEAKER (Poto Williams): Just wait. Can I call you first? I call the Hon Stuart Nash.

Hon STUART NASH (Minister of Revenue): I move, That the Taxation (Neutralising Base Erosion and Profit Shifting) Bill be now read a third time.

I’m very pleased to see this bill reach its third reading, because it’s an important bill for New Zealand. I’m proud that this Government introduced this bill in December last year, following on from the work done by the previous Government. To give credit where credit’s due, the Hon Judith Collins did some good work in this space. It’s also very gratifying to see this bill pass its second reading with wide support in the House.

It addresses tax avoidance. This bill addresses base erosion and profit shifting, or BEPS, as it is referred to. It is the problem of companies operating cross-border and using aggressive tax structuring to reduce their tax bill in countries like New Zealand. BEPS distorts investment and threatens the integrity of tax systems all over the world, and it also means that Governments lose out on tax revenue.

Unlike smaller domestic companies and individuals, large companies with cross-border structures can exploit BEPS opportunities to get around tax bills. The goal is to make company taxes more transparent and even in their application. Companies should pay tax somewhere and, ideally, in the right country, and, of course, if they’re operating in New Zealand, they should pay tax in New Zealand. It is not in the interests of New Zealand businesses and individual taxpayers if multinational companies can avoid paying taxes in New Zealand or elsewhere, so tackling BEPS issues is critical to ensuring the integrity of our own tax system.

The OECD and G20 have led the charge on this issue. They developed a 15-point action plan and released final recommendations in 2015 to combat BEPS. The action plan is an upgrade of the international tax framework to account for BEPS strategies that can be used by sophisticated multinational organisations.

New Zealand has been part of those discussions at the international level in working out how to ensure that multinationals pay their fair share of tax. In fact, David Bradbury, the head of the OECD’s tax policy and statistics division, recently said that he was—and I quote—“very pleased with the strong support that New Zealand had provided to the BEPS project”. We actually bat way above our average when it comes to work in the OECD, and I congratulate our Inland Revenue Department officials for the fantastic work they have done, both here and globally.

This bill builds on New Zealand’s strong international tax framework, which includes rules regarding the taxation of New Zealand - controlled foreign companies and the thin capitalisation regime. The result of our strong framework is that New Zealand is already somewhat better placed when weighed up against the OECD-recommended standards. This is not, of course, any reason to be complacent. Most multinationals operating in New Zealand pay the tax they should and are compliant, but there are some that adopt BEPS strategies to undermine their New Zealand tax obligations. So in certain areas there’s still clearly work to do in protecting the New Zealand tax base through domestic law.

The measures in this bill, therefore, are aimed at specific BEPS strategies known to be operating in New Zealand, while striving to maintain the attractiveness of New Zealand as an investment decision. We canvassed this quite a lot in the committee stage, and I think we arrived at a pretty good space cross-party.

This BEPS package can be broken down into five key measures. The first one is interest limitation rules. The use of debt is one of the simplest BEPS strategies: multinationals with excessive levels of debt or related party debt with high interest rates have large interest deductions, leaving little taxable profit in New Zealand. The bill reduces the ability of multinationals to artificially inflate their interest rate on loans to their New Zealand subsidiaries by adding new rules around credit rating of the New Zealand subsidiary and by ruling out exotic features not typically found in arm’s-length borrowing.

The second one is the permanent establishment avoidance. The existing international tax framework restricts the ability of a country to tax a business unless that business can be said to have a permanent establishment in the country. I understand this can be a little bit technical, but this is the very nature of international tax legislation. But, unfortunately, this permanent establishment concept can be manipulated by multinational firms. The bill will therefore prevent a multinational from dodging tax on its sales to New Zealand customers in cases where those sales are booked in an offshore company despite being generated by salespeople who work in New Zealand.

The third area is transfer pricing rules. Transfer pricing rules guard against multinationals using related party payments in order to shift profits offshore, often to low- or no-tax countries. The bill proposes amendments to strengthen the transfer pricing rules so they align with the OECD’s transfer pricing guidelines and Australia’s transfer pricing rules.

The fourth area is hybrid branch mismatch rules. Hybrid and branch mismatches arise from the exploitation of differences in the tax treatment of an entity, branch, or instrument under the laws of two or more countries. To address this issue, the bill contains new OECD-designed rules that prevent this particular type of BEPS strategy by denying tax deductions under the relevant transactions. These hybrid and branch mismatch rules are aligned with already enacted rules in the UK and a recently introduced bill in Australia.

Finally, administrative powers: we are providing Inland Revenue with additional administrative powers so the new rules can be used effectively. To be more specific, the bill will empower the Commissioner of Inland Revenue to investigate a multinational by obtaining relevant information held by an offshore holding company or headquarters. The bill will also facilitate the assessment and collection of tax and penalties in cases where a multinational fails to cooperate with an investigation.

These are sound measures that are tailored to the New Zealand context while being largely in line with the OECD G20 BEPS action plan. The measures will ensure that multinationals pay tax based on the actual economic activity they carry out in New Zealand. This will improve the integrity of the tax system considerably. In order to achieve its intent, the bill amends the Income Tax Act 2007 and the Tax Administration Act 1994. The Government wants to see progress in this space quickly. The bill’s proposals have been well consulted on and will apply from 1 July 2018—a little over two weeks from now.

Estimates from Inland Revenue are that the bill will result in an extra $200 million of tax revenue every year once the measures are fully phased in. This means a gain for other Government priorities—areas like health and housing—but, ultimately, this is a matter of fairness: multinationals paying their fair share of tax in New Zealand.

In bringing this bill to its third reading, I would like to thank the policy and drafting officials for all their hard work. As mentioned, this has been a complex process and is a very, very complex piece of legislation. I would also like to pay tribute to the organisations and individuals who submitted on the bill. The submissions made by tax professionals and members of the public on our taxation bills are very useful and welcome, and we all get a better tax system as a result.

I’d also like to thank my fellow parliamentarians that sit on the Finance and Expenditure Committee for their engagement with what was undoubtedly a complex set of provisions in the bill. The fact that they read all the submissions and their deliberations has meant that we have a better piece of legislation than when it went before the committee.

Michael Wood: We enjoyed it.

Hon STUART NASH: I’m sure you did enjoy it, Mr Wood—I’m sure you did. There’s more coming your way.

Finally, I would like to give a particular thanks to the advisor to the Finance and Expenditure Committee for providing such excellent assistance to the committee members. Therese Turner does an absolutely brilliant job and I think she is a true treasure, and we love her dearly. It is therefore with great pleasure that I commend this bill to the House.

Hon PAUL GOLDSMITH (National): Thank you, Madam Assistant Speaker, and my pleasure to speak on this bill, the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, which is one that was introduced by the previous National Government under the tax leadership, or the leadership of the revenue portfolio, of Judith Collins and is being carried on in the new dispensation that we find ourselves in by the Labour Government.

Broadly speaking, we remain supportive of the thrust of this bill, which, fundamentally, is trying to deal with that tension that we face—and that all countries face in the globalised world—of wanting to ensure that international businesses pay their fair share of tax. And so if you’re a multinational company based in New Zealand selling, for example, pharmaceuticals or something like that and you’re making profits in this country, we want to ensure that that profitability is accurately described and taxes paid for it. As long as companies have been trading across borders, there have been ways and means and efforts to reduce the amount of tax paid in countries where tax rates are relatively high and profits shifted to places where tax rates are low in order to avoid paying tax. Naturally, we, like every country in the world, have tried to resist that urge.

As a small economy such as New Zealand, we’ve always been conscious of the fact that it’s not something that we can fix on our own and that we’re far better to work with and through multinational organisations to achieve this. And so the OECD, of which New Zealand is a member, based in Paris, has been working in this tax area for a long time, and, as the Minister has acknowledged, New Zealand has had a long and proud tradition of having a very constructive role in those discussions. And so this bill flows out of the recommendations of the OECD working groups in order to try and defeat that.

Now, the tension also arises, though, between—while we’re wanting to ensure that international businesses pay their fair share of tax, we also want to have multinational companies investing in New Zealand and trading in New Zealand so that New Zealand has access to the goods and services they provide and so that we can enjoy the many, many benefits of having multinational companies actively engaged in this country, not just in terms of doing business but also from the management experience and the many, many benefits that you get from having branches of multinational organisations based in this country and investing in this country.

So we want to ensure that the tax rules that are developed are not unduly hostile to that happening. We acknowledge that if you live in a world where people are making decisions in Singapore or Shanghai or New York or London about where to invest as a company and where to trade as a company, it’s not automatic that New Zealand has to be at the top of the queue, and that we have to be attractive. The after-tax returns are obviously what companies look at, and so a certain measure of predictability about the tax that they’re likely to pay and the effective rate of that tax according to the rules that apply is very important. So what we’ve tried to achieve here in this legislation is to try and sort of get an effective line between those things—you know, wanting to make sure that the proper amount of tax is paid and that the system is robust and, at the same time, not being arbitrary and unpredictable and excessively tight in the way that we gather that tax.

As we’ve seen over the very lengthy and detailed debate that we had in the committee stage, there are lots of fine arguments to be had around the particulars. The basics of the measures of this bill are around stopping foreign parents charging their New Zealand subsidiaries a high rate of interest to reduce their taxable profits in New Zealand. The basic sort of dynamic there is that if a multinational company bases a parent company in a subsidiary in New Zealand, loads it up with debt, and then charges a high rate of interest for that debt, then the New Zealand company trading in New Zealand will post a very small profit, even though it might actually be very profitable on its trading, and therefore pay very little tax in New Zealand. The tax is paid instead where the interest is gathered. If that’s in a low-tax regime, then overall they pay less tax, but the New Zealanders receive less out of it.

I suppose the broader point I’d make in all of this—and I won’t go too deep into the details of this bill—is to contrast, I suppose, the process that we’ve had in the construction of this legislation. It may not prove to be perfect, and no tax legislation ever is, and I won’t be at all surprised if we come back in the not-too-distant future, re-examining some of these decisions that we’ve made and asking if we’ve got the balance right. But at least we’ve had a process where we’ve spent a considerable amount of time working out what we’ve tried to achieve. There has been detailed advice come in from officials about what we’re trying to achieve; then there’s been a large and considered select committee process, and changes have been made as a result of that select committee process, which has had the feedback of the many hundreds of practitioners in this space in New Zealand and internationally, and we’ve adjusted the legislation to get the best result that we can.

Unfortunately, that is proving to be not always the case in the way this Government goes about its business. The most striking contrast, of course, is with the oil and gas decision that was made in the absence of any detailed analysis by officials, by arbitrary ministerial fiat, and not actually going through Cabinet, let alone the legislative processes that may well be taken. Then we’re seeing in many other parts of the business community—if we’re looking at industrial changes legislation, for example—a determination on the Government to do very significant things but an unwillingness to listen to the businesses that are most affected by that when they raise realistic concerns about the costs that are being imposed on business. I just wish that we translated the tax development process that has been a relatively bipartisan one over many, many years in this Government and a well-known and proven track record of developing legislation and actually getting meaningful engagement with practitioners in the field—I just wish that we applied a similar level of rigour and analysis in research and a genuine listening and engaging with stakeholders most directly affected and an attempt at some bipartisanship over the political debate.

If we applied that in the fields of industrial relations or in economic development or the foreign investment rules, for example, or in the many other areas where this Government is going out and making very substantial changes in a seemingly arbitrary sense and not meaningfully listening and engaging with the broader business community, I’d think we’d be in much better shape than we are at the moment. We wouldn’t be seeing what we are seeing right now, which is falling business confidence right across the country.

So I suppose it’s a bit of a message of “This is a pattern that the Government would be well advised to follow in the broader way that they go about their business.” And I only wish that they would. So I just encourage the next speaker and the many Government speakers that will follow to reflect and consider the way that tax legislation is being developed and apply that more broadly in the way that the Government goes about its business. Thank you very much.

KIRITAPU ALLAN (Labour): Well, I must thank the previous speaker, Paul Goldsmith, for his wise words of advice that we listen to his sage command to, you know, consult and engage with people in a pragmatic and bipartisan way. Look, I’m very proud of this Government, which does exactly that. It is about providing space and opportunity for all New Zealanders to actually engage in the big issues that concern us.

In this instance, I must acknowledge, though, the trajectory of this bill. It commenced in December 2016—off the top of my head—under the previous Government, and I want to acknowledge the work of our Minster of Revenue, the Hon Stuart Nash, for taking on and developing and working very hard with IRD officials and others to develop a fit for purpose tax scheme to ensure that multinationals are paying their fair share.

I think, just listening to this debate and having had the opportunity to contribute at all stages, and also sitting in the Finance and Expenditure Committee (FEC), and listening to the widespread concerns of the submitters, I want to acknowledge that there have been a number of submissions from tax experts and practitioners that have expressed that perhaps this bill doesn’t go far enough. Then there have been submissions to their contrary: that it’s gone too far, too fast. I must say, it’s actually a bit of a pleasure, really, to have been part of this process, where we’ve had to work across the aisle to, I guess, work through the very nuanced considerations, to make sure New Zealand remains a place where global business feels like they can call us home and conduct their affairs here, but also to ensure that some of those companies we’ve seen that do operate globally, that have adopted practices of aggressive tax planning and have effectively managed to dodge paying their fair amount—that we’ve tried to strike the right balance.

So I actually really just want to acknowledge Carmel and all of her team at IRD for the work that they’ve put in, working with practitioners and the industry. I also want to acknowledge the work of Therese. I know it was quite an oft-cited quote that she put in one of her papers to us on FEC that it was the most complicated piece of tax legislation that she’d seen in her 30-odd years. I do note that that was a sentiment that was reiterated across the board by many of the practitioners, because what we’ve got here—New Zealand’s not in isolation in trying to develop fit for purpose tax laws that apply themselves globally. Following from the G20 in December 2015, I think it was, they came up with a 15-point plan. So you’ve had all of these countries across the world who are members of the OECD try to—the harm is that, per annum, there’s approximately $240 billion of cash that the OECD considered wasn’t being paid and their fair bit wasn’t being done. At a more local and domestic level, the cost of tax avoidance here by multinational corporations is considered to be around $500 million—that’s gone up and down the scale, but around about $500 million.

I think, for many folks, when you’re considering how that impacts real-life human beings, it can be quite hard to sort of see how tax avoidance in a bubble can have a real-life impact, but I just want to draw attention to the well-considered and well-thought-through submission of the New Zealand Human Rights Commission, which drew on some remarks of the former UN expert on extreme poverty and human rights, Magdalena Sepúlveda Carmona. In that report in 2014, it said, “Although taxation policy may seem far removed from the daily problems of the poor, it in fact plays a major role in determining and adjusting levels of inequality in a society and in funding essential services, social protection and poverty reduction measures; it is therefore central to realizing the rights and defining the opportunities of people living in poverty.”

So I just want to really commend the work of our Minister of Revenue, but I want to commend both sides of this House for being able to work together constructively over a very lengthy period of time to develop a piece of legislation that has been well guided by the officials to ensure that New Zealand’s tax regulatory environment is fit for purpose in a global world and to ensure that multinational corporations who have decided to operate in New Zealand and call New Zealand their home are indeed, in fact, paying their fair share to our domestic revenue pot. So it’s my pleasure to commend this bill to the House.

DEPUTY SPEAKER: I call Ian—Ian—McKelvie.

IAN McKELVIE (National—Rangitīkei): Madam Deputy Speaker—the member for Rangitīkei.

DEPUTY SPEAKER: Goodness me! Ian McKelvie.

IAN McKELVIE: Ha, ha! I don’t blame you at all, Madam Deputy Speaker. You’re not the first person who hasn’t known who I am. Ha, ha!

DEPUTY SPEAKER: I do know who you are.

IAN McKELVIE: Right, I apologise.

DEPUTY SPEAKER: I was stunned because you didn’t look like Amy Adams.

IAN McKELVIE: It gives me a great deal of—well, I don’t think you’d ever get pleasure speaking on a taxation bill, but it does give me pleasure to get up and speak on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, known affectionately—and I don’t know whether anything could be known affectionately, but it is known affectionately as the BEPS bill. I don’t think a tax bill would be known affectionately either, actually.

It is an interesting piece of legislation, initiated by that great revenue Minister in the last Government the Hon Judith Collins and, certainly, supported by the National Party in Opposition. It is one that we’re obviously keen to—well, I think, as Paul Goldsmith said earlier, taxation is really a bipartisan issue, and it’s something that all in the House should really, I guess, share support for bills of this nature. It’s a very complicated bill, and according to our Minister it has the potential to increase the tax take by up to $200 million per year, which is a considerable amount. However, it’s worth making the point that many of our overseas companies do pay their way in New Zealand and are very good corporate citizens of this country. This bill’s designed to, I guess, fix up those ones who are not necessarily good corporate citizens of this country.

It is a corporate bill and one that takes a lot of getting one’s head around in how it works and what it’s to achieve, and, you know, it’s unlikely to be perfect—although, obviously, those people putting these bills together strive for perfection. I think the Finance and Expenditure Committee had the use of some great advice from an independent adviser in Therese Turner, who did some very good work on it and gave us some very good advice too. I think the hard work by a number of officials from the IRD and, indeed, the members of the select committee themselves and also, I think, some very good submissions certainly gave the bill every chance to get—well, it got through its committee stage no problem, didn’t it, and now to the third reading. I think that hard work’s paid off, but we’ll see, I guess, as the results of this bill become more apparent in years to come.

One of the challenging matters that need significant consideration when introducing tax legislation is what direction tax advisers, experts, accountants, and lawyers might take as a result of that legislation being introduced. Having access, again, to an adviser of the experience of Therese Turner certainly helped give Parliament the confidence that this legislation’s fit for purpose and will achieve its stated intention of preventing multinational companies or businesses from shipping their profits from New Zealand via various means, thus avoiding paying tax in this country.

One of the other constant challenges we face, as do other countries, is to put in place legislation that protects our attractiveness as a spot or a destination for investment and, at the same time, protects our own citizens from, I guess, the mercenary tax habits of some of those companies—in other words, tax erosion. It’s interesting—this same thing applies to a lot of other issues we face in this country too. We have to make sure our country’s attractive as a place to bring new products to, and you’ve only got to look in the pharmaceutical sector or even the animal health sector. It’s important that we have legislation that gives a good balance to whatever we do in the country and, at the same time, is attractive to other people to bring their products and their businesses to New Zealand.

It is a very fine balancing act at times and one that’s hard to get right every time. The simple example of this, of course, are things such as a tourism tax or a border charge for biosecurity, where, if it’s set at the wrong rate or the wrong level, it will be a disincentive for people to come to New Zealand, just as this could be a disincentive for people to invest in New Zealand if it wasn’t pitched in the right manner. So it’s very important that we do this in a manner that keeps our place in the world and also enables people to come to this country and invest in us and put their products into this country in a manner that they can make money out of it and we also get fairly recompensed for what they do.

We’ve got to keep our tax system simple, because we don’t have a large enough tax base to complicate the system. If we get it too complicated, it means compliance is far too expensive for a small country and becomes inefficient, so I think it’s really important that we do at all times try to keep our tax base simple and efficient. Of course, whilst this legislation might be complicated, it doesn’t affect a huge number of people, or a huge number of multinationals either, for that matter. It does affect some very big accounts, however.

The new measures put in place by this bill will ensure multinationals pay their fair share of tax in New Zealand by targeting a number of things which have been around since humans first came to light, I imagine. Interest manipulation: there’s a difference between interest manipulation at arm’s length—in other words, with an independent party—because you’re not going to get a great deal of discount or unusual interest rates, because the market effect will sort that out; interest manipulation between internal or like-minded companies, or companies of the same family, is much more likely, and that’s a way that’s been used historically for shifting tax and liability from one place to the next.

The next one is to stop the means, or use other means, to move profit around, and this can be done through hybrid mismatches or where tax law in various countries can be, effectively, gamed, I guess, or played off—in other words, it is advantageous to take your tax someone else rather than pay it in the country you operate in. We have to make sure that we don’t get that balance wrong as well. So that’s a pretty important issue.

It makes it easier for the IRD to investigate uncooperative multinationals, and that, again, is complicated—and I might go into that a little later if I get some time, because there’s plenty of things to talk about in this bill. Avoiding having a taxable presence in New Zealand, or what we might know as a permanent establishment in New Zealand—which is very easy to do, and many companies have done that in the past, where they don’t have an official New Zealand taxpaying entity, so to speak, and that means they don’t pay any tax in this country; they take it all home.

Then there’s things like capitalisation rules, where high levels of debt which could be held here and not in the parent company at home—in other words, they push their debt offshore into a different entity and, consequently, they can run very high interest charges and things like that.

So there are many methods that can be used to shift profit around the world, basically, and avoid paying tax in countries like New Zealand. Interestingly, there’ve been times in New Zealand where the same methods were able to be used to move tax liabilities around New Zealand entities. This is no longer the case, of course.

Tax has become of much greater global interest in recent years, and I’ve noticed a big change in people’s attitude toward tax and to the avoidance of tax. I think it attracts much more commentary than previously, and it’s no longer socially acceptable for business to exploit a country and move on without paying their fair share. Paying one’s way in the world is now part of one’s licence to operate in the market place, and we need to ensure these entities have sound guidance and legislation to ensure they’re able to operate here as good corporate citizens. And I think that the ability to be able to operate in the market place doesn’t just apply to paying tax; it’s a very big issue with respect to environmental behaviour and on things that operate socially in our economy as well. I think it’s really important that we ensure that people play their part in our community and in our society. And, morally, they have an obligation to do that. And this bill, whilst it doesn’t impose that moral obligation, certainly ensures that those companies that are affected by it will play their part in it going forward.

I briefly want to comment on a couple of measures contained in the bill to ensure the IRD has powers to investigate—and I touched on this earlier—and can do it relatively easily. These changes to information request powers—the original bill increased the information request powers of the IRD to request information concealed by any member of a large multinational group. And the revised bill requires that requested information relate to an investigation of a multinational group’s tax position. This reduces privacy concerns, because the bill, as originally written, could have requested information from an actual person such as a bank customer, and so it would have affected the way we operate with our privacy laws in New Zealand. And I think, from the Inland Revenue Department’s point of view, however they do this has got to be as simple as it possibly can.

The bill had both criminal and civil penalties for failing to provide the requested information. And criminal penalties have been removed from the bill, as it’s not appropriate to apply a criminal conviction to a New Zealand person when the failure may have been caused by an associate or offshore group. Thank you, Madam Deputy Speaker.

MARK PATTERSON (NZ First): Madam Deputy Speaker, thank you. Unlike the previous speaker, Ian McKelvie, it is a pleasure to get up and speak on this Taxation (Neutralising Base Erosion and Profit Shifting) Bill, not the less because I don’t often get the opportunity to speak on matters economic. That normally falls upon our spokesperson in these matters, Fletcher Tabuteau, who genuinely does love this stuff and is a bit of a thought leader in how we can make our systems more fair and our economy work better for everyone; in fact, such so that I understand that he is affectionately known as “the Professor” within this Parliament—a term that he, I think, is rather chuffed with. I also enjoy the tax debates from afar, listening to Deborah Russell—Dr Russell—when she gets up here and talks about The Wealth of Nations and Adam Smith and almost makes it sound like required bedtime reading.

So here’s my chance. And I’d like to say that the purpose of this bill is to strengthen the integrity of our tax system, protect our tax base by introducing measures that address the issue of base erosion and profit sharing by multinational corporates in New Zealand. And I’d also like to put some context around this.

The following bill that we are going to be debating after this is the Overseas Investment Amendment Bill. And this is a sign of this Government going through the gears to make sure that overseas investment is channelled in such a way that it advantages New Zealand—that it is to our advantage and not to the disadvantage of our citizens. And this bill is very much in the same light—making sure that we level the playing field so our own New Zealand businesses get to compete on an even footing. This is absolutely core New Zealand First practice and principles. There’s no reason why a dairy owner or a dairy farmer shouldn’t be playing on the same level playing field as a foreign multinational. If it’s good enough for them, it is good enough for everyone.

It’s important to acknowledge the work of the officials. This is highly complex legislation. We know that jurisdictions around the world are grappling with this very same set of issues and that our officials have, in many cases, I understand, been in front of the game when it comes to grappling with this issue.

We also do acknowledge the Opposition, because the Opposition did start this process—after eight years of denying it was a problem, finally rumbled into action. There must have been a focus group somewhere that said it was problem so they rumbled into action. And it was probably no coincidence that it was when the Hon Judith Collins came back from purgatory and took over as the revenue Minister that we finally got some action on this very serious issue. And what an excellent Leader of the Opposition she will be very shortly.

We know there is global concern about aggressive tax practices used by multinationals who pay very little tax anywhere in the world. And this is—as we’ve heard before—known as base erosion and profit sharing (BEPS). There’s various mechanisms that we can—

Hon Member: Profit shifting.

MARK PATTERSON: Profit shifting even, maybe. The OECD and the G20 have recognised this issue—as my colleague Kiritapu Allan alluded to before—in 2015. And it is a very complex, multifaceted issue. And there is no silver bullet, but that does not mean that we should not start.

Most multinationals, it’s worth saying, that do operate in New Zealand do act responsibly. They are valued and contributing corporate citizens. But some of our companies do not. Many companies that are household names to all of us, and that we probably use on an everyday basis, make tens or hundreds of millions of dollars of revenue, maybe more, but pay tens or hundreds of thousands in tax. There’s only two scenarios there: either they’re totally incompetent—which is clearly not the case given their global presence—or they are using the rules to their best advantage. There’s nothing necessarily illegal about that, but it is a loophole that we must look to close. This is about the social licence to operate. And we as farmers get that thrown at us all the time about our social licence to operate. And we know what that’s about, and it’s only fair that these multinationals do the same.

New Zealand businesses often miss out on lucrative opportunities because they are not competing on level terms, and they are required to pay their tax—and also, I might add, other multinationals that do play the game fairly and do try to be good corporate citizens are disadvantaged by this as well. We have heard that there could be—well, we’ve heard two representations of how much this could be costing the Inland Revenue: somewhere between Mr McKelvie’s $200 million and Kiritapu Allan’s $500 million. I’ve heard estimates of even more. But this is money that we need. There is so much call on the Government’s coffers after periods of neglect over the last nine years. We need that revenue, and we need it to be secured fairly and for the best interests of the country as a whole.

So it is important to address these BEPS, but this is not a vindictive measure. It is about levelling the playing field, and we continue to welcome multinationals, but they must be compliant—they must contribute.

The message this Government is sending is very clear: we are open for business on the global stage, but we must address the issue of the BEPS so as to allow a level playing field and so our multinationals who choose not to and aggressively look to minimise their tax are brought into line. Members across the House have spoken to a particular point of reasonable fairness. We must ensure we move down this path and we make sure that we cannot allow certain companies to avoid their obligations.

I’d like to congratulate Minister Nash on bringing this forward. This is—as we said earlier—a very complex set of rules and regulations and legislation that we’re bringing. It has been wrestled with over many countries. Particularly, we’re sharpening the structured arrangement definitions: we’ve replaced the definition relating to the hybrid and branch mismatch rules to correct that technical error to better reflect the recommendation made by the Finance and Expenditure Committee, which is well-led by Mr Woods and, of course, Mr Tabuteau is the deputy chairman. And I believe that this committee has worked very constructively together on this bill.

There are four main changes, as I understand it—the interest limitation changes. There are also changes to the time bar for transfer pricing issues. And in this we are aligning our thinking with Australia, which is a thoroughly sensible move. We have to act globally on this issue. The IRD powers to request information to offshore groups—and it gives Inland Revenue the powers to be able to request information that is held offshore by group members of large multinational groups with a New Zealand presence. And that is the—I’m just trying to find the other one, but that’s three—there are four, but we’ll have to leave that to the subsequent speeches to cover off.

So, just to reiterate, in conclusion, New Zealand thoroughly endorses the change made by the Finance and Expenditure Committee. This brings me back to the earlier remarks we made: that this Government has made a clear commitment to the transformation of our economy—a transformation of the way we work together to improve the lives of all New Zealanders. This is a Government that is formed a little differently and does things a little differently, but it’s fair to say that we do expect to bring forward the human face of capitalism to reinvigorate the economic landscape of New Zealand, and having every company pay their fair share towards that is an absolute fundamental.

With this in mind, it is a genuine pleasure to be part of a Government that is showing clear and decisive leadership on this issue. We are committed to being responsible, not just fiscally but socially and environmentally, and with the passage of this bill, we believe that we are well on the way to walking the talk on these issues. I commend this bill to the House.

Hon JUDITH COLLINS (National—Papakura): Who knew tax could be so sexy? Who knew it could be? We’ve just heard a very political speech from the member who’s resumed his seat, Mark Patterson, and I liked a couple of the nice things he said about me. He acknowledged the fact that I had worked on this bill, that I had actually brought it forward through Cabinet and had got it approved that we would work through it, and that the Hon Stuart Nash had taken it over. And I say, too, I’ll give some credit to the Hon Stuart Nash because, in Opposition, he was very good in working with me on this, although I do recall the Labour Party howling at one stage that there were hundreds of millions more dollars that we weren’t trying to go after, and why weren’t we leading the world in this rather than waiting for the OECD and all the other countries to sign up to it. And that’s because this is not a New Zealand - unique issue; it’s an issue which every country is dealing with. And so we thought it was very sensible to go along and sign up to the OECD international treaty in Paris, where, at that stage, 73 countries had signed up to it—and I understand even more have signed since then—to actually enable the sharing of information and also the complementary, in many cases, duplicated legislation that is necessary for this to be of any effect.

Although we are New Zealand, and therefore an extremely superior country, in my opinion, we are a teeny, weeny little country, and we do not have the clout and the power or the reach of many of these multinational, global companies or incorporations. We would be wrong to think that we are talking only about companies that are based, at some stage, in some other country; we are talking about New Zealand - based companies here, as well. And people would be wise to remember that we have many New Zealand companies that are operating overseas, in many different markets, that make profits in many different markets, that make losses in some markets, and many of those markets might just be here in New Zealand. So it is not anything new that companies, corporations, will, in fact, shift their losses and their profits so that they have the most efficient use of tax legislation and tax rates. There is an entire industry around this. It’s tax advice, really.

Having said that, that doesn’t make it something that we should encourage. I think we should, as a country, make sure that we get our fair share of tax. And the reason for that is this: I’ve often thought it’s only the truly rich and the truly poor who don’t pay tax. Everyone else doesn’t get a choice. Those who earn salaries, wages, all have to pay their tax. Those who have investment income have to pay their tax. That’s one of the great things with GST, of course. It doesn’t matter how wealthy somebody is, they still have to pay GST. And I think it is really important that we understand this is not actually a bill that we should be engaging in political point-scoring on, because none of this would be of any use unless other countries signed up to it.

That is why, when the member who has resumed his seat, who did make a couple of very nice comments—acknowledgment there; not all of them were appropriate, though—wanted to sort of say, “This is New Zealand First and the Labour-Greens Government”—whatever. No, it’s not; it’s actually global. Everyone in the OECD pretty much has signed up to it, although, as I recall, the United States did not at that time, although they did do a very similar agreement with us. We were one of the first countries that they did a special deal with so that we could, in fact, share information and they would share information with us. And that is what’s crucial here. So information is king when it comes to this sort of legislation.

Is it going to be effective or not? I hope it will be. I hope it will be effective and that it will be effective in this country, as it will be effective in other countries, because if any of the countries signed up to it, who have said that they’re committing to it, choose not to enforce it, not to do what they need to do, they will actually be the weak end of the whole deal and, in fact, they will let this system not work as well as it should do. It only really works if everyone’s in it; otherwise, all that happens is people just move offshore. And nobody wants that to happen. Nobody wants us to lose iconic New Zealand companies because they’ve got a better sweetheart deal somewhere else.

I always think it’s good to remember in the New Zealand story that huge, big global multinational GlaxoSmithKlein, or GSK as they’re known now, started in Palmerston North, New Zealand, with milk powder. That’s the story of New Zealand business, and where is it now? Not really here. Not based here, anyway, although GSK is here, but not to the extent that one might expect. It is, in fact, now very much multinational, very much based out of the UK and Switzerland and all sorts of other places, because, actually, that’s what companies do; they will, in fact, go where the best deal is for them and their shareholders. And they’ll also look at not just tax, because that is very important, but also the business environment.

So this legislation, although it’s extremely worthwhile and our officials from the Inland Revenue Department worked very hard on this and will no doubt continue to work hard on it, and were seen in the OECD—and I got this straight from the OECD—as having contributed in a very positive way towards the work and, basically, the model law that was put together and signed up to as a treaty, the point really is that none of this will work unless it is (1) respected: endorsed by companies and corporations in New Zealand; and (2) treated exactly the same way by other countries, so that there is not just de facto base erosion and profit shifting that go around between countries that have signed up to this and then suddenly don’t actually enforce it. That’s the weak link in this; it needs everyone to do it. And I think that this is a bill that has potential, but we don’t actually know how much that potential is.

So when we talk about “Is it $200 million? Is it $500 million?”, all the advice I got was around the $200 million mark that we would be saving New Zealand, but actually, we don’t really know, because you don’t know what you don’t know. And until you start counting, you don’t actually know. And even then, it’s only going to be effective if the companies or businesses themselves respect it and actually comply with it without having to be checked constantly. They’re not going to do that unless they know that the Inland Revenue Department will, in fact, be looking at this, and whether or not there is a commitment from the accountants and the other tax advisers towards this. But my experience in law is that whenever there is a new rule put in place, it gives a lot of extra work to lawyers and accountants to work out how to get around it. And, clearly, that sort of thing will happen. So whether or not this is the answer for all tax issues around the multinationals—I’d say the answer is no. What it is is a step in that direction. It is a step towards making sure that countries, and particularly countries who don’t have the resources that even a small country like ours has, are able to get, at least, their fair share—or, at least, some of that fair share—of the tax that they’re owed.

I think it is always amazing. And I will allude to one of the comments of the previous speaker, who alluded to the fact that some companies apparently make a tremendous amount of revenue and seem totally incapable of making more than, say, I don’t know, $50,000 profit. I don’t know if it’s got anything to do with named companies like Apple or others, but I’ve often thought, “If they can’t make money here, I could take it over, because I could certainly make money with that sort of income”, and I think most people would think that, too. We just don’t believe it when we’re told constantly that huge global, international companies with massive reach, more power than any Government that New Zealand has ever seen and more power than any Government will ever see, suddenly can’t make a bean. Well, they should sack everyone, then, and start again because clearly there’s something wrong.

So I think New Zealand is taking the right step. I’m pleased to see such love and peace breaking out in Parliament today to support this bill. I think it’s a good piece of work and I give full credit to our officials at the Inland Revenue, because it’s actually their work not only in New Zealand but also in the OECD. We who have been Ministers and who are Ministers can go along on their coat-tails. It’s a good piece of work—nice to see everyone agreeing.

CHLÖE SWARBRICK (Green): E Te Māngai, tēnā koe. Tēnā koutou e Te Whare. It is a pleasure to rise and speak on behalf of the Green Party after the previous Minister in charge of moving this through Cabinet under the previous Government and, particularly, to tautoko her point about love and peace. It’s not necessarily what I saw coming from the lips of one the Hon Judith Collins, but I am very proud of the fact that we’re standing in the House today, or rather sitting and standing in the House today—

Marja Lubeck: On this special day!

CHLÖE SWARBRICK: —unanimously supporting this piece of legislation. Yes, to echo the sentiments of one Marja Lubeck, my colleague from Labour, on this special day—on my birthday—I wanted nothing more than to be debating a tax bill!

This is a very complicated piece of legislation, as many speakers before me have noted and as I was fortunate enough to note in my speech on this piece of legislation in the second reading. It was traversed, I think, incredibly well by the Minister Stuart Nash. There are four, I believe, operative tools in the legislation, which a lot of very smart and very fancy people involved in the sector have submitted on and a lot of people in the IRD and ministerial advisory departments have had their hands in creating. I kind of just want to point out—as was noted, I believe, in particular by the Hon Judith Collins but so too by Ian McKelvie—that as long as there is tax, as long as there are rules, there will be people who are likely to try and avoid or skirt around those rules. There are always going to be people who are going to cut corners.

I really actually quite enjoyed the quote of Ms Collins, that “it’s only the truly rich and the truly poor who don’t pay tax[es].” I kind of wanted to pick up on that point, in particular with regard to a campaign run last year, 2017, which, obviously, aligned with what was happening in the political sphere at the time, during the election: a campaign by ActionStation, who those in this House may be aware of as engaging in stirring up political debate and engaging community members, grassroots fund-raising, to start the conversation on a number of really important issues. They ran a campaign off the back of a report in the Pacific Accounting Review by Lisa Marriott from Victoria University and Dalice Sim from Otago University, who wrote an article called “Tax evasion and welfare fraud: do punishments fit the crime or the perception of the crime?” What they found is that annually tax fraud in this country costs us $1.24 billion, but welfare fraud, on the other hand, costs us $30.6 million. So to put that in perspective, there—

Tim van de Molen: I raise a point of order, Madam Deputy Speaker. I draw your attention to Speaker’s ruling 17/4. I believe the slogan on the member’s laptop is inappropriate to be displayed in this House. Thank you.

DEPUTY SPEAKER: Thank you. I was just actually looking at Speaker’s ruling 16/3, in which electronic devices are not to be on the top of the table unless they’re being used for speaking notes.

CHLÖE SWARBRICK: I’m about to refer to it. Sorry, Madam Deputy Speaker, I’m about to refer to my laptop.

DEPUTY SPEAKER: The difficulty is that you now have advertising on it and a slogan.

CHLÖE SWARBRICK: OK. I can put it down here.

DEPUTY SPEAKER: So if you put it down, that would be fine. Thank you.

CHLÖE SWARBRICK: All right. I could cover it—would that work?

DEPUTY SPEAKER: Yes.

CHLÖE SWARBRICK: So the point—

Andrew Bayly: Speak off the cuff!

CHLÖE SWARBRICK: Speak off the cuff? Mate, I’m about to refer to the white paper by BDO, which refers to the base erosion and profit shifting: “What you need to know”. Why this is important—

DEPUTY SPEAKER: Actually, I don’t need to know.

CHLÖE SWARBRICK: Sorry, Madam Deputy Speaker. The title of the article is “BEPS—What you need to know”, so if I can just clarify that point. It was published on 8 September 2017. Why I think that this is important to raise is that we’ve talked a lot about the impact that this is going to have on the tax take, for example, in Aotearoa New Zealand, and so too about levelling the playing field, but what this white paper speaks to is the perspective of businesses. They state, and I quote, “This means you need to be sure that: [firstly,] the price for which you are charging related parties for goods or services meets the arm’s length principle under each country’s respective transfer pricing legislation; [two,] your business is appropriately structured and your legal structure aligns with the commercial reality and economic substance of your business; and [thirdly,] your measures are well documented and the respective reporting requirements in each jurisdiction fully met.” Why I think that that is important to note is because what we’re talking about there is, essentially, transparency and accountability and businesses becoming comfortable with that.

We’ve had a few other speakers point to the fact that this is about a social licence to operate. There is absolutely a demarcation between morals, or ethics, and laws. What we are trying to do here is ensure that we have a legislative and taxation framework that aligns with our morals and our ethics with regard to fairness and the social contract, because what we often see with regard to what I was pointing to earlier, about so long as there are rules people will skirt them, is that we often see a circumstance where we have privatisation of profit and socialisation of cost. What I mean by that is that with the current situation, there are a few cowboys out there. I’d like to acknowledge what previous speakers have as well: that there are many businesses who are playing by the rules. But those who are not are utilising the infrastructure that taxpayers in this country have built, whether that be our very physical infrastructure in terms of transport, or whether it be the likes of our courts or judicial system. But, indeed, they are privatising profit by way of selling those goods and services and not paying the requisite tax.

So this is, indeed, about getting the balance right, and to get the balance right, as the Hon Judith Collins mentioned, we need everybody involved. That’s what’s actually really exciting about this piece of legislation, among other things: that New Zealand signed up, among 78 other countries, to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting—the multilateral instrument which adopts the OECD’s recommendations in the base erosion and profit shifting action plan, signed in June 2017, to amend multiple thousands of tax treaties around the world. So this is going to be sustainable because it is signed up to by dozens of countries around the world, and it is not a unique issue in New Zealand sole, so it requires a geopolitical response.

So, in summation, I think, to refer back to my excitement, this is a really critical piece of legislation that goes some way to pointing towards building a more fair and equitable tax system, and it’s an admirable piece of work both nationally and, indeed, internationally. I just want to thank everybody who has been involved in that but also to just quickly, if I may, point to the remarks of the Hon Paul Goldsmith, who spoke about the system needing to be robust but not arbitrary nor hostile but then referred to steps that the Government is making with regard to other policy and legislative decisions. Particularly, he referenced oil and gas and, I believe, in turn, the likes of what we are doing in the climate action space. He spoke to a want for bipartisan action, and on that point I’d like to say that I welcome his submission and the input of all of the National Party on the zero carbon bill. Kia ora.

ANDREW BAYLY (National—Hunua): I was enjoying that speech so much; I’m surprised it ended so quickly.

Kieran McAnulty: Speak off the cuff, mate!

ANDREW BAYLY: I am. So it’s an absolute pleasure to be talking on this, the third reading of the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. Of course, as I think many people alluded to, this was one of the most complicated tax bills to come before not only the Finance and Expenditure Committee but also this House for quite some period of time. Its genesis had longstanding roots. Going back to the days when National was running the country—well, I may say, and, of course, we had an Opposition baying for blood that we weren’t doing enough—one of the issues that did come to our attention and was noted in the media was the issue of tax and making sure that everyone was paying their fair share of tax. Of course, we all need to pay our fair share of tax.

What this bill is is a very good bill, promoted initially by the Hon Todd McClay and then by the Hon Judith Collins. So, in effect, it’s a National bill, but I do have to acknowledge the Hon Stuart Nash for seeing this through to completion and to seeing it into the House, having its third reading tonight. What this is about is actually meeting our OECD requirements around profit shifting. I know there’s been a lot of discussion about it, but, essentially, what profit shifting is is multinationals who have operations in New Zealand using means to otherwise reduce their profit. Those means might be that they take on an extraordinary amount of debt, more than what would normally be required, and consequently they have a high interest cost. Therefore, that’s why the profit is reduced, and that’s why the profit in the New Zealand entity and the tax that the New Zealand entity pays are lower than they should be. The other way is around high interest rates, and that’s another way of reducing the profit and therefore the tax.

Another way is transfer pricing. What I mean by that, Madam Deputy Speaker, because I know you’re an expert on this, is how international companies with New Zealand subsidiaries use the price transfer rate for the products or services that are transferred between countries. How you price that is a way, and can be used as a way, to minimise profit and therefore tax. Other ways are around how the multinational might impose a high management fee on their New Zealand operation, and, again, that reduces profit and therefore tax. These are all mechanisms that sophisticated companies use around the world—not just in New Zealand, of course—to minimise tax, and they take those profits back to low-tax jurisdictions, often called tax havens, and therefore that’s where they account for the profit.

Obviously, what this bill is about is making sure that New Zealand is not disadvantaged. Now, the whole process, to get to the point today, followed an OECD process which set about working with a whole lot of countries around the world—principally the OECD, but it’s not limited to that—to come up with a group of policies and rules to make sure that multinationals couldn’t shift their profits around and therefore artificially lower their tax requirement. New Zealand played quite a role in leading those discussions, and this is what has come about over, I would think, probably a three-year process now, maybe even longer, to get to this point. Of course, there were a lot of people saying, “Come on, hurry up! Do it. You need to do something.” And, of course, we were keen to do something, but the result of this bill is more than just New Zealand meeting its requirements; it is actually New Zealand meeting its requirements in the context of everyone in the major international community also meeting theirs and putting in similar rules, because only when you have a web of countries putting in these rules will they have the effect that we need to make sure comes to pass.

So there was a lot of discussion around this bill. We made a lot of changes, and I think one of the things—I’ll just summarise: the bill really deals with high artificial interest rates and debt levels, which I’ve talked about. Also, it deals with the issue of what’s a permanent establishment in New Zealand. Of course, Government members might be asking themselves, “What does that mean?” So what that means, just to help some of the members in the House, is that in terms of how a multinational may operate in New Zealand, it has various options that it can use. It can form a subsidiary company; it might set up a branch structure; it might have a sales representative office; or it might even use some other non-corporate - type structures like partnership arrangements. Depending on how they are deemed—whether they are a permanent establishment or not—it makes it difficult in terms of assessment of profit. Part of the changes we were clear about in the bill was: what is the definition of a permanent establishment? In some cases, multinationals achieve a lot of profits in New Zealand just by having a sales office. So one of the rules, for instance, is that if a multinational has sales of more than €750 million and they have a sales office in New Zealand, that is deemed a permanent establishment and therefore is caught by the taxation rules around this.

Also, as I talked about, there is inappropriate transfer of pricing arrangements and using what’s called hybrid and brand mismatches to exploit tax situations. Again, mismatching or use of hybrid instruments—I see you’re looking at me, Madam Deputy Speaker, so I thought I’d just clarify that small aspect for you. So what that might mean is there is a big difference between using terms or instruments such as a debt instrument—a loan or a debt instrument of some sort—or an equity instrument such as buying some shares. In between, you have what are called hybrid instruments. They might be, for instance, redeemable cumulative preference shares, which means that the dividend is cumulative. There is a dividend, but it may be redeemable for a debt instrument. There are a whole lot of permutations.

I could keep going on about a whole lot of hybrid instruments, but what those are, what they mean, is that in some countries what you might do is make sure that the instrument looks like it’s a debt instrument and therefore the interest cost is deductible in New Zealand, but when you take the other side of the ledger, because accounting always has debits and credits, as we all know—Rudyard Kipling—on the other side, it might be a multinational with its head office or its regional office in Australia. In that jurisdiction, it is treated as an equity instrument, and therefore you have a mismatch between the two countries of where the tax is paid and where it’s deducted. Those are hybrid instruments, and that’s where you have the mismatch. This—the bill—seeks to clarify some of those mismatch arrangements.

I think the big change we made was the one on the rights of the IRD to be able to go to multinationals—and it might be a smaller sales office, as I said—and say, “We want all your information and we need you to present it to us.” We made a change around those rules. Previously, the initial draft was that it was very Draconian. We said, “No, there needs to be some more rules around that to make sure the IRD has appropriate powers to request that information.” But you couldn’t necessarily sue a salesman in New Zealand, both from a civil and a criminal perspective, for failing to provide some of that information; so we limited it just to civil.

The other one was the rights of IRD to actually challenge a multinational’s tax position in New Zealand. Initially, they asked for seven years. We believe that was too long. At the moment, their rights are not that, and so what we did is we put in place an arrangement for the IRD so that they would have to notify the multinational, within four years, that they were going to make a claim or dispute a tax calculation, and then, at the end of the four-year period, they could have that notification of dispute, and then they’d have a further three years to take the action and clarify it.

So part of it was making sure that the IRD has the right powers to go and enforce and get the tax revenue that New Zealand is justifiably entitled to, and, on the other side, to make sure that the powers of the IRD are appropriate and warranted, and I think we ended up with a great bill. I’d like to acknowledge the officials, I’d like to acknowledge all the submitters, and I support the bill.

DEPUTY SPEAKER: The next call is a split call. I call Michael Wood.

MICHAEL WOOD (Labour—Mt Roskill): Thank you, Madam Deputy Speaker. There was a day when I thought that my parliamentary career had peaked, after listening to the submissions and the consideration and the deliberations about this bill in the Finance and Expenditure Committee, but the eight speeches in the Chamber today have well and truly scaled that mountain. Can I thank all of those members for their very learned and very precise contributions on this very important bill.

I think this bill has a great deal of momentum so I’m not going to go on and on, but in the comments I do make today, I just want to give a little bit of background in respect of the OECD process from which this bill arose, and just make a couple of comments that I don’t think have been picked up in debate so far. Can I also acknowledge the two Ministers who have led the development of this bill.

It’s fair to say that these issues in respect of multinational tax avoidance have been on the radar for some time. First there was quite a formal report from the Inland Revenue Department in 2012 to the Government of the day. It’s my view that it did take longer than it should have to get on to this process—as late as 2016, the previous Minister Michael Woodhouse was, basically, saying, “There’s not a big problem here.” But this was a piece of work that was significantly picked up by the previous Minister Hon Judith Collins last year. There was a substantial process of public engagement through the middle of last year, and it was one of the top priorities of Hon Stuart Nash when he came into the portfolio under the new Government. Between those two, we’ve made great progress on this bill.

As I said, this bill came out of the OECD base erosion and profit shifting project and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, more succinctly known as the “multilateral instrument”. Here’s the really important thing about the multilateral instrument: at the moment, there is a profusion of tax arrangements between different countries. We have double tax treaties with I can’t remember quite how many countries, but many, many other jurisdictions, and all of those jurisdictions have double tax agreements with other countries as well. So, effectively, you have hundreds, if not thousands, of these arrangements between jurisdictions around the world. If you want to rationalise the rules in some way to deal with a multilateral problem like multinational tax avoidance, how do you do that when you’ve got, literally, thousands of agreements sitting out there? It would take for ever and a day to amend every single one of them. So the multilateral instrument is the way in which we lever into making changes across all of those agreements. That is why it is so very important.

We should also not undersell our commitment in this area and just sort of say, “Oh, well, we’ve gone along with the multilateral process like everyone else.” I actually think we’ve been a bit of a leader in this area. One of the quite important points to note is that, in respect of the multilateral instrument, although many countries have signed up to it, not every country has actually progressed in terms of implementing all of the particular provisions of the instrument in the same way that we have. In fact, we did have some submissions from people who had relationships with multinational companies operating in New Zealand who sort of said, “You’re rushing ahead too fast. You shouldn’t be signing up to all of the provisions in this bill.” But, actually, the direction from the Minister, and certainly the view of the select committee, which I was very pleased to be a part of, is that this is an area we should be leading in.

As the Minister and other speakers have pointed out, this is fundamentally an issue about fairness and about the social contract. A member of this House from some years ago, Laila Harré, used to say that multinational companies are very welcome in our country but when they are here they are guests and they should play by the rules. I think, as the Hon Judith Collins said before, every small business in New Zealand has to pay its tax, every wage and salary earner in New Zealand has to pay their tax, and that tax is important. It funds the operation of this place. It funds the fact that we have a legal system that businesses can rely upon. It funds our infrastructure, our education system, which provides the workers. In a society, you all put in to those things, and that is fundamentally the ethical, the moral, and the political issue that we are dealing with here.

So I’m very pleased to commend this bill to the House. We’ve heard about the key areas in which it takes action. I just want to finish my remarks by thanking everyone who’s been involved: the two Ministers, the Hon Judith Collins and the Hon Stuart Nash; my fellow select committee members, who went through a long and detailed process to try to get to grips with this bill; all of the submitters; and our very, very good officials from the Inland Revenue Department.

I want to leave my final thanks to the people out there in civil society, including the journalists, who, over many years, have been driving this issue up and putting it into the light to say that we have to do something to make sure that multinationals are paying their fair share of tax. Well, the work’s not finished, but with the passing of this bill, we are on our way. Thank you, Madam Deputy Speaker.

TIM VAN DE MOLEN (National—Waikato): It’s a pleasure to take a call on the third reading here on this very exciting bill. I look around the House and I see huge interest and anticipation in the debate as we progress through the latter stages of this. I believe, indeed, there are people tuning in all around the country to follow the progress of this particular bill—watching online, no doubt, which is in part available to them of course because of the large investment by the previous Government in UFB, or ultra-fast broadband. Actually, before I deviate too much further, I heard an interesting fact recently: the average New Zealander now uses 3.6 devices per day. I thought that’s a really interesting fact—so tablets, etc., computers. So they’re tuning in all over the show.

But what we’re talking about here, with the Taxation (Neutralising Base Erosion and Profit Shifting) Bill in its third reading today, is about ensuring that multinationals are taxed fairly and on the basis of their actual level of economic activity within the jurisdiction of New Zealand. So what we’re proposing here is making some amendments to the legislative framework. It does need reviewing. There are numerous examples where some of these multinationals have been exploiting loopholes where while they’re not illegal we definitely could and should be capturing more revenue through those streams. So it was great to see the previous Government’s work in initiating this and bringing this bill before the House. I would like to also commend the current Government for continuing with that line of work.

Actually, there are a number of great pieces of legislation this current Government is putting through, and the one similarity they all have is that they were put forward, initially, by the previous Government, and I would like to encourage them to continue in that vein, indeed with this bill and others.

So, look, just coming back to that tax aspect. We’ve heard a number of ways in which some of these multinationals are looking to minimise their tax bill. Again, as one of the latter speakers in this debate, we’ve heard a lot of those technical aspects already. But I’d just like to touch on, in particular, the high interest rates that they can charge through debt levels from subsidiaries and also the artificial arrangements such as management fees, consulting fees that they can charge to help to avoid their tax obligations. Indeed, I just refer to a quote from Benjamin Franklin that the only certainty in life is death and taxes. Well, indeed, these multinationals are doing their best to disprove that particular quote. Benjamin Franklin, for that fantastic quote actually, and perhaps one or two other things was subsequently—

Kieran McAnulty: Make your own quotes up.

TIM VAN DE MOLEN: —given the honour of appearing on the US $100 note, which is a fun fact for Mr McAnulty if he ever participates in a pub quiz.

So, moving on from that, we need to focus here on what the additional revenue opportunity is, and we’ve heard that could be anywhere—perhaps around $200 million is one figure that has been put out by the previous Government, and indeed this new Government is proposing that it’s an additional $200 million over the earlier $100 million additional funds that were proposed.

Then we had a Government speaker, Kiri Allan, saying that it’s hard to see any real-life impact from this piece of legislation. Well, I would suggest that real-life impact comes from seeing that additional revenue of $200 million, where we could perhaps reinstate the previous Government’s tax cuts that were removed by this Government, helping those people on lower incomes, providing them with a better scope of life now that they’re paying so much more in fuel taxes. Indeed, they could perhaps be paying less fuel tax if we had an additional $200 million of revenue, or we could be investing more in Predator Free 2050. Or, indeed, we could even—for Mr Patterson’s party—be providing further tax cuts for good-looking race horses. So there are many areas of this bill that provide significant benefit to New Zealand, and I think that we are here trying to get the balance of attracting investment into New Zealand and also maximising the benefit to New Zealanders from that investment.

I’d just like to touch on one point the Hon Judith Collins mentioned earlier on around businesses like GlaxoSmithKline, which had its formative roots just out of Palmerston North. Actually, after that building burnt down it moved into my electorate, to a small town of Mātangi—a dairy factory now derelict, but it had been operating from that stage and became a global company. That same site also produced the Anchor milk brand, which is now a very well-known brand around the countries that it’s sold in as a Fonterra brand. So there are significant great businesses to come out of New Zealand, and this bill helps to ensure multinationals pay their fair share domestically.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Madam Deputy Speaker.

Chlöe Swarbrick: Give us a lecture.

Dr DUNCAN WEBB: No, no, I’m not going to give you a lecture today, Ms Swarbrick.

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

Dr DUNCAN WEBB: Thank you, Madam Deputy Speaker. I was just observing to my friend that it was such a good eight seconds I’m not sure I could improve on it, but what I was actually going to say to Ms Swarbrick, on this auspicious occasion of hers, was “Many happy tax returns.” But this bill is an important bill, and it is one where there’s a lot of cross-party agreement, so that’s good to see. It’s also worth noting that New Zealand’s at the forefront of this in implementing the OECD G20 base erosion and profit shifting action plan. And here we have it—one of the first countries to actually put this into place. And it’s really important to note that this is part of a global network. It’s about tightening the net.

It’s been observed in the House, already, that there are businesses out there that purport to make no profit in New Zealand, and that’s simply a fiction. What they are doing is making great profits in New Zealand, but by, essentially, fictional arrangements they’re moving those profits offshore. And what this bill does through the various measures it has is to eradicate those fictions so that when there are loans, as opposed to equity investments, those loans must be at market rates. And there’s a lot of detail around that. But the principle is this: the rules and frameworks that are imposed by this legislation create real commercial transactions so that real profits are shown and, if losses are claimed, they are genuine losses.

Transfer pricing is another one of these tools—the idea that when goods or services move between related companies, they’ve got to be priced realistically and fairly, and, of course, the permanent establishment rule: the idea that if you have an actual business that is genuinely being conducted in New Zealand, then it will be recognised as established in New Zealand and taxed accordingly.

These are just some of the tools that are in this legislation. But I must say, it is good to see that in New Zealand and elsewhere the whole idea of tax dodging as being a sport is something of the past; that, in fact, we now recognise that these global entities, if they’re going to have a licence to trade in New Zealand and in any civilised nation, they must meet their fair share; that as part of the social contract we won’t have tax havens, we won’t have—for illegitimate profit shifting, that, in fact, there’s a recognition that this is an important bill.

And if I can just say, just one real observation: Therese Turner, the specialist who assisted the Finance and Expenditure Committee, brought the most complex piece of legislation down to earth in the way that only she could so that committee members like me were able to engage in it and, I hope—with our friends on the other side of the House—improve it. So, on that basis, I commend this bill to the House.

LAWRENCE YULE (National—Tukituki): It gives me pleasure, in this last part of this process, to speak on the Taxation (Neutralising Base Erosion and Profit Shifting) Bill and to reaffirm, obviously, this party’s support for this legislation. It seeks to make an amendment to the Income Tax Act 2007 and the Tax Administration Act 1994.

I think, as I’m the last speaker, I do want to pay tribute to the people that have got us to this point: the Hon Judith Collins, who, actually, in the last Government went to OECD meetings, brought this issue back to New Zealand, and set up a process, and my Hawke’s Bay colleague the Hon Stuart Nash, who’s guided it through this part of the process and who, I might add, in the committee stage gave one of the best set of representations from that side of the House in answering questions. I think we appreciate it on this side.

This is all around fairness and equity. It’s a global issue, it’s been identified, and we are seeking to align it with the OECD, and it’s taken us a while to get there. This coalition Government is, really, following work led and started by the National Government. That’s why we support it.

Most multinational companies actually follow the law, but there are some that don’t. There are some that have been in our face flouting the law, and most New Zealanders do not like it. This piece of legislation and this change, on the National Party’s prediction, was expected to bring $100 million worth of new revenue annually. Under the Labour Party projections, it’s more likely to be $200 million. That is a significant amount of money to come to make this tax system in New Zealand more fair and equitable.

I go back to its genesis, though, and it’s pretty high level, and this signifies how big this was globally. This was put on the G20 agenda in 2013. It wasn’t some sort of little idea of New Zealand; it is a global problem, and there was a 15-point action plan put out by the OECD in that year.

Simon O’Connor: How many?

LAWRENCE YULE: 15-point.

Simon O’Connor: Oh, it’s 15 points.

LAWRENCE YULE: Yes. And in terms of recognising the vulnerability of not just New Zealand but other countries, New Zealand agreed to participate up to 2015, and in 2016—in June of 2016—we released our response. Really, what we’re doing tonight in this House is completing that process in multi-party agreement to actually align ourselves with the OECD. On 1 July 2018—which was, really, the start of this legislation—we actually brought it first to this House.

So the combination of measures will do a number of things: stop foreign parents charging their New Zealand subsidiaries high interest rates to reduce their taxable profits in New Zealand, stop multinationals using artificial arrangements to avoid having a taxable presence in New Zealand, ensure that multinationals are taxed in accordance with the economic substance of their activities in New Zealand, counter strategies that multinationals have used to exploit gaps and mismatches in different countries’ domestic tax rules to avoid paying tax anywhere in the world, and make it easier, importantly, for the Inland Revenue Department to investigate uncooperative multinational companies.

The OECD multinational instrument seeks to implement tax treaty - related measures to prevent base erosion and profit shifting (BEPS) and also allows several thousands of global treaties around the world to be quickly aligned in one. We’ve heard, at the committee stage and previous readings of this bill, that there are over 2,000 country-to-country treaties. In one fell swoop, this seeks to align most of them under the OECD treaties.

Simon O’Connor: How many treaties?

LAWRENCE YULE: Over 2,000. The multinational instrument is a new major weapon to fight against base erosion and profit shifting, because tax treaty abuse is often the basis for such techniques.

There were some significant changes made to the bill in the Finance and Expenditure Committee, and I want to congratulate members of that select committee and the bipartisan approach which this committee took to resolve these issues. I’ll give you some examples. First of all, the removal of the interest-to-income test for New Zealand borrowers for foreign lenders: the original bill actually stipulated that a New Zealand borrower who borrowed funds from a non-resident lender had to pass three tests to prove it was a high BEPS risk. If it could not pass these three tests, then its credit rating could be capped at one notch below the worldwide group’s credit ratings. This revised version of the bill removes one of these tests—one of these three tests—meaning the New Zealand borrower from overseas lender will only have to pass two tests to prove it is not a high BEPS risk. The test that has been removed is the income-interest ratio, which was, roughly, whether the New Zealand borrower has an earnings before interest, tax, depreciation, and amortisation data at least three times the interest expense.

Now, these are significant and complex issues, and for me, as a new member of the Finance and Expenditure Committee, it took me a while to get my head around. But, actually, where we’ve ended up is largely endorsing and supporting the submissions that were made to the select committee by technical evidence and by the staff at the Inland Revenue Department. There was actually not a lot of contention in this space, and the test was removed as it unfairly targeted companies making a loss who are new traders. The purpose of the test to identify companies with a high relative debt is captured by the debt percentage test, which is one of the following remaining tests.

We also made changes in relaxing the credit rating restriction. The original bill stipulated that where a borrower failed one of three tests for being a high BEPS risk, it would be restricted to a credit rating one notch below that worldwide group. We made changes to this, as I’ve just alluded to, and the purpose of this change is to address concern that that one-notch spread was too light and would increase the risk of double taxation, so we actually changed it to a two-notch test.

The last thing I wish to comment on is the third-party debt. The revised bill extends the third-party exclusion to a credit rating to include those companies that are classified as high BEPS risks. The logic here is that if an unrelated lender is willing to lend significant debt at a particularly implied interest rate, then this is objective and independent evidence of a credit rating of the New Zealand borrower and removes the need for an arbitrary credit rating based on the parent company. We’ve tidied this up, and I think we’ve made a fundamental difference.

We also had a lot of conversation—and it was raised at the committee stage—about the extension of the IRD’s time limit to investigate breaches of these various rules. The original bill had the time bar. It had to amend the tax position of a taxpayer from four to seven years if any amendment was related to transfer pricing. We had conversations in this Chamber, and the Hon Stuart Nash explained to us that as long as the initial investigation had begun within the four years, then it could carry on into seven years, but if it hadn’t begun in the four years, it could not carry on. I think, reluctantly, we accepted that provision. What we on this side of the House were worried about was long, drawn-out proceedings that the actual company did not estimate at the time were going to be carried out, and to have something done on you after seven years, we thought, was too long. So I think the compromise provision is accepted and supported.

During the last two years particularly, there have been a lot of conversations in the media and in New Zealand about companies’ rightful share of taxation, particularly corporates like Amazon, Google, Facebook—you name them—as to whether, in fact, they are paying their fair share of duty and taxes in New Zealand. This is an international phenomenon, and I think most New Zealanders accept—and I certainly believe—that companies like that should pay their fair share and should not use discrepancies in international tax law to crawl around the world trying to find a country where they can get a better tax deal, and I think this Parliament has responsibly answered that call. We’ve done it in consultation with the OECD. It’s taken us nearly four years to get to this point, but in the way in which we went through the select committee process, the time we took, and the submissions we received, there were actually very few things that this committee disagreed with.

In closing, I commend this bill to the House, and I commend the work that was done between the parties to get it to this point. It’ll make the New Zealand tax system a fairer system. Thank you.

Hon JENNY SALESA (Minister for Building and Construction): Thank you very much, Madam Deputy Speaker, for this opportunity to speak in the third reading of the Taxation (Neutralising Base Erosion and Profit Shifting) Bill. This is a bill to avoid tax avoidance by multinational companies, but, before I do speak on this bill, I would like to acknowledge the work that the previous Government did on this legislation. They started this work. I want to especially acknowledge the Hon Judith Collins, who then handed it on, and I want to thank and acknowledge the Hon Stuart Nash, who finalised this work.

One of the things that was stated earlier on this evening which I really agree with is the fact that there is love and peace in this House and Parliament as we’re talking about this bill. It’s not very often that we have unanimous agreement to a bill, but to have love and peace on a taxation bill is indeed unique.

This bill has been designed to ensure equity of taxation where multinational enterprises are concerned. We welcome the operation of multinational corporations and companies in Aotearoa New Zealand. They often bring goods and services to our country, but when these multinationals come and they operate here in Aotearoa, they do benefit from a lot of our public services—our public roads, our telecommunications, our infrastructure—and with that it is only fair that they pay their fair share of tax whilst operating here in our country.

On 6 December last year, this bill was introduced by our Government, and one of the main purposes of this particular bill, as I said, following on from the work of the previous Government, is to protect Aotearoa New Zealand’s tax base from erosion through abuse of the tax system. There is a concern around the world about the aggressive tax practices often used by multinationals either to pay no taxes at all or to pay as little tax as possible anywhere around the world. Now, many of these multinationals are operating in New Zealand and they are compliant with our legislation. However, for those that are not compliant, the reason why we are introducing this particular bill is to ensure that these strategies that minimise their obligations for tax purposes are actually addressed.

This bill is designed to ensure fairness for New Zealanders in terms of multinational tax corporations. I commend this bill to the House. Thank you.

Bill read a third time.

Bills

Overseas Investment Amendment Bill

Second Reading

Hon DAVID PARKER (Minister for Trade and Export Growth): I move, That the Overseas Investment Amendment Bill be now read a second time.

I’d like to start by thanking all who have worked on this exceptionally important piece of legislation. I stand here today proud of my fellow Ministers, select committee members, agency officials, and all of the many New Zealanders who took the time to make a submission during the Finance and Expenditure Committee’s consultation. In particular, I’d like to thank all of those who provided useful feedback on the forestry changes during the three rounds of consultation with Māori hosted by Treasury and myself. They’ve helped deliver a piece of legislation which, in turn, helps to restore New Zealanders’ birthrights, because tonight, we are enshrining in law that it is a privilege to invest in New Zealand residential land.

This is another step to making the great Kiwi Dream of homeownership more of a reality once again. We should not be tenants in our own land. The scale of the problem is clear. Statistics New Zealand, for the March 2018 quarter, showed that nearly 10 percent of all home sales in the Queenstown Lakes District were to people who were not New Zealand citizens or residence visa holders. In the same period, nearly 20 percent of the homes in central Auckland were sold to foreign buyers. The ASB survey out today says it’s even higher, and the Government doesn’t think that it’s a coincidence that these are some of the least affordable areas in New Zealand.

That’s why, under the Government’s changes, investors will no longer be able to purchase the existing homes that there are in New Zealand. That means 1.8 million existing homes will now be out of reach of foreign buyers, after we move through the following stages of this bill. Instead, they’ll normally only be able to be bought by New Zealand citizens and residence class visa holders who’ve spent, or who commit to spend, the majority of their time in New Zealand and who pay tax here.

The bill works along the Government’s extensive agenda to improve housing affordability, including KiwiBuild, the urban growth agenda, and tax policy changes to discourage property speculation. We are addressing New Zealand’s declining homeownership rates, we are addressing rapidly increasing housing costs, and we are addressing the associated rise in inequality—by ensuring that the prices of New Zealand homes, whether they’re lakeside gems, the best houses in the Bay of Islands, or family homes in our more modest suburbs in our regional towns and urban centres, these prices are going to be set by local buyers, not by the wealthy 1 percent from international markets.

A number of changes have been made to the bill to ensure the regime channels what foreign direct investment we do have in housing towards boosting housing supply. Firstly, developers of large apartment complexes are able to get approval to sell a portion of the apartments to overseas investors off the plans, but only if they’re for resale or lease to New Zealanders, not for them to occupy. This adds to housing supply, and it’s indeed what the Labour Party electioneered on. Securing off the plan sales can be important to some of these developments accessing the finance they need to bank their developments. We’re putting the right incentives in place to support this part of New Zealand’s housing market.

In addition, to support other large housing projects, the bill allows foreign developers to retain a long-term interest in new residential projects so long as they’re being leased or onsold to New Zealanders, including under rent-to-own or shared equity models. These changes too should assist first-home buyers to get a foot on the property ladder. In addition, we’ve made changes to simplify the process to acquire residential land for commercial purposes such as supermarkets and hotels, and we’ve also included an exemption for utility companies who sometimes need to acquire residential land for their utility purposes.

Consistent with our international obligations under CER with Australia and our free-trade agreement with Singapore, Australians and Singaporeans will be exempt from the new screening arrangements. Permanent residents from Australia and Singapore are treated the same way as New Zealand permanent residents.

We also are addressing forestry issues, and this bill reflects the importance the Government places on the forestry industry. The legislation both improves the coherence and simplicity of the screening regime for overseas investment in the forest sector. The current processes have not been working. They’re excessively long, they cost too much, and everyone that is involved gets very frustrated. We already have high rates of foreign direct investment in forestry and we need more to help plant the one billion trees. Under the Government’s proposed streamlined investment regime for forestry, this applies irrespective of whether they’re seeking to acquire a forest registration right or a freehold or leasehold interest in the land. These amendments reduce the regulatory burden that has been weighing on that sector’s productivity and help position it for future growth.

By bringing investments in forestry rights and certain forestry registration rights and certain other profit à prendres—which is a long-term interest in land—into the screening regime the same way as investments in leasehold and freehold are, we’ve also removed a loophole that would otherwise have allowed investors to effectively avoid the screening regime that we have in forestry.

It’s important to note that New Zealand welcomes productive foreign investment when this adds to the economy, and this Government is committed to maintaining New Zealand as an open, outward-looking trading nation. Consistent with this vision, the bill will allow persons to acquire residential land where they spend the majority of their time in New Zealand and are committed to reside and become tax resident in New Zealand; where their investment will increase housing supply; or where they’ll use the land in the ways that support the growth of our economy and the creation of new jobs and opportunities.

We are simplifying the process for acquiring an interest in our forestry land by reducing processing times. We’re going to supercharge investment in that system, with New Zealanders being the beneficiaries of a more effective and efficient sector. This bill will help ensure that a greater proportion of foreign direct investment is directed into the productive economy where the benefits of capital investment are greatest, rather than in other areas such as housing, where these flows can instead be detrimental.

National said this could not be done—wrong. They said stamp duty was an option—wrong again. They said this would break lots of prior free-trade agreements—wrong yet again. If this had not been fixed before the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect, the ability to control foreign buying of New Zealand homes would have been lost, in practice, forever, not just for buyers from the CPTPP countries, but for other countries including China under earlier free-trade agreements with the benefit of most favoured nation clauses. Through this legislation, we are preserving the sovereignty of future Parliaments. Be they Governments of Labour - New Zealand First - Green disposition or National Governments, we are preserving the future sovereignty of parliaments to tighten or loosen the rules. If we had not done this, Parliament would have, in effect, lost the right to do that. But they’ve got to come to Parliament to do it. If future Governments want to change these rules, they’re not going to be able to sneak it through by regulation, because we’ve got very tightly constrained regulation-making powers.

I note that one of my colleagues from the other side of the House, Clutha-Southland MP Hamish Walker, has argued for a carve-out for foreigners buying homes in Queenstown. It seems he’s happy that one in 10 properties in that region are sold to people who don’t live here, probably don’t pay any tax here, and don’t vote here. He wants to ensure they can continue to outbid the New Zealanders that they are outbidding, because that’s the only time they buy: when they’re outbidding in New Zealand.

But it gets worse. He doesn’t just want to carve out for foreigners; he wants to carve out only for rich foreigners. I quote from his press release: “It would make sense to give a carve-out for foreigners buying for Queenstown—for example, at a certain price point, say over $5 million for foreign purchases in Queenstown.” That is what they think on the other side of the House. That’s the difference between Labour and National: we act for the interests of all New Zealanders, not just the wealthy elite. We don’t want to prefer the interests of foreign buyers from overseas, 1 percenters who often don’t pay tax anywhere—anywhere—and yet come here because they like what we’ve got here, sometimes because their own countries are no longer safe places to live in.

We’re here for New Zealanders. We don’t think they should be outbid by foreign buyers. It’s our birthright, not theirs, and I commend this legislation to the House.

Hon AMY ADAMS (National—Selwyn): Thank you, Madam Deputy Speaker. Well, I come down to take a call on the second reading of what is an incredibly poorly designed, badly conceived, poorly implementable piece of legislation that is a response to the issue of housing affordability, yet it comes from a place of total misunderstanding and misrepresentation of the realities of the housing issue. This whole approach came from some dog-whistle politics that said it was all because of foreign buyers. That was the reason New Zealanders couldn’t buy houses! Foreign buyers were the problem and if we just stopped that, everything would be fine!

Well, here’s the problem that the Government has: the data just doesn’t bear that out. Under the National Government, we put in place data collection to understand exactly how many foreign investors were buying residential properties, and do you know what that data told us? Well, I can tell you that, for many consecutive quarters now, it’s shown us around 3 percent foreign buyers in any given quarter.

Hon Members: How much?

Hon AMY ADAMS: Three percent. But wait; if you take off the number of foreign sellers, the net number—the net increase in foreign ownership—is sitting at around 1 percent. One percent, and yet this is the big panacea from this bumper sticker slogan, “Don’t worry about the data. We don’t read evidence we don’t like. Why would you bother with evidence? Let’s just stick to the nonsense we’ve been pedalling for a few years despite what the data tells us.”

If this Government was serious about housing affordability, here’s what they’d do: they would grow the supply of housing and they would be relentless in ensuring that they did everything they needed to do to make it easier to build houses, to create developments, to hire workforce, and to create a market where people wanted to buy and invest in houses. And what are they doing? They are doing everything they can to turn off the landlord market through changing negative gearing, through bringing in capital gains taxes, through changing the costing on landlords so that, frankly, landlords are going out of the market in a roar. They’re turning off the tap on foreign investors. Foreign investors are saying to me just about every day—certainly every week—“Why would we invest in New Zealand? New Zealand has the ‘Closed for Business’ sign up. We’re not interested in investing in a country where the Government is going to be this unpredictable, uncertain, and punitive based on so little good information. We’re not interested in funding developers.” That is why we’re seeing—and my colleague Judith Collins knows this very well—developers struggling to get developments up.

So what’s happening now? You’ve got Phil Twyford riding in on his white—well, I would say horse but it’s probably a donkey. He’s coming in saying, “Well, all of those developments that now can’t proceed because the developers can no longer get finance, because of the actions of this Government—we’ll rebadge a few of them KiwiBuild.” and somehow that’s adding to housing supply! We’ve got news for Mr Twyford and Mr Parker: if you’re not growing housing supply, you will never fix the problem of housing affordability. This bill is quibbling around the edges of demand. If you’re mucking around with 1 percent of the residential housing market, you’re not seriously making a difference. This bill does exactly that. The answer lies in growing supply.

If you look at the work that happened under our Government, led by my colleague Dr Nick Smith and others, here’s what we did: we put in place the Auckland Unitary Plan to make sure that land could be intensified; we put in place special housing areas across the country to bring land to market quickly; we put in place the Housing Infrastructure Fund so that houses could get built; we supported the construction sector by enabling people to bring in the workforce that they needed; and we absolutely made sure that the international development market was available and wanted to come to New Zealand. That is why, when the previous Government left office, when the National Government left office, we had a forecast of 100,000 houses to be built, not in 10 years, Mr Twyford; in three. In three years, New Zealand was looking at another 100,000 houses being built by the private sector, because we supported them.

This legislation will slow down development—make absolutely no mistake about it; the signs are already there. Just today, I’ve had two more developers and a foreign investor come to me saying they are now not proceeding with major developments that they had planned, because of this legislation. This legislation will make the problem worse. We heard that at the Finance and Expenditure Committee time and time again—people coming before the committee who are in the business. On this side of the House, we listen to those who invest their money and make things happen. We don’t think we know better than Treasury, the Ministry of Business, Innovation and Employment, and everyone else who talks to the Government. The developers came in and they said, “This will slow down development.” Now, my question for the Minister is: how does a bill that slows housing supply possibly help with home affordability? It absolutely does not.

Then look at what’s in the bill itself. This is the really interesting thing, because here’s what the bill, despite all the big talk about how it is going to crack down on foreign ownership and apparently stop the insidious nature of this 1 percent or so of good people who come to New Zealand wanting to be part of and grow our economy, actually does: well, first of all, we had a last minute intervention from the Minister to include an Supplementary Order Paper that would bring forestry into the overseas investment process. “Oh,” we thought, “well, forestry’s coming in.” But look a bit deeper and no sooner does forestry come in than the Minister, effectively, carves it straight out. So here’s what players in the primary sector need to know: forestry land, which is already 72 percent foreign owned—apparently that’s not enough of foreign ownership, and this Government is doing all they can to make sure that the touch is as light as humanly possible.

Forestry land, under a forestry right with a profit-à-prendre, will only come under the Act now if it’s more than a thousand hectares being bought. But what’s the equivalent for non-forestry viticulture land, for example? Well, the threshold for viticulture land in the same circumstances is five hectares. Five hectares is the threshold. For forestry land, even if you’re over a thousand hectares, all you have to do is go through a pre-approval checklist, a self-certified checklist, to say “Don’t worry; we’ll plant some trees.” and you’re OK. You buy an investment into viticulture land over five hectares and it’s the full bells and whistles Overseas Investment Act process. As my colleague Stuart Smith has mentioned already, it will actually likely drive people into owning more viticulture land because why would you go through a profit-à-prendre where you can do that. It makes no sense, it is illogical, and it doesn’t achieve any of the principals it says it seeks to achieve. That’s just the beginning of the carve-outs.

If you look into this legislation, it’s like Swiss cheese. David Parker has achieved the almost unimaginable, in that he has a bill that is a cold handbrake on development while still having so many holes in it. Anybody that is in favour will, apparently, be able to get their developments consented. We have this new beast in the legislation now called “standing consents”. Standing consent, effectively, means you go to the Minister, you convince them that you’re someone that they would want to deal with, and you get an open ticket to go and buy up, as you will, for the period of that consent. That doesn’t sound like good process and a Government that wants to stick true to its word to me.

You’ve got a process now of exemption certificates, where certificates will be granted to developers if the Government chooses to allow some sales off the plans. For those apartments and those residential properties, they can be foreign-owned and they can be foreign-occupied. So, for all the big talk, again, if you get an exemption certificate from this Government—under what sort of process we do not know, and we have to wonder—you’re OK. There’s even more: the Government can now carve out, by regulation, anything it decides to let through. So next time there’s a tough negotiation between Winston Peters and the Labour Party or Shane Jones and one of his pet projects, you know it’s going to get an exemption certificate or a regulatory carve-out. That is not good process. That is not the sort of principles-based legislation that this Parliament should be looking at.

Then, finally, we have this very questionable process of the exemption that the Minister tried to put in place for a single development in Northland—75 percent owned by a Queenstown developer and an American developer. Isn’t it interesting that David Parker took a pot shot at Hamish Walker for standing up for his community when that very Minister told us today, in question time, that he tried to bring an exemption himself through Cabinet, against Treasury advice, for a Queenstown developer for high-end properties to be sold into the American market? There is no good reason why that would be granted—none at all. There are going to continue to be some very serious questions asked about how it is that this Minister, who stands here and tells us that he is opposed to rich Americans buying our land, tried to do exactly that against all advice: against Treasury advice, against Office of the Clerk advice, and certainly against the strong concerns of others on this side of the House. This is a matter that there is going to be a lot more said about over the coming weeks.

Hon DAMIEN O’CONNOR (Minister of Agriculture): Thank you, Madam Deputy Speaker. Another outrageous speech from a National Party member who knows better. I’ll stand by my colleague David Parker and his integrity any time. The problem is that the National Party can’t understand that Ministers can judge with integrity, because they can’t do it over there. Nick Smith’s one of them—the courts ruled that.

The veterans who went to fight the wars from this country would be ashamed with some of the speeches coming out of that side of the House. This bill is ultimately about sovereignty and about New Zealand’s ability and New Zealanders’ ability to live in their own country as we move forward. The reality is that around the world there are billions and zillions of dollars, literally, sloshing around looking for a safe place to park. Our country, for the most part, is a country free of corruption—for the most part. It’s a country where people work hard, where the regulatory systems are sound, and people like to park their—

Hon Dr Nick Smith: It was. It was.

Hon DAMIEN O’CONNOR: For the most part, I was saying, Nick Smith. The fact is that they would like to park their money in this country, particularly a country that doesn’t have a capital gains tax—but that’ll be looked at, because I think it’s a perverse disincentive for many people. This bill is about setting a line in the sand and saying that New Zealand—and this Government, anyway—wants to manage New Zealand primarily for New Zealanders—firstly, to have a good job and to have a home, and to have somewhere to put their family and bring their family up. The reality is—in part because of the incompetence of the last National Government, but also in part because we’re a very small country and we are attractive for investors—that we have seen house prices and land prices escalate to the point where they are not affordable for the average New Zealander.

The previous speaker pointed and referred to a percentage ownership in this country. Can I say that the percentage ownership of houses in foreigners’ hands is less relevant to the fact that they’re in the market trying to buy them. Because what they do is drive up the values and drive up the market, drag up the market, and make every house in the market less affordable. The fact that 20 percent of the house sales in central Auckland in the March quarter were to foreign buyers is indicative of the ongoing and upward demand by foreigners to invest in this country.

We are concerned about affordability for New Zealanders buying homes and farmland—the National Government wasn’t. I’m quite proud of the fact that we’re intervening, passing a piece of legislation that will better protect—not absolutely, but better protect—the ability of New Zealanders to be able to afford to buy a home, because that’s why we’re in Government. We’re not in Government under some market ideology, like the National Party was, that the market will sort this all out. What sort of flat earth have you come from—right? We accept the reality that with zillions of dollars out there—happy to take 1 percent return, then they would like to invest in New Zealand with no capital gains tax and, actually, speculative returns that are quite out of this world. So they want to keep doing it unless we intervene and unless we bring into place legislation that protects the long-term opportunities for New Zealanders.

I’m proud to be part of a Government that’s doing that, and I’m proud to be led by senior colleagues like David Parker, who’s managed to walk the fine line, through his trade negotiations, respecting the rights of our foreign partners to come and invest where there’s clear additional value for our country, but, when it’s just to buy existing assets or existing homes, what’s the point? We’re here to manage for New Zealanders. We will welcome foreign capital, but we’ve got to be cautious with that, and we have to put controls on it and some guidelines, and that’s indeed what we’re doing here. We’re not saying no to foreign investment absolutely, but we’re saying that we’ll treat it cautiously.

If people want to come in and buy or build new hotels that we can utilise in our tourism industry, we’re saying that’s OK. We’ll have some caution on that, of course, but we welcome that. If you want to come in and invest in a business utilising New Zealand land, then we say welcome. Come in and add additional value to our economy, but don’t just come and speculate or park your money and inflate values to the point where some poor New Zealand business person or some poor New Zealand homeowner or farm owner can’t afford to buy the property and make a decent living. We want opportunities for all New Zealanders, all the way through the system.

In terms of forestry: yes, we do want to see some more trees planted. There is an opportunity, an advantage for New Zealand, in having a billion trees planted, because it will help us offset our carbon emissions. It will help us continue with our economy and our way of life, pretty much as it is, if we put in place proper mitigation and change our behaviours, you know, in a reasonably moderate way. It won’t require the radical change in the way that our economy operates if we were not to have the billion trees planted.

So I acknowledge the investment in this area. I acknowledge this bill as being a careful measure of a balance between welcoming investment for new opportunities but blocking investment for speculation. Kia ora.

Hon JUDITH COLLINS (National—Papakura): Madam Deputy Speaker, thank you for the opportunity to speak in this debate. It’s actually a very important debate, despite the contribution from that member who’s just sat down, Damien O’Connor. I thought he could’ve done a bit better, possibly even got to somewhere close to 10 minutes, but I guess he just ran out of puff.

Tonight, we’ve heard some of the issues that this Government is trying to solve. However, a lot of those are around the housing market, and as someone who is interested in the housing market, obviously, as the National Party housing and urban development and planning (RMA reform) spokesperson, but also—

Matt Doocey: Long title.

Hon JUDITH COLLINS: —it’s a very long title, a very long title; thank you—as someone who has been a keen observer in the market, particularly as a lawyer for more than 20 years before I came into Parliament, and also someone who has been deeply involved in commercial and tax work for many years, when I look at this bill, I see a bill of compromise. It reminded me of the Land Settlement Promotion and Land Acquisition Act 1952. Unlike some members in the House, I wasn’t actually around at that stage. However, I did have to, in practice in law in the 1980s, deal with that bill, until the then Labour Government got rid of it. It’s very much like that. In the bill, as introduced and passed in 1952, the Government had the right to take people’s land to use it for other purposes—for servicemen coming back from the war, which was, obviously, a good thing to do, to give people a chance in life—but the issue is that, over the years, that changed.

What we heard tonight is that the Government, which opposes foreign investment in property, now no longer opposes foreign investment in property as long as that property is in apartment blocks and is in hotel units. The weird thing is that somebody who wants to bring their money into New Zealand—a country which they must be wondering if they can ever take their money out of, given the behaviour coming from this Government in only nine months—will bring this money in and they’ll buy off the plans for apartments within an apartment building. It’s up to around about 60 percent of that apartment building, we now read, rather than the 30 percent that we were told last week; so who knows what it could be by then. They will do that, and they’re not allowed to live in it. They will do it so that they can then rent it to New Zealanders. So you’re going to have to turn up with your passport to prove you can rent something now? And the answer is, apparently, yes. That’s exactly what it will be. They can’t live in it themselves, but they can rent it out to others—nothing to stop them from going and renting something else, though, for that time, but just not live in their own property.

Who’s going to check all this? Was there going to be a little army of people running around checking who’s in which room, who’s doing what? Are they there? Should they be there? Where’s their passport? I think this is a mess of a bill, and it’s a mess of a bill because it seeks to deal with an issue that we have found out, from Statistics, is not actually the issue.

We heard the previous member who was speaking, Damien O’Connor, refer to the 20 percent of houses in central Auckland that have been owned by foreigners. What a load of codswallop. Actually, it is 20 percent of “dwellings”, and since central Auckland is primarily composed of apartments—if you’re looking at dwellings—I think that is actually going to be exempted; so I’m just not sure what the problem is here. And they’re talking about Queenstown. Well, Queenstown’s got a lot of apartments, too. Apparently, that’ll be all right, too. So, essentially, the reason that there is this exemption is not because they’re trying to lessen the blow of this but because even since this Government has been in power, even before this bill becomes law, the building of apartment blocks has entirely stopped. And if you sit down with Phil Twyford, as I do every Friday morning before breakfast, on The AM Show—

Hon Member: Puts you off your breakfast!

Hon JUDITH COLLINS: —you need an empty stomach for that one. Ha! We talk about issues like apartment buildings, primarily because I raise the issue. He has admitted to us that the issue around foreign investment has actually closed down all these apartment block buildings—the building of them, I should say. What that means is this: even without the law, it stops. Investment has stopped. It’s stopped in the very apartment buildings that we’re supposed to be wanting to encourage. So it’s stopped. What is the message that’s gone out to people who might want to invest in New Zealand? “Go away.”, “Oh, we’ll want you today; tomorrow we won’t.”, “Bring your money here; we might pass a law to stop you taking it back.”?

Certainly, there was a time in New Zealand when that was true, back in the early 80s—absolutely. In those days, we actually had to get permission from the Reserve Bank to send money overseas. I can remember doing some research on an issue and I needed to send some money to a university in America to get the—they used to be photocopies in those days, or Gestetners or something, and I had to get the permission of the Reserve Bank to send over what was probably the equivalent of a couple of hundred dollars. That’s the sort of administration quagmire that this Government is wanting to bring back, whether it’s in foreign investment or whatever.

Now, we heard today from the Hon Phil Twyford, in Parliament, something that made all this side laugh a lot, and quite a few of his colleagues smirked as well, and that was that he said that the Government has always supported foreign investment. Well, who could tell? Who could tell? Well, what’s this bill doing here then? What’s this bill doing here? The bill is here to tell people wanting to invest in New Zealand, “Hey, we’re going to have the same rules”—or very similar rules—“to Australia, so you may as well just go there.” We’re going to have more people in Australia. They’ve got 25 million people; we’ve got not even 5 million. Where would you rather go if you’re going to invest? You might invest there instead of in New Zealand if you were really after making some money. Then you might say, “Well, what has been the effect of these rules brought into Australia?” Tell me about the prices of houses in Sydney. Are they higher or lower than, say, in Auckland, New Zealand?

Hon Dr Nick Smith: Higher.

Hon JUDITH COLLINS: Oh, they’re higher? Fancy that! They’ve got a lot of apartment blocks, too, haven’t they, and still they’re higher. Fancy that! So it would possibly be about demand and supply.

The best way for a Government to make housing more available to people is to increase supply. If we have more supply—more people investing into building apartments or more people investing into development of property—that supply will start to overtake demand, and then we will end up with prices going down. That sounds a great thing if one is out in the market looking for a property. It is not such a great thing if someone’s already got their property and they’ve got a big, fat mortgage on it. That’s not such a great thing. And, in fact, what we’re likely to see under this Government is that it won’t be too long before they’re putting the begging letter out to foreign investment to come back to New Zealand, please, and buy something, because, suddenly, a whole lot of people will leave.

We’re already starting to see people moving back to Australia after we’d stopped that flow, brought people back home, and they’re already starting to go back. Tradespeople are going to start to go back, too. And I think what we’re seeing in New Zealand now around the construction industry is something that might actually be worthy of the pre-crisis mode. Construction of housing in New Zealand is 10 percent down on what it was when we left office—10 percent down—and that’s after all of the rhetoric, all of the money, the $2 billion KiwiBuild budget, and everything else. It’s down 10 percent. You start dropping 10 percent a year like that Government is and we’re going to end up with a crisis all right. That will be their crisis. We’ve already got the State housing waiting list up by 2,000—the highest it’s ever been—under this Government. This bill won’t help any of that.

Dr DUNCAN WEBB (Labour—Christchurch Central): Well, thank you Madam Deputy Speaker. The usual scaremongering from over there, but let’s start at the beginning. Let’s ask a pretty fundamental question: who should be able to own a home in New Zealand? It’s a pretty simple question.

Hon Ruth Dyson: I think New Zealanders.

Dr DUNCAN WEBB: Oh, New Zealanders, the member for Port Hills says—brilliant, brilliant. And that’s exactly right. We don’t want 10 percent or 20 percent of our market to be held by people who don’t live there who have simply invested from overseas, never laid a foot in New Zealand. They don’t even have to lay a foot in New Zealand under what we’ve got at the moment; they can simply buy that on the knowledge that the market’s going silly because of the panic buying that’s created.

Now, this shibboleth of supply and demand was coming from the member over there before. Well, I’ll tell you what, there is some fictitious demand happening, and that’s what this bill puts a stop to. There are 1.8 million dwellings in New Zealand, and you know what? For all of the talk, for all of the sniping from the other side, those dwellings are now going to be for New Zealanders.

And being a New Zealander doesn’t mean that you have to have been here for five generations. We’re not going to ask the impossible. All it means is you have to hold a residence class visa, you know, and what’s more is there’s a whole lot of other frameworks in there which look after the need to generate houses. The apartment framework which says, “Yes, you can buy and develop an apartment complex and own up to 60 percent of those apartments on a continuing basis.” And you know what? If that doesn’t work, the Minister can tweak those settings as well. So if we need apartments—as the member Judith Collins was going on and on about—well, we can allow that.

This legislation doesn’t need to stand still, but the core fact of this legislation is that Minister Parker has done something that the National Government did nothing about. He has said, “I’m putting a stop to overseas owners speculating in the New Zealand housing market.” And that is going to create a whole lot more homes for New Zealanders. It’s a comprehensive bill. It’s well thought through, and it’s something that should have been done a long time ago. I commend this bill to the House.

Hon Dr NICK SMITH (National—Nelson): I’m actually saddened to be speaking in the second reading of this bill. I’m saddened, firstly, because the origin of this bill was the cynical Chinese-sounding name debacle led by Phil Twyford in 2015. And I hate seeing racism rewarded. I’m also saddened because I came to this Parliament to be involved in evidence-based policy-making. And all the advice shows that this bill, quite the opposite from improving housing supply and affordability, will actually do the opposite.

And I’m also saddened by the politics of this bill. You see, when this Government was elected, international media aligned the Ardern-Peters Government to those of the politics that occurred with Trump and Brexit. And members opposite screamed foul and said they’re different. No, this bill is New Zealand’s Trump or Brexit moment, because it plays off the fear—it plays off the fear—of foreigners for a bill that is all poorly thought-out.

Now, I was astonished to hear Dr Duncan Webb begin his speech by saying he was concerned about scaremongering. Well, let me talk about scaremongering by winding back to 2015, when Mr Phil Twyford launched his campaign against foreigners. Mr Twyford claimed in this House that 39 percent of homes were being bought by people with Chinese-sounding names—39 percent from Chinese-sounding names. He actually only used data from one real estate company. It was only for one area. Whether your name was Lee or Ki, or anything that sounded slightly Asian, then he said that they must be foreigners. His message was simple, and that is the core of our housing problem is a whole lot of money-hungry Asian people, and it was one of most disgraceful moments that I have heard in this House.

Mr Twyford’s not the first person that’s gone down that road. I think members opposite would know the history of Enoch Powell in the United Kingdom in the 1960s blaming jobs on foreigners. I recall the time in the 1990s when Winston Peters blamed Asians for crime in New Zealand, when, actually, most of us would know from the statistics that the levels of crime amongst people of Asian ethnicity in New Zealand is actually substantially less than other groups. But here’s the difference: Mr Powell was demoted by the Leader of the Opposition at the time. Instead, what we have from the Labour Party is those racist connotations now being transferred into this bill.

Let’s test Mr Twyford’s bill against the facts. Remember, he said 39 percent of homes were being built by foreigners. Well, every single property transaction for more than three years now has been collected as to the residential status of those buyers, and it has consistently shown that, of the 200,000 properties that are bought and sold each year, 3 percent of those are bought—

Hamish Walker: How much?

Hon Dr NICK SMITH: —3 percent—by people that are from overseas. But here’s the interesting part: the report also shows that 3 percent of the sellers are overseas residents. Actually, over the entire last three years—over the entire last three years—the net change in the number of homes that are owned by people overseas is 1,300, out of 1.7 million homes in New Zealand.

We’re building 30,000 homes a year—double the number that we were just five years ago. Does any member in this House seriously believe that a change of 1,300 homes over that number is at the core of the housing issue? In this Parliament, for three years, we heard Labour members saying that those statistics produced by Land Information New Zealand were rubbish and indefensible. Well, it’s interesting that since they have become the Government, those figures have magically—they’re exactly the same, but now they’re reliable. Doesn’t that just show the dishonesty and the fraud behind this bill.

Then I want to talk about the carve-outs, because here’s the really interesting part: if we look at those same statistics, guess who’s the biggest group of buyers and sellers of overseas people owning New Zealand property? It’s those damned Australians! Those bloody Aussies! So I want to ask Dr Webb this: why is it OK for an Australian or a Singaporean to evilly speculate in New Zealand property? That’s OK, he says. That’s what this bill says is OK. But if he’s from China, he’s to be feared. If he’s American, well, we’ve got to ban him. Can some member opposite explain the logic of that differentiation?

Then let’s come to the next part of the bill. What this bill now says is that if it’s an apartment, it’s OK to have foreign speculators, but, if it’s other sorts of houses, it’s not. Well, I’ve just listened to years of debate on housing, and I thought: whether people want to live in apartments, in town houses, or in your stand-alone home, why would Parliament want to have different rules for different types of houses? It is a nonsense.

And then I have to come to the glorious, biggest hypocrisy that I have ever seen in this House, and that is the specific exclusion for a Millbrook-type development in Northland. How often we heard from members opposite, “We’re not having foreigners building McMansions in New Zealand.” They forgot to add a few words on to the end, and those were “We’re opposed to expensive McMansions, except if they’re our mates.”—except if they’re our mates. That is, the Government proposed a specific amendment, and a carve-out from all of these issues, for the development that is in Northland. And, guess what: in that development, what’s the average section price? Oh, $4.5 million. So my question to Dr Webb and co. opposite: why are you so opposed with this bill but want to exempt $4.5 million sections of David Parker’s mates in Northland. Now, I say, that’s wrong, that’s immoral, that exposes the nonsense of this bill.

Hon Ruth Dyson: Ha! This member lecturing us on morality! That’s a joke.

Hon Dr NICK SMITH: I say this to Ruth Dyson, who’s interjecting: one of the proudest things I have of the nine years of the Key-English Government is that Transparency International concluded in 2017 that, of 196 countries in the world, the least corrupt country in the world was yours truly, New Zealand. And that is something for every member of this House to take pride in, and I honestly say the provisions of this bill will take us backwards, because, in the standard exemptions that are proposed here, we’re opposed to foreign investment, except Ministers are able to pick out their mates and say, “Oh, but they’re exempt from those controls.” Now, the truth is that in many parts of the world it is those sorts of provisions that are wide open to corruption. We should have laws in this Parliament that say, “You can do A or you can do B.” But a law that says “You can do B, providing you’ve got a ministerial exemption.” is bad law. And members opposite have form in that regard, and that’s why I say that this bill is a bad bill for housing. But, most importantly, it’s a sad day for this Parliament.

Hon EUGENIE SAGE (Minister for Land Information): Tēnā koe e Te Māngai o Te Whare. Shouty Dr Smith encapsulates the negativity of the National Party in relation to anything about housing. He’s so negative and he’s so shouty because National said this couldn’t be done and this Government has gone and done it, because we are committed to improving the affordability of housing in New Zealand, through KiwiBuild, through this initiative, to ensure that we’re not pushing up house prices through allowing foreign speculators to buy homes in New Zealand. I commend the work of Ministers Twyford and Parker, and I strongly oppose the National Party’s efforts to try and smear—personally attack—politicians and put aspersions on their integrity. It is the lowest form of debate, Dr Smith.

The select committee’s work on this bill—the 213 submissions on the bill and their careful consideration by the Finance and Expenditure Committee, ably chaired by Michael Wood—has improved the bill. There have been some significant and well-considered changes, which focus on quite specific aspects of the bill, making it simpler, for example, to acquire residential land for commercial purposes such as supermarkets and hotels.

I also take issue with Dr Smith’s comments about the way this bill will be implemented. As Minister for Land Information, I have responsibility for the Overseas Investment Office (OIO). There is a major investment of time, energy, and resource going into ensuring that the office is well equipped to implement the bill once it becomes law. Budget 2018 saw an extra $7 million available to the office for monitoring and enforcement. There is money available for education, for ensuring that the professionals who will be dealing with this bill—the real-estate professionals, the lawyers, the accountants, and others—understand the bill and can ensure that their clients can easily comply with it. There is a lot of work being done about simplifying and ensuring that there are plain-English processes. So Dr Smith’s claims about lack of transparency and leading to corruption are utter nonsense.

Hamish Walker: You watch!

Hon Dr Nick Smith: Tell us about the water-bottling plant.

Hon EUGENIE SAGE: We will watch, Dr Smith. And it will be a major improvement on the regime that we had under your Government, because your Government did absolutely nothing to control overseas speculation.

The first steps towards this bill happened last year, when the Government issued a new ministerial directive which ensured that the sales of rural land had to provide a substantial and identifiable benefit to New Zealand. That same ethos informs this bill. Under National, you had only the Overseas Investment Office having oversight of the sale of large farms; that has now changed. Similarly, with this bill, it is aiming to ensure that New Zealanders can afford to buy a home, and that we get rid of those property speculators, who were a factor in pushing up prices and pushing Kiwi buyers out of the market.

We know that capital is coming into New Zealand from many different countries. We are seen as a safe, a stable, and a secure country—a good place to invest. But while we encourage investment that brings substantial and identifiable benefits to our country and our economy, purchases that are speculative help push up prices. They contribute to making housing unaffordable to New Zealanders, and that’s one of the key reasons that this bill has been introduced.

We want to encourage investment by some of the bigger developers where they can make a substantial difference in providing a large number of homes. That’s what the bill will help to do. It will also help ensure that we get the forestry investment that we need to meet the billion trees target by making the screening regime much more coherent, much simpler than exists under the current law. We’re also closing the loophole around profits à prendre—those long-term usage rights that, effectively, created a loophole in the overseas investment regime. This is a bill which is about ensuring that we recognise that it is a privilege for overseas investors to buy land and property in New Zealand, and that they must deliver a benefit to our country for that. So the rest of the world has placed a high value on owning a home in New Zealand; we’re saying with this bill that that privilege belongs to New Zealanders and those who live here permanently and who bring benefit to our economy.

Mr Walker, as the MP for Clutha-Southland, was suggesting that there be exemptions for regions like Queenstown and for things like luxury homes. I’m pleased that the select committee has rejected that, because what that would’ve seen is investment drifting to those parts of New Zealand. It would have seen additional pressure on already high house prices in areas like Queenstown, which are shutting locals out of the market because houses are unaffordable. It would’ve seen additional competition for resources in the construction sector. So the bill, as it’s being reported back from select committee, is a coherent regime. There is a lot of effort being put into ensuring that the OIO is ready to implement it, and in terms of the streamlined test for forestry, that will help us meet our billion trees target.

The National Government said this couldn’t be done; once again, this Government is showing that it can be, to protect New Zealanders and make housing more affordable for Kiwis. Thank you, Madam Deputy Speaker.

Ian McKelvie: Madam Deputy Speaker—Ian McKelvie, Rangitīkei.

DEPUTY SPEAKER: I’d actually written your name down. I call Ian McKelvie.

IAN McKELVIE (National—Rangitīkei): Thank you, Madam Deputy Speaker. I was quite intrigued by the speech from the “Minister for Water Bottling” a minute ago. I thought that—

DEPUTY SPEAKER: Order! Order! [Interruption] Order! We will use proper names.

IAN McKELVIE: Oh, apologies, Madam Deputy Speaker. I was—yes, OK. I wanted to correct a couple of items that she mentioned. We didn’t at any stage say it couldn’t be done; what we said was it shouldn’t be done, and we still would have exactly the same stance now. I think that we were always of the view that this piece of legislation would be fraught, and it most certainly is.

I just wanted to correct a couple of other issues, because we took significant action not to control or to get rid of foreign buyers—well, certainly to control them, I think, and I just wanted to mention a couple of them, because I think they’re pretty relevant. We required all foreign buyers to be registered with the IRD and indicate that they are a foreign buyer; we introduced regular monitoring of foreign buyers; we introduced the brightline test, which applied to foreign buyers and New Zealanders who do not live in the homes; and we introduced a number of other items which had an impact on the market—and, of course, that’s proved since to be true.

Today, we’ve seen what I consider to be two of the worst pieces of legislation debated in this House in my time in Parliament, and this is the second leg of the dreaded quinella. There can be no winners here, and it’s another example of the penchant this Government has for gambling with our economy and the lives of everyday New Zealanders in order to blatantly push their distorted view of overseas investment in New Zealand. We’ve already heard Minister Twyford today, completely confused, with his statement that he’s happy to have offshore investment in new builds, when we know this bill not only disincentivises foreign investment in many new builds, because of the residential clause, but also stops new builds in many other types of businesses, such as vineyards, farms, and other places in New Zealand.

Everyone wants a fair go in New Zealand, and I support that in every way, but to cut our noses off to spite our faces is plain stupid. The tragedy of this legislation is it will stifle development in the very area the Government is trying to grow the pie—and I’ll say more on that later. I want to deal with three particular examples of why it’s so bad—and despite overwhelming opposition from a majority of submitters, the Government members on the Finance and Expenditure Committee pushed on blindly with this piece of legislation. First, I want to talk about the exemption that was put in place for the Te Ārai development. We also heard the last speaker, Eugenie Sage, talk about high-value property in Queenstown, and this exemption was put in place for what I’d consider very high - value property in Northland—I can’t see the difference.

Despite warnings from the Rt Hon David Carter, the select committee chair belligerently and arrogantly ignored written advice from the Clerk’s Office that it was not a fit and proper way to introduce legislation, giving a private enterprise an exemption. Fortunately, the integrity of the select committee has been saved by the very unusual action of the Speaker, where he ordered the exemption be removed. In doing so, he mooted that the Labour-led and dominated select committee had been motivated by a desire to assist and to be fair to the landowner. Well, I wonder about that, and I wonder why the many other affected landowners have not been considered. There would be many landowners throughout New Zealand affected by exactly the same issue as this, and I don’t think it matters who they are or where they reside. I’m not going to prosecute the reasons for this extraordinary decision; I’ll leave that to others more knowledgable than I. They are—these challenges—not, of course, specific to iwi-owned land. This will affect many such developments throughout New Zealand and, in many cases, affect the financial viability of them. So I don’t see any difference between that development and any other that might have been applicable under this bill.

I would note that I, too, have sympathy for those parcels of land that have had their value affected by this unfortunate piece of legislation, as many businesses and private homeowners will possibly be affected financially by this, and that will depend on the market reaction to it—one which, I imagine, we’ll see pretty soon after it has been implemented.

There was a lot of discussion in the select committee around the apartment building projects and the potential for them to be stifled by actions taken by this piece of legislation. I think one of the real flaws in this is that work that has been undertaken allowing foreigners to own but not live in their properties. This is a great lurk in an escalating market, but it’s certainly not an attractive place to be in a market that’s either static or dropping. The reason for this, of course, is that there’s no potential for gain. No foreigner is going to put money into an investment in New Zealand for New Zealand’s benefit that they get no benefit financially from; they need to have the potential to have a financial benefit from it. In fact, in this environment you’d almost think they’re probably going to lose, especially given the statements of the Acting Prime Minister today, who clearly wants to drive the price of houses down. If you’re going to drive the price of houses down, you’re certainly not going to get investment in those properties to get them going.

Stuart Smith: Did he turn up?

IAN McKELVIE: Perhaps not. These investors are not stupid; they’ll run a mile from this great opportunity, and anyone who has experience in this type of market knows the danger of holding property awaiting capital gains. Then there’s the mouth-watering incentive of being slapped by the capital gains tax—if, in fact, there is any gain to be had.

Kieran McAnulty: Stop reading your speech.

IAN McKELVIE: The difficulty for—it’s beautifully written. The difficulty for property developers accessing capital is clearly the issue at stake here, and that’s been a long-time issue for property developers, particularly where they’re developing apartments. If they can’t sell off the plan, they can’t get the bank to back them and they can’t get funding to get going, so, consequently, those property developments don’t take place. This is the big challenge for this piece of legislation, and it’s the big challenge for the Government.

The next thing I want to talk about is the forestry issue, and I think this is quite a serious one, and I think it’s serious for some different reasons than have been raised earlier in the night. I think the real challenge here is that we’re giving foreigners the right to buy forestry land to grow their own trees, export them to their own mills in their own countries. So, effectively, we’re giving away a section of New Zealand property—and not only a section of New Zealand property, we’re also giving away the jobs and the product from it, and I think that’s an extraordinary thing for a Government that pretends to be here for New Zealanders to be doing.

It’s highly likely, also, that these properties will be sold lock, stock, and barrel to foreign owners, and they will then plant the property in its entirety. The issue with that is that if you do plant the property in its entirety, you’re planting a large proportion of class I, II, III, and IV land, and there’s no way that that class of land should ever be taken out of food production. From a world perspective, I think that’s hugely serious.

So it’s extremely dangerous for Governments to interfere in a market. It always causes distortions, and we’ve seen many instances of this throughout our history. I go back to the supplementary minimum prices in the farming sector in the days of Muldoon. I go back to the Dairy Industry Restructuring Act, to the regional fuel tax, and on it goes. So everything we do has the potential, once we start interfering in markets, to distort markets. That is a great tragedy, I think.

We’ve also seen—

Hon Tracey Martin: The market will deliver—trickle-down, trickle-down.

IAN McKELVIE: It’s like a parrot. We’ve also seen countries be exempted from this process—

Hon Members: Ha, ha!

IAN McKELVIE: I can’t imagine where it is. Up there? We’ve also seen countries exempted from this process, which has now been extended to include Singapore. Who next, we may well ask, and we now see the Minister has the right to chop and change the legislation at will, to suit what’s going on at the time. Well, I think that’s fine, but, in fact, if you’d left it to the market, the market would have done that for the Minister, so that’s not really, in my view, of great value to us.

The last topic I want to speak to as this second reading speech comes to an end for me and we dispatch this legislation to committee of the whole House, and no doubt there’ll be some wholesome debate in that area too—I want to talk about the cost of compliance that this piece of legislation is liable to bring about. It’s going to be huge. Treasury predicted the applications in workload will increase from some 150 per year to 4,700. Imagine the cost to investors and the bureaucracy in this. Every time we add a cost to the business of houses, we add to the cost of the house.

This is a poorly conceived piece of legislation. It will be poorly implemented, and we’ll be paying the price for it, in my view, for quite some time. I’m extremely pleased with the fact that this Opposition has put a minority report into this bill, and I’m sure that minority report, unfortunately, will come to haunt us into the future. Thank you, Madam Assistant Speaker.

ASSISTANT SPEAKER (Poto Williams): I understand this is a split call—Anahila Kanongata’a-Suisuiki.

ANAHILA KANONGATA’A-SUISUIKI (Labour): Kia orana, e Te Mana Whakawā. It is always a privilege to contribute in the House and, in particular, to this important bill, the Overseas Investment Amendment Bill, the second reading.

But before I do that, since we are talking about overseas, I want to take this opportunity to congratulate Jason Taumalolo and the Mate Ma’a Tonga rugby league team for their leadership in utilising expat Tongans to sing the Tongan national anthem. Maybe our national Kiwi team might learn a lesson from that. So I just want to acknowledge the Mate Ma’a Tonga team for utilising Club Fofo’anga to sing the national anthem.

Let me get back to the Overseas Investment Amendment Bill, and I refer to the Finance and Expenditure Committee report to the House. I want to take this opportunity to acknowledge the chairmanship of Michael Wood. I’ve always found, as a regular sub into the committee, I find him very respectful and with due diligence, and, of course, the rest of the members of the select committee, thank you very much for your hard work.

As with the previous speakers on this side, I want to echo our acknowledgments of all the submitters. When I think about this bill, the whakataukī, “Whatungarongaro he tangata, toitū he whenua”—man disappears, but the land remains—comes to mind, because, in reality, we are talking about the land and our role as lawmakers to ensure the landowners of this land are ordinary residents of Aotearoa New Zealand. As we all disappear, whether we’re in ashes or whether we go in a box in the ground, we all at the end, whether we are a billion trees or whatever you call it, become compost, to belong to the land—just a reminder.

Then reading the select committee’s report, I just want to finish because I know that many of this side have actually said a lot that needs to be said. I just want to alert members to three points—three points. This bill, actually—the words that stood out to me are that it ensures the investment in New Zealand by overseas persons will benefit New Zealand. It also ensures that the overseas people who are not ordinary New Zealand residents would generally be not able to purchase existing houses on land classed as residential under this bill. Lastly, the member from across the road was worried about enforcement. I want to refer that member, the member from Papakura, to Part 3. It actually talks about enhanced information-gathering and enforcement powers of the Overseas Investment Office—more than just monitoring.

All that has been said has been said. I want to commend this bill to the House. Malo.

LAWRENCE YULE (National—Tukituki): Since I’ve been on the Finance and Expenditure Committee, it has been the biggest learning experience for me about how a Government should not do a bill, because, actually, this is a dog of a bill. I listened to the Hon David Parker saying “We don’t want to be tenants in our own land.” In fact, last week, I listened to the Hon Damien O’Connor saying that he doesn’t want any farmland to be sold to any overseas owner in the future under his watch. He’s proud of that, but I say there is a balance in New Zealand.

We have produced—and there have been sales of—200,000 homes over the last three years in New Zealand. Three percent of them have been sold to foreign buyers, 3 percent have been bought by foreign buyers, and we have actually lost from the housing stock about 1,300 homes to foreign buyers in those three years. That is not what is behind the cost of housing going up. The cost of housing is going up in New Zealand as a supply and demand equation as the market works. And, while those on the other side don’t like the market, if you go and ask people in Auckland or in my town who have actually had their property values go up from $500,000 to $700,000, or $700,000 to $1 million, they are actually quite happy with the increased equity in their property.

What we are dealing with is a shortage of residential land and houses in New Zealand. This is actually having a chilling effect way greater than that side even understands. It’s no different to the oil and gas decision made without any consultation, any Ministry of Business, Innovation and Employment analysis, and now we know—and now we know—may be worse off for climate change than what we were doing before. There’s a lot of advice, even in this space, that says that what this will do to the New Zealand housing market will be detrimental. It’s being ignored by those on the other side. We’ve just heard the Hon Judith Collins tell us that housing development and apartment development in Auckland has stopped dead. The law isn’t even in place yet, but it’s stopped dead because we’ve scared off the very people we need to help build and fund these developments.

We actually can’t have it both ways in New Zealand. I’m reminded by the pastoral sector that when the dairy industry’s in trouble, and when the payout drops to under $5, and a number highly geared properties are in difficulty, you know what happens, you know the people that are out there—sorry, Madam Assistant Speaker, the other side should know what happens. What happens is that often large corporates, some of them foreign-owned, come in and actually underpin the market. What we’re saying is we actually don’t want them in good times, but when things get a bit rough we actually still need them. Well, I’m arguing you can’t have it both ways.

The carve-out provision in Northland worried me at the time. I sought questions and asked whether, in fact, we had received any advice about whether it was allowable; whether, in fact, there were any other examples; or did it, in fact, set a precedent. The chair, Michael Wood, said that was for us to decide. We ignored the Clerk’s advice and then the Speaker had to make a rare move and rule it out. I found that a really difficult process. We asked genuine questions, as the Opposition should, and were largely fobbed off and, in the end, the Speaker made an unprecedented ruling.

I also want to comment on some comments that were made about my friend Hamish Walker by the Hon David Parker. You see, in my area, foreign investment has been transformational. We have Craggy Range, Elephant Hill, Cape Kidnappers—all wonderful examples of foreign investment; wonderful corporate citizens who have made a big difference. In Clutha-Southland, in Queenstown at Glenorchy a couple have transformed the Glenorchy camping ground, spent $40 million, and donated it back to the community. That’s what they’ve done, and we say to those people, “Oh, you’re not welcome. We don’t want you to buy a house in New Zealand.”? I just think it’s rubbish.

Today we heard from the Hon Phil Twyford that he welcomed foreign investment. I also heard today that he welcomed flat-pack houses from China or some other country to help us with the housing crisis. You cannot have it both ways. You cannot tell people who you want investment from that they can’t live here but then ask them for all the cash as well. That’s why I think this bill is fundamentally flawed and we oppose it.

MARK PATTERSON (NZ First): It’s with some determination, actually, I get up and speak on the Overseas Investment Amendment Bill. As many of you know, I was a member of the National Party, and I was active in the National Party, and I do have sympathy with some of their philosophies. But the one thing—the one thing—I could never get my head around was this obsession with putting foreign interests in front of our own citizens’, and that is why I stand here. This is absolutely core New Zealand First policy, and it is something that we are united about on this side of the House. I would commend Minister Parker and the work that he’s done. It was said that we could not do it—we couldn’t do this and comply with our international obligations. Well, guess what? We’re doing it. We are.

So what happened was that the way it was structured up until now was our homes have, essentially, been a commodity on the international market to buy and sell like pork bellies or coal or iron ore—exactly the same.

Kieran McAnulty: Embarrassment.

MARK PATTERSON: It is an embarrassment. There are no restrictions. So while we can play around with the figures and we could say there are only 3 percent, well that’s 3 percent too many. In our biggest city, Auckland, our houses are at $1 million just for an average house—how could you let that happen, over that side? How could you let that happen?

ASSISTANT SPEAKER (Poto Williams): Order!

MARK PATTERSON: Sorry, Madam Assistant Speaker, not you. How could the National Party have allowed that to happen under their watch?

I tell you what, I know—I can pinpoint to the day—the day that sentiment changed against that former Government. There was an item on The Nation. Mike Wesley-Smith went round—the Hon Jenny Salesa, I believe, was involved in that. I was sitting in my comfortable lounge in Lawrence watching that with my jaw open—to see my fellow New Zealanders living in garages, at best, paying exorbitant rates.

Kieran McAnulty: They don’t care.

MARK PATTERSON: They did not care. What on earth? Where are the morals? Where are the morals in that position? When your citizens, when our citizens are in that situation, we pull every lever—every lever—and one of those levers is to take demand out, and those foreign speculators that are coming in here had to go and they are going.

There are record low levels of homeownership. We heard from the Rt Hon Winston Peters today when he quoted the great National Party Prime Minister Sir Keith Holyoake, who used to brag that New Zealand was a property-owning democracy—an absolute founding principle and quality and value that we want the most. That has been taken away, slowly eroded over time, particularly for Māori, who have incredibly low rates of homeownership in their own country. That is a shame.

I would also pick up on Minister Sage’s comments about the Land Information New Zealand and the Overseas Investment Office and farm ownership, and how we’re tightening up on the letters of intent there. [Interruption] There was a day when young New Zealanders, Mr Yule, could aim at picking up a handpiece, putting on a set of cuffs, and working their way to farm ownership. I’ve just heard him, over that side of the House, saying that we need foreign investors in here to prop up the markets, keep the prices up. What about letting young New Zealanders, those that are out there working hard—giving them the incentive, like past generations have had, to get out and own their own piece of dirt. That has been taken away.

I do have the privilege of owning a farm, but I don’t care if it drops by 20 percent. I’m not in there for the capital gain; I want to pass it on to my family, as, I’m sure, most farmers round New Zealand do. We’re now seeing that the current rules are going to actually put substantial and identifiable benefit where it belongs, and actually up in lights, so that our young farmers can have that hope and that dream.

Of course, we have been pragmatic about this bill. The Finance and Expenditure Committee—we’ve taken on the views, particularly, as has been mentioned, around the cutting rights for trees as we build towards our billion-tree strategy, that nation-building strategy as we seek to accept our responsibility to meet our Paris commitments. That is a thoroughly sensible amendment, and credit to the select committee and those that have worked through that process.

We’re not banning foreigners from owning property here or building property; there are provisions where people are coming in to add to the existing housing stock. That investment is welcome. It is helping, it is beneficial to us as an economy—we accept that. But the rules are ours. We’re making the rules for our benefit. We’re not enabling speculators to come in and disadvantage our own citizens. So on this side of the House we make absolutely no apology—none whatsoever—for putting the interests of our citizens, New Zealanders, first.

Andrew Bayly: Madam Assistant Speaker.

ASSISTANT SPEAKER (Poto Williams): I call—

Kieran McAnulty: Here we go, “Old Shouty”.

Andrew Bayly: Madam Assistant Speaker, it’s a pleasure—

ASSISTANT SPEAKER (Poto Williams): Just a second. I apologise to the member; I hadn’t quite called you. Could I ask the Government whip, when I’m calling members, to actually restrain himself. Thank you. I call Andrew Bayly.

ANDREW BAYLY (National—Hunua): Thank you, Madam Assistant Speaker. It’s a pleasure to be talking on the Overseas Investment Amendment Bill. What a divisive issue this has been. I, like a number of us in the House, have sat on the Finance and Expenditure Committee, which received 213 submissions, and heard 63 of them in both Auckland and Wellington. I’ve got to say that it was almost an embarrassment, actually, being a member of the Finance and Expenditure Committee during the period that we heard submissions on this bill. I think it’s best characterised as one of those feel-good bills that parties like New Zealand First like to promote because it sort of appeals to the general public—yes, we’re going to stop foreigners coming in and buying our assets. Then, on the other side, having little regard to what that actually means and what the implications are. In life, it’s always a balance, and I think, unfortunately, we’ve ended up with a very poor balance.

Obviously, what we’ve heard is that this bill is about seeking to place limitations on overseas persons from acquiring, basically, residential land, and characterising it as “sensitive land”. There are three ways that they can obtain consent—I’m talking about overseas investors. Those are: if they are in the business of buying the land and adding to New Zealand’s housing supply, i.e., they buy the land, sit on it, develop it, and then flog it; if they want to use the land for non-residential purposes or residential purposes relating to core business, i.e., it’s a business you acquire which happens to have some residential land, and a case in point was telecommunications companies, which were initially precluded, or residential retirement village - type companies; or, the third one, if they hold an appropriate visa and could show they had committed to reside in New Zealand. And the big issue was in allowing overseas persons to acquire residential land for the purpose of supply of housing.

We’ve heard, from a number of people, that the way the bill has been written, it has had a chilling impact on new developments already, even though the bill is still not even enacted. And it raised the question, in the committee, about what sort of land an overseas buyer might buy. So is it a residential piece of land; is it land deemed rural-residential, which is on the outskirts of—for instance, in Auckland—my electorate; or is it rural land that could be bought and then subsequently re-consented and actually used to build property? The question is: if you’re an overseas person, over what time period can you buy this land and over what time period can you hold it? Can you be a land banker for a long, long period of time—which is actually the issue around property development? If you wanted people to develop property, and if they’re overseas people—if you really wanted them to develop property—you would have put time pressure on those foreigners—

ASSISTANT SPEAKER (Poto Williams): Order! Order! I’ve let the member go on a bit, but, please, don’t bring me into the debate.

ANDREW BAYLY: But this bill had nothing of that. The bill was silent on that and still allows for overseas persons to actually land bank, and that’s one of the core reasons for why we’ve got a lack of supply in housing.

One of their changes was an exemption if the overseas person is buying it—if you are buying and building a multi-storey apartment. So the rule that was subsequently announced during the course of the hearings and the committee’s work was that if you’re an overseas person, if you’re building a multi-storeyed apartment with more than 20 units, you could offer some of those—

ASSISTANT SPEAKER (Poto Williams): Again, I just remind the member the use of the word “you” brings the Speaker into the discussion. So if you could just not do that, that would be great.

ANDREW BAYLY: Thank you, Madam Assistant Speaker. So the developer, the overseas person, could sell those off the plan, to overseas people, and up to 60 percent—and we didn’t get clarity around that, whether that was 60 percent, but we believe it could be—of the units could be sold to overseas people. There were some exemptions around that: rented, share equity schemes—whatever. But, effectively, what that allows is apartments to still be built and sold to overseas people.

What this raised was the issue around who might actually rent those properties or enter into long-term arrangements. The rules around it are that they must be subject to a market rent on a proper basis. And, of course, one of the things—and I think this is where the biggest hole is in this bill, when it becomes an Act—is that a foreign person could develop apartments, then sell them to a family member under a market rent situation and, therefore, still have control of that and still achieve the same outcome. That issue was never actually resolved within the committee. I think it’s the one that cuts through and actually undermines the case of this bill. If you were to actually be clear about it, you would have actually put a dent in that if you were trying to stop foreigners coming in and buying apartments.

There were similar exemptions for hotel units. One of the things we’ve asked—you know, with all these sorts of complex arrangements where foreigners are allowed to do these developments and then have to sell them within a certain time period, and foreigners are allowed to buy these units—is how on earth do you monitor that? We spent a lot of time with the Overseas Investment Office (OIO) asking that very question. As my colleague Ian McKelvie noted before, at the moment the OIO do only a very, very small number of consents—about 150, but now they’re probably estimating they’re going to have to process about 4,000 a year. That is a phenomenal increase, and the whole issue about the resourcing of the OIO is, incredibly, one that we could not get a view on. We were told that they were going to have some additional people, but it is a big issue, and it’s a complex issue. It’s not only at the time that these original arrangements come into place, but because they have transitional arrangements later on, how on earth is the OIO going to continue to monitor these types of arrangements and property and rental arrangements to make sure they comply with this bill?

There was a step change during the bill. I’ve spoken about it. Previously, the bill envisaged that power and gas companies and telcos, who often have a requirement to buy residential properties for their own operations, were all going to be excluded. Only through the process did the Minister put in place a new change to give a dispensation to those groups but ruled out a dispensation for retirement homes, because, in many cases, our largest retirement homes are owned more than 25 percent by overseas parties merely because they’re listed on the stock exchange. There was no real reason why they were actually precluded.

The one that really worked us up as a committee was around forestry rights. As my colleague the Hon Amy Adams noted before, 72 percent of the forestry rights in New Zealand are already owned by foreigners; yet we have a Government who says that’s not enough and actually sets about dismantling and making it easier and setting in place three easier steps for foreign forestry people to come in here and buy more of our forests. There is no justification for why we should allow more foreigners to own more than 72 percent of our forests. I heard the argument about trying to achieve our billion-dollar budget of new trees, but, of course, New Zealanders should be doing that. That’s New Zealand stuff. Why on earth would New Zealand First support foreigners increasing their share of forests in New Zealand? I absolutely cannot understand it. On the other side, we’ve got a viable vineyard winery business in New Zealand—highly successful. Do you think there are any such dispensations for that? Not one jolt—not one jolt.

Some of the other issues were around the conveyancing of it. The conveyancing rules were actually very significant for people who had to do that, and through the work of the committee we reduced some of the liability so that now there’s an obligation on the purchaser to provide a statement which the conveyancer merely has to note and pass on. But the liability for making any false claims now sits with the foreign overseas party. Now, that’s another issue with the Overseas Investment Office. How is it going to monitor that? How is it going to check it, given the significant scale of 4,000 consents a year? I do not support this—

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

JAN TINETTI (Labour): Kia ora, Madam Assistant Speaker. It’s a wonderful opportunity to stand here in support of this bill. I’m absolutely delighted, because this bill will mean a lot for New Zealanders—New Zealanders that I have worked with every day—

Kieran McAnulty: The people we serve.

JAN TINETTI: —the people that we work with. That’s right, Mr McAnulty—the people that we are here to serve: our New Zealanders. Tonight, we have heard the Opposition, when we said that they said this bill couldn’t be done, say, “No, no, no, we never said that. We said it shouldn’t.” But the reality is they wouldn’t—couldn’t, shouldn’t, wouldn’t—do this.

That is the reality, because that Opposition is on the side of the foreign buyers. They believe that they are there to support them. Well, we, as a Government, are here to support New Zealanders into homeownership. We believe in New Zealanders buying their homes. The reality is that the Opposition said this bill will mean that there can be no winners. Well, I challenge the Opposition to look in the faces of those people who have been hurt by those overseas buyers over the last few years, and tell them that there can be no winners out of this bill. There are winners out of this.

The reality is that you can—sorry Madam Assistant Speaker; the Opposition can—quote statistics and twist statistics as much as they like. But the reality is the faces of those people who have been put out of homeownership because of foreign buyers coming in. I have worked closely with those people over many years. You ask any teacher now, starting out, the reality of owning a home right now. They don’t believe in that dream any more. They don’t have that dream, because it is not reality for them.

One story that I would actually like to finish with is the story of families that I have worked very closely with in the past few years, who were quite excited, actually—just bear with me, please, Government members, but they were quite excited to start with—when they heard that an overseas buyer was buying a number of the houses that they were renting, because they felt that that meant they would be able to stay in their rentals and stay in the community that they’d called their community for many years. Two weeks after those sales went through for houses—two weeks after that sale went through—they all got eviction notices. Eighteen months after that sale had gone through, those houses are still lying empty, and one of those families, at least, is still living in a van in a car park every single night.

That is what the reality of foreign buyers coming in and buying up our homes means, and that is what the Opposition is completely failing to acknowledge, yet they’re on the side of those people who will leave those houses empty and leave our families living in vans. Shame—I think it’s a big shame. I believe this is a great bill, and I commend it to the House.

The question was put that the amendments recommended by the Finance and Expenditure Committee by majority be agreed to.

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

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1.

Amendments agreed to.

A party vote was called for on the question, That the Overseas Investment Amendment Bill be now read a second time.

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1.

Bill read a second time.

Bills

Local Government Regulatory Systems Amendment Bill

First Reading

Hon JENNY SALESA (Minister for Building and Construction) on behalf of the Minister of Local Government: I move that the Local Government Regulatory Systems Amendment Bill now be read a first time. I nominate the Governance—

ASSISTANT SPEAKER (Poto Williams): Order! Order! Could I just ask the Minister to repeat that, please, in the order in which it is written?

Hon JENNY SALESA: I move that the Local Government Regulatory Systems Amendment Bill now be read a first time.

ASSISTANT SPEAKER (Poto Williams): Order! Could you do it one more time, please. Thank you.

Hon JENNY SALESA: I move, That the Local Government Regulatory Systems Amendment Bill be now read a first time. I nominate the Governance and Administration Committee to consider this bill.

I’m introducing this bill on behalf of the Minister of Local Government, the Hon Nanaia Mahuta. This bill will ensure that the legislation that local authorities operate under is fit for purpose, not standing in their way, and not holding them back.

The bill amends seven local government Acts through a variety of minor and technical amendments. Government departments are responsible for the stewardship of the legislation that they administer. The 2014 Productivity Commission report Regulatory institutions and practices noted it can be difficult to find time and opportunity for departments to undertake repairs and maintenance of existing legislation.

Regulatory systems bills like this one have become an efficient vehicle for carrying out repairs and maintenance of existing Acts. They take care of inconsistencies, gaps, and errors, and clarify provisions which may be outdated or ambiguous. They can remove unnecessary costs and complexity within the regulatory system and ensure legislation remains relevant. These bills are not used to make substantial changes in policy. Instead, they can be used to make sure the original policy intent remains effective in a contemporary environment. This bill makes sure that public notice information is required to be in electronic form and key council information is provided in a useful digital format, and it removes the requirements for hard copies to be submitted to government agencies.

So, with this in mind, I will now summarise the changes made by this bill to the seven principal Acts. First, the amendments to the Dog Control Act 1996 will replace the definition of “disability assist dog” and will remove the list of certified disability assistance dog providers from the definition. A new schedule, Schedule 5, will be created to list organisations that are authorised to certify disability assistance dogs. This schedule may be amended by an Order in Council approved by the Minister of Local Government in consultation with the Minister for Disability Issues. The schedule will ensure there is one list of approved organisations, and the ability to amend the schedule ensures it remains up to date.

A further change to the Dog Control Act amends the public notification requirements for a local authority’s dog control policy report. The notification requirements will now align with those in the Local Government Act of 2002. The focus will remain on ensuring this information is publicly available.

The changes to the Local Electoral Act of 2001 are designed to encourage greater participation in local elections and polls. Effective engagement of citizens with their councils is vital for councils to support and enhance the well-being of our communities. This is a fundamental role for local government. The amendments include a new responsibility for electoral officers to facilitate and foster electoral participation. While electoral officers have undertaken this role, the mandate to do so has never been clear. These changes respond to the Justice and Electoral Committee recommendation that changes be made to the Local Electoral Act to provide a clear mandate to improve the facilitation of participation.

The change to the Local Government Act of 1974 will clarify the consultation and public notice requirements when designating a road as a pedestrian mall. This change will align the requirements with those of the Local Government Act of 2002.

There are a number of changes being made to the Local Government Act of 2002. A definition of “Internet site” is inserted into the Act, and the definition of “public notice” is replaced. The new “public notice” definition will allow public notices to be published online while retaining the requirements to print notices in newspapers. The definition of “working day” will be updated so that it is consistent with other Acts.

The delegation and sub-delegation powers of local authorities will be aligned, and the definition of extraordinary meetings is clarified. This is to clarify that the power to sub-delegate is no greater than the power to delegate, as well as ensuring that extraordinary meetings can only be called when they are absolutely necessary. This preserves public opportunity to participate in meeting processes.

There is a new power enabling the Secretary for Local Government to set requirements of form for documents or information that must be made public. This will provide consistency of information across all of local government. Documents will be made more accessible to the public, and they will ensure the information they contain can be analysed and reused in the future. The bill removes the requirement for local authorities to send hard copies and particular documents to central government. This includes councils’ long-term plans, annual plans, rating resolutions, annual reports, and summaries of their dog control policy and practice report.

A change to the Local Government (Rating) Act of 2002 removes the requirement to send a copy of any resolution setting rates to the Secretary for Local Government. These documents will still be required and will still be publicly accessible, but not having to send them in hard copy will reduce compliance costs for our local authorities.

The changes to the Local Government Official Information and Meetings Act of 1987 will update and clarify public notification requirements. The changes apply to the notification requirements for extraordinary or emergency meetings, and will allow these meetings to be notified on a local authority’s internet site.

Finally, the changes to the Rates Rebate Act of 1973 will clarify the definition of “income” and will ensure that all retirement village residents are able to apply for a rates rebate. The definition of “income” is updated to be consistent with the entitlements listed in the Veterans’ Support Act of 2014. It does not change the entitlements of veterans or their families. This change to the Rates Rebate Act will enable all retirement village residents, regardless of their occupancy arrangements, to apply for a rates rebate. This was the intention of the changes made by the Rates Rebate (Retirement Village Residents) Amendment Act passed earlier on this year. However, it came to light that the changes would inadvertently exclude residents with a particular previously unknown occupancy arrangement. We are correcting this.

As I noted earlier, bills such as this have become a vehicle to address a range of minor and technical issues. It is important that we take opportunities such as this to repair and maintain the legislation we pass in this House. And so with that, I commend this bill to this House.

Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Assistant Speaker. National is pleased to support this bill, the Local Government Regulatory Systems Amendment Bill. It contains a number of clauses in it and, as the Minister for Building and Construction has outlined, makes a number of tweaks to legislation, all of which are eminently sensible. There are one or two, perhaps, which I want to speak a little more to, but we are pleased to support this because, in effect, it’s our bill. So I want to acknowledge the work of the Hon Anne Tolley when she was the Minister of Local Government in bringing forward—[Interruption]

ASSISTANT SPEAKER (Poto Williams): Order! Order! I apologise to the member. Could the two members at the back of the House please take your seats?

Hon JACQUI DEAN: Thank you, Madam Assistant Speaker. That was an interesting intervention, so now I will continue, for the benefit of those members, to just, perhaps, say once again that we are supporting this bill, and the reason we’re supporting this bill is because the provisions in the bill came from National when we were in Government.

It really just underlines the fact that the National Government was very focused on reducing red tape for local government, and the clauses in this bill—most of which are very sensible and eminently sensible, but there is one clause I do wish to speak to—do exactly that. It was a very strong focus of the National Government to attack those very issues that made local government inefficient, out of date, and inconsistent between some of the provisions and some of the Acts. So, again, I say—and I’ll probably say it a few more times during the course of the speech, but this is a good piece of work, mostly, because it did come from the previous Government.

It does actually give rise to the open-ended question—and I know that members on this side of the House are also thinking this. I’m pretty sure that it is something that is troubling them also, and that is: gosh, isn’t local government lucky to have a bill brought forward with some pretty insubstantial amendments when over the other side of the House we have a Government telling us how endlessly busy it is? So why is it that up to two hours of tonight’s House sitting time can be spent on debating something which, effectively, should be business as usual for any Government and could be put further down the Order Paper with no harm done to anyone? Could it be that there is a lack of legislation coming through? I just wonder, and I just wonder whether the other members of the National Party are wondering the same thing. I bet they are—I bet they are.

But here we are. Here we have got the Local Government Regulatory Systems Amendment Bill before us, and so I’m not going to painstakingly go through clause by clause by clause. I could—I could—but, again, I’m going to leave that to my colleagues because I know they want to do that. I know they want to go through changes to the Dog Control Act, Local Government Act 2002—they are busting to make contributions around those clauses, I just know they are.

But there is one part that I do wish to speak to, and it is a new part, and it’s the second one in the bill. It is “Amendments to Local Electoral Act 2001”, and it does make quite a substantial change to responsibilities of councils. So the purpose of the changes to the Local Electoral Act is to empower councils to improve representative and substantial participation in local elections. “Nothing wrong there”, I hear you think, and on the face of it there is nothing wrong with that. But how are they going to do it? So we are putting a new purpose into the Local Electoral Act which empowers local authorities to increase participation in local elections. We all want that. Participation is declining in each and every election, and I think participation is down around 40 percent. There are members here who might—it’s around 40 percent.

Lawrence Yule: 42 percent.

Hon JACQUI DEAN: Forty-two percent. You see, when Lawrence Yule gets up to make a contribution, I just know he’s going to hammer this point, because I know he cares about it a lot—that and some other points.

But how are they going to do that? Are we going to, yet again under this Government, give an unfettered power to local government to increase participation in local elections? It sounds great on the face of it, but I can tell members something: we will be watching this part through the passage of this bill through the House. In select committee, we will be very, very interested in just what is meant by the insertion of the part into this otherwise very, very good bill. I will leave my contribution there, and I commend the bill to the House.

PAUL EAGLE (Labour—Rongotai): Thank you, Madam Assistant Speaker. First of all, can I start with an apology. I was just talking with my colleague here, the Labour list MP based in Hamilton, about how great local government was and we were totally fixated; so I apologise. But, look, we are here now. I am always proud to come into the House and talk about local government. I can see some former colleagues over there. I’m sure they too will give this a resounding thumbs up. It’s been a night of thumbs up, and I’m really happy that we got to this before we closed for the evening.

This is a bill that you usually do at a time when you think “What else can we do to make things better?” I want to praise the local government Minister, the Hon Nanaia Mahuta, for taking the time out to say, “Look, let’s fix those things that local government have been asking to be fixed for many, many years.” I’d say “nine long years” but that might be a bit mean. Anyway, can I say that this takes care of those inconsistencies—the gaps, the errors, the maintenance stuff of at least seven Acts related to local government. And I just want to talk about a few of them.

One is the Local Electoral Act 2001. We know that there’s a bill going through the House now but what this will do is make the facilitation of participation mandated. It’s important we do that. Some of you may not know that, unlike in central government where the orange person comes out, it’s a centralised campaign, and the promotions go out, in local government, it’s localised. Every council does their own thing. Some councils do better than others, but I know, in this city, the great city of Wellington, you get roughly 40 percent of people voting. I don’t know how that compares with other parts of New Zealand but that’s not good enough. I think that to get facilitation mandated to get more people participating is a great thing.

There’s another small but important thing too, and this relates to that modernisation that this Government wants to do. It’s making sure that public notices are not placed only in newspapers. It’s a bit of a pain when you go through a newspaper and all the public notices are bunged at the back, but what this piece of work, this bill, says is that they must be published on the internet too. So you still retain the printing in the newspaper, but you’ll put it on the internet as well. That also connects to the future, which won’t see local governments having to be lumbered with big documents. The long-term plan, the annual reports, the annual plans—some are probably about this thick or that thick. Now it can all just go on the internet. So I’m really proud that councils are not going to have to be lumbered with producing these documents, many because they have to, now they can go online and they can produce just enough for what they need.

There’s also going to be some clarity around the Local Government Official Information and Meetings Act 1987. That’s really around the notification of extraordinary or emergency meetings. In the past, these meetings have been held without the need to notify properly. They can have them; councils can make decisions quickly. The concern here is, and the feedback’s been, let’s make sure we get communities notified that these are going to happen. So there will be a requirement that those too will have to go up on the internet as well. As I said, small changes but very, very important. Likewise, the Rates Rebate Act 1973—we’ve already made some of those changes but, inadvertently, it’s come to light that there have been some changes which exclude residents with a particular or previously unknown occupation agreement. This corrects that, and I want to say that what we have here is just a range of small but very important things.

One of the more interesting things is the Dog Control Act 1996, also. What this will do is make sure—I mean, really it’s just some wording changes to say, “Look, here’s a list of organisations that are authorised to certify disability assistance dogs.” Those will simply be updated and added to the list. So the schedule may be amended by an Order in Council, approved by the local government Minister, in consultation with the disability issues Minister, but now there’ll be one list of approved organisations ensuring that that list stays up to date.

I just want to applaud the Minister, as I said at the start, for taking the time and going through a whole range of Acts. This is part of this Government’s commitment to giving local government more powers, modernising the way they do things, and ensuring that when they carry out their business, it’s a whole lot easier to do the things that they need to do. I’m really proud that what we’ll see with some of these changes is that they will enable the work that’s going through, or has already gone through, this House to make some real changes. When we look at the Local Electoral Act, you can already do online voting now, but what the changes that come through in a different bill are to give effect to will enable trials to take place online. I’m really happy that some of the things that were started by the previous Government—that, yes, this Government will actually make sure they happen. And they will happen with the protections in place so that local authorities know that if they want to carry out a trial online or if they want to do something, it’s not going to come at a reputational risk for that city, that district, or that region. So a real thumbs up there.

I want to go back to some of the work that local government also does around just producing publications. I’ve said that what you’ll see is that no longer will they have to submit the work, but what this gives is an indication to local government that they can carry out their work knowing that the cost to ratepayers won’t be going in to all that printing or that unnecessary cost around distribution. For those smaller councils that find this a necessity, it will mean that they won’t need to pay the money or be lumbered with the costs of doing some of this work. I think notification of things like the extraordinary meetings is key also. And I can say to that: in a previous life, being able to easily do things because the law allows you to do that but without carrying out that “requirement”, I guess is the word, to engage with your citizens and do that properly—that can now no longer be done. What that does is set up the transparency and democratic processes a whole lot better.

I’m really proud that we’ve got this to the House. I’m also proud that I think we’ll get a unanimous vote on this. So I commend this to the House.

KANWALJIT SINGH BAKSHI (National): Thank you, Madam Assistant Speaker, for the opportunity to stand in support of this Local Government Regulatory Systems Amendment Bill in its first reading. First of all, I would like to congratulate Minister Nanaia Mahuta for picking up this bill, and the speech given on her behalf by the Hon Jenny Salesa shows that the work done by the previous Government is being acknowledged.

I was listening to the speech of the member Paul Eagle. He was passionately speaking because he has been part of local government, and I can see members from this side—Simeon Brown, Denise Lee, Lawrence Yule, and Ian McKelvie—who all have been part of local government. They are very passionate about this bill because they know there are minor technical changes in this bill but they are very important, and this is because of the report by the Productivity Commission in July 2014, which recommended these changes. The Productivity Commission found that it can be difficult to find time on the parliamentary calendar for repair and maintenance of existing legislation. As a result, regulatory agencies often have to work with legislation that is out of date, not fit for purpose. This can create unnecessary cost, complexity, and ambiguity for the regulators and regulated parties. It means that the regulatory regime may not keep up with the public or political expectation.

We also see, as Paul Eagle mentioned, some of the modernisation which has taken place, as we see in the Parliament also—we are becoming paperless, and so are councils. So these technical changes can really help to improve the working of overall local government.

The local government legislative framework is a complex arrangement of multiple Acts and regulations. Over time, amendments to local government regulations have been introduced and errors and inconsistencies have been fixed. That is why this bill was a part of the previous Government, which wanted to reduce the paperwork and bureaucracy, and to improvise the regulatory system so that people can have the advantage of that. Those are the things which were in the minds of the previous Government members, and which this regulation was for.

I would like to touch upon some of the issues which are being addressed in this legislation. “Local Electoral Act 2001: The purpose of the changes to the Local Electoral Act … is to empower councils to improve [the] representative and [the] substantial participation in local elections, and to clarify when a successful candidate in a by-election may come into office.” “A candidate who is declared to be elected comes into office on the day after the day on which the official result of the election is declared by public notice under section 86.”

So this legislation is going to improve a lot of local government legislation problems, and it will fix the errors which are present there. With these words, I commend this bill to the House.

Hon RON MARK (Minister of Defence): Thank you, Madam Assistant Speaker. It’s a privilege to be able to stand and speak on behalf of New Zealand First on this, the Local Government Regulatory Systems Amendment Bill. I want to start by acknowledging the Hon Nanaia Mahuta, Minister of Local Government, for bringing the bill to the House. I also want to recognise previous speakers who have local government experience, in particular—and I see a few more on the Opposition benches lining up to take calls—just to pay recognition for the service of some of those members. They have long, deep experience. I acknowledge member Lawrence Yule as a former president of Local Government New Zealand. I enjoyed the time working with that member and local government, and being part of the local government family.

It’s no secret that, for years now, there have been numerous inconsistencies in the Act. And it’s when the previous speaker Jacqui Dean spoke on the bill and made it clear that it was the previous Government that put this legislation together, and, therefore, the previous Government and the Opposition benches deserve the credit for this bill being here—I guess, what they must also accept is the criticism for it taking so long to get here. Nine years they had to tidy up some of these matters, and instead of dealing in some of these technical issues that were costly, cost productivity, were difficult to interpret, and, in fact, in some cases just simply out of date—instead of dealing with those simple matters which would have reduced compliance costs, reduced red tape, reduced rates for the ratepayers or costs on the ratepayer, something that the previous Government promoted itself as being a champion of—they instead got diverted by other nonsensical local government amendments, such as the 2013 legislation, which, I assume that the Hon Jacqui Dean was taking credit for as well, along with that erstwhile former minister Nick Smith.

You see, it’s pieces of legislation like this bill that come in and they’re quite technical—they’re sort of a technocrat’s tidy up. It’s long overdue, and it’s work that has to be done. I don’t anticipate there’ll be a lot of opposition. In fact, I would anticipate that, given that the previous Government who sits in Opposition apparently produced this perfect bill, there wouldn’t be a lot of discussion in select committee and it’ll be all over and dusted and reported back tout de suite back to the House, and we will be able to enact it in a very efficient manner as well—in a very expeditious manner. So I look forward to seeing that, because I do not anticipate, on the back of the Hon Jacqui Dean’s speech, that there’s much that they’re going to criticise in select committee, that there’s much they’re going to change, because apparently they wrote it, and they wrote it perfectly, and therefore it should stand on its own and just move straight through that select committee process very, very swiftly indeed. So I look forward to an early report back, possibly, if that’s what they could possibly manage for the Hon Nanaia Mahuta, and thus allow us to get the changes through swiftly. But I’m not anticipating that’ll happen, for some funny reason.

In my time in local government, it was often frustrating for a small council to be required to churn out large documents in volumes at great expense to the ratepayer, like the long-term plan, and being expected, at the drop of a hat, to give everybody who asked for a copy a copy—a very expensive exercise. So it’s understandable that we change the law so that these documents, and all documents including minutes of all council meetings, should be available online, so everyone can see exactly what their councillors did and didn’t say in those meetings that took place. And if we reduce this cost to the ratepayers, that’d be a very, very good thing.

There’s only the one caution, and I would ask members to pay a little bit of attention to it, because I’m anticipating that mayors, councillors from rural and provincial New Zealand will say, “That’s all very well and fine if you’re online.” And we know that there are parts of New Zealand who have not had the pleasure, the enjoyment, the privilege of rapidly rolled out broadband initiatives that John Key promised them into their hinterland. I can tell you that you can’t even make a phone call from Gladstone, let alone get broadband. So this provision in Part 4 Amendments to Local Government Act 2002, I’m anticipating some discussion at select committee around whether or not there might still be an obligation in some parts of the country to provide where necessary. So I’ll look forward to seeing the report back and seeing if—based on the submissions, based on the evidence—that is an issue, and if it’s an issue that needs addressing at all in the committee stage.

The other areas—electoral participation; this is a real doozy. I’m looking forward to hearing the discussion and debate around this post the select committee hearings, because we all know that turnouts in local government elections are appallingly low. Again, it’s interesting that in rural and provincial districts it tends to be high. There tends to be something about those districts, those territorial authorities, that drives their constituents to take a higher level of interest, indeed, responsibility, as citizens, as ratepayers, in making those decisions. And so they do fill out those voting forms, and they do post them—not in wonderful numbers but in far better numbers, from all the evidence that I’ve seen. So to have, finally, the Electoral Act amended so that there is focus and mandate to facilitate and foster representative and substantial electoral participation in the legislation is a welcome addition. It will be interesting to see how this rolls out in different parts of the country—what it is that people determine is the cause of the low turnout, the low expressions of interest, the low participation levels, and what it is they choose to do to try and change that, because, believe you me, we need to change that.

There is nothing more frustrating, I think, for many of us who have served in local government than to go through all of the hoopla of consulting, producing a draft annual plan, a draft long-term plan, putting it out for consultation, and then sitting there patiently, late into the evening, waiting for people to come in and make their oral submissions. And at 10.30 or 11 o’clock at night, one finally packs up their notebooks and pads and walks out having had only two people walk in the door, both of them friends of a councillor, who just wanted to come and see who was going to be there—and then, post the publication of the annual plan or the long-term plan, to be bailed up when you’re trying to have a beer in a pub by someone who doesn’t like the long-term plan, who doesn’t like the rates increase, who doesn’t like the plan to modernise or improve the playground or the park, or whatever. And I would always find myself saying to these people, “Did you make a submission?” Did that person vote? And it was always frustrating to find that, in far too many cases, they didn’t even vote. Anything that we can do to increase participation in local government has to be a win. So empowering those in the position to actually promote and foster representation and increase participation and increase voter turnout has got to be a jolly good thing.

Like I said right at the start, I think unanimity is breaking out across the House. Consensus is having its way in the final hours of this evening. Unlike the previous bill, the overseas investment bill—I wish I’d been able to debate this bill with the same degree of passion that I would have debated that one, but I certainly recommend this bill to the House.

Dr JIAN YANG (National): This omnibus bill is an attempt to improve and maintain the effectiveness and efficiency of the regulatory system established by principal local government Acts. A well-functioning Government needs an updated and well-informed and practical regulatory system. Outdated and impractical regulatory systems would increase substantial costs and, of course, would reduce efficiency. Like taxation and Government spending, regulation touches the lives of all New Zealanders in different ways. After all, the proper functioning of our society, of our economy, is dependent on a well, sound regulatory system. It is believed that regulation, when implemented well, underpins markets, protects the rights and safety of citizens and their property, and assists the efficient and equitable delivery of goods and services. So we can argue that regulation is an important tool for preserving and advancing the public interest. Poorly designed regulatory arrangements could reduce efficiency and substantially increase costs, while well-designed regulatory arrangements would do otherwise. So it is important—

ASSISTANT SPEAKER (Poto Williams): I apologise to the member. This debate is interrupted and is set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow. Pō marie.

Debate interrupted.

The House adjourned at 10 p.m.