Thursday, 1 November 2018

THURSDAY, 1 NOVEMBER 2018

THURSDAY, 1 NOVEMBER 2018

The Speaker took the Chair at 2 p.m.

Karakia.

Business Statement

Business Statement

Hon CHRIS HIPKINS (Leader of the House): Next week, the Crown Minerals (Petroleum) Amendment Bill will complete its remaining stages. Third readings will be given to the Courts Matters Bill, the Tribunals Powers and Procedures Legislation Bill, and the Telecommunications (New Regulatory Framework) Amendment Bill. The Fire and Emergency New Zealand (Levy) Amendment Bill and the Copyright (Marrakesh Treaty Implementation) Amendment Bill will receive first readings, and, as notified to the Business Committee, there will be an extended sitting on Wednesday morning.

Hon MICHAEL WOODHOUSE (National): Thank you, Mr Speaker. May I ask the Leader of the House if it’s the Government’s intention to pass the Crown Minerals (Petroleum) Amendment Bill prior to the Prime Minister travelling to APEC?

Hon CHRIS HIPKINS (Leader of the House): As I indicated, the Crown Minerals (Petroleum) Amendment Bill will complete its remaining stages next week.

Oral Questions

Questions to Ministers

Question No 1—Finance

1. PAUL EAGLE (Labour—Rongotai) to the Minister of Finance: What examples, if any, are there of a well-being approach influencing Government policy?

Hon GRANT ROBERTSON (Minister of Finance): This Government is currently using a well-being approach to underpin the Budget 2019 process, through which agencies are collaborating across Government on their Budget bids and policies in support of the Government’s well-being priorities. These priorities have been informed by a comprehensive well-being analysis, undertaken by Treasury to determine where the greatest need for improvement in long-term intergenerational well-being exists. At the core of this is Treasury’s Living Standards Framework, which measures success across finance, environment, communities, and people. The Government is putting the well-being of New Zealanders at the heart of what we do and, in particular, our Budget policy and investment decisions.

Paul Eagle: What specific Government initiatives have been developed under a well-being approach?

Hon GRANT ROBERTSON: This morning, the Government announced a major $1.5 billion project to revitalise eastern Porirua. The project will renew and build 2,900 State homes and at least 2,000 affordable KiwiBuild and market homes. This project is a genuine partnership with Ngāti Toa Rangatira. I want to acknowledge Māori Crown Relations: Te Arawhiti, and the Minister Kelvin Davis for his work with them, but also a range of other Government agencies: Housing New Zealand, HLC, Te Puni Kōkiri, Treasury, the Ministry of Housing and Urban Development, the Ministry of Education, the Ministry of Social Development, and, indeed, the Porirua City Council. It is a plan for a total community renewal, including housing, education, urban development, and employment. It is a 25-year intergenerational well-being project and represents a practical application of the well-being approach not just being about a narrow view of a return on investment but actually being about how we can improve living standards, health, justice, and education outcomes all at once.

Paul Eagle: Why is it important that policies are assessed under a well-being approach?

Hon GRANT ROBERTSON: The core focus of this Government is to improve the well-being and living standards of all New Zealanders. Rather than seeing New Zealanders as some kind of liability on a balance sheet, we are using the well-being approach to ensure our policies and investments benefit our people, our communities—

Hon Dr Nick Smith: Just mush.

Hon GRANT ROBERTSON: —and our environment. Hard luck, Nick. We’ve actually got on and done something—

SPEAKER: Order!

Hon GRANT ROBERTSON: —unlike you. This is groundbreaking work, and I am proud to be part of a Government that is truly putting the well-being of New Zealanders at the heart of everything we do. I want to acknowledge all the Ministers who’ve been involved but, in particular, the local member, Kris Faafoi, for his tireless advocacy for the city of Porirua.

Question No. 2—Immigration

2. Hon MICHAEL WOODHOUSE (National) to the Minister of Immigration: Does he stand by all his statements and actions in relation to Karel Sroubek, also known as Jan Antolik?

Hon IAIN LEES-GALLOWAY (Minister of Immigration): Yes, in the context of the information that I had available at the time.

Hon Michael Woodhouse: Did Mr Sroubek’s immigration lawyer seek residence for his client, or simply cancellation of deportation liability?

Hon IAIN LEES-GALLOWAY: No. The determination that I made after reviewing the case file was that Mr Sroubek’s deportation liability should remain but that it should be suspended for five years on the conditions which I think are publicly available. However, due to the fact that he had initially been issued a residency visa in an incorrect name, I was advised that the way to give effect to that decision was to issue a residency visa in his correct name, carrying the conditions that I would have placed upon him had I suspended his deportation liability.

Hon Michael Woodhouse: Has he seen statements by Mr Sroubek’s lawyer that he did not ask for residency?

Hon IAIN LEES-GALLOWAY: Yes, but what he asked for was for the deportation liability to be cancelled. I determined that it should not be cancelled, that it should be suspended, but, given the peculiarities of this case, the way to give effect to that decision was the course of action that I took.

Hon Michael Woodhouse: Did Mr Sroubek or his lawyer assert that he was in danger if he was returned to the Czech Republic?

Hon IAIN LEES-GALLOWAY: Given that I have just called for an investigation into—

Hon Members: Answer the question.

Hon IAIN LEES-GALLOWAY: Given that I have just called for an investigation into the information that I had available, and some additional information that is allegedly available, I am not making any further comment on what information I used to make that decision.

Hon Michael Woodhouse: I raise a point of order, Mr Speaker. The Minister didn’t assert that he could not answer because it couldn’t be given consistently with the public interest. Therefore, the question wasn’t addressed.

SPEAKER: Well, my view is that he, effectively, did.

Hon Michael Woodhouse: Did the Minister believe Karel Sroubek was in danger if he was returned to the Czech Republic?

Hon IAIN LEES-GALLOWAY: I am not divulging the reasons that led me to the decision that I made.

Hon Michael Woodhouse: Was he aware Mr Sroubek twice returned to the Czech Republic while awaiting trial on kidnapping and aggravated robbery charges?

Hon IAIN LEES-GALLOWAY: It is not in the public interest for me to divulge what information I—[Interruption] It is not in the public interest for me to divulge what information I did and did not have.

Hon Michael Woodhouse: Was he aware the Parole Board considered him unsafe to release back into the community, a decision they made just 48 hours before the Minister granted him residency?

Hon IAIN LEES-GALLOWAY: It is not in the public interest for me to divulge the information that I did or did not have in making that decision. [Interruption]

SPEAKER: Order! Order!

Hon Michael Woodhouse: Was—

SPEAKER: Would the member resume his seat. I do want to say to the Minister that while the Speakers’ rulings do make it clear that the discretion as to what is in the public interest and what is not is something for the Minister to decide, I also want to say to the Minister that a straight answer to a question about whether a publicly available document was in his possession or not is quite a long stretch of that discretion that he has when addressing the House, and it’s one which I would encourage Ministers to think about carefully. Clearly, the public interest test is one which should be a high test when it is applied, because otherwise it can be used to avoid proper scrutiny of ministerial decision-making.

Hon Michael Woodhouse: Was he aware the Parole Board considered him unsafe to release back into the community, a decision they made just 48 hours before the Minister granted residency?

Hon IAIN LEES-GALLOWAY: Given that not only does the Immigration Act not require me to divulge the information or the reasons for the decision that I made but also that I have asked Immigration New Zealand to conduct an investigation into information that may or may not exist that may directly contradict the information that I relied upon in making that decision, I’m not prepared to jeopardise that investigation by divulging that information today.

SPEAKER: Again, the answer in its totality is acceptable, but I do want to make it clear to Ministers that the fact that they are not required to generally disclose something under a statute is not a protection for answers in this House.

Hon Michael Woodhouse: Apart from Mr Sroubek’s lawyer, who has made representations to the Minister of Immigration in relation to this case?

Hon IAIN LEES-GALLOWAY: Sorry, could I get the member to repeat the question, please.

Hon Michael Woodhouse: Apart from Mr Sroubek’s lawyer, who has made representations to the Minister of Immigration in relation to this case?

Hon IAIN LEES-GALLOWAY: There were a number of sources of information in the file that I considered. In this case, it is definitely not in the public interest for me to reveal those people.

Hon Paula Bennett: Does the Minister still stand by his colleagues who have said this is the most open and transparent Government that this country’s ever seen?

SPEAKER: I think the member knows that that’s not this member’s responsibility.

Question No. 3—Justice

3. Hon MARK MITCHELL (National—Rodney) to the Minister of Justice: Does he stand by all his answers given to Oral Question No. 2 yesterday?

Hon ANDREW LITTLE (Minister of Justice): Yes.

Hon Mark Mitchell: Was there an extradition request made by Czech Republic officials concerning Karel Sroubek?

Hon ANDREW LITTLE: No.

Hon Mark Mitchell: Why did the Parole Board say, “We are … aware from the papers on the Board file that there is a current application for extradition to the Czech Republic for outstanding criminal proceedings against him”?

SPEAKER: Before the Minister answers the question, I just want to test the responsibility of this Minister, whether it is this Minister who is responsible for the Parole Board?

Hon ANDREW LITTLE: Yes.

SPEAKER: It is? The Minister will answer the question—I thought it was the Minister of Corrections.

Hon ANDREW LITTLE: Parole boards are judicial or quasi-judicial bodies. The chair of the particular parole board that he is referring to is a District Court judge, and it is not for me to account for what information a chair of a parole board or an entire parole board had available to them. The fact of the matter is there has been no extradition request from the Czech Republic to New Zealand in relation to Mr Sroubek.

Hon Mark Mitchell: In light of that answer, where would the Parole Board have received a report from saying that there was an extradition request from the Czech Republic?

Hon ANDREW LITTLE: It’s impossible for me to answer that question; I have nothing to do with the operations of the Parole Board.

Hon Mark Mitchell: Has the Minister, since question time yesterday, gone back to his officials and asked for more information around the case involving Karel Sroubek and engagement with the Ministry of Justice?

Hon ANDREW LITTLE: I have said to my officials explicitly that I do not want any information in relation to Mr Sroubek, because the Czech Republic, in 2015, indicated that they may be interested in making an extradition request in relation to Mr Sroubek. They have not yet done so, they may well do so, and because it is a matter that, eventually, I may be seized of, it is entirely inappropriate for me to do anything that might contaminate any future decision I’m called upon to make.

Hon Mark Mitchell: So, in light of the Minister’s responses today, is he asserting that the Parole Board is making decisions based on flawed information?

Hon ANDREW LITTLE: It is not for me to explain the decisions of the Parole Board; they stand on their own merits. As the Minister of Justice responsible for the Extradition Act, I take a close interest in what happens under that Act. The starting point of anything under that Act is a request by another nation to this country for extradition—that has not happened in relation to Mr Sroubek.

Hon Mark Mitchell: So when the Minister told us yesterday there had been contact between the Czech Republic and New Zealand Ministry of Justice officials in 2015, what was the nature of the information exchanged?

Hon ANDREW LITTLE: Well, that member might be better to ask the former Minister of Justice, the Hon Amy Adams. What I have been advised is that the Czech Republic made contact with New Zealand authorities and expressed an interest in Mr Sroubek in relation to extradition, and that was it.

Question No. 4—Pike River Re-entry

4. JO LUXTON (Labour) to the Minister responsible for Pike River Re-entry: What progress, if any, has been made on the work of the Te Kāhui Whakamana Rua Tekau mā Iwa Pike River Recovery Agency?

Hon ANDREW LITTLE (Minister responsible for Pike River Re-entry): I’m happy to report to the House that yesterday I received a report on re-entering the Pike River drift, following nine months of intensive work by Te Kāhui Whakamana Rua Tekau mā Iwa—Pike River Recovery Agency. The agency has identified three re-entry options to recover the drift. These are to drive a small tunnel to create a ventilation circuit; secondly, single entry using the existing main drift access tunnel as the sole means to ventilate the main drift; and single entry with a large-diameter borehole. I’ve also received advice from my independent ministerial adviser, Rob Fyfe, who has reviewed the re-entry options. According to the reports, all of the options are safe and feasible and the product of months of rigorous analysis and risk assessment.

Jo Luxton: Why is the re-entering of the Pike River drift important?

Hon ANDREW LITTLE: The explosion at the Pike River mine on 19 November 2010 was a national tragedy. Therefore, the re-entry and recovery of the Pike River drift is an act of justice, to bring closure to the families of the 29 men who lost their lives in that event and by ascertaining the causes of the explosion so we can ensure that a disaster like this never happens again.

Jo Luxton: What is the time line on re-entering the Pike River drift from here?

Hon ANDREW LITTLE: It’s my responsibility as Minister to carefully weigh the options, alongside Rob Fyfe’s independent advice. I take that responsibility very seriously, and I expect to make a decision by mid-November.

Question No. 5—Housing and Urban Development

5. Hon JUDITH COLLINS (National—Papakura) to the Minister of Housing and Urban Development: Does he stand by all of his answers to Oral Questions yesterday?

Hon PHIL TWYFORD (Minister of Housing and Urban Development): Yes, I have looked into the matter, and I’m advised that the tenant contacted Housing New Zealand on 19 October because of a burglary. In response, Housing New Zealand contractors secured the property the same day. Housing New Zealand has installed deadlocks and were due to install a new locking system yesterday, before the member raised the matter in the House, but the tenant wasn’t home. Housing New Zealand has arranged with the tenant to attend at 4 p.m. today to replace the door locks. I understand that the deadlocks took 11 days to be installed. That is, in my view, unacceptable, and I have asked Housing New Zealand for a detailed explanation of why, in light of the particular circumstances and the vulnerable situation that this tenant was in, Housing New Zealand did not install deadlocks with a lot more urgency.

Hon Judith Collins: Is it acceptable for Housing New Zealand to continue to insist on replacing the external door lock and putting a deadlock in when the entire doorframe and the whole locking system are faulty and currently rendered useless with a screwdriver?

Hon PHIL TWYFORD: I’m advised that Housing New Zealand were there within hours to secure the property. Deadlocks have subsequently been installed, albeit after far too long a period of time. Housing New Zealand is now reviewing the locks that have been used in all of its homes in the McLennan development.

Hon Judith Collins: Does the Minister, then, agree that wood and duct tape are not an acceptable Housing New Zealand solution that was supplied to the tenant? [Holds up photo]

Hon PHIL TWYFORD: Well, I’m happy to receive that information if the member wishes to pass it over, and I will investigate it.

Hon Judith Collins: I seek leave to table a photograph of the repair.

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

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

Hon Judith Collins: Should Housing New Zealand be especially aware of the fear that a tenant has in losing her home when she has been challenging the decisions of New Zealand’s biggest landlord?

Hon PHIL TWYFORD: My expectation is, clearly, that Housing New Zealand will respond to tenants’ concerns, and situations like these burglaries, promptly and compassionately.

Hon Judith Collins: From the answers given today by the Minister, is he advising the House that all 63,000 of Housing New Zealand houses will now be checked to see if their locking systems are faulty?

Hon PHIL TWYFORD: As I said, I’m advised that Housing New Zealand are checking all of the locks that have been used in this development, and I will ask them to look into whether or not that review of the locks at McLennan should be applied more widely through the Housing New Zealand estate.

Hon Judith Collins: I seek leave to table two further photographs of the locking system and door, showing that there is a massive gap between the two, and how they do not actually connect very well—

SPEAKER: Is that the full set that the member wants to table today?

Hon Judith Collins: Yes, Mr Speaker.

SPEAKER: Is there any objection to those two being tabled? There appears to be none.

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

Question No. 6—Education

6. DAVID SEYMOUR (Leader—ACT) to the Minister of Education: Does he stand by his statement in relation to partnership schools that “The Government’s strong view is that there is no place for them in the New Zealand education system”, given that UNICEF’s Innocenti Report Card found New Zealand has one of the most unequal education systems in the OECD?

Hon CHRIS HIPKINS (Minister of Education): Yes. The UNICEF data from 2015 and 2016 reinforces the importance of the Government’s commitment to a quality public education system that caters to the needs of all New Zealanders.

David Seymour: Did the Minister have any official documents or advice suggesting that partnership schools were not contributing to greater education equality?

Hon CHRIS HIPKINS: The reasons the Government has removed the partnership schools model, or the charter schools model, have been well canvassed. They were well canvassed in the debate. The charter schools didn’t have to employ registered and qualified teachers, didn’t have to teach to the Curriculum, and weren’t using the quality of educational facilities that we would expect of public schools—in one case, with a school being threatened with closure in the middle of the school year because its lease had expired. That’s not the type of educational model that we think some of the most vulnerable kids in our education system should be put into.

David Seymour: I raise a point of order, Mr Speaker. Can I just ask that if the Minister was quoting from any official document, he table it? He didn’t have any official document?

SPEAKER: The Minister was clearly not quoting from anything. He was answering the question. It was a supplementary question.

David Seymour: Oh. Well, in that case—

SPEAKER: Does the member want another supplementary?

David Seymour: Yes please, sir.

SPEAKER: Away you go.

David Seymour: How can the Minister reconcile his answer to the previous supplementary question with an independent report by Cognition Education that said that partnership schools “are aligned with the New Zealand curriculum and provide for the personalised needs of priority learners, many of whom had been failed by the current public education system.”?

Hon CHRIS HIPKINS: Quite easily, because the legislative model allowed for those things to happen. Those schools that have been complying with those requirements are transitioning into the public education system.

Question No. 7—Pacific Peoples

7. ANAHILA KANONGATA’A-SUISUIKI (Labour) to the Minister for Pacific Peoples: What recent announcements has he made regarding the future of Pacific peoples in Aotearoa?

Hon AUPITO WILLIAM SIO (Minister for Pacific Peoples): I recently launched the Pacific Aotearoa website ahead of the 13 November Pacific Vision summit to share what the Pacific community have said in relation to a refreshed Pacific Vision for Pacific peoples of Aotearoa New Zealand. With nearly two-thirds of our Pacific population now born in New Zealand, our Pacific story has evolved from a story of migration to one of belonging to Aotearoa New Zealand. It’s time our Pacific Vision, set back in 1999, was refreshed to reflect this.

Anahila Kanongata’a-Suisuiki: What is the refreshed Pacific Vision about?

Hon AUPITO WILLIAM SIO: When I became the Minister for Pacific Peoples, I asked the ministry to engage with our communities through the talanoa process in our search to find inspiration and confirmation from our communities about what issues are a priority to achieving their general well-being, how we have fared in the past, where we are today, and where we want to be in the future in our collective pursuit to achieve success, prosperity, and security for our families. To date, we have engaged with more than 130 Pacific groups and more than 2,500 Pacific people, representing the diversity of community organisations and the diverse make-up of Pacific peoples who willingly provided raw and valuable feedback in developing a refreshed Pacific Vision. The ministry have captured this feedback in a reflections report, which will be shared next month at the Pacific Vision summit. The Pacific Vision work gives us a much clearer picture of what well-being means for Pacific people from a Pacific perspective.

Anahila Kanongata’a-Suisuiki: What key issues have Pacific communities identified through the talanoa process?

Hon AUPITO WILLIAM SIO: There were many issues captured during the talanoa process, and I just highlight a few of the key priority areas. Pacific peoples value their languages, cultures, their arts and heritage, and our stories, our spiritualties, are key areas of pride, our source of identity, confidence, and our source also of our well-being. They are treasured by Pacific people, including the New Zealand - born generation, who want to see it recognised and valued as an asset in New Zealand. They want prosperous Pacific communities, participating in the labour market, embarking in businesses and social enterprises, volunteering, learning, caring, donating, and contributing to New Zealand’s economy. They want to strengthen their healthy well-being and resiliency by being the authors of the design and delivery of our own health solutions: a confident, thriving, innovative, resilient—

SPEAKER: Order! Order! Order! I think the member has been following the bad example of the Minister of Finance—far too long.

Question No. 8—Energy and Resources

8. JONATHAN YOUNG (National—New Plymouth) to the Minister of Energy and Resources: Has she received any reports which show that wholesale electricity prices for the first 22 days of October 2018 are over 2½ times higher than the previous record for October, which was in 2011, and is she aware of the main causes of this record electricity price?

Hon DAVID PARKER (Minister for Economic Development) on behalf of the Minister of Energy and Resources: In answer to the first part of the question, no; in answer to the second part of the question, yes.

Jonathan Young: Can we expect the current high wholesale prices to become normal in the future as gas reserves rapidly deplete, as has been the case currently?

Hon DAVID PARKER: On behalf of the Minister of Energy and Resources, no, because the main cause of the current price rise, which is short term, is problems with faults and maintenance of the gas supply system, not a shortage of gas. In these circumstances, why the member would want a system reliant on more gas rather than less is beyond me. However, I am pleased to inform the member that the South Island’s coming to the rescue. There’s been rain this week and there’s more forecast in the next week or two.

Jonathan Young: Is the Minister aware that we are currently burning 5,000 tonnes of coal a day to keep the lights on because of current gas shortages, and is this what the future looks like?

Hon DAVID PARKER: Well, the future would look like more of that if that member was in Government, but under this, it will be more renewables not more thermal. I would quote from an article in Business Desk, which quotes the chief executive of Genesis, who says that “The problem is a combination of low storage and reduced gas supplies from the Pohokura field. Normally in other dry periods they would have been able to rely on gas, but they can’t because of these faults in the system. It’s not about the shortage of gas.” I would also note that the chief executive of the Electricity Authority says that the problem is that thermal is only running at 40 percent of its potential because of those gas constraints.

Jonathan Young: So does she still disagree with her officials that her offshore exploration ban will increase electricity prices and will increase greenhouse gas emissions, when these two things are happening right now, as an example, due to natural gas shortage of supply?

Hon DAVID PARKER: No, for two reasons. The most recent investment, which is a matter of competitive market choices by participants, has been in more wind power not in more gas, because it’s cheaper.

Jonathan Young: So with the Crown Minerals (Petroleum) Amendment Bill going through the House today and next week, can the Minister give us a guarantee that this bill will not contribute to electricity price increases?

Hon DAVID PARKER: Yes.

Question No. 9—Justice

9. SIMEON BROWN (National—Pakuranga) to the Minister of Justice: Is the maximum sentence of two years for the supply of psychoactive drugs a sufficient penalty, when the coroner has reported up to 45 deaths over the last 12 months due to these drugs and St John Ambulance has reported up to 30 callouts a week related to these drugs?

SPEAKER: I have received the warning of the possibility of a longer than usual answer.

Hon ANDREW LITTLE (Minister of Justice): In response to the factual assertions in the member’s question, there have been six confirmed cases since May 2014 where the coroner found that synthetic cannabis use was the primary cause of the person’s death. Since 1 June 2017, there have been approximately 40 to 45 cases nationally which the Chief Coroner has said provisionally appear to be attributable to synthetic cannabis toxicity. These cases are active, as the final cause of death is yet to be determined. Increasing the penalty for supply of psychoactive substances is unlikely to deter psychoactive drug use. I’ve seen no credible evidence that supports increased penalties resulting in reduced rates of offending. This Government is taking a harm reduction approach to the issue and is looking to do something more effective than simply raising the penalty.

Simeon Brown: So if the Minister says that he’s taking a harm reduction approach, does that also mean he’s taking a penalty reduction approach?

Hon ANDREW LITTLE: No, the two are not the same. But I think the member seems to operate under the illusion that regular users of psychoactive substances and other illicit substances—[Interruption]

SPEAKER: Order! The member will resume his seat. This, I think most members of the House agree, is a very serious issue, and I think most members of the House actually want to hear both the questions and the answers. A barrage of interjections is not helping with that.

Hon ANDREW LITTLE: Thank you, Mr Speaker. The point I was making is that I think the problem with the underlying principle of that member’s question is that he seems to assume that users of these substances sit around each week waiting for the latest edition of the New Zealand Gazette to see what law changes have been made and what penalty changes there have been; they do not. This is a street drug for people looking for a cheap street high. It needs an approach that addresses the street life of those people, to create a safe environment for them to deal with their problem.

Simeon Brown: Does the Minister understand the difference between a drug dealer and a drug supplier, and does he believe it is just that dealers of cannabis can receive eight years in prison while synthetic drug dealers can receive only two years?

Hon ANDREW LITTLE: Yes, I fully understand the difference between those two things. What that member doesn’t seem to understand—and the advice that this Government has had from the Ministry of Justice, from police, and from others on the front line—is, actually, when it comes to street drugs like synthetic cannabis, they are one and the same. Suppliers are sellers and sellers are users.

Chlöe Swarbrick: Is the Minister aware of any evidence that shows increasing penalties will reduce drug harm?

Hon ANDREW LITTLE: The advice that this Government has received is that just increasing penalties is the least effective approach to dealing with illicit substances that cause harm. Actually, the approach that countries around the world have now adopted and this Government is going to adopt is a harm reduction approach.

Chlöe Swarbrick: Does the Minister agree with former Prime Minister Helen Clark, who recently said—

Brett Hudson: New Zealanders do.

Hon Jacqui Dean: Gosh, that’s something.

Chlöe Swarbrick:—that the only people who benefit from a prohibitionist approach to drugs are the criminal underground?

SPEAKER: Before it’s answered, could I have an indication of which members interjected during that question?

Brett Hudson: Mr Speaker, that was me.

SPEAKER: And?

Hon Jacqui Dean: I think it appears it might have been me. Thank you.

SPEAKER: Right.

Hon ANDREW LITTLE: Naturally, it’s always difficult to disagree with the former Prime Minister Helen Clark. I’m aware that she is a key member of an international drug harm reduction body. I met their chair recently, Ruth Dreifuss, a senior politician from Switzerland, to talk about these issues. They have been very clear that around the world, Governments are taking an approach that is about seeking harm reduction, which usually—or, in fact, almost inevitably—also leads to less use. That is better for communities and safer for people who are prone to using these substances.

Simeon Brown: How can he be critical of National for seeking the more appropriate maximum penalty of eight years for people dealing in psychoactive substances, when his own Government colleagues in New Zealand First say he is wrong and want 14 years?

SPEAKER: Order! Well, the first part of the question was out of order, and the second part of the question was out of order, because he doesn’t have responsibility.

Simeon Brown: Will the Minister agree to meet with the dozens of parents who have lost sons and daughters to these psychoactive drugs, like Lewis and Lorraine Jones, and explain why he is dismissing their plea for tougher penalties for the drug dealers who have profited from their tragedies?

Hon ANDREW LITTLE: I have met the families of users of these substances, and they have all agreed with me universally that the one thing that this Government needs to do is to provide facilities and places where these people—mainly young people, many who are disengaged, some who have been thrown out of their own homes, some who have left home for a variety of reasons—a place where they can go and get their issues dealt with, their addictions dealt with, and a safe place for them to disclose, without the risk of prosecution either of them or the people seeking to treat them.

Chlöe Swarbrick: Does the Minister agree with the recommendations of the 2011 Law Commission report that New Zealand’s drug legislation should be repealed and replaced with health-focused, harm reduction legislation?

Hon ANDREW LITTLE: I think it is time for this Parliament, and this country in fact, to face up to—after decades and decades of a drug law regime that clearly is not reducing drug use and reducing drug harm, to look at alternatives. Many other countries have gone down that path with very positive effects. We should have a good, close examination of it. It would be good if all members in the House could be involved with that. We all share the same objective of reducing harm, but we seem to have different ways of getting there. We need to do something better and different to what we’re doing now.

Chlöe Swarbrick: So, then, does the Minister agree that the best way to reduce drug harm is not to perpetuate prohibition but to regulate and to resource services that are focused on reducing demand?

Hon ANDREW LITTLE: The latter proposition the member puts of providing resourcing to reduce harm is certainly the priority view that this Government takes, but, in the end, it’s going to take all of us to reach an agreement on what’s actually going to reduce harm and reduce illicit drug use.

Simeon Brown: So is the Minister saying, by arguing for a drug harm reduction policy, that the Government will also look to remove or reduce penalties for drug dealers?

Hon ANDREW LITTLE: There will always be a place, obviously, for suitable penalties for criminal behaviour, but if the objective right now, in the view of the deaths of young people using toxic substances that they should not be using, is to reduce harm, let’s find the way to reduce harm, provide the environment for them to stop using, to address their issues, rather than thinking and puffing up our chest that writing another statute that extends penalties is going to make a difference. It never has before; it won’t now.

Question No. 10—Transport

10. MARK PATTERSON (NZ First) to the Minister of Transport: What recent announcements has he made regarding regional rail?

Hon PHIL TWYFORD (Minister of Transport): On Tuesday, along with the Deputy Prime Minister, the Rt Hon Winston Peters, and the Acting Associate Minister of Transport, the Hon James Shaw, I announced $35 million for KiwiRail to reverse the decision made under the past Government to decommission the electric locomotives running on the Palmerston North to Hamilton section of the North Island main trunk line. This follows announcements of the upgrade of the Wairarapa line, the reopening of the Wairoa to Napier line, and the start of geotechnical investigation for the Marsden Point spur. For these initiatives, I would like to thank the Deputy Prime Minister and the Hon Shane Jones, as the first citizen of the provinces, for their leadership.

Mark Patterson: What impact will these projects have on regional New Zealand?

Hon PHIL TWYFORD: Investing in the rail network will get trucks off the road, reducing deaths and serious injuries and the costs of road maintenance while also reducing carbon emissions. Enhancing regional rail lines will mean more jobs and economic growth in the regions. Our Government believes that rail can be the backbone of a sustainable, 21st century transport system. Our aim is to accelerate the transition to non-fossil fuels, and moving to diesel alone would have been a backward step.

SPEAKER: Order! Can I just ask members—I’m sure you’re not calling out about train speeds, and therefore the interjections are not relevant.

Mark Patterson: What has the reaction been to these projects from regional New Zealand?

Hon PHIL TWYFORD: The Rail and Maritime Transport Union general secretary, Wayne Butson, said that investment from the Government will be a boon for regions such as Taumarunui, Taihape, and Ōhākune. These regions have highly skilled rail workers on good pay and conditions, putting money back into the local economies. When I was recently in the Wairarapa with the Hon Ron Mark, the local mayors were extremely positive about the Government’s long-overdue investment in upgrading the Wairarapa line.

Question No. 11—Workplace Relations and Safety

11. Hon SCOTT SIMPSON (National—Coromandel) to the Minister for Workplace Relations and Safety: Does he stand by all his statements and actions in relation to the Employment Relations Amendment Bill; if so, what changes, if any, has he agreed to make to the bill at the committee of the whole House?

Hon IAIN LEES-GALLOWAY (Minister for Workplace Relations and Safety): In answer to the first part of the question, yes; and in answer to the second part of the question, if the Government determines that changes need to be made, that would be a decision for Cabinet.

Hon Scott Simpson: If changes have been made, why will he not disclose what those changes are?

Hon IAIN LEES-GALLOWAY: Changes have not been made.

Hon Scott Simpson: Which Ministers has he had discussions with in regard to changes of the Employment Relations Amendment Bill?

Hon IAIN LEES-GALLOWAY: Many of them.

Hon Scott Simpson: Have any members of New Zealand First discussed with him issues they have with the bill as reported back from the select committee?

Hon IAIN LEES-GALLOWAY: We are a collaborative Government made up of three parties. Of course I’ve spoken not only to members of New Zealand First but to members of the Labour Party and the Green Party too.

Hon Scott Simpson: Why, when the bill has been through a Cabinet process and through a select committee process where the Government has had a Government majority, can he not be transparent with New Zealanders about what the final shape of his Employment Relations Amendment Bill will be?

Hon IAIN LEES-GALLOWAY: Because sensible Governments do take all opportunities to make sure that their legislation is fit for purpose and as good as it can be. No decisions have been made. If any decisions need to be made, the public will be made aware of that at the time.

Hon Scott Simpson: Isn’t it true that his trade union friendly employment relations legislation, originally supported by the Deputy Prime Minister and his party, is now being used merely as a political bargaining chip by the Deputy Prime Minister and his party?

Hon IAIN LEES-GALLOWAY: No. That’s a very silly accusation.

Question No. 12—ACC

12. Hon TIM MACINDOE (National—Hamilton West) to the Minister for ACC: Does he stand by all his answers to Oral Questions relating to ACC’s proposed increase to motor vehicle levies, which would include an increase of 1.9c per litre for petrol?

Hon IAIN LEES-GALLOWAY (Minister for ACC): Yes.

Hon Tim Macindoe: Why did he argue on Tuesday that the asset-to-liability ratio, which, in his words “actually maxed out at 115.7 percent” in 2015, and has been significantly above the 105 percent funding position target each year since, explains the proposed 12.1 percent motor vehicle levy increase when those figures actually highlight that an increase is neither needed nor justified?

Hon IAIN LEES-GALLOWAY: Over the past two years, the number and lifetime cost of treating accidents that happen on the road involving a motor vehicle has increased. ACC has paid an average of 30,400 road accident claims per year. This is 9 percent higher than the last time it considered levies in 2016. Some of the drivers of increased costs include increased social rehabilitation costs involved in restoring the independence of road crash victims following accidents, the impact of historically low interest rates which can impact the future performance of ACC’s investments, a higher volume of weekly compensation claims, and a faster than expected increase in the lifetime cost of treating injuries. ACC is aware that it currently has more money in reserves than is needed to cover the costs of motor vehicle injuries already on its books. The projected solvency ratio, as at the start of 2019-21—

SPEAKER: Fairly soon, fairly soon.

Hon IAIN LEES-GALLOWAY: Nearly there, Mr Speaker. The member has asked me this question several times. I think he’s interested in the answer.

SPEAKER: Well, that’s right. It’s becoming tedious.

Hon IAIN LEES-GALLOWAY: The projected solvency ratio at the start of the 2019-21 levy period, i.e. 1 July 2019, is 111 percent, and it needs to get back to its 105 percent target. ACC intends to do this by charging less than what it needs to cover the costs of treating injuries. This shortfall will be paid by the surplus that it has saved.

Hon Tim Macindoe: Why does the Minister assert that an “exploding road toll” is behind ACC’s proposed increase in the motor vehicle levy when the average road toll under the previous National Government was 305 deaths per annum—significantly lower than the average road toll of 416 road deaths per annum during the nine years of the Clark Labour Government?

Hon IAIN LEES-GALLOWAY: Because, despite the road toll falling consistently for a couple of decades, over the last five years it has gone up steeply.

Hon Tim Macindoe: Has he questioned ACC officials about their decision only to propose an increase in motor vehicle levies in its discussion document, and not a decrease, despite the ratio being so high in favour of assets?

Hon IAIN LEES-GALLOWAY: Under legislation, ACC is required to return its ratio to 105 percent over a 10-year horizon. In its consultation documents, it has indicated that these proposals are what it thinks it needs to be able to give effect to that funding policy statement—a funding policy statement gazetted by the Hon Nikki Kaye.

Hon Tim Macindoe: Is he concerned that the proposed increase of 1.9c per litre in the motor vehicle levy will add to the methamphetamine for petrol black market, as reported by Newshub?

SPEAKER: Order! That’s not a matter of responsibility of this House.

Hon Tim Macindoe: If the ratio is in such a healthy position, will he recommend to Cabinet that ACC decreases the motor vehicle levy to provide New Zealanders with some much-needed respite from the skyrocketing petrol prices that have occurred under this Labour-led Government?

Hon IAIN LEES-GALLOWAY: I will be making a recommendation that I think is responsible for the long-term viability of ACC, and is responsible from the point of view of the living costs that ordinary New Zealanders face. I would point out that the motor vehicle levy is considerably lower today than it was for a large chunk of the time that National was in Government.

Bills

Crown Minerals (Petroleum) Amendment Bill

Second Reading

Hon Dr MEGAN WOODS (Minister of Energy and Resources): I move, That the Crown Minerals (Petroleum) Amendment Bill be now read a second time.

I am very proud to rise in support of this important bill, which contains amendments to the Crown Minerals Act 1991, to give effect to the Government’s policy announcement on the future of offshore petroleum permitting. In April 2018, the Prime Minister announced that the Government was taking an important step to take action on climate change and begin a just transition to a low-carbon economy by halting the granting of any new offshore oil and gas exploration permits. This decision is about New Zealand’s future for the next 10 years, the next 20 years, the next 30 years, and the next 40 years.

This bill is about futureproofing our economy. We know the world is changing. Placing all our economic eggs in the basket of fossil fuels is simply not a long-term strategy for economic development. It sets us up for economic shocks, and we’ve seen in this country, when rapid economic transformation takes place, where that gets us. On this side of the House, we will not let that happen. We will not let New Zealand become a place that pulls the rug out from beneath workers and communities because we did not have the courage to think about the future. That’s why this is a long-term, managed transition.

This bill will not end oil and gas exploration, nor will it halt existing production. Existing rights and existing privileges for permit holders are being preserved. In addition, to support the just transition, the Government has established the just transitions unit within the Ministry of Business, Innovation and Employment (MBIE) to help prepare for a future that will look different than today. The team is already on the ground in Taranaki, supporting local leadership to chart out a long-term course for the local economy beyond fossil fuels.

This Government is supporting this transition. We’re investing millions of dollars through the Provincial Growth Fund, and we’ll be investing millions more through the Green Investment Fund. Just this week, we introduced the bill to put $1 billion into innovative Kiwi businesses through our research and development tax credit. That will support new energy resources and sources like hydrogen, which will create jobs, improve living standards, and help us tackle climate change.

I now want to talk about the select committee process for this bill. To those who argue that the process was too short or was inadequate, I would like to point out that over 7,000 submissions were received in the response to the Environment Committee’s call for submissions. Over 7,000 organisations and individuals made submissions, and the vast majority of those submitters either supported the bill or felt that it did not go far enough. That is worth repeating: the vast majority of submitters either supported the bill or thought that it did not go far enough. I think this shows that we got the balance about right.

The Environment Committee heard from submitters voicing their concerns around climate change and the need for New Zealand to take immediate action to reduce our greenhouse gas emissions. The committee heard about the opportunities the bill will create to help stimulate innovation and increase uptake in alternative energy sources, and the committee heard about New Zealand’s desire to show leadership in the global effort to address climate change—leadership that is particularly important for our Pacific neighbours. While the vast majority of submissions supported the bill or felt that it did not go far enough, the Environment Committee also heard from submitters who had concerns. I would like to take this opportunity to address some of those concerns.

The committee heard from submitters concerned about the impact of the bill on the economy. To those submitters, I’d like to say that without this bill, we would only be postponing and intensifying an inevitable economic shock. The long-term picture is like this: the world is changing. Climate change is happening, and, with that change, our planet and our economies are changing. The world is racing to adapt and to stop its most damaging effects. This means that the same old ways of doing things don’t work anymore. We cannot expect to rely on fossil fuels for jobs and for prosperity for ever. The world is moving away from them, and we, as a country, have to be ready. If we don’t change and if we keep relying on these fuels, we’re going to get left behind. We must have the courage to lift our sights beyond the three-year electoral cycle and to plan in the long term.

To the submitters that were particularly concerned about the impact on communities in Taranaki, I want to reiterate our reassurance that this Government has a long-term plan for economic growth in our regions. As part of that, we’ve already started to invest in the regions through the Provincial Growth Fund in Taranaki. The Provincial Growth Fund has already earmarked more than $21 million in funding for the region, including almost $1 million in support of developing hydrogen as a zero-emissions hydrogen fuel, as well as support for other clean-energy technology projects.

During the committee, we also heard the tired old arguments—that I’m also hearing shouted out across the House—from the oil lobby that the only way to decrease global emissions is for us to continuously burn more and more carbon here in New Zealand. I’m sure we’ll hear the Opposition continue to sing from the oil lobby’s songbook today, but the reality is the rest of the world is taking action on climate change.

The MBIE’s analysis makes very clear that any oil or gas from Block Offer 2018 would not come into the system until 2027 at the earliest. By that time, major decarbonisation shifts will have occurred in the global economy as many countries work to meet their Paris Agreement targets. New technology such as battery storage and hydrogen will change the energy outlook.

Jonathan Young: When’s that going to happen?

Hon Dr MEGAN WOODS: The overblown fear of carbon leakage is simply 20th century thinking in a 21st century world. To ask when that is going to happen shows how backward-looking the Opposition is. It is happening now. It is happening around the world. We are not talking about something in the never-never future; we are talking about a change that is happening in front of our eyes, and one that the Opposition refuse to open their eyes to.

But we need to get serious about planning for the next 30 years, and we need to begin that now. As our Prime Minister, Jacinda Ardern, has said, climate change is this generation’s nuclear-free moment—our opportunity to once again lead the world, to follow in the proud tradition of New Zealand as a bold, visionary, and progressive country, and to begin the transition to a low-carbon economy that will create jobs and ensure prosperity. I am proud to commend this bill to the House.

JONATHAN YOUNG (National—New Plymouth): Just a couple of points before I start on my substantive comments. The funding to hydrogen projects first started from this side of the House—Minister Megan Woods may forget that—and, secondly, if she is aware of what’s happening in Australia in terms of developing a hydrogen-based energy system, the Australian Gas Infrastructure Group have said that this will take them 20 to 40 years, and the New Zealand expert in this particular field has said to me that the development of such a system in New Zealand will take several decades.

My concern is that what we are seeing here is the ending of an industry and an energy source before we have a substantial replacement. We are going to be left with a substantial energy gap, which will affect not just households in New Zealand in terms of price increases in electricity but it will also affect major industries such as Fonterra, who are already quite nervous about where they’re going to get gas, particularly at this point in time right now, when they are hitting peak season. We do know, as does the spokesman over there for economic development, that we do have a gas supply shortage at the moment. We may not have a gas shortage just now, but we do have one coming. In fact, as we listened to the Ministry of Business, Innovation, and Employment (MBIE)—and they came to our committee to give us answers to our questions—they said to us that our gas resource and supply in terms of that which is proved, which we have 90 percent confidence can be delivered to market, is just under six years.

So when you look at a hydrogen-based system that can take 20 to 40 years to develop, or—from New Zealand experts—three decades, and we have a pending shortage of gas supply for companies like Fonterra that could come within six years, we’ve got an issue here. We’ve got an issue in New Zealand that I don’t think, you know, a 100-megawatt wind farm in Waverley—even though I support that project—is going to be able to rectify.

Hon Nathan Guy: When are they going to wake up?

JONATHAN YOUNG: When are they going to wake up? You know, it’s not as if we disagree with renewables. We don’t, but we want stability in New Zealand’s economy. We do not want more jobs lost, as an example of what’s already happening in Taranaki, with companies disappearing offshore, leaving this country—oil and gas companies selling up because they have no faith in this Government for their future.

What we want is stability. What we want, potentially, is a cross-party agreement, understanding energy and resources so we can have stability that does not chill off international investment. But not once—not once—did I get a phone call from the Minister of Energy and Resources. Not once did she ever approach me and say, “Let’s talk about it.” You know, I’ve had better conversations with the Green Party, who are probably on the far end of the spectrum, and Gareth Hughes has had the decency to say to me that if we wanted to go to Taranaki to hear people there, he would support that. I want to commend him and Chlöe Swarbrick for those positions of what I consider decency of Parliament to the people of Taranaki, who would be most affected by the decision that this Government is making.

Can I also say that we received a submission from OMV. They are the company in New Zealand who have already invested $2 billion and have paid probably a billion dollars of royalties to the New Zealand Government, who have the highest number of permits offshore than any other company—a company that is highly respected by MBIE; that has world’s best practice in operation. What they have said in their submission to the Environment Committee is that unless they have a commercial discovery in the 2019-20 summer drilling season—so that’s just over 1½ years away in terms of their thinking—and unless they have success, and we need to understand the chance of success is probably less than 10 percent, they will cease investment in New Zealand.

So when I say that there is a pending shortage, what we are saying is that MBIE’s figures say that we have confidence—90 percent confidence—for the next just under six years, but our biggest operator is saying they have confidence for two years, and I say that that has got to be a concern. Minister, that has got to be a concern. I would say that we will not have renewable generation in place to cover this gap by then. In fact, as I said today in questions to the House, today we are seeing massive increases in the wholesale cost of electricity because lake levels are low. Yes, and we face this—we’ve had two shortages, two lake-level issues, in one year. Potentially, this summer will be another, and we’ve also had an outage at the Pohokura field. Firstly, it was an issue around their pipeline, and, secondly, it is the shut-off valve that they are attempting right now to repair, and, because of that, that field has been operating at 50 percent capacity. Because of that, today we are burning 5,000 tonnes of coal to keep these lights on.

I’m asking in terms of the energy, complexity, and integration of our system here in New Zealand, what are we doing to ensure that New Zealand homes, schools, hospitals, and businesses can have access to affordable and reliable electricity? I believe that this decision by this Government wanting to address an issue around climate change is actually not achieving that, but is putting our economy and our jobs and our homes at risk, and this is why we actually protest. Yes, it’s jobs; yes, it’s the Taranaki economy; and yes, they have failed to consult, but it is an issue that will spread over New Zealand, and right now if this Government were to deny those issues, then they are not facing facts.

We are seeing a huge spike in electricity. We are seeing a massive increase in greenhouse gases today because of gas shortage. Is this a picture of the future? Well, it might not be if renewables can step in, but I don’t think they can. In fact, I have driven from this Parliament to Wellington Airport and I have looked at Transpower’s dial on their website to see that at that particular point in time, when 6,500 megawatts of electricity was being consumed on the coldest night in winter, we had zero megawatts from North Island and South Island wind because there was a high over the country, and that’s the vulnerability.

If we want to see more and more renewables, what we’ve got to understand is that the reliability factor around the technology to bring reliability is not with us yet. In fact, the Wind Energy Association have said—and I went to their conference—that they think that by 2026, they might be able to have an economic solution for batteries and turbines. Well, you know, that’s eight years away. That’s a long time away. I don’t take it—when the Minister of Energy and Resources says that we are looking back in the past, we’re dinosaurs, and they’re the 21st century Government, that is not true. I think we’re the smart ones, who actually are not prepared to be driven by ideology but want to get down to the facts and get down to the issues and we want to consult. We want to talk to the industries involved, and that is electricity, that is hydrocarbons, that is geothermal, that’s wind power, and that’s the solar generators.

We want to have an integrated system that is reliable, that New Zealanders can count on, and what’s happening with this bill is it’s creating a flaw—it’s creating a vulnerability in our energy system. It’s not that we are champions of hydrocarbons, but we are champions of energy for New Zealanders—energy for life, energy that will equip and enable our enterprises to succeed, energy that will continue to flood our schools and our hospitals, and energy that will enable our economic activity to grow and increase.

This Government has been criticised for lack of consultation. Let me say, if you consulted, you would have learnt a lot more. I have consulted far more, I believe, than the Minister of Energy and Resources, because she’s turned her back. When Treasury looked at the MBIE report, what did they say? They said “We looked at this report.”, and the statement that they said was that “Due to the time limitations and the analytical constraints arising from Cabinet’s previous decisions, MBIE had not consulted the petroleum industry or the public on the proposals.”

What is an analytical constraint? It’s a decision by that Cabinet to not analyse, to not get the data, to not get the information, and to not learn the truth, but to make a decision based on ideology, to make a decision that’s formed together to form a coalition that has been purely what they call leadership—I call it the lack of leadership. They have made a decision to weaken this country, instead of taking a pragmatic and a practical, a systematic, and an evidence-based and scientific-based decision—and I invite dialogue with us, because the time will come when we are in Government and we might have to fix up what you’ve started. We stand against this bill with everything in our being.

Hon DAVID PARKER (Minister for Economic Development): I rise to support the comments of the Minister of Energy and Resources, the Hon Megan Woods, and to thank her for bringing this legislation to the House. I’ve been around this place for 16 years now, and those speeches that we’ve just heard from the Opposition—I’ve got to say I’ve heard it all before. I was Minister of Energy from 2005 to 2008. I arrived at a time when New Zealand’s renewable electricity was decreasing. It was down to 64 percent of total and it was decreasing. We turned that around by a range of measures that led to investment certainty for the generation sector. We priced emissions—National opposed that.

Todd Muller: Nothing to do with the National Party. It’s all you.

Hon DAVID PARKER: Well, actually, on this occasion it is actually us, Mr Prebble—ah, Mr Muller. Mr Muller—sorry. It is. I’ll come back to that. We authorised the necessary investments in the grid to bring distant renewables to market to give investment certainty. We brought forward new forms of renewable regeneration—at that time, wind. We encouraged the generators to invest in renewables. We had a ban on baseload generation from thermal, which the subsequent Government repealed.

Now, at the time, the spokesperson for energy from the National Party was the Hon Gerry Brownlee. For those who want to look at this online, you just google “Sexy Coal Brownlee”, because he put up a blog, which I’m sure he now regrets, which was called “Sexy Coal”. He did that to gain attention, and he said that New Zealand, if we turned our back on thermal, would face an energy gap. This is one of the slides or the images from that video clip that is still there, and you can see that he has this growing wedge of energy insecurity in New Zealand that he predicted could only be filled with thermal—coal and gas.

DEPUTY SPEAKER: Order! Order! I’m sorry to interrupt the member, but the second reading is actually supposed to focus on the main purpose and the contents of the bill. Speakers’ rulings 108/2-5 all deal with that. So I’d ask to the member to relate the history to the contents and the principles of the bill in front of the House, please.

Hon DAVID PARKER: Thank you, Madam Deputy Speaker. In fact, I considered those rulings before I took my call, and Speaker’s ruling 108/3 says that “the broad principles … are a proper subject of discussion [it’s] relevant to”—

DEPUTY SPEAKER: That’s right.

Hon DAVID PARKER: Now, I’m responding to the comments of Jonathan Young, the energy spokesman from the National Party—

DEPUTY SPEAKER: I’d like you to actually focus on the broad principles of the bill in front of the House.

Hon DAVID PARKER: The broad principle of this bill is that we need to have a transition away from fossil fuels. The argument that the member opposite has been making—and I’m in debate now, Madam Deputy Speaker; I’m not making point of order, and I haven’t been making a point of order—is that we can’t do that because security of supply will be at risk. I’m saying that’s not correct, and this is the same argument that is always run by the National Party whenever we move along this transition away from fossil fuels. In simple terms, you cannot start a transition without starting a transition.

Jonathan Young: It’s already started before you put this bill in.

Hon DAVID PARKER: Well, after this legislation goes through, 100,000 kilometres, approximately, of prospective territory already permitted for exploration which can be taken to conclusion—that is the most prospective 100,000 square kilometres that New Zealand has, which is why it was offered first. That’s the equivalent of the area of the North Island.

The contradictions in the last speaker’s contribution are clear. On the one hand he said that we’ve heard that takes till about 2027 to bring on any gas from new block offers, assuming they were explored and then drilled tomorrow, and yet he says we can’t rely upon the comments from the Wind Energy Association saying that if we want battery storage it won’t be here till 2026. That’s far too far out. These are long time frames. The system has time to adjust. I would make some predictions as to how the system will adjust, because what is happening here is we are creating investment certainty for those who have to make the generation investments that we need over the next couple of decades.

The work that’s been done by Transpower and others that have modelled the extra electricity generation that’s needed to electrify transport, to take renewables ever closer to 100 percent of total electricity generation, and to start replacing some industrial heat—there’s roughly a doubling of electricity generation capacity needed in the next 20 or 30 years. We want that to be renewable. We are, by this decision, making it clear that it must be renewable. Who will invest? The people who want to make a buck out of renewables.

Now, the next argument we hear from the National Party is that that will increase prices. Well, we don’t agree with that on this side of the House, and we point to the fact that since those decisions were taken by the last Government—and they were taken mainly by the last Government—the investment that flowed as a consequence lifted New Zealand’s renewables from that declining percentage at 64 percent up to 85 percent or 84 percent in a recent quarter. That’s because we’ve created the right investment signal for people to invest in renewables. Actually, the last Government said they were going to abandon the 90 percent renewables target that we’d set. In the end, Mr Brownlee was moved on and Hekia Parata had the good sense to keep it. That ambition was maintained, and we are close to realising that because we are 85 percent renewables now. It hasn’t been the cause of electricity price rises. Those electricity price rises in recent years have actually been caused by increments in the reinforcement of the grid that the last Government, wisely, carried on with. The current cheapest sources of new generation are renewables, proven by the fact that that’s what those companies are investing in—in geothermal and wind.

Jonathan Young: It’s not true.

Hon DAVID PARKER: He says it’s not true. Well, why are they doing it, then?

Jonathan Young: MBIE gave us a report last week, and it’s gas baseload.

Hon DAVID PARKER: Well, the latest investment that we’ve had is this new wind farm in Taranaki, and they’re doing that because it’s more cost-effective for them than investing in more gas. That decision was obviously under way before this latest decision was taken.

I think that we’ve got a very, very low-cost transition to a low-carbon future in New Zealand, and I also think that we’ve got more advantages in doing this than any other country in the world.

Jonathan Young: Yeah.

Hon DAVID PARKER: The member agrees we have. Well, then, if New Zealand doesn’t do it, who will? If New Zealand doesn’t do it, who will? The answer to that is no one. And if no one does it, we ruin the planet. So there really is another issue, other than the dollars and cents. I think this will prove to be cheaper than the alternatives anyway, because we’ll replace our reliance on those expensive imported fossil fuels, and we’ll replace them with hydrogen and electricity in batteries. But if New Zealand doesn’t do this—if we’ve got the cheapest transition in the world and we don’t—then no one will. If that’s the sort of leadership that the National Party wants to show the world, well, I’m glad I’m on this side of the House. I believe that this is sensible policy. I believe it will be sending the right investment signal that we want industry to be investing in renewables so that over the next 20 to 30 years, we double generation capacity so that we electrify transport and electrify industrial heat.

The one technology key that we’ve not yet cracked is hydrogen. I thank the member for his contribution, saying that the last Government made some efforts in that regard. Those were good, and we’re continuing on and amplifying those. We’ve had an agreement signed last week with Japan, who are one of the world leaders on hydrogen technology. I’ve got other things here. [Holds up pictures] These have been shown in the House recently. We’ve got hydrogen cars out there in the world now from Hyundai and from Toyota. We’ve got hydrogen buses, we’ve got hydrogen trucks, and we’ve got hydrogen trains.

Hon Member: They’re a million dollars.

Hon DAVID PARKER: The member says they’re expensive. They are expensive, but if you go back 20 years or 30 years, so was wind power. The cost of these are being driven down. The Japanese are absolutely determined to use their point of comparative advantage in these technologies to create industrial opportunities for themselves and to clean up the world. We’re going to help them do it because we’re going to get the investment signal right in New Zealand. We’re going to go to renewables. We’re going to bring forward those new technologies. We did it when last in Government, getting ahead of the curve in wind. If we hadn’t done that as a Government, New Zealand would have developed and burnt more gas rather than going into wind. That’s proven to be beneficial for us, and we’ve been able to take advantage of the cost of wind power, which is still going down even to this day—those new facilities.

I have great confidence that this country will be one of the first countries in the world to get to net zero in carbon dioxide, and I’m very confident that we’ll not only be cleaner but we will be wealthier as a country because we’ll avoid that imported oil bill. My goodness, wouldn’t that be good, if we were a beacon of hope in the world rather than yet another source of despair, as the other side of this House would have our trajectory.

TODD MULLER (National—Bay of Plenty): Thank you, Madam Deputy Speaker. One of the significant consistent themes across the select committee process and the submitters that the Environment Committee heard from was an incredible frustration and palpable anger that the Government had put in front of this Parliament a policy that was anti - climate change, anti - New Zealand’s economic interests, and anti - Taranaki region and that had absolutely no supporting data that the ministries could stand behind. This is the low tide, in my opinion, of this Government’s performance thus far—low tide in terms of competence and low tide in terms of analysis. This is public policy of the worst sort, because—and we heard it in Megan Woods’ contribution this afternoon—when you strip their rhetoric away, this has nothing to do with climate change. This is about their fundamental view, informed by their relationship with the Green Party, that they are anti - the extractive industries—full stop—because the data says you don’t need to do this, but the Government are doing it anyway.

The Government is anti - big oil. You heard it in Megan Woods’ criticism that by giving voice to a sensible view that most New Zealanders hold—in our opinion—somehow we are captured by big oil. That’s why the Prime Minister stood on the forecourt, signalling that this decision was going to be made, with the slogan “End big oil” behind her. That’s why she went up to Europe and made this decision quickly, despite the fact that the official advice said do not do it from an economy perspective, do not do it from a climate change perspective, and do not do it from a regional development perspective. Your own officials are saying this is woeful policy, but do it you do, because it’s all about celebrity politics. It’s all about the slogan. It’s all about being able to stand up beside Emmanuel Macron and say, “Look. We, New Zealand, are taking a leadership position. We are going to end big oil.” And then, when the communities that you’re going to impact say “Come and see us and talk to us about it.”, you say “No.”, because that is exactly what we have seen: an arrogance of a breathtaking—breathtaking—level.

Let’s step through some of the perspectives that we heard and allowed through our questioning to be put on the table through the select committee process. The economic impacts: 4,000 jobs at risk; $7.9 billion of export receipts lost—they’re all looking down; anyone who’s watching this at home, they can’t look at us—this is the Government’s own official advice on the cost of this policy, and that is a mid-point. It’s up to $23 billion. That’s what the advice says—4,000 jobs.

Now, the other argument—and you’ve heard it here—is “But we have to do this because we must take a leadership position in climate change.” How many of the Government members have actually bothered to test that rhetoric by actually asking the question around the role of gas in the global supply and energy demand in the next 30 or 40 years? I suspect none of them. If you look out 30 or 40 years in terms of energy demand globally, I accept coal is on a negative trajectory. Renewables are on a significant uplift from an almost zero base globally. But the other key energy source that is seen as having a huge future across the world over the next 30 or 40 years is gas, as all those developing countries that are currently dependent on coal have the opportunity to move to gas. Gas has half the emissions profile of coal.

We sit in little New Zealand at the bottom of the world on an extraordinary gas resource that we could extract, that we do extract, that we could extract more of, and that we could assist the developing countries to move from coal to gas and assist the global climate change endeavour, and they say no because they would prefer the slogan of “End big oil” because it goes really well when you give a speech like that at Victoria University, but not so much when you’re out in provincial New Zealand and not so much when you’re in the Taranaki region. It is all ideology.

The whole premise of this bill—and we heard it from David Parker—is for New Zealand to take a leadership role on climate change. Leadership is providing developing countries with a fuel source that reduces their dependence on coal, and all the other gas exporters of the world, those countries around the world—Norway, other Scandinavian countries that have gas reserves—are wanting to fill their boots with that economic opportunity. But not this Government, not this group, because, actually, it’s not what the data says, from their perspective. It’s not a rational response. It is just optics. It is just an “End big oil” slogan that they want to be associated with.

Another area that I want to touch on is that I am currently working on behalf of the National Party with Mr Shaw on seeing whether there’s an opportunity to develop bipartisan support for a climate change commission, a commission that, if it is established—as certainly it has been signalled it will be—is to provide best-practice, science-based evidence on these sorts of issues. The Government, in its haste to get these sorts of issues being thought about by an independent climate change commission, has given an interim Climate Commission two jobs: find us ways of lifting our renewable generation from 85 percent to 100 percent, and find out whether or not it is appropriate to deal with agricultural emissions via an emissions trading scheme mechanism. They have a pre-committee already established for the purpose of these sorts of debates.

So if the Government wants to have a fair conversation around the issue and role of gas and coal and our natural extractive resources in the energy mix of this country and its export profile looking out 10, 20, 30 years, this is exactly the issue that you would give to a climate commission. Not a show, not even interested, and I know why: because a climate commission that is tasked with looking at what the science says, that is tasked with looking at what the economic impacts are, and that is tasked with looking at what the rest the world does would say, “This is flawed policy. Don’t do it.” My view is that they would give the same voice opposed to this public policy disaster as their own officials did, and still they look to the floor. If only this was some sort of theoretical debate, ladies and gentlemen, but, actually, Taranaki is one of our strongest regions: 4,000 people employed directly; 11,000 indirectly.

Jonathan Young: Three National Party MPs.

TODD MULLER: Indeed—very good ones, Jonathan. And when Bill Simpson from Waitara drove four hours to the select committee to give a heartfelt contribution on what this meant for his community and his whānau, by the time it got to five minutes—“Thanks. See you later. Our decision is made.”

Our future—New Zealand’s future—is symbols and speeches at the UN. It’s not delivering value for the people of Aotearoa and the regions who depend on being part of a global journey on climate change. This party rejects this as retrograde legislation that should be thrown out. Thank you, Madam Deputy Speaker.

FLETCHER TABUTEAU (Deputy Leader—NZ First): Thank you, Madam Deputy Speaker, for this opportunity to speak to this legislation. As usual, I am dismayed and upset by the hysteria and scaremongering coming from the other side of the House. In fact, many of the words that Mr Müller said in his contribution to the House—

DEPUTY SPEAKER: I think you’ll find his name is Muller.

FLETCHER TABUTEAU: Oh, I apologise. I think everyone in the House will find my name is “Tabuteau”. But, anyway, Mr Muller—his words I could have used verbatim, because he’s right. What the National Party have done is sold this story of everything stopping—“It’s the end of the world, and it’s happening now.”—so let’s do a little reality check for those members opposite, shall we? The reality is in the next 18 months or so, the fine companies that the member from New Plymouth spoke about—

Jonathan Young: Mr Young.

FLETCHER TABUTEAU: Yeah, I was going to pronounce it wrong, so I didn’t want to say it. OMV, Todd, and others have signed up to currently 18 drills over the next 18 months. They’re dropping lines right now. In fact, from memory, there’s a 450-kilometre line being laid right now by one of those companies to get to those gasfields.

Jonathan Young: 450 kilometres?

FLETCHER TABUTEAU: No, you’re right. It must be 45 kilometres. So the—

Jonathan Young: Know your facts.

FLETCHER TABUTEAU: Oh, be quiet. The reality is that what we are seeing—sorry, he interrupted my flow of thought—is actually potentially 31 permits, as Petroleum Exploration and Production Association of New Zealand itself has said, over the next 18 months. There are 31 permits for drop to drill lines right now.

So Mr Muller was talking about the need to get gas, get it now, and make sure it’s part of our transition to renewables. That’s exactly what we’re making sure can be done, and that’s what we said we’ve wanted them to do. In fact, one of those companies just applied for an extension on one of those exploration permits’ time line because they made the argument that they’re going to need more time to do it. Guess what? The extension was approved straight away.

Jonathan Young: By MBIE, not the Minister.

FLETCHER TABUTEAU: Straight away, by this Government, Mr Young.

So the scaremongering from the other side of the House is just infuriating, because it does generate its own kind of self-fulfilling prophecy by those in that area who believe it—who believe those members of the House who say these things. This gentleman on the other side of the House was trying to make the argument in his contribution today and in question time, as he said himself, that gas supplies were running out, when Minister David Parker himself very clearly outlined that the reason for the price increases was not the supply of gas or the volume of gas available; it was the infrastructure itself that was in need of repair and was at 40 percent capacity. And yet over there they’re talking about running out of gas.

So it is frightening what they are saying and it is incredibly disappointing, because New Zealand First and this Government have written a piece of legislation that ensures—actually, here’s another point for Mr Muller again. Over the last, what, 20 years, with the declining price of oil, Taranaki exploration has naturally decreased, because where’s the profit motive in it for big business? That has been the fundamental decline in oil exploration over the last decade or so—because of the price of oil. Well, guess what’s happening now, now that the price of oil is going up? They’re exploring more. The viability of the commercialisation of those drops is looking better every day, and so the exploration is increasing. So please stop—

Jonathan Young: Exploration doesn’t create a resource.

FLETCHER TABUTEAU: No, it doesn’t. But there they are—big business doing the numbers, dropping the lines, looking for gas and oil right now out in Taranaki. So I suppose I should stop addressing—it was just infuriating to hear.

This is a good piece of legislation. It is a piece of legislation that is about transition. It is legislation that has put a line in the sand, as it were, and that has said—as Mr Parker actually so eloquently put it in his contribution—we are a country that has been through this conversation before. We are transitioning to renewables. We have sent clear signals to industry, and we have seen investment in those renewable technologies increase such that our renewables is at, I think, 84 percent. That is fantastic. We need to do more, and industry itself wants to do more—new wind farms, new solar plants.

Mr Young made the argument that we’re not there with solar and battery technology yet.

Jonathan Young: Of course we aren’t.

FLETCHER TABUTEAU: Well, he’s saying it again, and yet one of our biggest electricity suppliers in New Zealand is installing solar and battery combinations into new builds in Auckland and has been doing it for over a year because the numbers make sense, Mr Young. The numbers already make sense, and what we’re seeing—like the microchip in computers; the processing chip—is the exponential increase in power with the correlating drop in price. That’s exactly what we’re seeing with battery technology. It’s an incredibly exciting time to be a part of a Government that has said that it’s time to consciously make that decision to transition, to encourage those big businesses who see renewables as the way forward for this country.

Mr Parker said “Wouldn’t it be nice if we were a beacon.”, but, actually, Mr Parker, we are a beacon in the world already with our 84 percent renewables. The diversity of renewable technologies that we use is a light for countries around the world. They are excited by what they see here.

This House has been having a conversation about hydrogen. I’d like to add to that because, personally, I find the technology incredibly exciting and so have been doing a lot of work with businesses in Taranaki, for example, and around the country who are looking at accelerating the hydrogen time line as we speak. Mr Young, did you go to Aberdeen with that group to speak and watch as the energy industries from around the world had this exciting conversation about hydrogen and the way forward? In fact, Minister Woods was in Japan just recently having a very similar conversation with Japanese officials and Japanese business. Mr Parker was right: Toyota, Hyundai, and Honda are on board now with hydrogen technology. They’re speaking about 30 years, but, actually, I’ve just been having a conversation with New Zealand businesses who are talking about retrofitting technology for large trucks for hydrogen, and the payback period on it is five years, from the savings on the fuel alone. Now that is, according to them, less than a year away in terms of physical implementation and viability into the market—less than a year away, hydrogen—and New Zealand is in an amazing position to offer the world this green hydrogen alternative. We can export that to the world, and this Government and I, personally, are incredibly excited to be part of that journey and to help accelerate that.

In the meantime, we are making sure that there is a transition phase for gas and the transition technologies that are available. More permits and more drilling is happening right now, and I truly wish them the best because it is a hard business to be in and very difficult to make money. So good luck to them, and yeah, let’s get on with this and transition to an economy and a country where energy is something that we can be incredibly proud of. Madam Deputy Speaker, thank you.

MELISSA LEE (National): Thank you, Madam Deputy Speaker. It is a pleasure to rise to speak on this bill, and I must signal that I am standing to oppose this bill, together with my National Party colleagues, who spoke so passionately before me. I have to say that I may not have the technical expertise that the two speakers who spoke before me have, because they have been involved in this particular area for quite some time.

But I would like to start off with a response to Mr Fletcher Tabuteau, who actually used some words that I found quite interesting. He talked about hysteria on the side, he talked about how infuriated he was at listening to us, and he was talking about how frightening things were for him. I guess I want to start with how infuriated he should be at his colleagues. This particular legislation comes about because—actually, it was about the timing of the Prime Minister’s first trip overseas. It was policy on the hoof, like the one that she actually made about the regional fuel tax. She said that as long as she is the Prime Minister, there won’t be another one, and when we asked Minister Shane Jones about when he’d first heard about it, he said, “When the Prime Minister stood up.”

This particular policy, about the decimation of Taranaki and the industry, was one of those. It was one of those policies that the Prime Minister, together with two other leaders of the party that she is in coalition with, made without the consultation of the Cabinet or the advice of the officials, who should be the experts that the Prime Minister and the Ministers and the Cabinet should turn to.

I am totally, totally floored by the decision that this Government has actually made. This is going to cost—as my learned colleague to the left of me, Todd Muller, said—4,000 real jobs, and 11,000 jobs that are affected as a result of those jobs being impacted in a region that is going to be decimated. Taranaki as a whole industry is going to be decimated—the townspeople, the city is impacted by this terrible decision that this Government has made. I am actually quite disgusted by the process—actually, the lack of process—that this Government has carried on, on this particular bill. What was the urgency that the select committee only had four weeks to manage this bill, to return it to this Chamber, and that the industries that have invested millions of dollars only had two weeks to respond, to make submissions to this particular bill? And then, when they did in fact turn up to the select committee, they only had 15 minutes to submit to it and some of them didn’t even get that time, either.

I was very interested to think about how much this $7.9 billion—the loss in revenue that this particular bill is costing. That is actually in the regulatory impact statement: $7.9 billion in lost revenue, and potentially up to $23.5 billion—not million; billion. And $7.9 billion will actually pay for quite a lot of things, as you could imagine: the Auckland light rail that, you know, cost $1.8 billion; the Waterview tunnel that the National Government delivered only cost $1.4 billion; Transmission Gully is only going cost $850 million; the brand new Dunedin Hospital only costs $1.2 billion; KiwiBuild is only $2 billion; Christchurch Stadium is only half a billion dollars.

I sort of thought, what else could $7.9 billion deliver for New Zealanders? I mean, up and down the country, this Government has seen unprecedented strikes from industries and teachers, and Government officials are even striking. I mean, this $7.9 billion in lost revenue could potentially deliver 316,000 hip replacement surgeries—316,000 hip replacement surgeries. It could actually deliver two more Auckland harbour bridges. That would be fantastic, I’m sure, for connecting the north and south. The average salary of 130,000 police officers—it could actually deliver 130,000 extra police officers with $7.9 billion. That would be 37,000 extra neurosurgeons that we could actually afford, and it could also mean a home for every homeless person in Auckland—$7.9 billion can actually deliver that. Yet this Government makes a policy, a unilateral decision without consultation, and they say—and I’d like to quote the Minister, actually. The Minister said this was actually about long-term management. I am baffled. I am actually unsure what she means—long-term management by this Government. Do they actually think that the long-term management that this Government is delivering for the people of Taranaki and the industry is loss of jobs, loss of revenue, and loss of opportunities for New Zealanders who actually rely on this?

One of the most interesting facts I found—and many members have talked about renewable energy. I don’t think there is anyone in this Chamber who will disagree that we need to move there, but it needs to have a clear plan, it needs to have clear signals, and it needs to have clear consultation before a policy is designed, discussed, debated, and implemented—not to unilaterally decide that it’s going to look good for the Prime Minister when she goes to the UN to say “Hey, New Zealand’s actually going down this way.” so that it’s great for the media press conferences and what have you. There is a lack of process, and I am appalled by that.

One of the things that the Minister Megan Woods actually said in her speech was that the future will look different than today. I am in agreement with that on one point: it certainly will look different. There’ll be 4,000 less people with a job and perhaps up to 11,000 people who will suffer as a result of this decision. Talking about renewable energy, I would like to share with the members in the House that it actually takes 270 tonnes of steel to make a wind turbine—270 tonnes of steel to make a wind turbine. Do members know how much coal it actually takes to create that tonnage of steel? It actually takes 300 tonnes of coal to make the steel that is required for a single turbine. It is not as green as some members have actually quoted.

Another thing that the Minister has actually said is—and I quote—“We are a Government that listens, then acts. That consults widely, thinks through issues deeply and seeks to forge consensus in how we can take New Zealand forward together.” I say to the Minister: bah humbug! That is utter rubbish, and they have shown by their lack of action that they are not true to their words. It is only words. You can see it in their actions: no consultations; they haven’t listened. There are industries that are actually really, really concerned. There are constituents who are really, really concerned. All of Taranaki and all of New Zealand is really concerned, and this Government is interested in rushing this through.

I am appalled by their action. They claim to be the most open and most transparent Government that this country has ever seen. I say that’s utter rubbish.

GARETH HUGHES (Green): Kia ora. Ngā mihi nui ki a koutou. Kia ora. This bill draws a line in the sand and starts the transition away from polluting fossil fuels towards clean energy. The Green Party is incredibly proud to see this legislation. After years of campaigning against that side’s “drill it, frack it, mine it” agenda for New Zealand, we’re finally starting to see the end of offshore oil and gas exploration. This bill shines like a beacon of hope in a world darkened by the threat of climate change.

This Government’s finally listening to people who want action on climate change, who want us to begin the transition now. This is urgent—the time is already running out. If we want to move to a gradual, sustainable system of energy production, we should have started decades ago, so we absolutely need to start now. The planet depends upon it, and those workers in the industries deserve the certainty of a transition.

We saw a huge number of submissions. An overwhelming majority of them support this legislation—in fact, they want it to go further—and then there were the oil and gas companies. At a time when islands are literally being washed away by rising seas, when super-storms are smashing into countries and killing thousands, and when vast swaths of the Earth are literally burning, big oil and gas came and talked to us about revenue, royalties, and attractiveness to foreign investors. They focused on their balance sheet risk when the rest of the country was talking about planetary risk. Economics is a question about resource allocation and negotiating how you do it, but you can’t negotiate with physics.

Over the course of the submissions, we heard of the Intergovernmental Panel on Climate Change and their wake-up call report which said that we have to reduce emissions by 45 percent by 2030 if we want to avoid 1.5 degrees Celsius and the tipping point of catastrophic climate change. We’ve got to be clear and honest, and I wish National members were honest—there’s no sustainable way to burn fossil fuels. The science says we can’t afford to burn more than two-thirds to 75 percent of all the fossil fuels we’ve already found, let alone spending the next decades out exploring for more that we can’t afford to burn.

The oil and gas companies came and said, “We need to burn the gas because it’s slightly less polluting than the coal.”

Hon Member: Half.

GARETH HUGHES: That’s like a tobacco company coming and saying “You should switch to mild cigarettes.”—and you very well know that the science isn’t clear, and it’s not as low as that. I don’t know why on earth we would trust the oil and gas companies when it comes to the science of climate change. This is the industry that has known about the science of climate change for decades and has actively worked and funded to stop action on climate change for their own profit. Their arguments are hollow and absolutely self-interested.

We’ve got a wealth of better options in New Zealand than fossil fuels and more gas. We’ve got a wealth of clean renewable energy. Over the course of the submissions, we heard that a new 100 megawatt wind farm is being built in Taranaki because it’s cheaper than fossil fuels. Across my lifetime, the price of solar has dropped by 99 percent, and it keeps getting cheaper every year.

Ever since 2011, there has been a global tipping point, and there’s more net international capital invested in renewables than fossil fuels. In the last year, we had figures that twice as much was invested in clean energy than fossil fuels. I mean, look at New Zealand. We’re already 84 percent renewable. We’ve got more than 3,000 megawatts of already consented renewables, ready to be built.

The Energy Efficiency and Conservation Authority says we have a $2 billion opportunity to use energy more efficiently, and we’ve got more ready and waiting. The gas industry says we need it for storage, but Transpower’s report Te Mauri Hiko shows we can use battery storage in the renewables scenario. When you look across the Ditch, they’ve got giant, 129-megawatt lithium-ion batteries. When you look at the price of batteries, they’re actually following what Moore’s law did for computing, which is a halving in price every 18 months. We’re seeing record sales of electric vehicles, and other countries are actually banning the sale of petrol and diesel vehicles—such as Norway, by 2025. It seems that the only people who are pessimistic about renewables are the National Party and the oil companies.

The fact is that oil and gas is a sunset industry. The truth is we need it to be a sunset industry. This sunset industry came to the select committee and portrayed renewable energy as some sort of unaffordable pipedream, but the only fantasy is the belief that we can have fossil fuels and a safe climate. Burning fossil fuels is what got us into the mess. It’s the reason why our consumers are paying such high prices. It’s the problem; it’s not the solution.

Then the lobbyists came and complained about the process. The very same industry that supported and the very same party that passed the egregious Anadarko amendment, a bill passed under urgency on Easter Sunday with absolutely zero select committee process to criminalise protest activity at sea; the very same industry that used the navy as private security when Te Whānau-a-Apanui got in the oil industry’s way; the very same industry that lobbied the previous Government and former Governments to get the fourth-lowest tax plus royalty rate in the world and $88 million a year in estimated fossil fuel subsidies; the very industry that’s left a trail of oil spills, broken promises, and divided communities—they came and complained about the process.

Lobbyists from the oil and gas industry are trying to paint this as some sort of sudden change, which is completely false. For years, I have challenged this industry to nominate a date when the transition should start—a transition that they said was inevitable but that they never showed leadership on, and the previous Government didn’t, either. This Government has decided to start the transition, but under this bill, oil and gas permits will continue for decades following. All existing rights are protected under this bill—that’s existing permits for prospecting, exploration, and mining—as well as the right to upgrade an exploration permit to become a mining permit if oil and gas is found. This bill is extremely generous to the oil and gas industry, yet they’re trying to mischaracterise it as a sudden change. I mean, look, there’s 100,000 square kilometres of existing permits. That’s the size of Iceland. All this bill does is stop future permits from being granted for offshore oil and gas exploration.

Current exploration permits have a wide variety of end dates, with some going even into the 2040s, and they can still be upgraded to mining permits, which means we could see mining for decades post that. The country is moving to net zero emissions by 2050 because the science demands it, but under this bill we could still be drilling past 2050, and then, the National Party and the oil and gas industry still want even more time to drill for fossil fuels we can’t afford to drill. And then, existing permits can still be extended on a case by case basis.

Now, we did see the OMV permit get an extension, which I strongly disagree with. I believe having permits being extended at the Minister’s discretion risks undermining the policy intention of this bill and it promotes uncertainty for the industry. It promotes bad behaviour by permit holders, who can take their time, and then spend their efforts lobbying for extensions.

From the over 6,500 people who submitted on this bill, an overwhelming 72 percent wanted it strengthened, with many wanting this extension to end and this loophole to be closed, and that’s exactly what I intend to do. I’m going to be putting forward an amendment at the next stage of this bill to strengthen it by removing this loophole that allows existing permits to be extended. This would be a new clause 6A to insert that an exploration permit for petroleum or any other mining permit may not be extended.

So, in summary, this bill is already a compromise between the environmental imperative of planetary survival and the interests of a fair, clear, and predictable transition for those workers that protects existing jobs and permits and provides certainty. In my opinion, deep-sea oil drilling and fracking should already be a prohibited activity and these exploration permits should have stopped being offered decades ago, because that’s what the science was urging. But still this bill is a strong step forward and a necessary one so that we can look our grandkids in the eye and say, “When we knew about the threat of climate change, we did something about it.” This bill isn’t rushed; it’s overdue.

My message to those who have submitted and to all those hundreds of thousands of Kiwis who have taken action for climate change is: thank you, we are winning, and we have more to do. We still need to encourage more clean energy in Aotearoa. We still need to pass the zero carbon Act. We still need to implement the Parliamentary Commissioner for the Environment’s recommendations. We still need to get rid of the egregious Anadarko amendment. We still need to change the Crown Minerals Act’s purpose. We still need to end National’s $88 million in fossil fuel subsidies. We need to stop more fracking and coalmining.

I’m proud to support this legislation and to start the transition to a clean-energy future. I’m proud of our Prime Minister, who’s leading on the world stage and who’s said that this is our nuclear-free moment. I want to thank the parties supporting it—the parties who are prepared to show leadership, who are prepared to show vision, and who are prepared to back a clean-energy future, not a polluting past.

ANDREW FALLOON (National—Rangitata): Thank you, Madam Deputy Speaker. It’s with a real sense of sadness that I rise to speak this afternoon on the Crown Minerals (Petroleum) Amendment Bill. The reason for that is although I haven’t been a member of Parliament for all that long—about 13 months only—in that time I have never seen a Government so shamelessly wreck the economy in pursuit of an international deadline.

I, unfortunately, didn’t sit on the select committee that considered this bill. It went to the Environment Committee, which I think surprised most of us on this side of the House. Historically, Crown minerals legislation always goes to the Economic Development, Science and Innovation Committee, so I, unfortunately, didn’t sit on the committee that considered this bill. But I have read through the submissions, which I think is a lot more, probably, than what some members opposite on the committee did. I want to turn to a couple of those submissions, and the first one is an excellent submission by the Petroleum Exploration and Production Association of New Zealand, which is the industry group for the oil and gas industry. They posed quite an interesting question, which I think members opposite need to listen to, and that is: what do we do with oil and gas now?

Members opposite might be interested to know that only 50 percent—50 percent—of oil and gas that’s extracted or used in New Zealand is used in motor vehicles. The member prior to me, Gareth Hughes, made a lot of statements about the environmental impact of oil and gas on our environment, and I think members opposite would accept a lot of what he said. However, 16 percent of the produced oil and gas is used in everyday, non-combustible products. So it’s a whole range of things. It’s medical and cosmetic products. It’s all sorts of things that have zero impact on the environment. So to have members opposite talking about this vast environmental impact that oil and gas has, they forget, I think, that there is a vast range of other uses for the oil and gas that we extract in New Zealand.

Their submission goes on to say that New Zealand produces all of its natural gas domestically, which provides just over 20 percent of our electricity supply. So I ask members opposite: where is that going to come from? If we cut off gas supply and the use of gas for electricity, where is the shortfall going to come from? I have to tell members opposite, because it’s in the Government’s own advice, that the shortfall in the short term is going to come from coal—from coal. Gareth Hughes mentioned earlier that “Oh, well, of course, gas only has a marginally better impact on the environment than coal does.” Well, that’s wrong—it’s half. It’s half. Natural gas is half as polluting as coal is, and so to suggest that cutting oil and gas exploration is going to somehow have this dramatic effect on the international climate change situation is an absolute farce, given that we’re going to have to burn more coal.

The other natural gas that we use in New Zealand is not just used for electricity supply; it’s also used for making petrochemicals like methanol—and I’ll touch on Methanex later on in my contribution—but it’s also used by 400,000 households, small businesses, schools, and hospitals. So I, again, ask members opposite: where’s that going to come from? Where’s that shortfall going to come from if we don’t use gas? Later on in their submission, they say—and I’ll quote them briefly—“If our gas supplies run out then New Zealand will need to import gas from overseas and/or develop renewable energy at an unfeasible rate.” That, I think, underlines the point that I’m making, which is that if we do cut off oil and gas exploration in New Zealand, we’re going to need to import it. If we don’t import it, then we’re going to need to move to other sources of electricity and, in their words, at an unfeasible rate. It’s not something that’s possible—that’s why we’re going to have to rely more on coal.

I want to touch on, also, the submission from Methanex, because they’re a very large employer in the Taranaki region. In fact, they are the only methanol producer in New Zealand. They say that methanol is a vital chemical ingredient in a range of things from furniture, building materials, biodiesel, solar panels, wind turbines, to pharmaceuticals. So I ask the members opposite, again: where is the polluting impact of those things that that methanol produces? There isn’t one.

I then want to point to the contribution that they have on the Taranaki economy. They employ 270 people, and 3,000 people indirectly. They add an estimated $640 million to the Taranaki economy and $834 million to the New Zealand economy. It’s nearly a billion dollars—nearly a billion dollars. So I ask the members opposite: where is that contribution going to come from? They’re shutting down an $800 million industry. One company alone—one company—produces more than $800 million of revenue for New Zealand, and it’s something that’s, unfortunately, going to go. These, of course, are all the jobs and the economic impact that exist right now, but I do want to touch on my own local patch of Rangitata, and specifically South Canterbury, where there are going to be dramatic impacts in Timaru because of this bill that’s being progressed.

New Zealand Oil and Gas have the licence to explore for oil and gas in the Barque development. They say that this bill makes development of the prospect materially less likely. Members opposite have talked at length this afternoon about how this bill isn’t going to impact on current operations or on licences where they already exist, but this is a company that does have that licence, and even they are saying that it’s going to have a dramatic impact. I want to quote their submission, because I guess members opposite probably don’t understand why it’s going to have that impact, and the reason is that they need to go off and find international investors to support the development.

In their submission, they say “Since the 12 April announcement, some of those companies have declined to progress further. We present a sample of their comments”—number one—“Looks interesting but given state of play in NZ at the moment I don’t think we will get much airplay internally. So will pass on this one”—number two—“I’m sorry to inform you but we excluded New Zealand from our area of interest for new ventures after series of opportunities review and recent political issues”—number three, the final one—“It’s been an education for me seeing the reaction by even discussing NZ here! … the NZ government has thrown a spanner in the works stopping future exploration licences.”

So I recommend that reading to members opposite, because there is a material impact on regions like South Canterbury which all the provincial growth funds in the world will never account for. This is a company that wants to develop this prospect, they have the licence to do so, and yet they’re saying that it’s unlikely to happen because of the legislation that’s being progressed through Parliament.

I do want to also just return to Taranaki for a moment because, again, members opposite have said that there’s no impact on current operations by this bill. Well, I think what they need to do is actually go to Taranaki, because they haven’t done that yet. They need to go to Taranaki and talk to Fitzroy Engineering Group. Fitzroy Engineering employ 400 people—400 people. They are a large company based in New Plymouth who service the oil and gas industry. On the day that the Government made its announcement, they instituted a hiring freeze. They haven’t employed any new people since the announcement, and it’s completely down to this bill.

I want to talk about process. I know some people probably feel that process isn’t important, but when you’re in Parliament, process is sometimes all you have. Members of the public might be a bit confused as to why we’re debating this legislation, because we only debated the first reading of it four weeks ago—just four weeks ago. This bill has been off at select committee for just one month. Submitters had two weeks to provide their contributions, and in the last two weeks, the Environment Committee has been hearing those submissions. It’s incredibly, incredibly disappointing and alarming that at not one point did that select committee travel to New Plymouth.

Jonathan Young, our senior MP who is responsible for oil and gas issues, moved a motion for the select committee to travel to New Plymouth, to go to Taranaki, and to hear from the companies and the people that are affected. There are 11,000 people directly or indirectly employed by the oil and gas industry. The vast majority of those people are in Taranaki. To have submissions heard only in Wellington has disenfranchised those people. I would have even suggested to them to not bother, frankly, coming to Wellington and having submissions here, but just go to Taranaki and hear directly from the people there, the people that will be affected—not the people in Wellington, not the lobby groups, and not the media in Wellington, but the people who will be affected in Taranaki. At not one point did members opposite bother to travel to Taranaki and talk to people up there, talk to the businesses that are affected, talk to the employees that are affected, and talk to the families that will be impacted by this disgraceful piece of legislation.

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

ANGIE WARREN-CLARK (Labour): Thank you, Mr Assistant Speaker. I rise today with immense pride in my Government. I rise today absolutely delighted with this courageous decision that we have made across our three parties in Government to make an end. I think it’s important to say this and to say this up front: when we considered this—and it was not a policy made just on the spur of the moment; this is part of the Labour Party’s and, of course, the Green Party’s manifestos, long, long made—

Andrew Falloon: Where is it? Table it.

ANGIE WARREN-CLARK: Have a look at the—

Andrew Falloon: Table it.

ANGIE WARREN-CLARK: It’s a public document.

Dr Duncan Webb: Google it.

ANGIE WARREN-CLARK: Google it. It’s a public document. Anyway, it is a longstanding decision that we have wanted to make, and what I wanted to say about it is, actually, it’s about a just transition but it is also about—absolutely—the environment. If we cannot get to grips that this is not an economic argument—this is an argument about a country and a world in crisis and about global warming—then, actually, cross-party discussions will never happen. Cross-party discussions will never happen.

We had over 7,000 submissions on this bill, and I’d like to address very quickly—because I will be taking a short call—the process discussion last raised. Now, we had over 7,000 submissions, chaired very, very ably by the good member Dr Deborah Russell, who gave each individual the opportunity to speak for five minutes and each group the opportunity to speak for 15 minutes. We used the technology of Skype and phones in order to hear from those members of the public who were based in other parts of the community. The entire country took the opportunity to ring in and make presentations.

ASSISTANT SPEAKER (Adrian Rurawhe): Order! Sorry to interrupt the member, but could the two hui taking place over there go out in the lobbies. I want to hear Ms Angie Warren-Clark and her contribution.

ANGIE WARREN-CLARK: Thank you, sir. So there was an opportunity. Of course it was a truncated process. We were ensuring that there would be a just transition for the short-term onshore permits on Taranaki.

I’d also like to make a very quick point: of the 75 percent of people who were in absolute favour, closest to my heart were those who were concerned about conservation land and about the mining on conservation land and schedule 1 land. I would like to, in conclusion, advise that this has clearly been covered in the legislation that we’ve proposed. With that, I commend this bill.

ERICA STANFORD (National—East Coast Bays): Thank you, Mr Assistant Speaker. There are so many issues with this bill: the massive decrease in investment in the Taranaki region, which has started already; the loss of skilled people and the loss, potentially, of thousands of jobs; the cost of billions of dollars of revenue—$9 billion at a mid-point; evidence from the Ministry of Business, Innovation and Employment—the fact that this bill does nothing to deal with the issues of demand and an inevitable switch to the importing of more oil and gas and an uptick of oil tankers coming into Marsden Point; and the major issue of carbon leakage, which means that global emissions will likely rise, rather than decline. But in the short time that I’ve got available, I would like to focus on process, and I do so because it was a theme that ran very strongly through the submissions that we heard and that we read.

This is a bill that has been dogged by a poor process right from the beginning. We know that this decision was made on the fly in front of an audience of university students in Wellington. We know there was no prior consultation with affected parties such as the oil and gas industry or the communities of Taranaki. We know there was no Cabinet decision prior to that decision. We know there was no advice or any attempt to analyse whether the policy would actually achieve the intended outcomes, or any cost-benefit analysis. We know that the regulatory impact statement and the Cabinet paper were prepared after the announcement was made. We know the Government used urgency to table the bill.

The feelings of betrayal from the submitters came through very strongly. The Taranaki Chamber of Commerce stated “In March, at the petroleum conference, Megan Woods said that this was something that they were only considering.”, and, furthermore, “She categorically stated that the Government would follow a robust consultation process. In fact, she used the word ‘extensive’ when it came to consultation before a decision was made.” The Petroleum Exploration and Production Association of New Zealand felt that they were misled by the Minister around consultation. They said in their submission, “At the Petroleum Conference on 27 March … the Minister of Energy and Resources [said] ‘We are a Government that listens, then acts. That consults widely, thinks through issues deeply and seeks to forge consensus on how we can take New Zealand forward together.’ ” Powerco stated in their submission, “The Government did not consult with stakeholders prior to making its announcement on 12 April … Nor has it consulted on the development of the Bill. The Bill [was] placed into urgency, which means this Select Committee [process] has also not allowed for meaningful consultation [which] affected [the] industry [and] the public.”

The extremely truncated and rushed nature of the select committee process was a continuation of this poor process. For such a massive decision that has huge ramifications for the region of Taranaki, our economy, and, in fact, global emissions, with no consultation taking place prior to the select committee process, this was our chance to have consultation—good consultation—and what did we get? A refusal of the Government members of the committee to allow us to travel to Taranaki to hear submissions.

Submitters were given just two weeks to digest the bill and then submit to the committee: four days of submissions and 10 days for us to deliberate and report back. Just compare this to our indigenous freshwater fish bill that we’ve also got before our committee: six months we’ve got for that bill, and fewer submissions, and I anticipate that the Environment Committee will likely be far more generous to those submitters in terms of travelling to Taranaki and the West Coast to hear from them in person. Great if you’re a freshwater fish; not so great if you live in Taranaki or rely on our economy for a good health system, or a good education system, or drugs, or all the other things that we get from the benefits of oil and gas.

We know that there were a number of substantial submitters who felt there wasn’t enough time for people to take into consideration what the bill was proposing. We know that submitters felt that they weren’t given enough time to have their say in their five minutes, or 15 minutes if they were an organisation, and they were cut off to the second—embarrassingly so, I felt—by our chair. We know that there were many potential submitters who didn’t get to have their say because of this truncated process. And why the rush? Why is it that we had to do this? Jacinda Ardern’s reasoning was so that the 2018 block offer could go ahead and this was something that she wanted to happen in this calendar year to give certainty to the industry. Firstly, the block offer isn’t happening in 2018—it’s not happening until 2019—and even if it was happening this year, the petroleum production industry of New Zealand said that the industry was happy to forgo this year’s block offer to allow them more time for a better consultation process.

Let’s face it, this was a political decision. It was made without proper advice or proper consultation, and when the Government did get advice, it actually undermined the justification for imposing the ban. Ministers, predictably, attacked the credibility of the advice in very dismissive terms. Then it rushed public consultation, and refused to go to Taranaki—a shameful and undemocratic process from whoa to go, and we oppose this bill.

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

Hon CLARE CURRAN (Labour—Dunedin South): Thank you, Mr Assistant Speaker. If not now, when? If not us, who? Those are the two key concepts that lie behind this bill. I’m really proud to stand here today in support of it, because it shows leadership. I’m also proud of the leadership shown in the Environment Committee led by Dr Russell. This is a careful, it’s a managed, and it’s a planned transition over 30 years.

Listening to that side of the House today, you would think it was all happening tomorrow. Everyone—and, in fact, everyone who submitted, pretty much, except for the few extremists on the bill—accepted that the world was changing and that we’ve got to change with it. We say that if we don’t act, communities will be left stranded and exposed to economic shocks. They say, “Oh yes, we have to change but not our industry, not now, not ever, and could we wait and let some other country do it?”

I refer back to what David Parker said earlier on. He said, “If not New Zealand, then who?”, and I also reflect back to 2008, when John Key told the world and told New Zealand that we should be fast followers on climate change. How ashamed I felt as a New Zealander—and those words will haunt him and haunt that party because that is basically the rhetoric that they’re using now. They’re still using it. They’re not using the phrase “fast followers”, but that’s essentially what they’re saying—“Don’t let it be us.” Well, why can’t it be us? That’s why I’m standing in support of this bill today.

ASSISTANT SPEAKER (Adrian Rurawhe): I call David Seymour—five minutes.

DAVID SEYMOUR (Leader—ACT): Well, thank you, Mr Assistant Speaker. I rise on behalf of the ACT Party in opposition to this bill. One of the things that’s interesting about the three governing parties in this Parliament, including the member who just resumed her seat, Clare Curran, is the profound lack of scientific training amongst the 63 members of those governing parties. I think there’s one medical doctor and one guy who used to teach biology at high school. Other than that, not one of them has studied science past high school, and you see the product of that in legislation that is entirely political and will have no practical effects on reducing emissions or achieving environmental goals but might actually be a little bit negative.

So let me talk to the governing parties in some language they understand, because if they don’t get science and they don’t get cause and effect, and if they don’t get practical solutions to real problems, then maybe they’ll get the politics of it. Maybe they should be asking themselves: “How will we explain to those kids that were at Victoria University that day? How will we explain to the likes of the people who work at Fitzroy Engineering Group, or any of the other businesses in Taranaki? How will we explain that when we banned oil and gas exploration back in 2017, we set ourselves on a path to having fewer sources of energy that required us to use more coal or to import more oil and gas overseas because we banned people from looking for it?”

Here’s is one of these conundra that the Government is facing: either it’s true, as David Parker constantly gets up in the House and tells us, that the cheapest form of energy is now renewables, or it’s not, because if the cheapest form of energy is renewables, there’s no need to ban people from looking for oil and gas. On the other hand, if they are wrong and we don’t have cheap renewables in the future, and we ban people looking for gas, we’re going to burn coal and increase New Zealand’s emissions. The people in the Government, if they don’t get science and they get politics, maybe they should ask themselves how they are going to explain that to those kids that were at Victoria University that day. You know, Clare Curran said that the National Party’s got some stains on it for their climate policy. I predict Labour will have the same problem in time because they have ignored the science.

Then, what about the economy? They might ask themselves how they going to explain to people that they have taken away billions of dollars of investment and of highly skilled labour, people who have been involved in industries that are vastly more technically sophisticated than most of the New Zealand economy—all discouraged, all kaput, because of the way that this Government has behaved. How are they going to explain to other people in business in New Zealand that it is possible for this Government, with no Cabinet papers and with no due process, to expropriate your property rights and to take away your plans and make it more expensive to borrow because people see New Zealand as risky? How are they going to explain to our friends around the world, including those who want to invest in New Zealand, that this is no longer a place where, actually, your property rights are safe and due process is adhered to by the Government of the day, but that, actually, this is a place where, with no warning, with no principle, with no due process or procedure, and with no scientifically demonstrable positive outcome—in fact, the opposite, from the Government’s own advisers—those property rights can be taken away?

I can see the guy from the Deep South there, thinking, “Jeez, how am I going to explain it? It’s going to be rather difficult.” He doesn’t agree with this. New Zealand First doesn’t agree with this bill; it’s just part of the horse trading of being in Government, I guess. I can understand that. But he knows that New Zealand First is going to have a hard time explaining this, and I wonder how this whole Parliament is going to explain to future generations that with such poor form, with such poor process, we put in place legislation that made us worse environmental custodians, that made us economically poorer, and that tarnished New Zealand’s reputation in the international community for being a place that upholds high standards. How are we ever going to explain that? I’m glad I’m voting against this bill, so I won’t have to. Those guys will.

MAUREEN PUGH (National): Thank you very much, Mr Assistant Speaker. I congratulate my colleague David Seymour for his insightful contribution. One of the attributes that you failed to mention, sir, of the qualifications along the Government benches is business experience, and that’s woefully lacking on the other side of this House. If there was any—if there was even an iota of business acumen—on the other side of this House, we wouldn’t even be having this debate.

I got a late call to speak to this bill, and I sat down to prepare and I was absolutely lost. I was lost because I just didn’t know where to start. The ammunition for arguing against this bill is rife. This is the most despicable piece of legislation that we have ever had to debate in this House, and the theme that has been coming across from this side of the House is about process. This bill has been devoid of process, and if it had followed due process, we would have heard from the people in the sectors, we would have heard from the people in the communities, and we would have a much better-informed debate. But no, we did not, and it’s an absolute disgrace that we are at this point.

Now, we should have known we were going to be in for this when this Government chose to make this announcement to a roomful of university students here in Wellington, and how is it that this Government has never had the gumption to turn up into Taranaki and talk to the people whose lives are going to be impacted? This morning, I was subbed on to the Environment Committee, and here they were this morning agreeing to travel to the West Coast to talk about whitebait when they couldn’t travel to Taranaki to talk about the most important industry in their region. Whitebait is bigger than the whole of the Taranaki region’s community! Well, that is another disgraceful—oh!

So when did this Government decide that they were going to refuse to hold their select committee in Taranaki? Nobody knows the process that has been followed here. This was never signalled to the communities prior to the election. This was never mandated through the election. This here is an ideological idea that got a great headline in Paris.

I have to say, how do we look these people in the eye? They can’t look me in the eye. Look at them. They can’t look me in the eye. They have no answers for the people of New Plymouth. They’ve got no answers for the people of Waitara or Inglewood or Hāwera or Pātea. And do you know the difference between those communities and the likes of Westport, Greymouth, or Hokitika? The difference is you haven’t got to us yet, but I know that you’re coming, and we’re going to be ready for you.

How many cycles of economic devastation do you need to see? How many of these devastating economic cycles? I sat in the select committee at the beginning of this debate, and they were absolutely resolute in their resolve to run roughshod over democracy. Now, democracy needs informed citizens if it’s going to survive, but it is not a democracy when you truncate the submission process to the point that it was. You had absolutely no consultation with the sector prior to even writing the bill. You have eliminated the expertise. There were countless calls from submitters. They were asking, “Please, consult more broadly. Give us more time. At the very least, give us the statutory time, not this truncated process.”

We’ve heard about the submission from the Petroleum Exploration and Production Association of New Zealand. They are a membership organisation that represents businesses producing 95 percent of New Zealand’s petroleum. They have valuable expertise in this field, and it’s a highly specialised field. They could have contributed in a valuable way to the writing of this bill. They could have contributed and helped inform the consideration of this bill, but instead they had to limit their submission. But they did note in their submission that had they had more time, they would have included a lot more information—and I quote from their submission. They would have talked to the unintended flow-on effects to the onshore sector and the broader economic effects of the decision that the regulatory impact statement covered. They would have talked to the consequence to the downstream energy sector, and they would have talked to the implications for shipping emissions from increased reliance on imports.

This is a sad day for this House, and I can tell you that the fears up in Taranaki are exactly the same fears that my own community on the West Coast have at the moment. We have seven working coalmines down on the coast, with two producing coal for export for steel-making. They employ 843 people, including the sub-trades. They produced 1.2 million tonnes of coal last year, and the estimated value of that was $334.5 million. There are five domestic coalmines employing 147 people, producing 285,000 tonnes, with an estimated value of $42 million, and another mine yet to be started has $72 million worth of value.

Now, with the power that is available to this Government, private individuals and organisations are being forced into accepting the imposition of powers that were never granted to them. There was no mandate for that Government to take this course of action. This Crown Minerals (Petroleum) Amendment Bill was decided on on the back of an envelope by three leaders, and then, I suspect, they told the rest of their caucuses.

I heard on the select committee the testimony or the submissions from people like Bill Simpson. Now, he’s a man, I understand, who is very well-connected in his community of Waitara. He drove for four hours to make his submission, but what he didn’t realise, when he got there, was that the select committee resolved at the beginning of the meeting to reduce the speaking time for all the submitters that were waiting in the waiting room to make their submissions that they had prepared. So they reduced the organisations down from 15 minutes to 10 minutes, and they had cut in half the submission time for individuals. They were prepared for their 10-minute submission, and they got five minutes. This Government was begged at the time by Bill Simpson, and he asked them what they are going to do for his town of 7,500 people with unemployment already at 58 percent. He was rudely cut off after five minutes, and then the committee spent two minutes arguing about whether he could finish his last sentence. One more sentence to go, and he was cut off.

I have two more issues that I’d like to bring up. One is what happens when you truncate a process and you do not allow time. Even in the departmental report, at the final draft, there were still mistakes being realised that were being amended. What other mistakes have been made that we don’t know about or haven’t had the time to have a look at?

I have one last visual: this photo here. This is what that Government lot over there hang their hat on, and it’s a source of pride to them. But when I look at this photo, what do I see? I see “Stopping this”, “Stopping that”, “Stopping that”, and “Stopping that”. This Government is all about stopping stuff, but what it’s done is stop the development of communities. It has stopped the economic viability of some communities, and they do not survive. They do not thrive. You are spelling the death knell of the Taranaki. You are damaging New Zealand’s reputation internationally—

ASSISTANT SPEAKER (Adrian Rurawhe): Please don’t bring me into the debate. Don’t use “you”.

MAUREEN PUGH: Sorry, Mr Assistant Speaker. That lot over there are damaging New Zealand’s reputation. They’re damaging our economic viability going forward. I say shame on them, not only for the decision but for the way the decision has been made. This is a very sad time for this country. We cannot reverse some of the damage that is being done, but we live in hope that the term of this coalition Government is limited.

Dr DEBORAH RUSSELL (Labour—New Lynn): I am the chair of the Environment Committee that heard all the submissions on this bill. We spent about 21 hours listening to submissions and working through the bill. Other committee members came and went, as happens on select committees. Some were there for some of the time, then replaced by other people. That’s the way it goes. I was there for virtually all of it. I spent five minutes out of the room at one stage, and that was it. So there was one presenter I didn’t hear from. Joshua O’Rourke, I did miss your presentation, I’m sorry. Absolutely, I read your submission, Mr O’Rourke.

Some of the presentations we heard are very much in my mind. They became very present to me. Some of the Opposition members today have referred to Mr Bill Simpson from Waitara, and that is a submission that has stuck in my mind. Mr Simpson spoke to us of the neglect in Waitara, of the lack of jobs, of the closure of the freezing works some decades ago—the freezing works that my grandad worked at, actually—of businesses that have closed down, of despair, and of the gangs in the town. May I suggest that that wasn’t caused simply by this particular bill but that that neglect in Waitara has been there for a very long time. Mr Simpson spoke quite clearly about the need for jobs. Mr Simpson, I say to you: I have heard that, I have conveyed that to members of my Government, and we are serious about doing our best for Taranaki. So you have been heard, Mr Simpson.

We also heard from students from Victoria University of Wellington a compelling presentation from two young women there—young women who spoke of the despair that young people feel, that they feel as though their future is being taken away from them, and they pleaded with us to act. I say to those two young women from Victoria University of Wellington that we do intend to act with respect to climate change. Mr Simpson and the students from Victoria University of Wellington represent the two sides of this debate: those who opposed this bill and those who supported it. There was no middle ground. There was very clear support for the bill or a very clear rejection of the bill. There was nothing in between. I’ll come on to that in just a moment.

I do want to speak of just one very memorable moment in the submissions when one gentleman came and gave us a short presentation, and then he spent the remaining two minutes praying for us. Thank you—that was very kind of you.

We heard many, many submissions by video link. We did our best to make sure that people from throughout the country could connect with us and talk with us. Indeed, I would like to pass on my thanks to our clerks, the staff of the committee, who made a big effort to ensure that everyone who wanted to speak to us could do so, and many, many people from Taranaki took up that opportunity.

We have an analysis of the submissions. I read them all and analysed them all and tried to understand what was actually in those submissions. We have an analysis from our officials as to the support for and against the bill. My numbers are slightly different, but they are in about the right order. So, coming from our officials, they say that about 735 submissions were not supportive of the bill. I got to about 720—a faintly different number. They had about 1,300 submissions that were supportive of the bill. I had about the same number. What becomes very clear—and these are just the individual submissions—is that there was two to one support in favour of this bill. That’s before we add in the submissions that were facilitated by Greenpeace and by Forest & Bird. When we add in those submissions, around about 85 percent of the people who made submissions on this bill support the bill. Only about 10 percent opposed it. So there is clearly overwhelming support for this bill.

We did get some interesting submissions and I do want to take us through some of them so that you understand what people have said. Now, against the bill, we had one from the boys in the Totara Street flat, and one of them said that he just doesn’t like Jacinda Ardern in general. That was his reason for opposing this bill. To be fair, many more submissions that were opposing the bill did have, I guess, more substantial reasons. Jeff Lingrell was concerned about jobs. He said, “I am the father and financial support for a family of 6, this bill greatly places my livelihood in direct jeopardy.” We know this will have an effect on Taranaki. There’s no doubt about that, but that is exactly why the Provincial Growth Fund is being used to support employment in Taranaki.

The Major Gas Users Group were concerned about the energy supply. It was an interesting one. They said “It is important to recognise … that for [the major gas users] significant capital investment is … based on 20-30 year asset lives. Any uncertainty over security of energy supply raises the risk that … investment will not be fully recovered.” We know that this will reduce the energy supply from fossil fuels, but that is exactly why we are actively working on alternative energy sources—on wind, on hydrogen—and on new investment.

The Employers and Manufacturers Association was concerned about future investment in New Zealand, saying that the rapid change to policy would send a negative signal that will chill intent from overseas investors because they’re worried about what might happen in New Zealand. I suppose the evidence to that is directly to the contrary. We have a queue of people who are lining up to invest in the infrastructure development opportunities here.

The Petroleum Exploration and Production Association of New Zealand (PEPANZ), of course, wanted us to carry on with fossil fuels, and they had all sorts of reasons in favour of that. But in response to PEPANZ, I offer the submission from Richard Middleton. Mr Middleton quotes from Adam Smith: “Any proposal from business ought always to be listened to with great precaution and ought never to be adopted until after having been long and carefully examined not only with the most scrupulous but with the most suspicious attention.” I suggest that we need to apply that test to what those who profit from fossil fuels would say about it.

And on it goes through all the submissions. I just want to echo something that my colleague Clare Curran said earlier. When I look at what Business New Zealand said about the bill, they said “Business New Zealand agrees with the underlying policy objective sought by the 12 April decision, but strongly considers that banning new oil and gas exploration is an unnecessary way to achieve emissions reduction goals.” But if we aren’t going to do something, how can they show they really do support the idea of taking action to mitigate climate change? If not, how and when? These were just a few of the submissions against the bill.

Chris Norton, however, said, “I acknowledge some people and interested parties will feel like they’ve been short-changed. However, this financial loss to a few is nothing compared to the catastrophe that continuing with the exploration and exploitation of our fossil resources would contribute to for everyone.”

Abbie Jury from Tikorangi in Taranaki said she urged members of Parliament “to understand that while gas may burn more cleanly than some other fuels at the point of end-use, there is nothing at all clean or sustainable in the process of getting that gas out of the ground and keeping the gas flowing.” She went on to say, “If we do not change our energy sources now, that change will be forced upon us by the probability of catastrophic climate change.”

We examined these submissions initiated of the most recent Intergovernmental Panel on Climate Change (IPCC) report. Dinah Hawkins says that the latest IPCC report makes it absolutely clear that we—all of us—must work now to keep fossil fuels in the ground.

Last of all, giving everyone a flavour of all the submissions that were totally in support of the bill—the 85 percent of submissions that were in support of the bill—is this from Sam Netherclift: “I am 18 and I think it is very unfair that my generation is inheriting a world affected by climate change because of older generations, so making exploration for oil illegal is one step forward in the right direction.”

There is overwhelming support for this bill, and, in conclusion, I give you the simplest submission of all—of all the many I read—“I support this bill because climate change.” I support this bill.

The question was put that the amendments recommended by the Environment Committee by majority be agreed to.

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

Ayes 63

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

Noes 55

New Zealand National 54; ACT New Zealand 1.

Question agreed to.

A party vote was called for on the question, That the Crown Minerals (Petroleum) Amendment Bill be now read a second time.

Ayes 63

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

Noes 55

New Zealand National 54; ACT New Zealand 1.

Bill read a second time.

Bills

Taxation (Research and Development Tax Credits) Bill

First Reading

Debate resumed from 30 October.

ANDREW BAYLY (National—Hunua): It’s a pleasure to be talking on the Taxation (Research and Development Tax Credits) Bill, first reading. I want to start out by saying that National is keen to support creative New Zealand businesses, to help them grow and prosper. This includes providing not only the right economic environment for them to flourish but also the ecosystem for younger businesses to flourish. Reducing taxes, ensuring laws are kept to a minimum, and other such measures are all part of creating that environment. But R & D is also an important part, as R & D—research and development—has the potential to drive growth in the New Zealand economy not only by increasing the size of businesses in New Zealand but actually by diversifying the activities that our good companies undertake in New Zealand.

It is exciting, in terms of the new creative industries that are occurring and the tools that will be adopted in the future—when you go and talk to these businesses, the growth in things like robotics, artificial intelligence technologies are always going to be there and are an important facet, in terms of further growth of our businesses. But that is why the New Zealand National Party has always been keen to assist companies with R & D. The Callaghan Innovation Growth Grants scheme was part of that programme that we put in when we were in power. I think it’s slightly perverse that when the Prime Minister was recently at Methven on 3 October, waxing lyrically about high-growth companies and the importance of R & D, David Banfield presented her with the latest technologies in a showerhead developed by Methven, and of course that new technology came out of the direct support from the Callaghan grant scheme, which over the last year gave away approximately $150 million a year.

But the Government has chosen to do away with the Callaghan scheme and revert back to a scheme that previous Labour Governments have put in place. That is one based around a tax credit scheme where companies undertake R & D activities and then they’re entitled to offset 15 percent of the total expenditure they incur, and use that as a deduction against their future profits. This scheme that’s been put forward has big bucks. It’s a billion-dollar programme.

The Minister has claimed that businesses will be better off, as more companies will be covered by this new scheme. Initially, she claimed that 3,000 businesses would benefit, and then that was reduced to 2,000. Now, in the scheme of how many businesses we have in operation in New Zealand—nearly 530,000 businesses—it was interesting that officials providing advice on this new scheme said that 85 percent of the Government’s tax payments would go to approximately about 330 firms. In essence, what that’s saying is there is a very small clutch of businesses that are responsible for most of the research and development in New Zealand, and of course that cuts across the whole concept of trying to provide R & D to a whole raft of companies.

The second issue with this scheme is how the Minister knows that only $1 billion will be spent, and that’s an interesting question. In the Australian R & D tax incentive scheme, which is very similar to what’s being proposed by the Minister in this bill, they originally budgeted for a $1.8 billion research and development scheme. That was put in place in 2011. That subsequently blew out by roughly half, to $3 billion. That’s the nature of the scheme that’s been proposed by the Government. The Minister has claimed that, no, that’s not going to happen with this scheme and she’s going to put in mechanisms to make sure that it doesn’t take place—that we do not have a ballooning of the $1 billion to $2 billion or $3 billion. But there have been no further details provided by the Minister as to how she will ensure that there is not such a substantial blowout.

The advantage of the Callaghan scheme—the scheme that’s currently in place—is that it is fixed, and it’s one where the budget is divided and directed at the highest priority research and development companies. This is the one area of particular importance that we will be ensuring is addressed adequately in the select committee stage.

The other issue with this bill is around enforcement. This is a big issue because generally what happens—and this happened when the previous scheme was in place—is that there are rules around which activities will be included and can’t be included. In the schedules there are 24 activities that are excluded and 11 other areas that are excluded from supporting R & D. It’s interesting: things like the cost of incurring and obtaining patents is actually one of those that are excluded in this R & D expenditure. However, rules create the opportunity for interpretation, and this is the issue. Commonly referred to as rorting, these schemes are open to widespread claims by people to say that what would otherwise be normal business expenditure they incur are subsequently reclassified as research and development. This is a real possibility. Again, we will be highly vigilant during the select committee stage as to whether and what measures the Minister will be putting into place to make sure that that does not take place.

The other thing, and this is one of the biggest concerns for us, is that this bill is totally silent on the issue of supporting those young, innovative, creative businesses, made up of wonderful New Zealand men and women, who every day are seeking to fulfil their dreams by creating new products and services. That is incredibly hard work and these people often put themselves in a financial disadvantage to be able to go and do it. But these are the success stories of the future, and we want to see more of them succeeding. I think one of the things that we can do is we need to see how we can support them. National was very conscious of it, and when we were in power we put into place two provisions, both in regard to start-up businesses or pre-profit businesses. One was to provide a real tangible benefit, which was to the extent that they could take in the form of cash any tax credit equivalent amount of 15 percent of the expenditure, which is the most precious element apart from their time in terms of helping them to continue their research and development. That cash-out clause was an important and tangible measure that we put in place.

The other thing we put in place was the ability to deduct what’s otherwise termed black hole investment, which is expenditure that’s incurred in doing R & D that sometimes cannot be deducted against future profits. Again, we came up with practical measures to make sure that black hole investment expenditure could be depreciated and actually taken into account.

But, again, this bill is absolutely silent on the issue of start-up companies, and I think that’s a great travesty. This Government should particularly be concerned about the representation from NZTech, representing over 800 start-up technology businesses—and by the way, New Zealand technology businesses are huge and a large part of our GDP. That organisation made it clear that these proposals do nothing for their members, and that is a travesty.

On behalf of the National Party, I want to say that we support plans to help New Zealand businesses to grow and prosper. That’s an absolute given. We understand the value that R & D plays in terms of helping our economy to diversify and to create high-value jobs. In many cases, they are very high-value jobs. And, unfortunately, we’ve just had the debate around the oil industry. We’re not persuaded that this package will work, and I’ve noted some of the specific elements before, but we will be supporting this bill through to the select committee because we want to hear from businesses about the specific elements of this package. But I do say that we give no guarantee of our support beyond that because of the significant concerns I’ve already raised.

KIRITAPU ALLAN (Labour): Tēnā koe e Te Māngai. I actually must say, I always enjoy the contributions of the honourable member Andrew Bayly. We sit on a number of select committees, and I do value his intellectual input. I think that there are a number of issues that the member raised that I think are also of equal consideration for this side of the House when it comes to striking the right balance, in getting a scheme that incentivises innovation by industry, by our companies. This scheme here is one of, I guess, probably the most—it’s something that private industry all throughout the country has been calling for. Here they were, shackled by a red-tape Government organisation—that was well supported by the Opposition, oddly—that really constricted the way that R & D tax credits have been able to work.

So I want to commend New Zealand First for bringing the R & D tax credit scheme into our coalition agreements and negotiations. I want to absolutely applaud the efforts of the Hon Megan Woods, alongside the Hon Stuart Nash, because what we’ve done here—and, look, you’ll know from when the R & D scheme was first introduced that there was a whole range of measures. One was that the threshold was going to be quite high—$100,000 that every private enterprise had to spend in order to qualify for the scheme. The other was that it was going to be a 12.5 percent rebate. Well, what private industry said, and particularly small and medium sized businesses, was that that is going to make this scheme too hard to access.

Now, what we were trying to do is unlock the potential—look, New Zealand is and always has been a country that has always been able to get out that number eight wire. We rely on our innovation. We rely on small enterprise to create massive momentum. So what this did, in consultation with a whole range of small to medium sized business, plus, of course, our larger industries, is worked—and I commend the officials for the work that has gone into getting this scheme. It’s a technical scheme but it is a positive one that re-enables our businesses to create our own solutions for some very challenging tasks that we as a nation have ahead of us.

I want to draw on the words of the chief executive of Business New Zealand, Kirk Hope. He said, “The Government has listened to small business. They’ve halved the incentivisation scheme to get in, from a $100,000 to a $50,000 spend, and lifted the incentives for smaller companies to access.” And, for us, that’s a real achievement.

I listened to the honourable Andrew Bayly’s consideration, and I think one of the things that this Government has been very cautious to do—we are mindful for the need of fiscal pressure and maintaining the integrity of the tax system. We heard from the Opposition that they’ll be eagerly looking and focusing on the way in which any abuses of such a scheme can exist and occur—as will we, because we’ve been working alongside our officials and alongside the stakeholders because what we do believe is that taxpayers’ dollars must be carefully targeted at the people who are conducting true research and development. So we put a lot of effort into the eligibility scheme, and this is something that I am very proud of our side of the House—that we are going to strike the right balance.

For instance, the bill proposes that claimants must satisfy certain general criteria to be eligible for the R & D credits. The bill contains criteria which will ensure that we’re supporting support for R & D that happens in New Zealand rather than offshore, although some offshore companies that have a stake in New Zealand will be able to apply for those tax credits. To be eligible for the tax credits, claimants have to perform at least one core activity for New Zealand.

Like I said, this is a long and complicated bill. The Hon Megan Woods, when she introduced this bill, spoke to the merits, and she gave a thorough, comprehensive overview of what this bill contains. As it progresses through this House—and I’m glad that the Opposition have decided to support this bill through to the select committee stage. What they will hear is from private industry that have been calling for the R & D tax credits to be made back available.

I implore the Opposition to eagerly listen and follow what private business is saying. They’ve been calling on the previous Government to re-establish the R & D scheme, but, this Government, we’re just getting on and doing it. So, that said, I commend this bill to the House.

Hon JACQUI DEAN (National—Waitaki): Thank you, Mr Assistant Speaker. The National Party support the R & D tax credit bill to select committee because, while we support the principles behind the bill, we have some serious questions to ask of the Government and we will be doing that through the select committee process and in the House here. My colleague who spoke on this side of the House, Andrew Bayly, has given a very good summary of our concerns around this R & D tax credit bill and what is just in and what is just out, so I’ll just start there with my brief contribution.

The first thing to do is go to the schedules in the bill and see what is excluded and what is not. I don’t have time—and probably it’s not a good way to spend my time—to go through each and every one of those things, but there are a number of matters which are excluded from the definition of core research. So there’s things like routine software and computer maintenance—well, of course, that should be excluded from claim as an R & D tax credit line item; management studies—yep, that’s fine; activities relating to organisational design—and on it goes. There are 24 of those exclusions, and then in Part B there are 11 activities that are excluded from the definition of supporting research and development activity, and on it goes.

Through the schedules, there are a lot of inclusions and exclusions, and I would expect that a number of the submissions on this bill will relate to these inclusions and exclusions. That always is the weakness and the pressure point and the soft point, if you like, in drafting legislation which has to be so prescriptive, because it won’t just be parliamentarians and the submitters who are scrutinising these inclusions and exclusions; it will be accountants who—as they did back in 2006, 2007, I believe, when Labour, when it was previously in Government, did introduce an R & D tax credit scheme. Accountants were gearing their clients up so that they understood fully those items that they could claim. There is a concern, and I think it is valid, that rorting could be—I mean, this kind of expenditure is prone to rorting. So it’s good to see that this bill is prescriptive, but there are weaknesses within the regime.

My concern and qualified support for this bill centres around the fact that small business—which comprises 97 percent of business activity in New Zealand and ranges from anything from a tech start-up in Wellington where the directors and managers of that start-up are so enthusiastically falling over themselves with enthusiasm and great ideas—and that’s fantastic. Will they be eligible for R & D grants? Start-ups go from that to rural New Zealand, where a farmer is using the woolshed to develop a new product to diversify their agricultural offering, as happens all around rural New Zealand. As a threshold for R & D investment, $50,000 is high for someone who is literally developing a new idea, developing a new technology, or developing a new product out of their back bedroom or their shed or their woolshed. Those of us who talk to small business—and constituency MPs talk to people like that every day, who are just as excited about the opportunities presented with their new product or idea as anyone else. But will they be entitled to claim the R & D tax credit, because of the $50,000 threshold of investment?

I would really like and appreciate—particularly in the committee stage, when this bill is returned in due course—the select committee to examine that, because if this is an R & D tax credit system which will benefit some business in New Zealand, why then is such a large sector potentially excluded, particularly when there is no certainty around other measures that National brought in when we were in Government around providing tax relief and stimulation for small business.

My final point is that the one thing that small business and business in New Zealand needs is stability of Government policy. That is one of the factors why the National Party is supporting this R & D tax credit bill through to select committee. But, having said that, certainty is what they haven’t got, because the contents of this bill are not sufficiently clear. Having said that, there are a number of very prescriptive schedules in the back of the bill, but that actually doesn’t advance their certainty any further, and that is yet another matter I would like to see addressed in select committee. Thank you, Madam Assistant Speaker.

FLETCHER TABUTEAU (Deputy Leader—NZ First): Thank you, Madam Assistant Speaker, for this opportunity to speak to such a fantastic piece of legislation. You wouldn’t realise it by listening to those on the other side of the House, would you, but this is exciting. This is amazing, and we’re doing it at a time when the economy is doing really well—really well.

Hon Member: Ha, ha!

FLETCHER TABUTEAU: The member laughs because he believes his own internal spin machine. But right now we have, for example, the tech industry—they just saw, I think it was, an increase into their R & D of $1 billion themselves just in the last year. Why are they doing that? It’s because they see the positivity of this Government that’s willing to participate and encourage and make sure that this country takes advantage, and that our businesses are able to take advantage of real opportunities that are out there in abundance through the Provincial Growth Fund (PGF). And through—I’m proud to say—New Zealand First’s negotiations with our amazing coalition partner, Labour, we’ve got Minister Woods and Minister Nash doing fantastic work to bring this vision to fruition. They see and understand, and saw it themselves, the logic of what we’re trying to do here.

I’m getting lambasted from the other side of the House, not very well, but what I would say to that is for—I think, forgive me, I forget the year that it was trialled. It was kind of started and then it wasn’t implemented particularly well.

Hon Andrew Little: 2008.

FLETCHER TABUTEAU: 2008?

Hon Andrew Little: Never had a chance to get off the ground.

FLETCHER TABUTEAU: No, it was pretty much stopped as soon as National came in. That’s right—2008. That’s right. Thank you. That’s exactly right. And they spoke about the abuses of it, the stories that Mr Bayly was regurgitating earlier in his contribution. So what he doesn’t acknowledge in his contribution is that we learnt from that lesson. We saw the abuses that businesses were trying and successfully getting away with. So we saw it; we’ve identified it. Good minds, good people with tax expertise have worked on this so that we’re not enabling another system where businesses can take advantage of a tax system.

What we’re doing, actually, and what we should have done a long time ago—what a Government should have done a long time ago—is actually bring in these R & D tax credits, because what our businesses have been facing is the real issue of competing with their international competitors who have regimes that we’re trying to implement in New Zealand right now. They have been advantaged by this very type of regime, and they are doing incredibly well because of it.

I wanted to note that, for example, our tech industries—and I’ve spoken about the PGF, so I’m pleased to say, I’ve seen first-hand our tech industries in our regions actually setting up shop out in our rural communities, out of the big cities and doing incredibly well, because we’re supporting them to do that. We think it’s a wonderful thing. Their revenues grew by 11 percent in the last financial year.

Alastair Scott: Without tax credits.

FLETCHER TABUTEAU: I’m getting there, mate. Calm down. And their exports rose by 12 percent and staff numbers in the tech industry have increased to nearly 50,000 people. Now, what we have seen in the conversations that we have had is the engagement with PGF and the opportunities that has created, but they’ve seen that fundamental change in the Government’s approach. They knew this was coming. They knew that they will be able to take advantage of real opportunities for R & D tax credits so that they can compete on a level playing field with their international competitors. We are at 0.86 percent, I think, of GDP in terms of spend on R & D. What we’re trying to do here is take us to a place where we’re at least at 2 percent. My understanding is that actually is simply a good start, because international competitors are at two-point-something percent of GDP in terms of the R & D tax credits.

So this is fundamentally good Government practice. This is something that will encourage the very innovations that we have been celebrating recently and we will see more of. We were having a debate around clean technologies in the House earlier, and this is the very kind of mechanism where we can encourage these renewables, that research, that fundamental core element of good business at that cutting edge so that New Zealand can continue to be good at what we do in terms of niche industries where we’re operating just ahead of the curve in terms of world competition. This helps. This makes a big difference, but you wouldn’t think so from listening to the Opposition.

We envisage 2,000 businesses, including start-ups, benefiting from this package. We are absolutely sure that what we are doing in terms of the Callaghan Innovation Growth Grants—that’s just the growth grants. Callaghan’s still there. We’ve still got New Zealand Trade and Enterprise; we’ve still got Callaghan trying to do good work with businesses directly. But we know that industry said, “Actually, this growth grant is really difficult, and actually it’s putting us into boxes that we don’t necessarily want to be put in. So let us make our decisions for ourselves. Let us take the risks that we want to take, but help us to do that.” And so that’s exactly what this Government intends to do with this piece of legislation.

Thank you to the Opposition for not politicking for the sake of politicking, I suppose, is one way to put it. We will have a good, robust select committee process, and I look forward to that. And, I suppose, all there is to say now is: I commend this piece of legislation to the House. Thank you.

LAWRENCE YULE (National—Tukituki): It’s a pleasure to follow Mr Tabuteau. On a lot of things we agree, but some of the comments he made in his previous contribution I can’t agree with. First of all, this side of the House is very, very supportive of growth in New Zealand. In fact, the current growth is largely the result of the policies of the previous National Government. We want that to continue. We want New Zealand to be prosperous and to succeed, and we support research and development support, and we have done previously.

This has been announced, as my colleague Mr Bayly said, as a billion-dollar programme. That’s ambitious, and anything that supports research and development and the growth of New Zealand businesses we also support. But he also said—and I wish to reiterate—that around 2,000 businesses would probably be eligible for this type of support, out of a business community of around 550,000. So it’s a very small percentage, but it is important.

In my own electorate, I’ve watched innovation, research, and development flow right through the horticultural sector in my own community. At a very time when that is booming and we can’t find enough labour, what we need to do is innovate, and I see lots of businesses that are doing that. So I’m hugely supportive of research and development and how we can do things, and we on this side of the House are happy for this bill to go to the select committee. Then we’ll have a proper analysis of the issues that are involved in this different approach. It’s fair to say that we have some concerns, and some have been raised by previous speakers—my colleagues on this side of the House.

The Australian example would show you that the tax credits tend to blow out over time. They start off as a prescribed amount—and in this case, we’re talking about a billion dollars—but the Australian example, with all the best advice, with all the best rationale and all the best controls, has ended up in a somewhat uncontrolled position, far greater than what was envisaged. That’s because accountants, lawyers, and smart business-restructuring experts find ways around to actually shift normal income that isn’t taxable into a taxable expenditure. We shouldn’t underestimate—and I’ve read the schedule and I’ve seen the exemptions—how accountants will try and reclassify expenditure to get a greater deduction.

I also have a particular concern because I can’t see in the legislation how start-up companies can access this easily. I’ll give you an example: in my own electorate, last week, I met a start-up company that, in my reading of this bill, would qualify for R & D tax credits, but they told me that for the first four years they have been cash-flow negative, so they are not paying tax to get a credit. These are the types of things that we want explored properly in the select committee. This is why we’re happy for it to go to that stage, and at the select committee there will be a robust debate, and this side of the House will form its view as to which side we’re on, whether we’re supporting grants like with the Callaghan Innovation process or we’re supporting R & D tax credits or a combination of both.

But I do not want Mr Tabuteau and others to think that this side of the House is not supportive of R & D support and grants or tax initiatives going to our businesses. We are a completely pro-business party. We strongly support the endeavours of community businesses, large and small, right across New Zealand.

When I draw it back once again, in closing, to my own electorate, I see tremendous opportunity for more R & D and tremendous opportunity for more growth. We just have to make sure, as politicians in this House, that we create a structure in terms of R & D that is fair, enduring, and also uses the best of knowledge we can glean from other countries that have tried this. So I commend this bill at its first reading to select committee, and I’m really interested to see what comes out of that process. Thank you, Madam Assistant Speaker.

CHLÖE SWARBRICK (Green): E Te Māngai, tēnā koe. Tēnā koutou e Te Whare. It is a pleasure to rise and speak on this, the first reading of the Taxation (Research and Development Tax Credits) Bill. We as the Greens believe that a clean, green economy has to be our future because, indeed, if we don’t have a planet, if we don’t have a sound, safe, secure environment, then we don’t really have an economy.

I also wanted to reach out across the aisle and say thank you very much to the Opposition for throwing their support behind this piece of legislation. I do think that it’s perhaps the first time that I’ve ever heard from the National Party fears or concerns about tax credits or reducing tax, but I absolutely invite their critiques on this piece of legislation, because that robust scrutiny is going to be incredibly important at the select committee process.

This piece of legislation is important because New Zealand is presently behind the rest of the world, but we typically, actually, pride ourselves on being at the cutting-edge. We’re behind the rest of the world when it comes to our investment in research and development—a point which has been noted by speakers prior to myself, but I think it’s important to put it on the Hansard, in detail—and New Zealand’s investment in research and development measures at 1.26 percent of GDP, which is well below the OECD average of 2.35 percent. New Zealand is also behind on the number of patentable ideas produced, with most OECD countries producing nearly four times the amount produced here in Aotearoa New Zealand.

I think that we’re a country and a people and a society that prides ourselves on our innovation and, indeed, on our ideas. The purpose of this legislation is to get behind those ideas and incentivise them, with as little bureaucracy and red tape as possible. Why we are stoked about this methodology as opposed to what other members from the Government benches have criticised, the grants-type approach, is that grants appear to pick winners. There is absolutely a competitive process, but it isn’t as simplified or as streamlined or as available to all companies who are investing in that research and development, and innovating. There therefore are barriers to entry, and it’s not available to all. Tax credits remove that bureaucracy and ensure that all who are investing, obviously, within that threshold are able to get that tax credit.

So too I think it is important to note that this diversification, which is enabled by way of investment in research and development and, indeed, in innovation is incredibly important to build a more robust and sustainable economy—one which adds value. New Zealand has often actually led the world when it comes to our innovation and ideas in services, in software, and in products.

I think that it’s also worthwhile noting that throughout the select committee process, it would be incredibly valuable for members of the select committee, as I’m sure will come up throughout the submissions process, to take into account that it’s presently kind of unclear how loss-making companies—which, notably, is the situation for many start-ups and small businesses, which has been cited by many members—will be catered for under this new regime. So that, perhaps, is something worth taking into account throughout the submissions process, and, indeed, I would invite any member of the public who is interested in this riveting piece of legislation—I promise, it is riveting—to engage in that select committee process. It creates, essentially, a more level playing field because it is moving away from this system of grants and picking winners. Instead, it is available to all of those companies who engage in that investment in research and development.

I just, finally—despite the cross-partisan sense of great unity—want to bring to account a few of the tiny things mentioned by the previous speaker Lawrence Yule, when he noted that it was under the National Government that we steamed ahead with our diverse and our highly productive economy. Just on one point in particular, I wanted to state and fact-check the point that labour productivity in the final years of the National Government was at the lowest that had been seen since 1996. So I think that’s just an important fact to put on the Hansard, if we shall entertain such facts.

But, moving back to that unanimity and that great sense of innovation and collaboration, which I’m stoked to see lighting the way across the House this Thursday afternoon, the Green Party is incredibly proud to be supporting this piece of legislation and would like to tautoko the sentiments raised by my colleagues—particularly from New Zealand First—in bringing this idea to the table and making it happen in this Government through the coalition agreement. We’re incredibly proud of this move.

I would also—just finally—like to make the point that this is something which I hope Russel Norman, former Green Party co-leader, will be incredibly happy with, given that it is something that he advocated very loud and strong for, for quite a long while. Kia ora.

ANDREW FALLOON (National—Rangitata): Thank you, Madam Assistant Speaker. It’s a pleasure to be taking a call this afternoon and speaking on the Taxation (Research and Development Tax Credits) Bill. I enjoyed—as I often do, actually—the contribution of the Green member Chlöe Swarbrick opposite, and she noted that it’s the first time that she’s heard National MPs speaking with some scepticism about how a tax credit might be applied. Well, I’d just simply counter by saying that it’s the first time I’ve heard the Green Party speak in favour of a reduction in tax.

We do support this bill, though, because primarily we do support a greater uptake of research and development in the New Zealand economy, particularly for small businesses. We also recognise the destabilising effect that can happen when Governments do change, and Governments have a habit sometimes of throwing out everything that the previous Government has done. So we are conscious that we want to preserve some stability and ensure, I guess, a lasting research and development regime that can continue into the future. So we do support it to select committee, and we will be working in a collaborative way and contributing, hopefully, to a lasting policy to support research and development.

But I do wish to just dispel a couple of myths that have been raised this afternoon and in the wider debate. The first one is that we do actually have a very innovative economy, and if you want some evidence of that, you don’t need to look too much further than my electorate of Rangitata. In my electorate of Rangitata, we’ve got a very large Fonterra plant called Clandeboye. The Clandeboye plant now produces more than half of the mozzarella that tops the pizzas in China. Several years ago, Fonterra moved away from the volume products like milk powder and started investing in some of the value-add products, and that’s a really good example, where a huge amount of mozzarella is now being produced in South Canterbury, and it employs a large number of people in the Temuka area.

That sort of innovation was supported by the previous National Government through things like the Primary Growth Partnership, also the Sustainable Farming Fund, and, of course, we also created Callaghan Innovation to work hand in hand with New Zealand Trade and Enterprise to help create and market the new products and ideas. In the past 12 months, Callaghan Innovation has worked with more than 2,700 companies, so their spread is quite broad. They do work with a range of companies.

There has been some criticism, I think, so far in the debate of the growth grant process and how they’re allocated, but I do just want to remind members opposite of why that growth grant scheme was put in place. It’s because when we came into Government in 2008, there was a situation where the previous tax credit regime was being rorted. Unfortunately, a number of companies were reclassifying existing expenditure as research and development, and they weren’t actually undertaking genuine R & D. So we unapologetically axed that scheme and brought in the growth grant scheme because we felt it was important that if you are going to undertake R & D, then you should be up front about the fact that you’re doing that and that you should provide some evidence that you are doing that, because otherwise you do have a system where it is being rorted.

So that will be the focus, I think, of members of the committee. I hope it’s coming to the Economic Development, Science and Innovation Committee to be worked on, because I’m very keen to ensure that we do have a lasting research and development scheme but that it’s one that’s robust and has a number of safeguards to ensure that that rorting doesn’t happen.

ASSISTANT SPEAKER (Poto Williams): I understand this is a split call. Dr Deborah Russell, you have five minutes.

Dr DEBORAH RUSSELL (Labour—New Lynn): Thank you, Madam Assistant Speaker. It gives me great delight to stand and speak on a tax measure. Actually, I’ve been thinking about a brilliantly innovative company in Avondale, in my electorate of New Lynn—the Smart Hot Water Company. They do some amazing things with hot water cylinders and layers and convection currents to enable people to manage their hot water cylinders very efficiently and effectively. It shows real ingenuity and thoughtfulness. They’re doing some incredible work right at the moment with solar panels and heaters. I don’t think it’s public news yet so I won’t take it all that much further.

What this makes me think is just—you know, they’re doing a great job, but there is real ingenuity and real knowledge amongst New Zealanders about how to do some of this great research and development, and wouldn’t it be great if we could do more? And we know we need to do more, so that’s why I support this particular measure. It’s about upping our R & D and about trying to get some stuff right for our economy. But, as previous speakers have noted, there is a need to get some of the technical details of a tax credit right. There’s the ongoing issue of grants versus R & D—research and development—tax credits, and, as my colleague Ms Swarbrick noted, it’s about giving everyone an opportunity to access Government support for research and development instead of picking winners. But that’s a debate we can have in, I hope, the Finance and Expenditure Committee. I’m certainly looking forward to it.

The bill as presented does have a definition of what this research and development is going to look like. It’s an interesting one, and I know it’s been developed throughout consultation, but I’m looking forward to debating that particular section: it’s a new section LY2, set out in clause 10, that will go into the Income Tax Act.

But what I especially want to address is the issue of supporting start-ups. Now, the previous National Government introduced a very interesting measure whereby companies which were engaging in research and development could get refundable tax losses. Now, this is interesting because normally when you make a tax loss you don’t get any money back on it. You can carry the tax loss forward and set it off against future profits. But for some types of R & D, instead of having to carry that tax loss forward, you could actually get some cash back straight away, and this was explicitly designed to help start-ups.

Now there is a measure in this bill to assist start-ups. In fact, these tax credits will be refundable tax credits, so that means that for certain small companies, up to a certain value, you will be able to get actual money back on the R & D that you’ve done. Now, that’s a very useful measure, and I hope, Mr Yule, that addresses some of the concerns that have been raised this afternoon. I think Mr Yule and Mr Bayly both raised this concern. There is a measure in this bill that will help with this. I want to know what the relationship between that measure and the refundable tax losses will be, because they both cover a bit of the same ground, so I think that’s one of the issues that we will discuss in depth in the select committee.

I think one of the other issues that has been raised, I think by Mr Bayly and I think by Mr Yule, was around issues to do with rorting and the possibility of people rorting these really quite generous measures—it’s a good concern to raise. It’s interesting, because clearly the people who have designed this particular set of legislation and have drafted it have thought of that issue already, and clause 7 of this bill introduces a new section into the Income Tax Act, section GB 56, and that’s about arrangements to avoid tax liability.

So there is a sort of a catch-all measure in there, but like other members who have spoken this afternoon, I do want to have a look at those schedules and have a little think about what ways that clever accountants—because people have noted that accountants are clever—can get around this particular measure, and, you know, it’s worth having a good think about, a good examine. I’m looking forward to doing it in the select committee, remembering always that the objective here is to promote research and development and to promote more R & D in our economy. And for that reason, Madam Assistant Speaker, I commend this bill to the House.

ALASTAIR SCOTT (National—Wairarapa): Thank you, Madam Assistant Speaker, and, as we know, this side of the House will be supporting this bill, but with some strong reservations. I guess the first question is why we need to have research and development tax credits, or even grants, when, as Mr Tabuteau himself said, the IT sector is spending a lot of money and doing very well, all by themselves, without tax credits, in research and development. And so you have to ask the question why—why are we supporting this bill and why are we supporting tax credits? From the Government’s point of view, they say it is to increase productivity—increase productivity—and it might. But there are lots of other things that should be done first and as a higher priority if we want to increase productivity.

We could do all sorts of things around industrial relations. We could talk about immigration, we could talk about cutting the tax on fuel, we could talk about investing more in teachers. There’s a whole lot of stuff that we could talk about if we are to talk about increasing productivity, but we’re here and we’re arguing—and agreeing at this point—that research and development tax credits will increase productivity. But then I’d like to quote Professor Göran Roos, an Australian academic, who says that none of the top-performing countries in the world have R & D tax credits. So in select committee that is the first question we should be asking ourselves: do we really need R & D tax credits to increase productivity? At the end of the day, it’s taxpayers’ money that we’re dealing with. It’s a subsidy from the taxpayer to the business.

But having said that, and we’re going to discuss that and we’re accepting that that is the case for now, I’d like to point out a couple of other issues that I have with the bill, and that is the restrictive nature of the terminology that it uses. It’s only good for scientific or technological research and development, so it excludes market research. It excludes research on social services, for example. So let’s say that one of the main things we want to do is reduce poverty in this country. Wouldn’t it make sense to allow research into the way we deliver social services in this country from the private sector, if you like—or any entity—to allow them to get a deduction for research? I’m thinking of the Salvation Army, and I know it’s a charity in any case, but why is that not allowed as legitimate research and development? Why is research and development into markets not allowed?

We’re an export nation; we need to develop customers and satisfy customer needs. We have no idea of the specific cliques, small groups, target markets in India, China, Mongolia, and Europe for our markets. Why are we not allowing market research, or product research, in those markets? We’re restricting ourselves. We’re missing an opportunity to subsidise, if you want to call it that, really essential channels to market for our primary produce. And we might be able to develop the leanest, meanest sheep carcass with the finest cuts, but if we have no customers and we don’t understand who’s going to buy that product, then we’re wasting our time.

So I submit that research and development should not be restricted to just scientific and technological solutions. We should be discussing the ability to use this research and development pool of funds to do other things that benefit society as a whole, in the social services sector, and in the market place specifically around market research and product development, because those things at the moment are not included in this deductibility regime. So, in the meantime, we will support this bill. We want it to be debated in select committee. We’ll be asking those questions about whether we widen it, whether we narrow it, whether we have nothing to do with it, but in any case I look forward to that process.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Madam Assistant Speaker. This Taxation (Research and Development Tax Credits) Bill is a really important piece of legislation. I think, as Mr Alastair Scott asked, the right question is: why should we have these tax credits? I think we need to be very careful when we think about that. It’s not simply because we want to encourage research per se; it’s because research has value which goes well beyond the company or individual who generates that research. And we’re talking about hard research; we’re not talking about market research.

Hard research—research which creates technological advances—adds to the net sum of human knowledge and human wealth. In terms of wellness, it gives us greater choices and it gives us greater prosperity, and that’s what we need to do. But the difficulty for a researcher, for someone who’s at the cutting edge of some technological improvement, is that once they make that improvement, it’s very hard to hold on to it all for themselves. Notwithstanding the law of patents and copyrights and what have you, the fact of the matter is that once we get an advance of one kind or another, others jump on the coat-tails. That’s no bad thing, because what it means is that New Zealand as a whole, the industry as a whole, and, in fact, quite probably, the world as a whole benefits in some way. In economic terms, that’s one of those rare things: a positive externality—a side benefit, if you like, conferred as an effect of the main thing.

So by providing this tax credit, what we are doing is recognising the fact that the benefits of this go beyond the researcher themselves, and we are, in a sense, giving back a little bit of that capture. So research isn’t just good for some vague reason; it’s good because it enhances productivity, it enhances prosperity, it enhances knowledge, and, also, it has that filtering effect where it spreads beyond the person who may have generated it in the first instance. This, in a sense, offsets those losses, because the worker who developed it might have gone to another competitor or something along those lines.

It is important to recognise here what “research” is under this legislation. It isn’t some loose market research, some non-systematic furthering of knowledge in a loose way; it is scientific research. It has to be systematic, and, importantly, it must create new knowledge. We discussed, not long ago, a patents bill, and talked about the need for genuine innovation. That’s what we want to fund here: genuine innovation which makes an actual step forward. It’s interesting to see what it’s not. It’s not some advance that is deductible from publicly available information. So in that sense, we need to make sure that it is a genuine scientific improvement.

Now, it’s also worth noting that the rate here is generous—15 percent is a generous tax deduction—and, also, there’s a low threshold. The $50,000 threshold which is proposed, I absolutely endorse, because there are many small companies, whether they be IT companies or medical companies, who may actually be one guy or one woman working away, and they may only spend $50,000 or $100,000 in a year, but that also is deductible, so that’s a great idea. It also captures—we mentioned Fonterra before—large companies with up to $120 million of expenditure.

So what this is doing is really encouraging something which has wider benefits. It’s a great innovation. I sit on the Finance and Expenditure Committee with Dr Russell and many others, and I look forward to engaging in a robust discussion—

Kiritapu Allan: And Fletch.

Dr DUNCAN WEBB: —on how to make—oh, and Mr Tabuteau—

Kiritapu Allan: And me.

Dr DUNCAN WEBB: —when he’s not overseas. Oh, and Ms Allan, when she’s not far too busy doing something else. For that reason, I absolutely commend this bill to the House.

BRETT HUDSON (National): Thank you, Madam Assistant Speaker. We rise in support—at least at the first reading—of the Taxation (Research and Development Tax Credits) Bill, with some reservations. The reservations are actually historical fact. Historical fact should always trump optimism. So the research tax credit has been tried before in New Zealand—tried and proven to be rorted. Now, I know this for a couple of reasons. One is I trust official advice—and I’ll come to that in a minute—but I also know it because I had customers telling me not only that they were rorting it when it was last in this country but how they were able to rort it. So particularly in the area of information technology, businesses were able to reclassify simple maintenance activities, upgrade activities, as research and development, and claim the tax credit. An absolute rort—running all the way to the bank, which is possibly also somewhat symptomatic of the customer in question. So it is a rortable event.

The official information of the time actually put that to the Governments of the day, both Labour and then National. The point they made was that a tax credit was far less certain and less likely to provide an incentive for genuinely new research and development. The information they had and the projections they made were that it would be more likely to foster, if anything, perhaps some acceleration, but simply the undertaking of R & D that was going to happen anyway. Their advice of the day was that a grant-based system would be far more likely to create a genuine incentive for new research and development—that which wouldn’t have otherwise happened. That might go some way to explaining why it was, for instance, that the National-led Government in 2008 and beyond chose to get rid of the tax credits and instead use a system of grants-based assistance to businesses in research and development. So the rorting of it is a serious, serious issue.

But the better question—Dr Webb said it’s a question of whether we want research and development tax credits. Really, the question is: are tax credits a better method than other options available? The advice of some years ago suggests very strongly that that’s not the case. There are other elements of a tax credit, and particularly the implementation proposed, that suggest that it is a suboptimal approach to, particularly, the grant structure that was used under the previous National Government.

Dr Webb has said it’s a simple threshold to meet and the relief is quite generous—well, that’s debatable, but that was his position. That being the case, there was therefore an incentive for as many businesses as possible to recode their activities to take advantage of it and to meet those so-called simple and worthwhile thresholds. But it also creates a system which simply means that if you meet the threshold, you get the cash back, in effect—you get the credit. So there’s no cap on the actual expenditure for Government, and this is what happened under the previous Labour Government—the actual cost of the tax relief was much higher than had been budgeted for.

But, secondly, it risks creating the ongoing expectation within business that they will always get that level of Government assistance to help part-fund, in effect, their research and development. It creates an expectation that that will perpetuate. So instead of, perhaps, the approach that the previous National Government had, which is “prime the pump”—get businesses investing, because they get the returns from it, they get the benefit from it, and they get the realisation that it is worth their while making continued private personal investments in R & D. Well, the tax credit isn’t going to do that. It’s simply going to perpetuate the same level of assistance, no matter how much you do over how many years.

You might take, for instance, our growth grants. Over the term of the Government, we started off by having something of a 50/50 split, so the business had to show that their ideas were good enough to get half of the funding from private risk and private investment. Then over time we shifted that up, so they had to provide even greater than 50 percent of that investment from private funding sources before the Government would contribute the remainder. That actually helps to wean—if I can use that word—businesses off an over-reliance on money from the State to undertake research activities that, principally, they are going to be the beneficiaries of. This tax credit system actually undermines that approach.

But we do believe in listening to business. We believe in listening to New Zealanders. We think it’s worthwhile that this goes to select committee so we can tease those and other matters out—matters like will software development and labour-based activities be included; if so, will there be any caveats, any thresholds, any protection measures? These are all things worthwhile canvassing in select committee. It’s for that reason that we will vote in support to go to select committee.

Hon STUART NASH (Minister of Revenue): Thank you very much, Madam Assistant Speaker. It’s a pleasure to speak on this bill, for a number of reasons. First and foremost though, I’d just like to address a couple of the points that Brett Hudson made. I hope that the honourable member does get to sit on the Finance and Expenditure Committee. I’m not too sure if he’s on the committee or not, but I hope he is, because what he will see when he is on the committee is that in fact a lot of what he has said is actually incorrect—this will come out in the select committee—first and foremost, about rorting the system.

We are not the first country in the world to do this; in fact, we’re one of the outliers. The countries with economies of a similar size to ours, the vast majority of them actually have a much higher R & D spend than we do. As a consequence of that, what we have done is we have actually gone out and talked to these countries. Officials have gone out and they’ve had a talk to them and said “Hey, what works? What doesn’t work? How can we end up with a system which isn’t easily rorted but is going to drive innovation in the way that we know it needs to happen in our economy?”

A classic case is one of the first discussions I had with senior officials from the Australian Taxation Office. They said, “An R & D tax system is really good at driving innovation, but don’t do what we’ve done.” I thought, OK, well that’s a salutary lesson. So we’ve spoken to the Brits, we’ve spoken to the Norwegians, and we’ve said “How have you”—not you, Madam Assistant Speaker—“How have the officials made this work in a way that creates integrity but also drives innovation?” The last thing we want to do with taxpayers’ money is end up with a system which is easily rorted. No one benefits from that, and that is why we are very careful and have been very prudent in the way we have done this.

One thing I will say is when there is a grant-based system, what ends up happening is that inevitably you end up picking winners, because those that can fill in the forms or have the relationships or have the technology that ticks a whole lot of “gee whiz” boxes end up with a lot of the money. What we’re doing with R & D tax credits is actually giving companies the ability to drive their own future. So what we’re saying to them is “Hey, you think you’ve got some great R & D? You think you want to drive innovation and growth? Well, go hard. We’ve set up the infrastructure.”

To give surety, we’re actually introducing a pre-approval process. So that means that a small to medium business—and as the Minister for Small Business, not just the Minister of Revenue, this will give a level of certainty. And it’s not some massive bureaucratic behemoth we’re creating here. We believe that we can provide a yes or no—yes, this is R & D and fits within the tax credit structure; or no, it doesn’t—within about six weeks. So it will give small to medium businesses the certainty they need to move forward in the knowledge that they will be able to acknowledge the R & D tax credit.

What we did is we went out—this is Minister Woods and I—and we consulted. We said, “We’re starting with a threshold here of $100,000.” What we actually heard was “$100,000 is too high. You’re not going to get a whole lot of small to medium businesses spending $100,000 on R & D.” So we said, “OK, we’ve heard what you’ve said; we’ve come back, and we’re going to make the limit $50,000.” They went “Oh, well, shivers. That’s a Government that’s listening.”

Mr Hudson suggested that in fact there’s a lot of companies that won’t take this up. Well, our market research shows that in fact there’s going to be about between 2,000 and 3,000 more businesses that will engage in R & D as a result of this tax credit. So where we think we’ve landed is a place where we can actually allow businesses to take control of their own future whilst driving research and development in a way that allows us to be productive, that allows our small businesses and medium and large businesses to grow. We do not think—we do not believe in any way, shape, or form—that this is just a system that will be rorted by the big guys who have the really smart accountants, because we have learnt about how we can do this better.

We understand the need for fiscal prudence. We are not being blasé about this. We are not being casual about this. We know that in order to earn the trust and the confidence of the business sector, we need to ensure the integrity of the system. There is absolutely no doubt about that whatsoever. So we have set up a system that we think will provide a level of fiscal prudence. To be eligible for the tax credit, claimants have to perform at least one of the core activities in New Zealand. We acknowledge that sometimes it’s necessary to go offshore. We know it’s necessary to go offshore, but what we’ve said is that no more than 10 percent of a claim can be for R & D credits.

In fact, what I will do is I’ll just sum up in a way, because we do want to get this first reading through and the bill to the select committee, and I don’t want have to come back next week to do this. But one thing I will say is I recently attended the chartered accountants’ annual tax conference, and I was delighted to hear someone—a chap by the name of Dr Tim Benbow, a partner at Ernst & Young—speaking in very positive terms about the approach that the Government is taking, and saying that the open discussions that occur between officials and the private sector have made a huge difference.

I am interested to hear what submitters have to say on the bill when it does go to select committee, but one thing that I absolutely believe this will do is drive research and development in a way that will be positive for our country. I think it’s a fantastic bill. Thank you very much.

A party vote was called for on the question, That the Taxation (Research and Development Tax Credits) Bill be now read a first time.

Ayes 115

New Zealand National 52; New Zealand Labour 46; New Zealand First 9; Green Party 8.

Noes 1

ACT New Zealand 1.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.

ASSISTANT SPEAKER (Poto Williams): Is there some Minister to move the report-back date?

Hon STUART NASH (Minister of Police): I move the report-back date.

ASSISTANT SPEAKER (Poto Williams): Can someone help the Minister with the wording please? [Interruption] Does the Minister need some assistance?

Hon STUART NASH: That would be very kind, Madam Assistant Speaker.

ASSISTANT SPEAKER (Poto Williams): Just a moment.

Hon STUART NASH: I move, That the Taxation (Research and Development Tax Credits) Bill be reported to the House by 1 April 2019 and that the committee have authority to meet at any time while the House is sitting (except during oral questions), during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House and outside the Wellington area, despite Standing Orders 191, 193 and 194(1)(b) and (c).

Motion agreed to.

Bills

Family Violence Bill

Family Violence (Amendments) Bill

Third Readings

Debate resumed from 31 October.

RAYMOND HUO (Labour): Thank you, Madam Assistant Speaker. Today would otherwise be yet another ordinary extended sitting day, but today is special. Today is extraordinary. Earlier this morning, Prime Minister the Rt Hon Jacinda Ardern delivered her speech at the second reading of the Child Poverty Reduction Bill. Child poverty reduction is at the very heart of this coalition Government, and in a similar vein we are having this third reading debate on the Family Violence Bill and Family Violence (Amendments) Bill—two bills that are designed to prevent and eliminate family violence.

The two bills were divided from the Family and Whānau Violence Legislation Bill through a Supplementary Order Paper at the committee of the whole House stage. Preventing and eliminating family violence is one of the greatest opportunities to improve the well-being of New Zealanders. Isn’t it shocking that one in three New Zealand women experience physical violence from a partner in their life, and more than a quarter of New Zealand children have witnessed family violence.

Debate interrupted.

The House adjourned at 6 p.m.