Tuesday, 30 April 2019

TUESDAY, 30 APRIL 2019

TUESDAY, 30 APRIL 2019

The Speaker took the Chair at 2 p.m.

Prayers.

Motions

Condolences—Acts of Terrorism, Sri Lanka and San Diego

Rt Hon JACINDA ARDERN (Prime Minister): I seek leave to move a motion without notice that this House condemn the Easter Sunday bomb attacks in Sri Lanka on 21 April and the shooting at a synagogue in San Diego, USA on 28 April.

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

Rt Hon JACINDA ARDERN: I move, on behalf of the Government, That this House condemn the 21 April act of terrorism against Christians worshipping in three churches and tourists in three hotels in Sri Lanka on Easter Sunday and the shooting on 28 April at a synagogue in San Diego, leading to the loss of innocent lives.

The Government of New Zealand wishes to extend its deepest condolences to those communities in Sri Lanka and the United States affected by these tragic events, the effects of which will be felt globally. I am struck by the tragic parallel between these attacks and the one which took place in Christchurch on 15 March. They all saw innocent lives lost in the act of peaceful prayer and worship. New Zealand stands with the people of Sri Lanka and the United States of America against such assaults on religious freedom, tolerance, and compassion.

New Zealand immediately registered our shock and concern with the attacks in Sri Lanka, and the share scale and magnitude of those attacks was truly horrifying. In addition to my statement of 21 April, I have written to the Prime Minister of Sri Lanka to express New Zealand’s sympathies and solidarity with the people of Sri Lanka and to offer any assistance that we can. The Governor-General and the Minister of Foreign Affairs have likewise written to their counterparts. Consular advice and support have been offered to New Zealanders in Sri Lanka, and the New Zealand Police has provided force-to-force support to Sri Lanka police. Our thoughts and aroha are with the people of Sri Lanka, our Sri Lankan communities in New Zealand, their families and friends, and all those in our communities affected by this tragic event.

The Minister of Foreign Affairs has also written to Secretary Pompeo expressing the Government’s concern at the attack on Jewish people worshipping in San Diego and our sympathy to the United States of America and our stand against such assaults, based on our shared values of religious freedom, tolerance, and compassion.

New Zealand stands alongside both countries in condemning all forms of terrorism. These atrocious attacks that we have experienced in our nation are an affront to our shared values and common humanity. We share that same perspective when we see these assaults abroad. They remind us why it is so important that New Zealand remains a country that embraces and celebrates diversity, a place that stands for the values of inclusion, compassion, and empathy. We encourage all our communities to work together towards this goal.

Hon SIMON BRIDGES (Leader of the Opposition): The Opposition wholeheartedly associates itself with the comments of the Prime Minister on the atrocities in Sri Lanka on 21 April, which left at least 250 people dead and more than 500 others injured, and the shooting on 28 April at the Poway synagogue in San Diego.

With over 220 people killed inside churches and places of worship across Sri Lanka, it is one of the bloodiest terrorist attacks committed against Christians. Anyone in any place of worship in any part of the world should be safe from hate and violence. Worship and reflection in any faith, be it Christianity, Judaism, Hinduism, or Islam, should be peaceful, it should be respected, and it should be done without fear of violence. Easter Sunday, the day when Christians remember the resurrection of Christ and the birth of new life, is a time to come together with friends and family and remember.

On the holiest of days, unimaginable sadness and hurt fell on Sri Lanka. These attacks are yet another reminder that there is still much work to be done in our world to ensure the freedom of worship for the God you choose, ensure people have freedom of speech and association, and ensure that other such freedoms are inalienable rights given to everyone, irrespective of where you live and what you believe. We stand ready to help ensure those freedoms are protected and enhanced around the world.

I want to particularly acknowledge the first responders who, like in Christchurch, never expected that when they woke up that morning they would be responding to this evil attack. We stand with the Government in offering our support, and indeed New Zealand’s support, for whatever we can do to help the people affected by these devastating events.

MARAMA DAVIDSON (Co-Leader—Green): The Green Party too absolutely stands with this House in condemning both the attack against Christians worshipping on 21 April in Sri Lanka and also those worshipping on 28 April at the Chabad of Poway synagogue in San Diego.

I was reminded of my nana taking me to the Easter mass in the Ōtara Rd Catholic church as a child all my life, and remembering that, once again, these people were in the absolute place of worship and peace, in an absolute calm and professing their faith to their God. And I want to acknowledge that this again has happened and that we need to make certain that we are protecting these peaceful places of worship for every religion and every community.

I was reading about a five-year-old girl who was badly hurt in the Sri Lanka St. Sebastian Church, and she asked as she was recovering, “Why do people bomb?” We know that the motivations share something in common. They seek to fill a place of peace and worship with violence and terrorism and fear and hate. We have to continue to reject those notions in the places of worship and peace around the world. There must be the exact opposite effect, and I am pleased to stand here with the Green Party and with all the members of this House to once again condemn acts of terrorism against communities and religions. Thank you, Mr Speaker.

DAVID SEYMOUR (Leader—ACT): I rise on behalf of the ACT Party to offer commemoration of those victims of the Sri Lanka and San Diego terror attacks, to offer consolation to their survivors, and to offer condemnation of their attackers.

Every time terrorists around the world try to separate us, using what they view as significant but really superficial differences between different people, our response in this House and beyond must be very simple. When they try to emphasise superficial differences amongst humanity, we must meditate on what makes us the same, the universal individual rights that we all share as humans: the freedom to speak and express ourselves, to move, to associate, to think, and, particularly, pertinent to this case—sadly, echoing Christchurch—to worship. Those are the common inheritance of humanity—those simple and inalienable rights—and it’s upon those that we must meditate as the only proper response to the terrorists who try to divide us with superficial differences.

I’m very proud to be part of this House that, once again, is united in that conviction. Again, I offer condolences to the survivors, along with commemoration of the victims, and absolute condemnation for their terrorist attackers. Thank you, Mr Speaker.

Motion agreed to.

Speaker’s Statements

Chamber, Lobbies, and Galleries—Wi-Fi Testing

SPEAKER: Before we move to oral questions, I just want to indicate to members that there is some testing of Wi-Fi strength occurring around the gallery today. So if people see someone standing up with something in their hand, don’t get too concerned—it’s just a device which is testing Wi-Fi strength, because, apparently, when all of you are using your devices at the same time, there’s some question as to whether they’re working properly or not.

Oral Questions

Questions to Ministers

Question No. 1—Prime Minister

1. Hon SIMON BRIDGES (Leader of the Opposition) to the Prime Minister: Does she stand by all her Government’s statements, actions, and policies?

Rt Hon JACINDA ARDERN (Prime Minister): Yes.

Hon Simon Bridges: Does she think, in her Government’s year of delivery, that the Government is delivering with KiwiBuild when, instead of 10,000 houses per year, it has so far only built 70?

Rt Hon JACINDA ARDERN: If the member wishes to put on notice a question, as I notice that MP Judith Collins does when she usually asks these questions, then I would be happy to give the specifics of the exact numbers as they are today.

Hon Simon Bridges: With only one supplementary, is it already too hard for the Prime Minister?

Rt Hon JACINDA ARDERN: Raising leadership issues today—bold call, Mr Bridges.

Hon Simon Bridges: In that last supplementary, was it in fact competency, not leadership, issues I was raising?

Rt Hon JACINDA ARDERN: Again, if the member wants the specific numbers, I would prefer to be able to give him a level of specificity, given, obviously, he’ll know that in construction these numbers change. If he wishes to put them on notice, I’m happy to give them.

Hon Simon Bridges: Does she think the Government is delivering when the economy has slowed to just over 2 percent growth per year compared to 4 percent growth when she came to office?

Rt Hon JACINDA ARDERN: Yes, because as we’ve repeatedly said in this House, relative to what’s happening in the international environment, particularly when measured against those countries we tend to compare ourselves to, GDP for the December quarter was at 0.6 percent higher than the OECD average at 0.3 percent, and Australia at 0.2 percent, faster than Canada at 0.1 percent, the UK on 0.2 percent, the euro area on 0.2, and Japan on 0.5. If the member wishes to only compare New Zealand to China, then his Government wouldn’t have fared very well either.

Hon Simon Bridges: Does she think the Government is delivering when it is well behind its promise to provide 1,800 extra police?

Rt Hon JACINDA ARDERN: Again, we have increased the number of police officers on the beat, far higher than the numbers when we came into office. Yes we have set, over the course of a term, a goal of 1,800. We’ve always been very deliberate in saying that we are striving for the 1,800 because we will not compromise the quality of those recruits. [Interruption]

SPEAKER: Order! Order! I’m not sure whether it’s the new hearing aids or not, but my left ear is working a lot better than it used to, and what that now means is that I’m having trouble hearing the Prime Minister because of the racket. I know that people are a bit excited, but if they could just settle down and let the Prime Minister finish, please.

Rt Hon JACINDA ARDERN: The agreement between Labour and New Zealand First was very explicit from the very outset because we never wanted to compromise the quality of recruitment over that ambition. Of course 1,800 remains our aspiration.

Hon Simon Bridges: Is it now the “Year of Striving and Not Delivering”?

Rt Hon JACINDA ARDERN: No.

Hon Simon Bridges: Does she think the Government is delivering when doctors are on strike for the entire week, meaning New Zealanders are missing out on important and lifesaving treatment?

Rt Hon JACINDA ARDERN: If the member wants to talk about transformation in our health system, how about 600,000 New Zealanders getting cheaper doctors visits because of this Government?

Hon Simon Bridges: Does she think her Government is delivering when not a single new road has been started under her Government?

Rt Hon JACINDA ARDERN: I’m happy to reflect on the commencement of a number of new roads that will happen under this Government. Of course, we have got the Waipapa roundabout - State Highway 1 Loop Road, Manawatū Gorge replacement, Mount Messenger bypass, Matakana link road, Battalion Road seal extension in Wānaka, completion of Resolution Drive—look, I have a number, but the thing is, under the context of road safety issues, I think the issue I’d rather highlight is that between 2013 and 2018, the number of deaths and serious injuries on our roads increased by 55 percent, and yet that Government did not change their spending plans and put them into road safety. The signals were all there, which is why we’re investing a record $1.4 billion over three years to upgrade over 1,500 kilometres of our most dangerous roads. If that member is only interested in new roads rather than safe roads, then I can’t help him.

David Seymour: Does the Prime Minister stand by her Government’s very reasonable policy of issuing a special visa category for victims and the families of victims involved in the Christchurch mosque attacks?

Rt Hon JACINDA ARDERN: Yes.

David Seymour: Can applicants under the stalled parent category visa hope that the Government will move with the same alacrity any time soon, given they’ve been waiting two years now?

Rt Hon JACINDA ARDERN: That’s an area of policy work for the Minister of Immigration. However, I doubt that anyone in this House would disagree that after the terrorist attack on 15 March, giving certainty to those directly affected by the attack was the least that this Government could do.

Hon Simon Bridges: Does she think the Government is delivering value for taxpayers’ money when the Department of Corrections, under Kelvin Davis, has spent $1 million on slushy machines in prisons?

Rt Hon JACINDA ARDERN: I do think it’s right that we be concerned over the health and safety—

Hon Chris Hipkins: Obsessed with crushed ice.

Rt Hon JACINDA ARDERN: —of corrections officers—

SPEAKER: Order! Order! I’m going to ask the Leader of the House to be quiet now. Could I ask the Prime Minister to start again. Thank you.

Rt Hon JACINDA ARDERN: I do think it’s right that corrections focus on the health and safety of their corrections officers. For those who are, of course, wearing stab-proof vests, that does present health and safety issues, and they have resolved at an operational level the best way in their mind to be able to deal with that. It is an operational decision, but do I support them to look after their workers? Yes.

Hon Simon Bridges: Is $1 million for six-grand slushy machines good value for taxpayers’ money?

Rt Hon JACINDA ARDERN: Again, when they were dealing with thousands of staff members, they would have assessed all of the options for dealing with the health and well-being of their staff. I’m not the one at that level assessing all of the options, and it is not a matter for me as Prime Minister. Do I support them to look after their staff? Yes.

Hon Simon Bridges: Does she think the Government is delivering when the census has become a shambles, with the lowest turnout in 50 years?

Rt Hon JACINDA ARDERN: Again, bold call raising that, given that that Government was the one that said that Statistics New Zealand should move to one of the most dramatic changes in the census delivery without factoring in the risk and the potential cost that could be involved with that transition, and asked Stats New Zealand to reduce their costs by 5 percent. Look, yesterday we announced, though, that we are boosting funding to help deal with the aftermath of the census but also making sure we’re well-prepared for Census 2023. I’d also point out that that Statistics New Zealand have done a lot of work to make sure that they do have a reliable data set that can help across housing, health, and education.

Hon Gerry Brownlee: Just making it up.

SPEAKER: Mr Brownlee, settle.

Question No. 2—Finance

2. KIRITAPU ALLAN (Labour) to the Minister of Finance: What recent reports has he seen on the New Zealand economy?

Hon GRANT ROBERTSON (Minister of Finance): Last week, Statistics New Zealand released overseas merchandise trade data for March, showing exports rose by $899 million to hit $5.7 billion—a record monthly high. The increase was driven by higher values in exports of milk powder, beef, and cheese. On the other hand, imports fell $174 million in March to $4.8 billion, resulting in a monthly trade surplus of $922 million—the highest since April 2011.

Kiritapu Allan: What recent reports has he seen on consumer confidence?

Hon GRANT ROBERTSON: Friday’s ANZ-Roy Morgan Consumer Confidence report showed consumers’ confidence in the economy rose in April, with the index up 1.4 points. The proportion of households who think it’s a good time to buy a major household item rose—up eight points to a net 46 percent. In addition, more consumers are feeling better off now than a year ago, and more consumers expect to be better off this time next year. While it’s pleasing to see consumers noticing the strength of the economy, we recognise that there is uncertainty in the global growth outlook that may be weighing on confidence in New Zealand’s own outlook. That is why we are getting on with implementing our plan for a modern and more resilient economy.

Kiritapu Allan: What reports has he seen on the impact of an uncertain global economic outlook for New Zealand?

Hon GRANT ROBERTSON: In its April forecast, the IMF revised down its expectation for global growth to 3.3 percent in 2019 from 3.5 percent forecast six months ago, and, indeed, 3.7 percent six months before that. The IMF forecast that advanced economies will grow 1.8 percent in 2019, and 1.7 percent in 2020, but within that the IMF is forecasting that New Zealand’s economy will grow 2.5 percent in 2019, and 2.9 percent in 2020; in other words, stronger than our peers in the US, the eurozone, UK, Japan, Canada, and Australia. We are all well aware that as a small, open economy, New Zealand is not immune to global economic factors, but our underlying fundamentals remain sound.

Question No. 3—Finance

3. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Does he stand by all of the Government’s statements, policies, and actions in relation to the economy?

Hon GRANT ROBERTSON (Minister of Finance): Yes, in the context in which they were given, made, and undertaken, and, in the case of my friend and colleague Shane Jones, on a case by case basis.

Hon Amy Adams: When the Prime Minister said yesterday that the Government would now look for other ways to achieve fairness in the tax system, by his definition of fairness, does that include work now being done on higher tax rates or inheritance taxes?

Hon GRANT ROBERTSON: The Government has ruled out higher tax rates in this term of Government.

Hon Amy Adams: Well, if he agrees with the Prime Minister that tax reforms will be about fairness, will he commit to any tax changes being revenue neutral to the Government?

Hon GRANT ROBERTSON: I repeat: the Government has ruled out increasing the top tax rate. We’ve ruled out an inheritance tax. I believe the member might be referring to our party policies for the 2020 election, and they’re not my responsibility as a Minister, are they.

Hon Amy Adams: I raise a point of order, Mr Speaker. Sorry, Mr Speaker, I seek your assistance for that. I asked a very simple question about a comment the Prime Minister made yesterday about looking for other ways to bring fairness into the system, and I just asked for a statement on tax neutrality. The Minister appeared to answer my first question again. I just would like an answer. He may choose not to answer, but he could at least address it to what was asked.

SPEAKER: I think the member got a very clear answer about what the Government policy was—very clear.

Hon Amy Adams: Well, if tax reforms are going to be about fairness as the Prime Minister said yesterday, why can he not commit to any of those tax changes being revenue neutral to the Government?

Hon GRANT ROBERTSON: I’m pointing out the fact that the issues the member raised in her first supplementary question are not on the agenda of the Government. What we are doing is advancing, for example, a digital services tax, and making sure that we continue to close loopholes around GST issues. Those will remain important parts of the work programme for the Government, and the member will be able to see the status of all of those when the Budget’s released.

Hon Amy Adams: So by refusing to commit to revenue neutrality, is he not in fact making it clear that tax reforms will be about a tax grab for Government, not at all about fairness?

Hon GRANT ROBERTSON: No.

Hon Amy Adams: Was associate finance Minister James Shaw correct when he was asked by Radio New Zealand if not proceeding with a capital gains tax meant that the Government was going to be borrowing more money and replied, “Yes, we are.”?

Hon GRANT ROBERTSON: It is a statement of fact, that the member and I have covered a number of times in select committee, that in dollar terms the Government has been borrowing more money. But I do note that today’s accounts that have been released show that net debt is at 20.6 percent—or $60.5 billion—and that at the end of the September, the September accounts for 2017, those numbers were 22.8 percent and $61 billion. So, actually, it’s less money at the moment.

Hon Amy Adams: So if the capital gains tax back-down is going to mean the Government borrowing more money as the associate finance Minister has confirmed, doesn’t that just show us that the Tax Working Group proposals weren’t about fairness at all, and were in fact a thinly veiled tax grab that New Zealanders saw through?

Hon GRANT ROBERTSON: At no point had this Government factored in any revenue from the capital gains tax, given that had it come into force, it wouldn’t have been until 2021—barking up the wrong tree.

Question No. 4—Health

4. Hon MICHAEL WOODHOUSE (National) to the Minister of Health: What is his best estimate of the number of elective procedures and specialist assessments that have been postponed by district health boards as a consequence of the industrial action taken by the Resident Doctors’ Association this week?

Hon Dr DAVID CLARK (Minister of Health): Exact figures won’t be known for some time but hospitals are reporting no unexpected issues so far. Approximately 38 percent of house officers and 72 percent of registrars have made themselves available for work this week, and district health boards (DHBs) are advising the public that if they need to attend hospital for acute or emergency medical treatment, they should do so. I am advised that preliminary planning estimates are that 1,513 elective procedures and 776 other procedures—such as elective angiography—have been deferred. People are missing out on planned care as a result of the strike, and that’s why I am urging both DHBs and the Resident Doctors’ Association to make the most of facilitation to find a resolution urgently.

Hon Michael Woodhouse: What assurance can he give that no patient whose elective surgery was postponed has died in the period since the surgery was deferred?

Hon Dr DAVID CLARK: Elective surgery, or planned care, is that care which is deemed not to be acute. Those who have acute needs should present at the hospital as soon as they are able. Obviously, I feel sorry for anyone who has had planned care delayed because of industrial action—I can imagine how frustrating that would be—but I’m confident that DHBs are doing everything they can to minimise the impact on patients and to reschedule those procedures that have been delayed. It is why it is so important that both sides turn up this week, prepared for facilitation and ready to find a solution to this dispute.

Hon Michael Woodhouse: Who will be prioritised in the period after the strikes: those patients with surgeries and assessments already scheduled for that period or those patients who missed out on surgeries and assessments because of this week’s strikes?

Hon Dr DAVID CLARK: Patients are prioritised according to clinical need by those who have the expertise.

Hon Michael Woodhouse: Is he aware of any patients who have now had surgeries deferred more than once as a result of industrial action in the health sector since this Government came into office?

Hon Dr DAVID CLARK: I am made aware of incidents where people have surgeries deferred on more than one occasion. I receive an awful lot of correspondence, and that was certainly true under the last Government—I received correspondence on that too. It is really frustrating and disappointing when that happens.

Hon Michael Woodhouse: Will he now accept that after a year of negotiations and four periods of industrial action, he needs to step in to ensure the dispute is resolved?

Hon Dr DAVID CLARK: Nobody wants to see patients missing out on services, and it is disappointing that we are seeing this strike action when there is facilitation scheduled to begin this week. But, in the end, what is needed here is a resolution that will work for both the DHBs and the Resident Doctors’ Association. Let’s not forget that there is already a union that has settled with the DHBs, which has 750 members—the Specialty Trainees of New Zealand—and it’s also worth remembering that DHBs have settled pay rounds with nurses, with midwives, with Allied Health, and with clerical workers already.

Hon Michael Woodhouse: Does he accept that if he does not intervene to ensure the dispute is settled, the responsibility for adverse patient outcomes as a consequence of industrial action rests with him and his Government?

Hon Dr DAVID CLARK: It is, of course, my responsibility for the overall performance of the health system. I want to see more people get quality accessible care. I also take responsibility for making doctors visits free or cheaper for around 600,000 New Zealanders. I take responsibility for the Mana Ake programme, which is delivering mental health and well-being support in primary and intermediate schools in Canterbury. I take responsibility for overseeing a major programme of work to fix up our ageing hospitals, which were suffering from nine long years of neglect.

Question No. 5—Regional Economic Development

5. MARK PATTERSON (NZ First) to the Minister for Regional Economic Development: What recent announcements has he made regarding the Provincial Growth Fund?

Hon SHANE JONES (Minister for Regional Economic Development): Last year, I visited the deep South—Gore—and urged the community to drum up suitable proposals for consideration by the officials. I am pleased to report that with appropriate encouragement from a certain list MP, those proposals were approved and were announced by myself recently in Gore. They are the Maruawai precinct project, including the redevelopment of the Hokonui Moonshine Museum, and also a Hokonui Huanui programme—a wraparound set of support services for rangatahi, children, and NEETS.

Mark Patterson: How will these projects support regional development in Gore and eastern Southland?

Hon SHANE JONES: Obviously, the Maruawai precinct project will attract more visitors to Gore, as they need large bouts of encouragement to stay longer in Gore. This will enable Gore to attract those people that are travelling on to Queenstown and Dunedin. There are also the developments and the upside of the Hokonui Moonshine Museum, which celebrates the heritage of certain South Islanders hiding in the hills, away from the tax department, and making whiskey. That new distillery wing and the construction of a new Maruawai heritage centre will speak volumes about the heritage of a number of the South Island MPs.

Mark Patterson: How else has the Provincial Growth Fund (PGF) supported the people of Southland?

Hon SHANE JONES: Despite the churlish claims driven by petty resentment from certain Opposition MPs, the PGF is spreading, across the length of the country, financial elixir—$12 million, Milford Highway Fibre Connection; Invercargill, inner-city development for $1 million; and a Southland hatchery and nursery feasibility project to grow aquaculture in an area screaming out for attention, neglected for nine long years under the last regime.

Question No. 6—Social Development

6. PRIYANCA RADHAKRISHNAN (Labour) to the Minister for Social Development: What recent announcements has she made about increasing job opportunities in the construction sector for people on a benefit?

Hon CARMEL SEPULONI (Minister for Social Development): Yesterday, Minister Salesa, Minister Jackson, and I announced the launch of the Kiwi Can Do pre-employment construction programme. Kiwi Can Do is the Ministry of Social Development’s (MSD) largest provider of pre-employment construction training, now with up to 1,200 participants per year. This new programme is a joint venture between Kiwi Can Do, MSD, Wesley Community Action, and EasyBuild. Through the Wellington programme, people on a benefit will receive placement into employment as well as in-work support for 12 months. It will provide an opportunity for training in the installation of prefabricated homes on the Wesley Rātā Village site to prepare people for employment in the construction sector.

Priyanca Radhakrishnan: What employment support does Kiwi Can Do provide?

Hon CARMEL SEPULONI: Kiwi Can Do provides people with pre-employment construction experience under trade qualified mentors, helps to gain licensing and other pre-requisites for employment, and builds confidence working as part of a team and support in work for up to a year. The Kiwi Can Do instructors and mentors are made up of trade retirees, dubbed “Dad’s Army”, who have all run their own businesses, hired and trained apprentices, and are looking for an opportunity to pay forward some of their knowledge and life experiences. This approach to training and mentoring youth is unique to the Kiwi Can Do programme and has attracted the interest of a range of key industry businesses and organisations.

Priyanca Radhakrishnan: Why is this new pre-employment construction programme important?

Hon CARMEL SEPULONI: The Kiwi Can Do pre-employment construction programme is an example of an innovative partnership that will have a positive community and social impact. The key target for the course is 18- to 25-year-olds not in employment, education, or training, but is open to any age. The Kiwi Can Do programmes have a large percentage of Māori and Pasifika participants, where there is an enormous potential talent pool. This new initiative continues to contribute to this Government’s priorities to upskill and train young people on benefits for industries like construction and to increase the supply of community housing to low and middle income New Zealanders.

Question No. 7—Regional Economic Development

7. Hon PAUL GOLDSMITH (National) to the Minister for Regional Economic Development: Does he stand by all his statements and actions?

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

Hon Paul Goldsmith: When he told this House on 11 April that he asked the acting CEO of the New Zealand Transport Agency (NZTA) why his prosecutors were reducing Semenoff Logging’s Filipino truck drivers to, in his words, “begin acting as pimps”, how did he think that he was not involving himself in the case?

SPEAKER: Does the member want to try and—oh, no. I’ll let the Minister answer it. I think the question was sort of slightly out of order at the beginning. I think he really meant not what he said in the House but what he did with the NZTA, which is not quite what he asked. Shane Jones.

Hon SHANE JONES: The allegations contained in the question are grossly untrue.

Hon Paul Goldsmith: What parts of the question are untrue?

Hon SHANE JONES: The entirety.

Hon Paul Goldsmith: Does he think he has a right to query independent prosecutors’ methods with the agency’s CEO in the middle of a case?

Hon SHANE JONES: I refer the member to the various answers I have given. It is completely within my rights as the regional champion to draw to the attention the wisdom of using migrant labour up and down the New Zealand transport freight sector and encouraging them to act in a way that I have formerly regarded as pimps but now I call informants.

Hon Paul Goldsmith: What advice has he had from the Attorney-General on his actions regarding the Semenoff case?

Hon SHANE JONES: I have had several discussions with the Attorney-General. On one particular issue pertaining to fisheries, he has advised me that such matters are best left devoid of any commentary from myself.

Hon Paul Goldsmith: Why did the Minister meet Daron Turner, the general manager of Semenoff Logging Ltd, on 12 August 2018, just 11 days after the NZTA briefed Ministers on its intentions to revoke Semenoff Logging Ltd’s transport services licence, and what did he say?

Hon SHANE JONES: Obviously, as the first citizen of the provinces, I meet regularly with leaders of New Zealand industry. In a number of those meetings, occasionally I don a ministerial cap, and other times I’m enrobed in my New Zealand First cloak made of duck feather.

Ian McKelvie: I raise a point of order, Mr Speaker. Everybody knows that the Queen’s representative, the Governor-General, is the first citizen of the provinces, and I think the Minister should apologise.

SPEAKER: I thought he was going to indicate that a mallard cloak was something that he shouldn’t put on.

Hon Paul Goldsmith: Did he approach the Hon Iain Lees-Galloway in August last year regarding Semenoff Group’s application for accredited employer status in his regional development capacity, and if so, what was he asking for?

Hon SHANE JONES: I’d have to go back and check my records—rather than mislead the House—but for a long time I have been advocating for the New Zealand heavy freight industry not only to be given access, as a transitional measure, to migrant labour but to train our own people to drive the trucks and to be paid a fair wage.

Question No. 8—Health

8. Dr DUNCAN WEBB (Labour—Christchurch Central) to the Minister of Health: What progress, if any, has been made rolling out the Mana Ake programme to deliver mental health and well-being support in Canterbury schools?

Hon Dr DAVID CLARK (Minister of Health): Mana Ake started in schools just over a year ago, on 23 April 2018, delivering on a campaign promise. It puts social and mental health workers into schools for one-on-one and group sessions with children, to help them deal with anxiety, depression, and other mental health issues. I’m pleased to advise the House that, as of yesterday, every child in Canterbury’s primary and intermediate schools now has access to Mana Ake.

Dr Duncan Webb: Why was Canterbury chosen for the Mana Ake programme?

Hon Dr DAVID CLARK: Mana Ake was established in response to the unique mental health needs Canterbury children experienced following the 2010 and 2011 earthquakes. We wanted to support the young people of Canterbury and Kaikōura as they grew up with the legacy of those traumatic events. Mana Ake has also proved its worth following the 15 March terrorist attacks, and I know many parents and teachers will have welcomed having access to professional mental health and well-being support in recent weeks.

Dr Duncan Webb: How many children have benefited from Mana Ake support so far?

Hon Dr DAVID CLARK: As of 31 March, Mana Ake has supported over 820 children individually and 475 in groups since the programme first commenced in schools. That’s a lot of young lives that have benefited from being listened to and supported.

Question No. 9—Education

9. Hon NIKKI KAYE (National—Auckland Central) to the Minister of Education: Does he agree with the Waitakere Area Principals’ Association that estimates the changes proposed by the Tomorrow’s Schools Independent Taskforce could cost up to $2 billion per year?

Hon CHRIS HIPKINS (Minister of Education): The Waitakere Area Principals’ Association’s submission doesn’t appear to detail how they arrived at those figures, aside from three substantive proposals that they have costed in more detail—two of which, I note, have been endorsed by the National Party. I’d note that the task force is currently consulting on their draft recommendations, and the Government isn’t expecting to see their final report until the end of June.

Hon Nikki Kaye: Which month of this year can we expect to see public costings, given he’s confirmed in written questions to me that he shelved his proposal to take costings to Cabinet in May?

Hon CHRIS HIPKINS: One of the reasons that no further proposals will be going to Cabinet in May is that the task force is not going to be reporting back until the end of June. We have extended the time frame for them to do so. I’ve been very clear that any further consideration by the Government of the task force’s final recommendations will be after more detailed costing work and consideration of the pros and cons of any of their recommendations has been completed.

Hon Nikki Kaye: I raise a point of order, Mr Speaker. I asked a very specific question, which is: which month did he expect costings to go to Cabinet? I know the time line, in terms of the proposals of June, but it is a very specific question.

SPEAKER: And if the member asked just that question without everything around the edge of it, the member might have got a specific answer, or she might not have, but certainly the member had an adequate response.

Hon Nikki Kaye: Does he agree with the New Zealand Principals’ Federation that the task force hubs evoke images of bureaucratically bloated education boards—a long-rejected entity that represented powerful central control?

Hon CHRIS HIPKINS: I have been at some pains not to express a view on the task force’s recommendations in this area until they have presented their final report. That is a matter for the task force to engage in consultation around, which is what they are doing. I think it’s really important that all New Zealanders who have a view on this have the opportunity to have their say. The Government has not considered in detail the task force’s recommendations. We made the decision not to do so until further public consultation had taken place.

Hon Nikki Kaye: Has he had any discussions with the Minister of Finance or Treasury about putting contingency funds aside to pay for changes coming out of the Tomorrow’s Schools task force; and, if not, is he confirming that no policy changes will occur from the task force before the next Budget?

Hon CHRIS HIPKINS: In keeping with a longstanding tradition, I don’t intend to discuss what I’ve discussed with the Minister of Finance around the Budget.

Jo Luxton: When will the Government consider the recommendations of the independent task force?

Hon CHRIS HIPKINS: As I indicated, the Government’s not expecting the final report of the task force until the end of June. When we do get the final report, we will give that careful consideration, including a rigorous cost-benefit analysis of any proposals that we might consider taking forward. As we do so, we intend to continue a dialogue with those involved in education so that we can ensure that they are involved in the decision-making process, and I have every intention also of continuing the dialogue with the Opposition that we’ve had over the task force’s draft report to date.

Hon Nikki Kaye: When he backed up the PM in confirming there is no more money for the teacher pay envelope, was he guaranteeing that this Government won’t spend hundreds of millions of dollars in bureaucratic education hubs, instead of preventing more strikes?

Hon CHRIS HIPKINS: As I indicated in my answer to the primary question, two of the three elements that the Waitakere Area Principals’ Association identified in coming up with their costing were proposals that have been well supported, including the establishment of learning support coordinators and moving to an equity index for funding schools. Both of those things have been endorsed by the National Party and are things that the Government is likely to progress. Having said that, we’ll make final decisions on that once we’ve received the task force’s final recommendations.

Hon Nikki Kaye: I seek leave to table the Our schooling Futures: Stronger Together report review by the Waitakere Area Principals’ Association—

SPEAKER: Order! Isn’t that available on the web?

Hon Nikki Kaye: No, it’s not. Well, as far as I’m aware, it’s not available on the website. So actually this is—

SPEAKER: Sorry, I thought the submissions all were.

Hon Nikki Kaye: —important so that the House can see all of the costings, which include other detailed costings around the hubs.

SPEAKER: All right. Any objection? There appears to be none.

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

Question No. 10—Police

10. CHRIS BISHOP (National—Hutt South) to the Minister of Police: Does he have confidence in the security policies and systems of the New Zealand Police?

Hon STUART NASH (Minister of Police): Yes, and where there are breaches of these operational policies I also have confidence that the Commissioner of Police will undertake the necessary actions to ensure that the 12,000-plus men and women of the New Zealand police service are complying with these policies.

Chris Bishop: Is he concerned that part of a top-secret intelligence watch-list of more than 100 people being actively monitored by police post 15 March has been leaked to media; and, if so, what does he intend to do about this appalling breach of security?

Hon STUART NASH: I have not received advice that there was a leak of top-secret information. I have seen media reports that claim material of a top-secret nature has been received by a journalist. But my expectation is that if the Commissioner of Police suspects that there has been a breach of operational protocols, he will attend and investigate it accordingly. I must also say that the unlawful possession of top-secret information is a criminal offence and it is an offence under the Policing Act to release classified information to unauthorised persons.

Chris Bishop: Will the police be conducting an inquiry into how part of a top-secret intelligence watch-list of more than 100 people being actively monitored by the police made its way out of the police into the media’s hands; and, if not, will he as the Minister of Police order an inquiry?

Hon STUART NASH: I reiterate my answer to the last question: I have not received advice that there was a leak of top-secret information.

Greg O’Connor: What evidence does the Minister have to support his confidence in the New Zealand Police’s security policies and systems?

Hon STUART NASH: From the outset, when the firearms amnesty was announced, I made it clear that the least-preferred option is for firearms owners to deliver weapons to stations, but rather to go online and fill in the required form or call 0800 311 311 and organise a time for police to collect these weapons. I have always been very clear about that, and it appears the firearms community has been listening and they understand that police stations are not designed to receive tens of thousands of weapons. At last count, 2,388 forms had been completed online, 3,200 firearms had been declared for surrender, and 403 weapons had been physically surrendered. I am keen for police and the Government to work with the community rather than create divisions, which the Opposition police spokesman has a track record of doing, even if he has deleted such information from his Facebook page.

Chris Bishop: Is it correct that the person who stole 11 firearms from the Palmerston North police station walked through an open roller door, accessed the internal part of the station, and broke through an alarmed and locked door to steal the firearms; and, if that is correct, why has he been urging New Zealanders to hand firearms in to the police?

Hon STUART NASH: I will reiterate: I have never encouraged people to go to a police station and hand in firearms. I have always urged people with firearms that are prohibited, or that they want to hand in, to go online, fill in the form, or phone the 0800 number and organise a time for police to collect these weapons but not to go into a police station and hand them in.

Chris Bishop: Why is he now saying he has never encouraged people to hand weapons in to the police when he said, not two weeks ago, “What we would urge people to do is not wait until 29 September to declare your weapon or to hand it in.”, and if that’s not encouraging people to them in to the police station, then what is?

Hon STUART NASH: I reiterate: what we do know is that there are 13,000 registered military-style semi-automatics (MSSAs) out there—13,000 registered MSSAs. We have no idea how many assault rifles are out there. There could be tens; there could be hundreds of thousands. Police stations are not designed to store 13,000 MSSAs. We are currently in the process of developing policies and procedures to collect these firearms, store them, and have them destroyed. And the number one consideration is transparency and the safety of the public and the integrity of the system.

Question No. 11—Employment

11. MARJA LUBECK (Labour) to the Minister of Employment: What announcements has he made about increasing employment opportunities for urban rangatahi Māori?

Hon WILLIE JACKSON (Minister of Employment): On 17 April 2019, I launched Pae Aronui, an initiative to enhance education and employment outcomes for urban rangatahi Māori. Pae Aronui seeks to improve education and employments outcomes for Māori 15- to 24-year-olds who are not earning, learning, caring, or volunteering.

Marja Lubeck: How does this differ from other employment programmes?

Hon WILLIE JACKSON: This Government has already invested significantly in our young people in the regions. Pae Aronui will be delivered only in south and west Auckland, Hamilton, Porirua, and the Hutt Valley, as these are the metropolitan areas with the highest number of young Māori who aren’t active in the labour market. It is in our cities that we have a large number of young people who are underutilised and not engaged in our labour market. With the skills shortages we have in a number of industries, this Government is committed to ensuring all who can participate in our economy have the opportunity to do so.

Marja Lubeck: What difference will Pae Aronui make for rangatahi Māori?

Hon WILLIE JACKSON: Too many of our young people—our rangatahi—have already left the education system without having gained the qualifications they need to secure good jobs with long-term career options. For 2019, Pae Aronui will support 249 rangatahi to achieve enhanced education or employment outcomes. Pae Aronui supports communities, providers, and employers working together, growing the skills rangatahi need, especially to gain employment in growth industries, and will be underpinned by pastoral care to provide our young people with the best chance of success.

Question No. 12—Statistics

12. Dr JIAN YANG (National) to the Minister of Statistics: Does he believe Census 2018 was a success?

Hon JAMES SHAW (Minister of Statistics): The success of the census should be measured by whether the data derived from it is fit for purpose. The Government Statistician yesterday gave a detailed picture of when key outputs of the census will be released and the extent to which they will be fit for purpose. She indicated that the general population count is likely to be more accurate than that of the 2013 census. Stats NZ has been able to create—

Hon Gerry Brownlee: Of course they’re going to say that.

Hon JAMES SHAW: Would you like me to slow it down for you, Mr Brownlee? Stats NZ has been able to create a data set that includes records for 4.7 million people. This is only 58,000 people fewer than their estimated population on census night, compared to the 2013 census, which had an undercount of 103,800 people on census night.

Hon Gerry Brownlee: They’re making it up.

Hon JAMES SHAW: Well, Mr Brownlee, you shouldn’t have signed off on the business case back in 2014 that moved to the use of administrative data, should you? You should have crossed the House on that one. What this means is that for some of the most critical products, such as that for general and Māori electorate boundaries, or for district health board funding formulas, the output will not only be fit for purpose but be potentially more accurate than that produced by the 2013 census, which the National Party was also in charge of. New Zealanders should rest easy that the quality of data that they’ve come to expect from the census, for the highest priority purposes, will be maintained or improved on for the 2018 census. The Government Statistician has also indicated that in some areas it is unlikely that the output will be as high quality as she would like. Where this is the case, Stats NZ will work with the affected stakeholders to ensure that they have access to the best-quality data available. Clearly, there were problems during the execution—[Interruption] I’m tempted—of the field collection phase of the census programme. The Government Statistician indicated her disappointment with this aspect of the census many months ago. There is an independent review being conducted by management consultant Murray Jack and former Canadian deputy Chief Statistician Connie Graziadei. Their report is due by July and will cover all areas of census execution as well as funding and governance issues. My assessment of the success of the census therefore—

SPEAKER: Order! Order! The member will resume his seat. No—the member did warn me that it was going to be a slightly longer answer.

Rt Hon Winston Peters: In the census questioning, was there any category for us to find out how many loud-mouth buffoons we have in New Zealand?

SPEAKER: Order! No. [Interruption] Order! Order! Members will resume their seats and they will be quiet, and I will remind the Deputy Prime Minister of his obligation as the longest-serving member of the House to provide a good example to other members. And, if he fails to again during this sitting session, he will spend some time back in his office.

Dr Jian Yang: Will Census 2018 provide reduced-quality data for issues such as unpaid work, living in temporary accommodation, and family relationships?

Hon JAMES SHAW: As the Government Statistician indicated yesterday, there will be some gaps—notably, with iwi affiliation data and with some information arising from some of the questions to do with household data. It is really important to note, of course, that the census is not the only source of data that the Government has and that we run the General Social Survey and the household economic survey. In fact, this Government increased, or tripled, the sample size for the household economic survey in order to get more accurate information, including about the kinds of questions that the member is asking about.

Dr Jian Yang: How can the success of the upcoming well-being Budget be tested if the most recent reliable baseline on things such as unpaid work, living in temporary accommodation, and family relationships is from 2013?

Hon JAMES SHAW: The member has a question about the time line of the census, and I just want to compare this to previous expectations around time lines.

SPEAKER: No. The member will resume his seat. He will answer the question.

Hon JAMES SHAW: As I understand the question, the member is suggesting that the census information will be out of date by the time it is published, and I want to correct that. In the course of a normal census, the first release of initial data is usually about six months after census day. Other data sets would then be released progressively over a period of 12 to 18 months after that first release. There has been a 12-month delay to the first release of census data from 2018, but Stats NZ will now endeavour to compress the remaining releases to approximately nine months. That means that the overall Census 2018 programme is likely to run only three to six months behind a regular census.

Kiritapu Allan: How has administrative data been used to complement the data collected for census 2018?

Hon JAMES SHAW: Thank you for asking the question, and I would encourage Mr Brownlee to listen to the answer to this one. Stats NZ have compiled a file of administrative data from sources including education, health, ACC, and Inland Revenue records. This is reliable data about real people, and is not made up, as Mr Brownlee continues to suggest. Stats NZ then compared this with the census forms to establish who was missing from the census data. By using this administrative data, Stats NZ have been able to create a data set that includes records for 4.7 million people. This is 1.2 percent lower than their estimated population for census day, compared to 2.4 percent lower in the 2013 census. Stats NZ are therefore confident that they will be able to produce a range of robust data, including the use of defining electoral boundaries, and will begin releasing census 2018 data from 23 September this year.

Dr Jian Yang: What information has he received by consultation with the Minister for Treaty of Waitangi Negotiations in regard to the impact of the inability to properly count iwi affiliation on upcoming Treaty settlement claims?

Hon JAMES SHAW: There is a misperception that not releasing official counts means that there will be no information at all, and this is incorrect. While Stats NZ have said that they will not be able to produce official statistics using the iwi affiliation information they have gathered, the information that they do have can still be made available to be used in the most appropriate ways. Government agencies have actually never been great at collecting iwi affiliation data. This is a gap in our administrative data. Stats NZ will now seek to address this gap so that we do build up a much more comprehensive and accurate picture of iwi affiliation over time. While not being able to release official statistical counts for iwi is a significant loss, Stats NZ have spent time talking to iwi Māori to understand their data needs and are working with them to address any consequences of this. I also just want to emphasise that for information on Māori descent and Māori ethnicity data, the 2018 data set will actually be more comprehensive than the 2013 census.

Hon Nanaia Mahuta: Is the Minister aware, or has the Minister heard, where iwi are collecting their own sets of data of members registered to the tribe, that often that is more reliable in terms of how they make contact with their iwi members than what’s on the Statistics New Zealand database?

Hon JAMES SHAW: Yes, I have. In fact, Stats NZ have been working closely with iwi Māori to make sure that the information that we’re collecting from the census, as well as from other official surveys and administrative data, can be used to supplement the information that’s being collected by iwi about their own members and to produce more accurate data sets for iwi.

Kiritapu Allan: Will the data be ready and of good enough quality for electoral boundaries?

Hon JAMES SHAW: Yes, it will. As I said, the—

SPEAKER: Order! The member’s answered the question.

Bills

Credit Contracts Legislation Amendment Bill

First Reading

Hon KRIS FAAFOI (Minister of Commerce and Consumer Affairs): I move, That the Credit Contracts Legislation Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.

For vulnerable consumers, this is a significant piece of legislation that amends the law which regulates the provision of credit or lending in New Zealand. This bill represents the Government’s commitment to protecting vulnerable consumers and stopping families being trapped in debt spirals and hardship that result from unaffordable debt. It is estimated that more than 200,000 New Zealanders use high-cost credit. A large proportion of these New Zealanders are subject to excessive interest rates and fees that trap them in debt spirals with long-term detrimental impacts. Sadly, such conduct disproportionately harms our most vulnerable communities.

This bill will change the law to better protect consumers from irresponsible and predatory lending by introducing an interest and fees cap on high-cost loans of 100 percent of the principal. It also introduces clear minimum standards for responsible lending, it strengthens penalties for irresponsible lending, it makes enforcement easier by requiring lenders to demonstrate that their loans are affordable and suitable and that their fees are reasonable, it raises the bar to becoming a lender by introducing a fit and proper person test for lenders and shopping trucks, and finally, it improves transparency and access to redress during debt collection.

New Zealand’s credit legislation, the Credit Contracts and Consumer Finance Act 2003, or CCCFA, was last amended under the previous Government in 2015. But their amendments did not address some fundamental issues, and harm has continued. Last year, the coalition Government reviewed these amendments and the CCCFA and found that, across the country, consumers are still experiencing harm from non-compliance of the law and predatory lending practices and credit terms and continuing to get into trouble with debt spiralling out of control.

One of the biggest harms identified through the review was when small loans of, say, $500 spiralled to $5,000 or $6,000 worth of debt. And this often becomes an intergenerational problem and leads to significant hardship. I’ve seen this first-hand as a member of Parliament for Mana. For many years, I’ve had constituents come into my office who have become victims of egregious conduct from high-cost lenders and are now facing crippling debt.

Given that 40 percent of adult New Zealanders don’t have a credit card and may not be able to get an overdraft from the bank, a small, short-term loan can sometimes be the only option in times of need, and I acknowledge that, sometimes, access to credit is necessary. However, when that credit is irresponsible lending, it can lead to vicious and debilitating debt spirals, and this is why this bill puts strict limits on the total interest and fees that can be charged on high-cost loans. The 100 percent cap on the total fees and interest will go a long way to preventing the debt spiral problem. Importantly, this cap continues to apply even if the borrower refinances the loan or takes out further loans with the same lender. The cap means that interest and fees on loans with an annual interest rate over 50 percent will be limited to 100 percent of the amount borrowed. For example, if someone takes out a loan of $500, they will never have to repay more than $1,000.

But the 100 percent repayment cap is only one part of this package of reforms. We’ve heard from regulators and community groups that there continues to be non-compliance with the law around how lenders assess whether a loan is affordable or suitable. Unaffordable or unsuitable loans are the biggest source of harm to borrowers. To address this, the bill includes three measures designed to clarify affordability and suitability requirements, streamline enforcement, and create stronger incentives for compliance. First, the bill includes a regulation-making power to prescribe minimum requirements for affordability and suitability tests. Second, there will be an increased onus on lenders to verify details of those applying for loans. For example, lenders will need to obtain verification of primary income and fixed financial commitments like rent and other debts, given that this is among the most important information a borrower can hand over. Third, lenders will also be required to keep records that demonstrate their loans are affordable and suitable and that their fees are reasonable and cost-based.

In order for these reforms to be effective, we have strengthened the penalties where the law is breached. Stakeholders throughout the review commented that both stronger enforcement and penalties were needed in the lending industry for serious breaches of the law. We have listened to that feedback by including new and tougher financial penalties, statutory damages, and improving banning orders for breaches of the law.

The bill raises the bar for lenders entering into the industry as well. To lift professionalism in the industry and reduce the presence and operation of irresponsible individuals in the lending sector, directors and executives of consumer credit lenders will be required to meet a “fit and proper person” test. Directors and executives of lending companies and truck shops will need to satisfy this test before the creditor can be registered on the financial services provider register and lend.

Debt collection has also been identified as a problem, and there have been too many accounts of false and misleading claims being made by debt collection agencies. These include pursuing people for non-existent debts, misleading claims about the size of debt or the debt collectors’ powers, and using unnecessarily aggressive tactics. The bill addresses the lack of transparency and access to redress during debt collection. It requires key information to be shared with borrowers at the start of debt collection activity. The details of the information required will be contained in regulations but may include information about the original debt, the fees added by the debt collector, and contact details for the services that can help.

In conclusion, this bill will go a long way to protecting consumers from irresponsible and predatory lending and improve the well-being of many New Zealanders and their families. The Government is proud to be introducing this bill to the House, and I would like to thank all those stakeholders, during their review of the Credit Contracts and Consumer Finance Act, that have got us here to this stage.

BRETT HUDSON (National): Thank you, Madam Deputy Speaker. I rise to support this bill to first reading, and I acknowledge the Minister responsible, Kris Faafoi, for his comments about the intentions behind this piece of legislation. While there is so much pragmatic, practical, solid, and sound lending that occurs across our economy, we can all acknowledge—and probably most, if not all, of us have seen instances in our offices in the communities we serve of situations where vulnerable New Zealanders are taken advantage of through the needs they have to access credit but are placed in situations which make it very difficult for them to escape a revolving or recurring—

Darroch Ball: Spiral.

BRETT HUDSON: —spiral—thank you very much—of debt and obligations which they struggle to lift themselves out of.

Now, as the Minister pointed out, the previous Government did quite something in the amendment of this principal Act to address that in 2015, particularly around requirements on disclosure and on helping to educate potential borrowers as to what they might potentially get themselves into. There is much in this legislation that we support. For instance, bringing in to the scope of the principal Act new forms of lay-by, which include but are not limited to the instance of after-pay—very much different to forms of lay-by than I remember from my youth, but, certainly, instances today where people have deferred payment arrangements that don’t currently fall under the Credit Contracts and Consumer Finance Act. We support that explicit change.

We also support—and while Parliament is rightfully concerned about regulation-making powers in primary legislation, we support the instance of regulation-making power in this bill to permit the deeming of arrangements to be consumer credit contracts in the future where people may seek to vary sorts of lending to otherwise obviate the protections that are offered under this principal Act and as it may be amended through the process of this bill. We actually think that’s a sound idea. It’s a sound idea to make sure that people can’t just change a little bit here and there and, suddenly, no longer fall under the obligations of the principal Act.

We think the fit and proper person test for directors and executives is a good move, but there are a couple of areas where we counsel some caution, and this is principally the reason why we do want to support this to select committee; we believe that select committee is the right place to really flesh this out. They are the areas in the potential unintended consequences of having a total loan cap, or repayment cap, and also the element about removing the presumption that lenders can rely on information provided by borrowers.

Now, the first comment I’d make on interest rate caps or the effect thereof—which is what the total maximum payable regime puts in place—is that we need to be careful not to set a target where some borrowers today may not be subject to certain effective interest rates, but a lender suddenly decides that across their loan book, they’ve got risk where defaulters or bad payers might increase their loss as a lender somewhere, so they lift the effective interest rates paid by other good-payer borrowers to help offset that risk. So I’d be very keen to talk with officials to understand their thinking and the way the legislation, if not completely removing that risk, will at least allow officials at Parliament in the future to both monitor and, therefore, potentially manage that. We see that as a very real risk.

But I do note that in regard to the consultation documents that preceded this legislation some months ago, my maths skills from my schooldays, which are perhaps a little bit rusty, suggested very strongly to me that officials looked at what the effective interest rates were for various categories of high lending today, and they were, broadly speaking, in categories which have a typical repayment time within six weeks, a typical repayment time in a few short months, and a typical repayment time in, say, 12 months. They looked at what they felt was a generally prevalent market rate and they used the formula, if you will, to use the effect of that general market rate to equal what the maximum payable would be under this legislation.

So, without wanting to scare consumers too much, in using that consultation document exercise or example, they used an equivalent interest rate, it appears, of 800 percent per annum for an incredibly short-term loan, because in six weeks at an 800 percent per annum effective interest rate, it equals the amount of the principal, so you’ve reached that 100 percent level. Now, at one level that could sound troublesome for potential borrowers or current borrowers, but on the other flip side of that it also lessens the risk, I would argue. One, it reflects what is common practice in the market today for both good lenders and others. It reflects the common market practice but it helps to remove that risk that if they, effectively, look to shift the interest rates down, we would create targets that every lender would absolutely make sure they use.

Secondly, the other issue that we have that we want to deal with is the availability of credit, because if lenders feel that they can’t cover their risk adequately under this regime, the other consequence will be that they will simply remove those products from the market, which will constrain lending to people that need the money. If there’s one thing that I think became clear when both talking to various lobby groups but also by reading a document from officials, it was there is an acknowledgment that most people, if not all people, that seek this borrowing need it. There is an absolute need for the money that they borrow. So we don’t actually want to put in a regime that will have the unintended consequence of driving them away from regulated lending options, because the alternative there is a completely unregulated and quite possibly criminal-led lending to those people, which could worsen outcomes and not improve them.

On the second area—the area about removing the presumption that lenders can rely on the information provided by borrowers—we don’t inherently have an issue with the idea that lenders should have confidence in what they’re given. What we’re concerned about is understanding how, in very pragmatic terms, that will be able to be proven and tested outside of courts, because the most obvious thing is that one can test the “make reasonable inquiries” requirement in court, which isn’t really a good option in general circumstances for either the lender or the borrower.

But we would like to tease out with officials just how in the real world that test could be practically given effect to so as to not increase compliance and so as not to increase risk on borrowers or lenders. Again, the potential unintended consequence is if the cost of compliance is increased or the risk is introduced because the lender might be found to have not made those reasonable inquiries, then the lender’s obviously going to seek to obviate that risk through their charges—through their interest rates. If they can’t do that to good effect and if they can’t feel confident that their risk is covered, they simply won’t lend, and, again, we could have that very unwanted, unintended consequence of people in need of borrowing not being able to get that through legitimate channels and ending up in very unregulated and potentially criminal markets.

But, overall, we’ve acknowledged that the intentions behind the bill are very good. There is a great deal in it that is very good. There are these two areas which we look forward to exploring in select committee—after all, it’s what select committee is for—and, at the moment, we’ll reserve our future position until we’ve gone through that work, but we look forward to doing just that. We commend this bill to the House.

Dr DEBORAH RUSSELL (Labour—New Lynn): This is an excellent piece of legislation. Like Brett Hudson, the previous speaker, I am looking forward to working on it and improving it in select committee. But the need for this legislation is real and it is, I would hope, a piece of legislation that all sides of this House will be able to support all the way through, particularly once we’ve gone through that select committee process.

I think it’s important for people to understand why we need this legislation. Most people in this House perhaps have not had much to do with the shop trucks that ply their trade in some of the poorest suburbs in our country. Those shop trucks, they prey on our lower socio-economic groups. They prey on people with little money and few resources. We refer to them in this bill as mobile traders, but the common term for them is a shop truck. So what happens is these shop trucks drive into poorer suburbs—suburbs which often don’t have many supermarkets or shops—and they sell products and give credit for people who want to buy from them. Now, that might sound quite innocuous but, in reading about this bill, I found some information about the sorts of prices that these shop trucks charge, and they’re reprehensible. A can of milk powder: $35. A packet of biscuits: $24. A packet of cereal: $40. A pack of rubbish bags: $50—utterly absurd prices that would never pass muster in a supermarket.

So I guess many people think, “Why on earth would anyone purchase from these shop trucks?” Well, they offer credit. So there someone is, in her home, trying to feed her kids, desperately in need of some cereal. Along comes the shop truck, offers the box of cereal—at an outrageous price—and offers credit at the same time. That credit is attached to usurious interest rates. From the point of view of the trader, of course they charge a high interest rate, because there is a fairly high risk associated with it. But in fact, if the product wasn’t outrageously priced in the first place and if the credit contracts were more clearly understood and if the traders took more responsibility with entering into those credit contracts, perhaps our poorest citizens would not end up even poorer through the operation of these shop trucks.

So the objective of this bill is to prevent this kind of predatory lending on top of what, frankly, is predatory pricing as well. The shop trucks—the mobile traders—will still be able to operate. We are not intending to shut down these operations. All that we hope, all that we are working towards is ensuring that they trade fairly and reasonably, and that they act as responsible lenders. Mr Hudson made some excellent points about the need to ensure that we do have credit available, but at a reasonable price.

So what does this bill do? Well, it introduces some regulations, some rules for lenders, that all lenders must comply with. One of the first things it does is it ensures that these so-called mobile traders—or shop trucks—have to register as lenders. They have to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act. But they actually can’t just offer credit; they have to do it properly. Then once we’ve done that we can start to put some rules in place as to how they must behave, and some of the rules are quite straightforward, but they speak to what has been going on in that market. So first of all, the mobile traders and others are brought in under some fit and proper person requirements. Now, some of those rules are already sitting in there in the Credit Contracts and Consumer Finance Act—the various bits of legislation that surround credit contracts—but it’s providing for a process of certification by the Commerce Commission so that anyone who is offering consumer credit must be a fit and proper person, and there are various rules as to what that fit and proper person should be.

So that’s the first step. But then another step is requiring lenders—mobile traders—to make reasonable inquiries as to whether or not a person can actually afford the credit that’s being offered. Now, Mr Hudson raised some reasonable queries about that as to what sorts of reliance a shop trader can put on what a potential borrower says. That’s a good point; we’ll look at it in select committees. But in addition to making those inquiries, and I think this might reassure Mr Hudson a bit, the shop trader—the mobile trader—must keep records of what the inquiries are. Now, that might seem like an obvious thing to do, but often people don’t even keep the records. Now, if the mobile trader, if the lender keeps a record of what’s going on, then they can show that they have, in fact, made proper inquiries, that those inquiries were reasonable, and that they did establish that the person wanting to borrow money could actually afford to borrow it in the first place. So that’s a really simple sort of measure that is contained within this bill.

The next one I thought perhaps speaks a little too of what’s going on is to do with what language must be used for these contracts. So sitting in clause 14 of the bill—and it introduces new section 17A to the Credit Contracts and Consumer Finance Act—is that if you’re advertising in one language, you then have to be sure that the person taking up the opportunity actually has a reasonable grasp with that language themselves; the lender can’t just use one language and assume it’s going to be understood. Now, that’s critically important. We know we have large communities of migrants who often come to New Zealand, and while they may speak a little English, they may not speak it well, or they may not have had the opportunity to learn to speak it well yet, and yet they enter into these contracts. So by ensuring that lenders must communicate in a language that is understood by the person who’s doing the borrowing, that matches up with the advertising—it seems completely fair and reasonable to me. That’s the sort of change that is going to be brought in by this bill, and, again, it will protect some of our most vulnerable consumers.

So there are all these sorts of ideas sitting in this bill as to what we can do in order to protect our most vulnerable consumers, to protect people who might get caught by onerous lending. For that reason, I think this is an excellent bill. I am looking forward to the process of examining it in the select committee to make sure that we get the balance right. But may I suggest that in this case, getting the balance right means absolutely ensuring that we protect the poorest in our communities. I commend this bill to the House.

Hon PAUL GOLDSMITH (National): Thank you, Madam Deputy Speaker. It is my pleasure to speak on this bill, which the National Party will support to select committee in order to have a full discussion and inquiry about elements of this legislation. I think everybody can understand the impetus for it. We’ve had, actually, a number of bills in this House over recent years trying to deal with the issue of, particularly, truck shops, and the opportunities that are there for people to be exploited through credit contract arrangements and to end up paying colossal sums for items and, basically, paying a lot of money for short-term borrowing in particular, which has grown out of control—very high interest rates and high fees so that a cycle of debt is got into and the difficulties of vulnerable New Zealanders are added to considerably.

Everybody understands the issue and the concern. The question is: what is the best remedy, and whether the remedy might actually end up causing more problems than it solves—that’s the real trick. What we can see here, and some of the elements in this bill seem to make sense in terms of applying a fit and proper person test to directors and executives who are working in this kind of field in order to make sure that those people are people of good character—and that makes sense. What we’re a little bit more concerned about though is some of the expectations of lenders that are listed in this bill.

In one area, the bill is suggesting that it strengthens the principle that lenders must make reasonable inquiries before entering into an agreement with the borrower so as to be satisfied that the credit will meet the borrower’s requirements. We’ve already brought in legislation to do that—to ask them to make reasonable inquiries—and now we’re lifting the barrier higher. So that question of what is a reasonable inquiry—how far do you have to go into somebody’s private life and into their circumstances and how much they are earning and how much they are spending, whether they’ve got Sky or Netflix or whether they’re smoking or whether they’re doing this, that, and the other thing in order to get a realistic assumption about whether or not they can afford to do this—there is a limit to how far you can go on that before people don’t lend the money.

The reality that we have to face when we’re dealing with this legislation is that you’re dealing with the realities of life where some people need access to cash, particularly short term. They need to borrow $500 for something, and it may only be a month that they need it for until they get some money from somewhere else. So they’re going to get the money from somewhere, and the concern that we have is that if you make it impractical for a regulated part of the economy to provide that money, then the alternatives are worse, and that could be the outcome.

The area that is of particular concern is that the legislation removes the current rule in section 9C(7) that the lender may rely on information provided by the borrower. So maybe I should just make that plain for everybody. What we’re saying here in this bill is that if somebody comes to you and says “I want to borrow $50 or $5,000. This is my income and these are my expenses.”—if they lie through their teeth about those two things, the person that lends them the money is somehow still at fault because you can no longer rely on what people say.

Now, that is quite a dramatic thing to be introducing into the law. It is a very substantial step. There is a real prospect that, given that, people will just say “Well, we’re not going to lend to that particular group.” If the consequence of that is that you move people from the regulated area of borrowing into the unregulated area—because the regulated people can’t do it because they can no longer rely on what is being said—then the outcome might actually be worse.

That’s not an excuse for doing nothing, but that is something that we definitely want to tease out in the select committee process. In these complicated areas of financial market reform and regulation, there is always a very high chance that any legislation or regulation Government brings in achieves the exact opposite of what it sets out to achieve over time, because the marketplace is much more complicated than regulators and politicians give it credit for. So we have to be very careful about how we go about it.

On that basis, we will support it to the select committee to have that discussion, but we do have some serious concerns. Thank you very much.

FLETCHER TABUTEAU (NZ First): Thanks, Madam Deputy Speaker. I take this opportunity to rise on behalf of New Zealand First to add our contribution to this debate, and I take great pleasure from it. I actually, begrudgingly I suppose—because the nature of my relationship with Mr Hudson and Mr Goldsmith is such that I much prefer to have an argument with them—congratulate them on their constructive contribution to this debate, and thank them for the detail with which they have approached this House, and actually acknowledge their concerns. Although I do suggest to Mr Hudson that he be careful with the wording that he uses in his contribution, because this legislation does not actually set interest rates. Mr Hudson kept talking about the setting of interest rates and the concerns that National had with that. Actually, what the legislation does—and apparently there was some debate about that this morning in the public fora—is set an interest and fees cap at 100 percent of that original loan.

So I reflect on my time in Parliament, because I sought to write legislation, as a private member to bring to the House, on this very issue—a usury bill based on the legislation that the Australians have used in their interest rate cap of 40 percent. But that was in the time of National in Government. So I knew that that wasn’t going to get very far. Although that seems unfair now, and perhaps a conversation with Mr Goldsmith might have achieved more than I initially thought—but I doubt it very much.

However, in conversations with Minister Faafoi, New Zealand First has been incredibly pleased to support his efforts—not only he as the Minister but his officials—because what we have here is an attempt to address an incredibly serious problem. With your patience, I suppose, Madam Deputy Speaker, I think it is worth repeating, and I acknowledge those who have stood up in this House and highlighted what those issues are.

I come from a place in New Zealand that has some of the highest deprivation statistics in the country, and so I have seen, not only in my office but first-hand out in the community, what it means when these mobile trucks go out into our communities, particularly these mobile trucks. We know we have predatory lenders who aren’t driving to the victims but, particularly with these trucks, we have not only a predatory pricing regime but a predatory interest rate regime where there are people who initially think a box of cereal is going to cost them 30c over six months, say, even though they know paying the original amount of $40 doesn’t make sense. They know that, but in that instance they’re convinced by these people that “Well, don’t worry about the actual price. What this is going to cost you is a dollar a week for the next six months.” So if you’re sitting there and your baby is crying—because this is still what we’re dealing with in our communities—then what are you going to do? Unfortunately, good people make decisions because of circumstances thrust upon them. What makes me incredibly angry is that we have to have a debate about this in the House to stop people from preying on those in our community who are at their weakest and most vulnerable.

So it is with that anger that I say congratulations to all of us here, because it sounds like the contributions from the Opposition members means that we should be able to get to a constructive solution in select committee. I actually agree with them on one of those points around what it is that we set that cap at so that it is still a profitable business for lenders—because we need lenders in our society—but how do we make it such that good people are not attacked and preyed upon?

I put it to the members opposite—and this will come out in the debate in select committee, which is fantastic—that this was exactly the question asked by officials around what is that number. How do we strike a balance? So it will be interesting to see what that discourse and where that 100 percent figure reaches after a debate in committee.

This legislation actually follows on from the work, again, of the good Minister. I was with him in Māngere—I think it was in October last year—on behalf of New Zealand First, again, because this was exactly the work and the issue that we were trying to address. The Prime Minister was there, Minister Aupito William Sio was there, as were the Minister himself and myself, and we made these first moves in this space. New Zealand First is proud to be part of that—proud to be part of a solution that looks after our most vulnerable in our community.

What we are doing is ensuring that we have—I’ve already said it—that cap of 100 percent of the principal and introduce clear minimum standards for responsible lending. So that actually means establishing a criteria and engaging with those who would seek to be lenders and asking them: are you up to standard? My vision is—and certainly it’s my hope—that there are many operators out there who simply will not meet that standard, because we don’t need them preying on our most vulnerable.

It also strengthens the penalties for irresponsible lending. And the former Minister, the honourable member Goldsmith, spoke about requirements for record-keeping. I think it is fair to say that we do need more information so that we can clearly establish that if a person’s income weighed against their existing debt and their obligations to service that debt means they cannot afford to take another loan, then lenders should be stopped from issuing another loan. It sounds simple doesn’t it? That is exactly more of what we’re trying to do here. It makes enforcement easier and it raises the bar to becoming a lender, as I said, and it improves the transparency of access to redress debt collection itself.

My vision, New Zealand First’s vision, and this Government’s vision is about getting rid of irresponsible and predatory lenders. It is about consumers taking out loans that they can afford to pay, it is about consumers being protected, it is about—and I’m grateful for this—those truck shops, and it is about empowerment of our Commerce Commission to make sure that lending is responsible.

So with all of that in mind, with that in our consideration and in our thoughts, together as parliamentarians we can reach that goal. It may take some rewriting—and I respect that that may be the case—but I am very proud to stand on behalf of New Zealand First to support this legislation at the first reading. Thank you very much.

JONATHAN YOUNG (National—New Plymouth): Thank you very much for the opportunity to stand and speak on the Credit Contracts Legislation Amendment Bill.

I recall back in 2014—probably the last time this bill was amended—addressing some issues that once again were focusing on dealing with issues that made vulnerable lenders become entrapped in issues around their finance and the application for it. At that point in time, I remember seeing an invoice for a motor vehicle; the vehicle was $13,000 and there was a line charge in this invoice that said contingency was $2,000. We asked the person, at that point in time: “What is this for?” That charge of $2,000 was in case they ever defaulted on the loan. It was a charge upfront—and that is predatory lending. So we addressed those issues then, and I’m glad to see that further issues are being addressed as they come to light.

That’s why we support legislation that is going to protect vulnerable parts of our community: people who may struggle with financial literacy and people who may not have the ability to save but have necessities that they then have to get credit for. In the end that credit can become part of the trap—I wouldn’t say a credit trap—it becomes a poverty trap, because you end up paying excess money, huge amounts of money, well beyond the value of the goods or services that you procure. It’s tremendously unfair and it takes away the ability for those families and those people to be able to spend the money that they have on genuine articles that they need—whether that’s clothing, whether that’s food, whether that’s transport, whether that’s medicines. So it’s important that we follow through on these elements. We are very pleased to support this bill through to the Finance and Expenditure Committee to begin to look at all the issues that this bill is going to address, and to ascertain whether they are striking the right issues at the right levels.

I just want to, at this point in time, give a shout-out to the Electricity Retailers’ Association of New Zealand, who yesterday launched the EnergyMate. This work that they’re doing is very similar to what this bill is doing. They are educating and helping vulnerable people to be able to make savings and to be able to get good value out of electricity. And there is a part, I believe, that’s needed not only in just having legislation that protects people and also brings to account those predatory lenders, but we must always continue to understand and promote financial literacy for those people who need to access credit for whatever reason, or goods that come with a credit component to it. I believe that this bill will address some of those issues.

So we do see some value in the work that’s being done here—such as the fact that there is going to be regulation-making power to deem arrangements to also be consumer credit contracts that fall under the Credit Contracts and Consumer Finance Act, so bringing that legislative accountability into some of the practices that happen. Access to credit is important for New Zealanders. There are many New Zealanders who can’t access cheap credit, who then have to go on to access credit that costs a huge amount. Obviously, looking at financial literacy and helping those people manage their finances through all the different NGOs and agencies that stand by them is very important for them to be able to build their own credit rating. But it’s important that in the meantime, and while they are on that journey of learning and, I guess, adjustment in their own lives, that we do have very robust and strong legislation that will protect them as they go through applications and use of credit finance.

So there are some elements that we are going to question in the select committee process, and I believe Hon Paul Goldsmith raised one of those, and those are the risks that in setting interest rates at a cap, they can easily become not the cap but the target, and those lenders who then see a certain level believe that that is an acceptable level even though it’s excessively high. So we need to make sure that those elements of this bill are well-understood and nuanced if they need to be.

So we’re very happy to support this bill through to the Finance and Expenditure Committee, and we do anticipate a good, clear, and a robust process. Thank you.

GOLRIZ GHAHRAMAN (Green): Thank you, Madam Deputy Speaker. I rise very happily in support of this bill. It seeks to strengthen the safeguards in legislation around lending practices that we’ve come to know as being particularly predatory as inequality has been on the rise in New Zealand and has now become a tragic and significant contributor to widening the gaps in our communities and contributing to suffering and inequality that was already there at record highs. So we welcome the move to further regulate these kinds of practices.

We know that this kind of debt creates cycles of poverty that can be lifelong and, in fact, intergenerational for those in our communities who are struggling to pay for basics and so are forced into a situation where they will borrow money on any terms. When you are faced with an unexpected health expense or schooling expense for the kids and food was already something that you were struggling to provide for your family, then it is a case of, well, you will borrow at any cost, with any interest level, from anyone. So it is a matter of the Government stepping in and regulating the standards on which that lending can happen, both in terms of the cost and in terms of the kinds of companies and persons that can engage in it, because we know that increasingly, they’ve become a source of predation on our communities.

This bill comes to the House in the context of record inequality—in the context of child poverty that, according to Child Poverty Action Group’s latest report, was at just under 300,000 children in New Zealand living in what’s defined as poverty, which is under the 60 percent income bracket, and in terms of material hardship is at, I think, just over 100,000 children, so an incredibly high number. That’s not to say that poverty only affects children, but just to put that into context—the struggle that it has become in New Zealand for people to raise families. In the context of Auckland, where I live, that has meant that large numbers of families are now living in garages and cars. So it is very clear that in those circumstances, expenses are not able to be met easily and will lead to borrowing—and have led to borrowing—at extortionate rates of interest which contribute to that inability to survive for those out there.

So this bill is certainly timely. What it proposes to do is to limit the total accumulation of interest and fees on what’s defined as high-cost loans to 100 percent of the original loan. So a $500 loan would never cost the borrower more than $1,000, which is a huge change and will contribute to stopping that kind of lifelong, years-long indebtedness that actually means people do struggle far more than they initially did when they desperately took out the loan. It will require all directors and senior managers of lenders who are offering these loans to meet a fit and proper person standard, which is a long time coming, and it is the hope that it will help prevent what are called phoenix lenders, who pop up and can disappear again without accountability. It will strengthen the enforcement provisions of the Act, including higher penalties. We know these are businesses with a business model, so they will take into account the cost benefit of breaching the law, and so hopefully that will incentivise them now not to do that even more than before. So raising the bar on who can become a lender, improving transparency and thereby access to redress for those who’ve been harmed, is a package that will increase our ability to regulate for those who are vulnerable, as is the responsibility of Government to do.

One thing that the Green Party will look forward to in the select committee process is to see if—and I note that FinCap, which is a community organisation that supports the financial capability, education, and so forth in the communities, actually has spoken out and said that they’re disappointed that there wasn’t an interest rate cap included in this bill. This is something that the Green Party will look forward to exploring at that select committee stage, and we support FinCap’s recommendation that, as has been instituted in the UK and in Australia, this legislation also introduce an interest rate cap beyond what’s already included in the bill so that lenders can’t lend on any interest rate, as it is today, which is actually what causes that vulnerability. So it is an issue that we look forward to engaging with at select committee stage, and we hope that will improve the bill. But I’m very happy to support what is now a much-needed further regulation of lending practices that will alleviate poverty and inequality in New Zealand.

ANDREW FALLOON (National—Rangitata): Thank you, Madam Deputy Speaker, for the opportunity to take a brief call this afternoon on the first reading of the Credit Contracts Legislation Amendment Bill. I’m really pleased to, actually, because I think the last contribution I made in this Parliament a couple of weeks ago before the Easter break was on the wheel clamping bill, which was another piece of very worthy legislation by that up-and-coming commerce Minister Kris Faafoi. So I congratulate him on both that piece of legislation and the one that we’re discussing this afternoon.

The roots of this bill, though, do go back to about 2014, when the last Government passed the Credit Contracts and Financial Services Law Reform Bill, which was a very substantial overhaul of the legislation. Subsequent to that, the current Government have reviewed the arrangements that were put in place and have come forward now with some new considerations that we’re debating today. A number of those are quite positive, and I just want to run through a few of those very briefly. The first one is to bring lay-by arrangements under the provisions. Also, bring in a fit and proper test for directors and also for executives, and due diligence obligations on directors and senior managers.

But two of the more substantial arrangements are ones that are being talked about a bit this afternoon. The first one of those is around better regulation of mobile traders, and, unfortunately, mobile traders are a scourge on many communities across New Zealand. Deborah Russell spoke passionately about them this afternoon, and I agree with pretty much everything that she said. They are a scourge. They are predatory on the most vulnerable in our communities and, unfortunately, do perpetuate that cycle of poverty. So I’m pleased that this bill will bring better regulation on to some of those mobile traders.

The other aspect of the bill which I’m broadly supportive of is bringing in or imposing a limit on the accumulation of interest and fees on high-cost loans to 100 percent of the value of the original loan. Now, as has been pointed out this afternoon, particularly by my colleagues Jonathan Young and Paul Goldsmith, there are some risks in that, in that that doesn’t become just a limit; it becomes a target. So that’s something that we’ll be talking about, I’m sure, in select committee. The other aspect that we’ll be talking about, I’m sure, in select committee is the effect of limiting or capping the level of interest, and the availability of people to then access that credit or indeed those goods they would otherwise buy. So those are two really important aspects that we’ll be discussing at select committee. I’m pleased to hear that it will be, I think, coming to the Economic Development, Science and Innovation Committee that I sit on, and I look forward to engaging with members from across the House. Thank you.

DEPUTY SPEAKER: This is a split call, and I call Jo Luxton.

JO LUXTON (Labour): Thanks very much, Madam Deputy Speaker, for the opportunity to speak on this piece of legislation, the Credit Contracts Legislation Amendment Bill. It’s this type of legislation that makes me really proud to be a parliamentarian and have the ability, as a member of the coalition Government and also, actually, just a member of Parliament, to make changes to legislation that’s actually going to better the lives of people in New Zealand, and particularly some of those that are the most vulnerable people here in New Zealand. So I am really proud to stand in support of this amendment, and I commend Minister Faafoi for bringing this piece of legislation to the House.

So we know that the Credit Contracts and Consumer Finance Act was last amended in 2015. Some of what was put in place then didn’t quite go far enough, and we understand that people within our society are still being harmed by credit providers and these mobile truck shops that we’ve been talking about this afternoon. So this piece of legislation goes even further to bring in harsher penalties and, actually, better rules and regulations about these people and what they can do. This piece of legislation also complements a suite of other pieces of legislation that the coalition Government has been bringing in which, all in all, leads to enabling the people of New Zealand to have better lives—such as things like lifting the minimum wage, winter energy payments, and so on and so forth.

Ultimately, though, this bill protects consumers, and often our most vulnerable consumers. We know that a lot of people in New Zealand don’t have access to credit cards. Some people, potentially, have poor credit, and obtaining credit finance from credit providers is often the only way that they are going to be able to meet certain bills that come in—for example, there might be a family who are struggling financially and they have an unexpected cost. They’re not going to be able to go to their bank for a loan so they’ll go to a credit provider and borrow the money—quite easily, at this current point in time—and end up owing a lot more money. So, for example, something that might only cost a few hundred dollars initially can spiral into a debt of thousands and thousands of dollars that that family, potentially, can never ever escape from. What we do know is that things like this end up being inter-generational.

We have parents who, at the beginning of a school year, struggle to pay for their children’s school uniforms, and, again, this could be the type of situation where people look to these types of lenders for credit. What we do know though is that whilst we see there is a legitimate business need for people who provide these sorts of services, they must do it in a way that is appropriate—that ensures that the money that people are borrowing from them that they are able to afford to pay it back. We just don’t want to see some of our most vulnerable people continue to spiral deeper and deeper into debt that they will not be able to escape from.

What I do think is really important is that, within this piece of legislation, mobile traders and private sector lending practices are going to be brought more into line with other financial service providers, such as banks. So we know that the directors and senior managers are going to have to pass a fit and proper test before they can be registered on the Financial Service Providers Register and be able to lend money, or provide credit to people. We are going to have an interest and fees cap of 100 percent of the principal loan, which I think is essential so that it stops people having to pay penalties or pay additional costs when they need to continue to re-borrow, perhaps, to pay that existing debt. So I think that’s a huge step in the right direction.

Again, I’m very, very pleased to stand here and take a call on this piece of legislation—a piece of legislation that is going to enable people to make better financial decisions, I think, in the long run and put some responsibility, also, back on to our mobile truck shops and credit lenders.

LAWRENCE YULE (National—Tukituki): It’s my pleasure to take a short call to support this bill, the Credit Contracts Legislation Amendment Bill. In doing so, I wish to thank the Hon Kris Faafoi, again, for bringing a piece of legislation to the House and, again, this side of the House is happy to support most of it.

I come from a community that has had a variety of issues but also faces a variety of poverty. In parts of my community, I completely regard these trucks that are selling things as a major scourge on people’s ability to get ahead, so I am happy to stand here today and support any change to the legislation. We hope, through the select committee process, that we can find some ground to address the concerns that have been raised, including by my friend, the Hon Paul Goldsmith.

You see, what happens is people at their most vulnerable end up getting into lending decisions that actually make them more vulnerable than they were when they started. The phrase that has been used, which I concur with: when somebody has a crying baby and can’t find food it doesn’t actually matter what the interest rate cost is, or, in fact, what the cost of setting up the loan is. They just need the money.

Recently I was granted some leave from Parliament to attend a meeting of budget advisers in Hastings, and they came from Hastings, Napier, Wairoa, and Central Hawke’s Bay. I told them that I supported this bill and I encouraged them to participate at the appropriate time in a select committee. Minister Faafoi, I’m not sure whether it’s going to the Finance and Expenditure Committee or the Economic Development, Science and Innovation Committee—probably my preference is if it went to the Economic Development, Science and Innovation Committee because that’s what I’m on—that needs to be determined. But there will be submissions from a number of members of the public, and people that try to help our most vulnerable. So what I was told at that meeting, and what I’ve heard subsequently—and, actually, previously, when I spent a day in Gisborne—was that there are big, big issues about payday lending. In Gisborne, an employer was telling me that as soon as somebody was signed up for a job, even if it was short-term, certain organisations would lend up to $1,000, before they’d earned a cent, on the fact that they were going to earn income and they would go out and buy televisions, and food, and other things.

Equally, I’ve been told in my own community about what I call “interest rate rorts”. We are supportive of the 100 percent cap regime, which includes interest and fees. However, I was reading an article that was in the media today where they talked about the risk of people taking out a loan, that being paid back, and then taking out another loan and another loan as a way of rorting the system. I think a challenge for the select committee and this Parliament—and it was alluded to by the Hon Paul Goldsmith—is that when we get to select committee and when we get to the next reading of this bill we make sure that we’re not, in some way, making things worse for some people, because what I’ve observed is we can set legislation in this Parliament but some people go out of their way to try and find ways around every single thing we try to do.

So I stand here as a National MP, with the support of my other colleagues who have agreed to support this, on the basis that there is a real issue in my community with this type of lending and any effort that is made to improve it should be supported. We do want to make some suggestions in the select committee process, because if we get this wrong we do run the risk of driving some of this lending underground—which can end up in an even worse situation than the one many of these people are currently in. So in supporting this bill, this side of the House understands the credit and poverty trap issue. We may not have always agreed as to how it’s been resolved, but we’d like it to go to select committee. We would like it—Minister Faafoi—to go to a committee that’s got some time to resolve this. Then we’d like it to be reported back and for people to have their say in the proper way, because it’s my view that we can make a real difference to our most vulnerable.

WILLOW-JEAN PRIME (Labour): Thank you, Madam Assistant Speaker. I am really happy to take a short call on the first reading of this bill. I want to commend the Minister and this Government for undertaking a review and introducing new legislation to address some of those issues that we’ve heard spoken about by speakers prior to me today that have been unresolved, even though this legislation went through an amendment just a few years prior. It has come out, as part of the review, that further work needs to be done.

I am all too familiar with these shop trucks. I’m from Northland, where it is a familiar sight in the streets of Moerewa and Kaikohe to see these trucks often selling things like labelled clothing, you know, to people—on my own street, growing up in Leaity Street, I saw the truck down that street. We couldn’t afford it in our household, I knew they couldn’t afford it in their households, but these trucks were there selling labelled clothing to families who just simply could not have afforded that clothing. Northland has one of the lowest average incomes in the country and, like I said, it was an all too familiar sight, these mobile trucks, but also some of the financing companies on the main streets of Kaikohe and Kaitāia.

I am really pleased about the cap that is being introduced, but probably more importantly it is about the tests and measures that are going to be put in place around whether the loan is affordable or suitable. I know of examples from my community, young people who got into debt and spent the next 10 years of their lives paying off cars that they could not have afforded. Now, if they were to go to the bank and they went through their lending criteria, they simply would not have been given the money. They would not have spent the next 10 years trapped, paying off the debt and the huge amount of interest that had been charged on a car that really they could not afford and should not have been able to get the money to buy it in the first place at such a young age. So the measures that are being proposed here, I believe, will make a real difference to situations like that that I have witnessed firsthand.

So to address that, there are three measures. One is the minimum requirements for affordability and suitability tests. And, second, the bill will remove the presumption that a lender can rely on what the borrower is telling them unless they have reasonable grounds to believe the information is not reliable. In this case they’re going to have to obtain verification of primary income and fixed financial commitments like rent or other debts. And, thirdly, the lenders will be required to keep records that demonstrate their loans are affordable and suitable and their fees are reasonable and cost-based.

This is actually the biggest issue that we have around the affordability of the loans. Unaffordable or unsuitable loans are the biggest source of harm to borrowers. So I really commend the Minister for introducing this legislation. I am a member of the Finance and Expenditure Committee, so I look forward to this bill coming before us and to hearing submissions from a wide range of views, with a view to making this the best legislation possible. Thank you.

MELISSA LEE (National): Thank you, Madam Assistant Speaker. It’s a pleasure to rise to support this Credit Contracts Legislation Amendment Bill. As the last speaker from this side of the House, I’d like to echo my colleagues’ congratulations to the Hon Kris Faafoi, who seems to have had great success bringing bills to this House that have had wide support throughout this House.

Earlier speakers have talked about the issues in terms of the loans that people get into and get into trouble and aren’t able to pay, which becomes a problem debt. I do actually know that in the ethnic communities—for example, in my own Korean community, it has actually had issues with people who can’t find banks to give them loans for emergency situations, whether it is family members who are suffering from cancer and need treatment urgently and they can’t go to the bank and actually get loans specifically because it takes too long, or they have a particular desire. Earlier the Government member just talked about young people who are wanting cars, saying that they probably should not be able to afford, and could not afford, them but they managed to get these kinds of loans. Some of these lenders could only be classed as loan sharks, because these community lenders often provide exorbitant interest rates which are more than the 100 percent target that the Minister has actually put in this bill. I am a little bit worried that it will become a target, but compared to what is actually existing within the community for these informal loans that exist, it is a much better outcome, I think, and hopefully that is something that the select committee process might even look at.

We’ve had situations where bad debt has become a conflict situation between the lender and the borrower, where there have been physical fights. Quite a few years ago, while I was a journalist, there was even a murder that actually resulted because of a debt that was not paid back and the interest that grew so much that they were unable to pay it back.

I particularly like the idea of bringing lay-by into this bill. I have a fond memory of lay-by when I was a young student, when I was in Australia—going into a shop and hoping that maybe I could actually afford that pair of shoes. I would put some money down and go back and actually pay again. So I think all of these things that the Minister has actually put in place are in a good space.

The fit and proper person test for directors and executives is one that I always support. But putting more responsibility on lenders, I think, is one that we should be very clear on, in terms of how they advertise, and also the criteria. I think what we need to do is—you know, often people do not go to these loan sharks or go to these mobile trucks for purchases when they are able to afford them. Often it is the people who are the most vulnerable who actually go to these people for loans, who go to these mobile vendors for purchases, and they are the most vulnerable in our community and we should be protecting them.

I look forward to the debates in the select committee and the submissions from the community. I commend this bill to the House.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Madam Assistant Speaker. It’s a real pleasure to speak on this excellent updating of the Credit Contracts and Consumer Finance Act—an Act that’s been with us in one form or another since the 1970s. It’s been continually updated to take account of things like buy-back transactions in the 1990s, and irresponsible lending a little bit in the 2000s as well; I saw some updates there. But we’ve got to recognise, I think, not only that some debt is really problematic and causes huge harm and difficulties in our community, but also that other debt is good and really important so that people can look after their families, grow their businesses, and those kinds of things.

It strikes me that this piece of legislation strikes a great balance in ensuring that borrowers have the appropriate degrees of knowledge, there’s some basic fairness around the transactions, there’s appropriate remedies for borrowers as well, and penalties when they step well out of line. Obviously, the centre piece and the most significant innovation in this bill is found in clause 22, which inserts a new section which caps the amount that a high-cost consumer credit lender can recover. I want to make it very clear that this is an excellent balance that’s been struck whereby the lender can only recover 100 percent more than the amount advanced.

Now, there’s been some talk about a further restriction in terms of interest rate caps, but that’s a blunt tool. Here we have something which makes sure that the additional fees, the additional interest, and any collection costs will all be restrained and capped at 100 percent—a huge amount, nevertheless—of the amount advanced. But we know that there is a section of the community that needs money, often short term and in small amounts, so it is appropriate that those costs are high to reflect the risk and the transaction costs there. But it’s important to make sure that we have a cap there, and the Minister’s done well in striking that balance.

The other thing I would briefly touch on is the disclosure rules. One of the very useful innovations is that where lenders advertise in a particular language, and we know that lenders, particularly at this smaller end of the market, advertise in particular ethnic communities—whether it be the Asian Chinese community or the Pacific Island community—and they do it by using the appropriate language. It’s no good then to present them with a contract that’s in English and all of the disclosure documents that are in English, which they really have very limited ability to look at. So here, if you’re going to advertise in, say, Tongan, disclosure must be in Tongan—a great innovation, if I may say so. Here we have a balance struck—good—making sure that the borrower has knowledge, making sure that the terms are fair even in those high-interest cases, and also the Act tweaks some of the remedies and introduces some somewhat sterner penalties.

So, again, this really is mainly an updating bill, keeping this Act fit for purpose in the 21st century—an absolutely needed piece of legislation, with a couple of great innovations to make sure we look after the most vulnerable here. Thank you, Madam Assistant Speaker.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.

Bills

Taxation (Research and Development Tax Credits) Bill

In Committee

Part 1 Research and development tax credits: year 1

Dr PARMJEET PARMAR (National): Thank you, Mr Chair. In Part 1, I would like to start from clause 7. Under clause 7, which inserts new section GB 56(2), it reads, “A person’s entitlement to a research and development tax credit is reduced to the amount that the Commissioner thinks appropriate, whether or not the person is a party to the arrangement.” This is after the amendment that happened in the select committee process. I would like to get some clarification around this clause because this clause gives the ability to the commissioner to reduce the claim to whatever the commissioner thinks is appropriate.

Within this part, I jump to another clause, which is clause 37B, which amends Schedule 7, clause 39. It says, “Agencies for research and development”. Under that, it provides the ability to the commissioner to communicate “to an officer, employee, or agent of the Treasury …, of Callaghan Innovation, of the Ministry of Business, Innovation and Employment …”. So, basically, what it says is that the commissioner is able to communicate with these people to evaluate anything that the commissioner needs in regards to this policy.

Now, we see that there is a Supplementary Order Paper from the Government. It’s a very insignificant, I would say, Supplementary Order Paper because it’s, basically, correcting some punctuation marks, but, in that, it’s also providing the ability to the commissioner to allow these people I have listed before to look into information that might be necessary or reasonably necessary for making a decision that is about administering R & D tax credits. So my question here is: what criteria are there for the commissioner to reduce this amount from what has been applied for? Businesses compete with each other. How will we know that the commissioner is applying the same kinds of criteria for each businessman the commissioner comes up with that new figure for?

I understand the reason here is to see that there is no inflated amount put forward in the claim, but still it’s important that we know that the commissioner, when the commissioner is making that decision—because this clause says that whether or not the person is a party to the arrangement. Without having the individual or the organisation that is spending on research and development being part of this arrangement, the commissioner will come up with a reduced amount. So there are questions about this that I think it will be good if the Minister is able to answer, because the tax credit amount is 15 percent, and if the commissioner decides to reduce it, it could be just 2 percent or 5 percent—the effective tax credit that that business will receive.

The other question within this is that, in this part, the policy is mainly about 2019 to 2020, because the second part, which we will talk about later on, is for the policy that is implemented from 2020 onwards. In this one, there is no preapproval requirement. So if there is no preapproval requirement, as this policy has already come into effect from 1 April this year, businesses will be already spending money, thinking that they’re going to get this 15 percent of tax credit. But after they apply, if the commissioner decides that, actually, the commissioner is going to reduce that amount to the amount that the commissioner feels appropriate, that is not going to be fair to businesses. This is not going to provide any kind of certainty to any business.

The third point within this part is that if this is within the guidelines—which I can’t understand, because, for a lot of the questions, the answers we got during the select committee process were “Well, this is going to be covered in the guidelines.”—I think it’s still important that we have transparency around the method that the commissioner will use to come up with the reduced figure, otherwise that 15 percent tax credit means nothing, because it could actually mean just 2 percent or 5 percent for a business. And if it is going to be based on some kind of market value, it’s important that we discuss that too, because here we are talking about research and development, which means we are talking about people doing new things to acquire new knowledge—people wanting to get some new insights into the things that happen around us.

For that, how do we have a list of market value decided for everything that researchers will do in the future? We cannot. We cannot do that, because market value is available only if something is already available in the market, and sometimes the researchers, sometimes the scientists, could be using different approaches to reach the conclusion that they want to or the knowledge that they want to acquire. So what kind of resource is available to the commissioner here to decide what the commissioner should be deciding as the new reduced amount? And if it is just to make sure that nobody is putting forward inflated figures, then also how will the commissioner know that that is an inflated figure if something new is being done? Researchers have to try different kinds of things, and if some researchers are going worldwide maybe, then they are able to do something at a cheaper rate than someone who is just trying to access that resource from within New Zealand. So we have to be fair to these people.

The most important point in this is that, because the policy has already come into effect from 1 April this year, businesses are already incurring expense on research and development, hoping that they will be getting 15 percent of tax credit—because there is no preapproval in the first year. So how do we satisfy those businesses in terms of providing certainty that they will be definitely getting 15 percent of tax credit? This clause here does not give me any confidence that businesses will be able to get 15 percent of tax credit.

Another very important component in this part is the refundability provision, which is under clause 9. In clause 9, we talk about the refundability provision in this legislation. During the select committee process, it was really interesting to see that some members didn’t understand the difference between the R & D tax credit and the refundability provision, because the criteria for the refundability provision are different from the criteria for the R & D tax credit. It is not the same. The question, in this clause, that I have for the Minister is that the maximum cap of the refundability provision is $255,000, but if we look at the amount that people could access through the last R & D tax credit policy which was put in place by us, the previous National Government, when we were in Government, that amount was more than $255,000, which is the cap through the refundability provision in this legislation.

So why would a business access this provision and not access the R & D loss tax credit through that policy that was put in place by the previous National Government? Also, why put something that is different for a business that does not have enough tax liable income? If the real purpose is to improve business spending on research and development, then it should be for all kinds of businesses.

Moreover, this provision here in this bill is a temporary provision, because the Government has indicated—and during the select committee process officials also indicated—that the Government’s intention is to develop a policy that will be implemented from April 2020 that will look into providing support or incentive to businesses that do not have enough tax liable income. So why put something so temporary—because this is creating a lot of uncertainty amongst investors and small businesses?

I was talking to an investor. That investor is originally from here but is based in the US. He’s invested in two scientific companies here in New Zealand. He said, because of this—because they don’t know what is going to come from April 2020—why would he be continuing to invest here in New Zealand companies. These investors are going to go around and look for other options.

During the select committee process also we received some submissions on this clause, and submissions came from different entities. So, in summary, what they said was that “Refundability is important to provide support to early stage businesses and needs to be progressed as a priority. Lift the refundability cap that applies in year 1”. So that is definitely something that is of concern to businesses, because a $255,000 cap is not enough given there is a higher amount—a significantly higher amount—that businesses can access through the R & D loss tax credit policy. But the response that we received during the select committee process from officials was—this is not word to word, but overall—that the Government is developing a policy from April 2020, and so at that time, this will be taken into consideration and consideration will be given to allowing R & D tax credits that were carried forward from the 2019-2020 year to be refundable.

Another answer that we got during the select committee process was that a tighter regime in the first year of the regime is a useful precaution because in-year approval of the R & D activity will—[Time expired]

IAN McKELVIE (National—Rangitīkei): Thank you, Madam Chair. I shall take a brief call on the Taxation (Research and Development Tax Credits) Bill at the committee of the whole House stage to express a few concerns I have about the bill. I guess the major concern I’ve got with it is that I think it is going to be extremely expensive and complicated to access the tax credit regime. I think that’s OK for the companies that are equipped to deal with this and that have been in the business for a long time. They’ll manage it very well. And it will work for some of the bigger R & D expenditure companies in New Zealand. I don’t think it’s going to work for the next level, and I think it will be very expensive to get into, and I think it will probably put some of them off accessing this opportunity—which I think is a bit of a shame.

But this is an area in which I think we’ve struggled in New Zealand since the 1980s, frankly, and we’ve yet to find a real solution that works for research and development in New Zealand. We’ve seen a decline as a percentage of our gross spend in New Zealand. We’ve seen it decline over the years, and that happened—or the decline was initiated—with the changes that happened in the 1980s, where Government pulled out of a lot of R & D that it did itself through the universities and through what in those days were things like the Department of Agriculture, which, of course, have changed their name now—but AgResearch and those sort of companies did a lot of this kind of research and development in New Zealand. And it was actually great value to this country. But we changed the way we did things, and we expected the industries to pick those opportunities up. They really haven’t picked them up satisfactorily—with a few exceptions—in New Zealand since that time.

I think that’s the big challenge that I see with the R & D tax credit regime: is how, in fact, we get people introduced into it and how we get them to access it with confidence, particularly the smaller New Zealand - based firms. I was pleased to see one of the changes that was made as a result of the select committee process was the opportunity to use outside contractors. I think that was hugely important, because initially the bill precluded outside contractors. It didn’t preclude them being used, but it precluded them from being claimed at the full rate. And I think it’s essential that we do enable the use of outside contracts in this because many firms in New Zealand that will be accessing this cannot afford to employ that expertise themselves, and, in fact, that expertise isn’t available in abundance in New Zealand. So that’s a real challenge, and I think that was a positive change that the Finance and Expenditure Committee made to the bill.

There’ve been numerous estimates of the amount of money that this will cost annually, and I think it is a bit of a guess myself because, as I’ve said earlier, with the exception of the large R & D expenditure companies, I don’t think we’ve got any idea how many people will be able to access this in the next tier of businesses that are looking for this type of incentive or opportunity.

The other area that I think is going to create some challenges will be around those start-up companies who can claim, effectively, a tax credit in advance. And that’s a pretty risky business when you think about it, because you’re going out there spending money, you don’t know whether you’re ever going to get it back, and you’re getting a grant back from the revenue, I suppose, in a form, but, actually, you don’t know what’s going to happen with the other 70 percent of the dollar you’ve spent. So it’s quite risky, and it’s taken the place of what, effectively, were expenditure grants—or, in some cases, dollar for dollar matches.

I’m not so sure that’s going to work either, because I think that is a risky area for companies to get into, particularly companies that have got—well, I guess all start-ups to some extent are in a very unknown space and dealing in uncertainty to a large extent. And I wonder how confident we can be that they will actually access this or want to access this and then be able to, in fact, keep themselves going once they’ve done that. So I think there’s some risks in this policy, certainly below those large companies that understand the system and will be able to access and do well with it.

So for that reason—well, for that and a number of other reasons—we oppose this bill. I think it is high time in New Zealand we got to a point where we had a comprehensive R & D policy in place that covered business in general in New Zealand, and I’m sure we would find the expenditure in those areas greatly increase as a result of that.

So that’s the reasons that we’re opposed to it. I do think there’s some questions that we could well have answered in the course of the few minutes I’ve spent talking about it. So thank you.

Hon Dr MEGAN WOODS (Minister of Research, Science and Innovation): Thank you, Madam Chair. I just want to respond to a couple of the questions that have been put to me here by speakers so far. First of all, one of the contributors raised the issue of clause 7 and wanted to know about how this would operate. What I’d like to give that member a reassurance around is that this is one of the integrity measures that I think makes this a very strong piece of legislation and that what officials have done, when they have been designing this process, is they have spoken to a number of officials in jurisdictions that already have R & D tax incentives in place and looked at what is required to ensure the integrity of the scheme.

This is a rules-based system, and we have to ensure that within this bill we have a suite of integrity measures, and clauses 7 and 10 and 27 and 30 and 32 to 37 contain these integrity provisions within the legislation. Specifically, the clause that was raised by an earlier speaker was clause 7, and this is an anti-avoidance rule. The rule will only apply where someone enters into an arrangement to defeat the intent and application of the tax credit rules. This is a very high threshold to be used, and it allows the commissioner to reduce the amount of eligible R & D expenditure involved in a claim in these particular circumstances.

But I think there’s just a little bit of understanding of how clause 7 will operate. What it does not do is allow the commissioner to change the R & D tax credit rate. It will allow the amount that is available to be claimed under there. This is an important anti-avoidance rule, and it is very similar to many others that we already have in the Income Tax Act 2007, and it is necessary from this integrity perspective. It’s only expected to apply in a very small minority of cases, and I hope we don’t have to apply it, but it is important that we are writing robust legislation that does have these integrity measures in place.

A previous speaker also raised the question of why it is that within Part 1 of this bill there are different provisions for non-tax liable businesses. That is very simple. It’s because we firmly believe that, when we’re setting up a tax incentive scheme, we have to ensure that we’re also putting in place incentives for some of the companies that are the most innovative, that do have the most potential to transform our economy, and many of those companies are in the pre-profit stage. As I’m sure every member of this House will understand, a tax rebate isn’t a great deal of use to you if you’re not paying tax and therefore can’t apply the rebate.

What we have said is that we need to get this scheme working, so we’ve simply got to do more as a country, and I agree with the speaker that’s just taken his seat, Mr McKelvie. We have to do more to lift New Zealand’s very low levels of expenditure on R & D. This is a scheme that is aimed at going from 300-odd businesses receiving a growth grant to 2,000 to 3,000 receiving assistance under the R & D tax incentive.

What we have committed to doing is a phased approach. We are working in terms of the provisions that are there for these pre-profit firms in the 2019-20 tax year, and we are doing further work with that industry to see how it is that we can roll out post-2020. So that is why there are different treatments for non-tax liable businesses that are contained within the bill.

I’d like to reassure the member that took his seat, Ian McKelvie, when he said that he was worried that small businesses wouldn’t be able to access this. This is something we’ve spent a lot of time talking to industry and to the business sector about—about how it is that we could set up a regime that actually was fit for purpose for our small businesses, because we know many of our start-ups, many of our small businesses, are where innovation happens. What we heard really clearly was that under the current regime of the growth grant schemes, $300,000 expenditure on R & D was simply too high a threshold for those small businesses to be able to benefit from it. So we listened carefully, and under this tax incentive scheme that threshold is lowered to $50,000. If you’re using an outside provider such as a Crown Research Institute, there is no minimum threshold.

So this is a scheme that is set up very much to benefit some of our most innovative, some of our small businesses that we know have the power to transform our economy. We’ve made sure that we’ve consulted widely, we’ve listened today, and we’ve incorporated that feedback into the provisions. Thank you, Madam Chair.

Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Chair. I think, fundamentally, there is maybe a difference in opinion about what constitutes a small business. The Minister of Research, Science and Innovation has given a good exposition of her point of view that lowering the threshold to $50,000 expenditure on R & D is in fact making R & D investment easier for small business. I couldn’t disagree more. I couldn’t disagree more about that. There are a number of small businesses, which are small—small start-up businesses—that are the very ones who have the innovative thinking, innovative policies, and innovative plans and where some form of Government assistance, which of course they had available to them under the previous Government, would indeed be most useful. So I would urge the Minister, and I would urge the Minister for Small Business also, in conjunction with his colleague, when talking about our R & D investment, to really have a good look at what is a small business and what is going to be most useful for them, because I can think of a number of the many small businesses and start-ups that I have engaged with who couldn’t dream of investing a minimum of $50,000 in research and development, and yet that is just what they need to do to take the next step as a business.

I also would note on that point—and I just want to stick to that point—that, fundamentally, the primary reason that New Zealand does have relatively low levels of investment in research and development is the sheer size of our companies in New Zealand. It is the nature of the New Zealand business economy that most of our business is small. There are a number who grow and there are a number who will benefit from R & D grants, but that number is not predominant in the New Zealand economy.

So maybe I will finish on this point, because we did see back in 2007, under the previous Labour Government, when there was an R & D tax credit scheme, a lot of attention was given to companies by accountants and advisers about how they would get the best out of that R & D tax credit regime at the time. And I can’t see that this time it will be any different for accountancy firms, who I know are already beginning to put out newsletters alerting their clients to the work that their business and financial advisers are doing around how to best leverage and how to best use this R & D incentive. So it would seem a shame that there were some adverse impacts coming out of this legislation, where it is more about how we classify and code expenditure, rather than purely using the opportunity to invest. Thank you.

Dr PARMJEET PARMAR (National): Thank you, Madam Chair, for this opportunity. I would like to start where I left off when I was speaking before. I was talking about the refundability provision in this legislation, in clause 9, but I would also like to talk about some of the points that the Minister of Research, Science and Innovation has answered.

One thing the Minister said about clause 7 was that it will be to make sure that people don’t have the intention to rort the system. How would the commissioner know that there is an intention? How do you measure intention? You cannot measure intention without providing proper criteria, and I haven’t heard anything here about the kind of criteria that would be used to measure that intention. Also the rate, 15 percent—I totally agree that the bill is to implement 15 percent of tax credit, but if somebody has spent $100,000 on their research and development and they’re expecting 15 percent, $15,000 in R & D tax credit, but the commissioner decides to reduce that total amount, then it would be just $5,000. That means the effective rate, or the amount that the person will get, will be equal to only 5 percent. So that’s the point. Saying that this will be applied to hopefully only a minority doesn’t give a proper justification to have this kind of provision in this bill. So we need more than that. Just because it is going to be applied to a minority, or may not be applied at all, doesn’t mean that we should tolerate something like this, which hasn’t been based on a proper criteria.

Now, for the refundability provision, the maximum amount is lower than what people could access through the last R & D credit policy. When I was speaking before, I was saying that the answer that we got during the select committee process was that because there is no year approval, the pre-approval process kicks in from next year, 2020, and in this part, which is 2019-20, there is no pre-approval process. So the goal is to keep the whole scheme really tight. This actually conflicts with the whole idea. On one side, we want to see that businesses are able to access this incentive so that they can spend more on research and development, but on the other hand, this is aiming to make it difficult for businesses. So I don’t see a proper balance here, because there is focus on making it tighter but then the focus on business is smaller.

We also heard from the Minister when she talked about the integrity of this policy. The uncertainty that it creates for businesses wasn’t addressed in the Minister’s answer. So I think what we want to see through this legislation is that, yes, the Government should be able to control its policy, control the spending, and it shouldn’t be a fiscal risk—which we believe it is going to be a fiscal risk as we have seen what has happened in other countries—but on the other hand, providing that certainty to businesses so that they can go ahead and spend money on their R & D, knowing that they are going to get 15 percent after incurring that expense.

So here, they do not get that certainty. In clause 10, looking at the activities which are called research and development activities, they, again, are not consistent with other policies. Stats NZ use a different definition for research and development than this legislation—again, another point that creates uncertainty. So how do we measure business spending on research and development when the definition in different policies is going to be different? Here it’s different from what Stats NZ uses to measure business spending on research and development.

The answer we had was that the Ministry of Business, Innovation and Employment is going to look into it, but that doesn’t give us any assurance that it is going to be fixed. So we have this growth grant scheme, which is continuing for another couple of years, and then the growth grant scheme is going to be phased out. It is going to be only just one incentive, and that is this R & D tax credit. The other policy is going to be developed. So having a temporary measure in here, through clause 9, is creating uncertainty, and, again, the definition of R & D, which is different from other areas, is creating more uncertainty.

These things are really important for businesses. These things are really important for us to measure what kind of outcome we have from implementing a policy like this. We know that there is evaluation in new section LY 10. There is this evaluation provision that is after every five years, the Minister will be required to provide a report on evaluation of the policy. In that one, if we look through all the points which are listed, from paragraph (a) to paragraph (f) under LY 10—that is, “Evaluation”—the first one is “the delivery of the policy intent of the regime”. So how will it be measured? Again, it goes back to the point that I raised previously. This is so preliminary that we cannot see how this policy will actually help us increase or understand that it has actually increased business spending on R & D. First, the definition is different, so it will be difficult to measure what kind of business spending is going on on R & D, and then these points which are listed are quite vague. The second one is “the stimulation of spending on research and development activities”. What does this mean? Does this mean that there will be more jobs created? Does this mean this is just about expenditure, just about what dollar value will be spent by Government or spent by the private sector? What is the outcome here? There is a big focus on what is going to be spent rather than what is going to be achieved through this policy.

Also, how do we know that—because this is not fully developed; it is going to be developed close to the time. How do we know what is going to be the criteria that the Government will use to evaluate? It could be that just something that is looking good can be picked as a criteria, because then the Government can easily stand up and say that, yep, the policies are working well. So there are a lot of questions. These kinds of things are very important for us to see in the start, which are not available at the moment.

Under new section LY 2, talking about consistency of this legislation and talking about consistency of research and development, under “Core research and development activity”, under LY 2—this is subsection (1)(b)—it says “does not include an activity, if knowledge required to resolve the uncertainty, described in paragraph (a)(iii), is—(i) publicly available”. There is a lot of R & D work that goes around where only validated or publicly available methods are used, because if validated methods are not used, then they will have to first prove that the method was validated, and only after it is validated can they progress their work. Someone somewhere else in this big world should be able to replicate that work once it’s published. If they cannot replicate, then there are questions that need to be answered. So here I would like the Minister in the chair, Megan Woods, to take a call and tell us exactly what this means.

As a former scientist, I know in biological sciences research there are a lot of validated methods that are used on a routine basis. That doesn’t mean that they are not trying to acquire new knowledge. Of course they are trying to acquire new knowledge, and the guidelines that are developed so far are not looking satisfactory at all. Saying that businesses will have to rely on the pre-approval process is actually creating a lot of compliance cost for businesses, because businesses will have to list everything they think could possibly go through for their R & D tax credit, and then they will have to wait for that pre-approval process to see what actually has gone through and not gone through. So that is not good enough.

So this legislation—already, we can see it’s quite complicated legislation, because part of the policy is different. So the policy that has already come into effect from 1 April this year—today’s 30 April and we are debating this bill in the committee of the whole House. We can see how unorganised this Government has been in regards to this policy, which they think is one of their biggest policies. So here I think that it will be really good if the Minister is able to give us an example of some biological science research or maybe in terms of oil and gas exploration. You know, there are a lot of things which are publicly known and publicly available in terms of techniques which are used, because it’s important that validated methods and techniques are used to acquire that new knowledge. It’s important that we have confidence that this policy is going to cover all areas of research, not exclude some areas of research where they have to rely on getting pre-approval, because that is going to be very hectic for businesses, as I said. They will have to simply employ another person just to put that process together and then wait for pre-approval, which we will talk about later on, where I have some questions as well.

So it will be really good to see what the Minister has to say about this LY 2, “Key terms”, under “Core research and development activity”, paragraph (b). What does it mean by publicly available? It’s important for everybody to understand, and also those who are doing R & D—for them, it’s important to understand this legislation so that they can go ahead confidently, spend on R & D knowing that, yep, their R & D is going to qualify while they are waiting for pre-approval. They shouldn’t be just holding their work until they get the pre-approval.

ANDREW BAYLY (National—Hunua): Thank you very much. I’m trying to get to my feet with things in my way. This bill is an attempt to try and drive innovation in New Zealand. Obviously, if you go back through history, there have been many different arrangements. In fact, we’ve been here before. We moved to a new system with Callaghan, and, of course, under this new arrangement, we’re going to revert back, basically, to a scheme that previously existed.

There are some issues with this bill. Whilst, obviously, as the Opposition we support all attempts to try and drive innovation in New Zealand, the question, really, revolves around the mechanism that’s best to achieve that, and that’s obviously where the debate has been round this bill. The first issue I want to just ask the Minister who’s in the chair, Megan Woods—which is good to see—is the issue around the quantum. I know there have been various projections around what this scheme will cost and how many entities it’s likely to benefit, and, broadly, there’s been an estimate of around a billion dollars and, originally, it was 3,000 businesses and then over time that seems to have diminished somewhat to, I think, the latest estimate of around 1,500. But the issue I’d love to hear from the Minister on is around the issue of how the monetary quantum of this R & D scheme is going to be managed and to ensure that what is paid out goes to the highest-value proposition.

Now, I think we’re all aware that in Australia, when they introduced a similar scheme to this, the original projection for the Australian Government for the scheme was A$1.8 billion, but that blew out to roughly double—$3 billion. I think it’s very important and incumbent on this Minister that she provides some clarity around how that’s going to happen and, as I say, how it’s going to be targeted.

That’s one of the things around the existing system, with the Callaghan scheme, because that was an attempt, by using independent third-party professional people, to try and identify those companies with the highest potential to deliver the greatest value to the New Zealand economy. There is always going to be an element of prioritisation. It doesn’t matter whether you’ve got a billion dollars or three billion dollars. But this scheme will, because of a monetary cap, have to prioritise. Whether that’s on a “first come, first served” basis or whether that is by a prioritisation of some other arrangement, I would like to hear from the Minister, because I would suggest that if the prioritisation is merely on a “first come, first served” basis, those companies that are the most well-resourced and the quickest out of the block are going to benefit, and that may be to the detriment of New Zealand, because those companies that have very good propositions, in time, don’t benefit. Conversely, what that means is the billion dollars that’s projected at the moment is going to blow out to a much greater figure. That issue is of vital importance if we are to ensure that we end up with a scheme that we can put a line in a budget and actually know it’s going to take place.

I think the prioritisation of it—and this is one of the issues in the schedules. If you look at the schedules, there are 24 activities that are excluded, and there are 11 activities or areas around supporting R & D that have been excluded in the schedules to the bill. Again, this is a form of prioritisation, and I think one of the issues relating to this—and I’d like to return to this issue, if I may—is around how we promote, certainly, ICT companies and those companies that are not of the traditional public-good types of activities that are in R & D but that are actually focused on commercial outcomes. I think this is one of the most important aspects about R & D: what is the type of R & D that we want to take place in New Zealand, and what should the New Zealand Government be best putting its money into to ensure that we can drive the New Zealand economy forward? This is a crucial part of the conversation that I haven’t heard expressed by the Minister.

It’s very well-intentioned to be able to say “We’re going to spend a lot of money on R & D, and, by the way, we’re going to change back to an existing system that was in place a few years ago.”, but the prioritisation—and one of the discussions we had during the select committee process was around the area of what type of research is best undertaken. There was quite a lot of discussion around public good research which of itself does create value, but one of the things I’d also like to hear from the Minister is a cogent description of the specific types of economic activity she would like to see following a billion-dollar investment that this Government’s going to make over time, because I think it would be unfortunate if the Minister only talks about public good.

What are the commercial outcomes that she would like to see and that we would be able to look back in maybe five years’ time and say that we’ve achieved from spending a billion dollars of New Zealand taxpayers’ money? I think that’s the bit I haven’t heard clarity around, and it’s certainly not clear in the bill in the way that the intent of the bill and the direction of the spending is narrated in the bill. So that’s the second issue I would really like to hear from the Minister on: what are the benefits and what are the economic drivers that she would like to see in place or would like to see occur as a result of this investment?

The other thing is around pre-profit of businesses. This is probably the most contentious part, because I think there’s an assumption in the way that the bill is written and the intent of it and who it’s directed to, and I’ve heard my colleague Dr Parmjeet Parmar talk about the issue of small companies getting a minimum of $50,000 and the costs associated with that. That is a very salient point—a very salient point—because the cost to comply with this is substantial, and what we do need to make sure is that it’s not only the big companies in New Zealand that are very good at driving research and development. In many cases, it’s very small start-up businesses, and in some ways they are the most dynamic. Many of those now use ICT as a driver of that business activity, and what worries me most about the intent of this bill is that we have ended up with a proposition that really deals with medium-sized and large-scale entities. They have the resources to be able to fill in forms and bear the cost as part of a longer-term research and development activity and to be able to go to the Government and comply with all those requirements that are, over time, quite strenuous, and I know that from personal experience.

So the issue is—and it always has been—the missing element of how we support those pre-profit companies in New Zealand, and there are many, many thousands of those in New Zealand. We’ve got 530,000 businesses in New Zealand. Many of those are pre-profit and are there creating value and, often, taking a concept and driving it through the different stages of research and then development, and then through what people term the “death valley”, where it goes through to the commercialisation stage before it becomes a fully marketable proposition. How we support, how the Government intends to support—and this bill doesn’t actually deal with it, in my view, but I’d like to hear the Minister’s view on it. How do you support those pre-profit businesses as they evolve through those first three stages before they get to the stage that means that they’re in profit and they have the scale to be able to do the R & D that we’re talking about and be able to access the fund of this nature?

So that’s the other aspect I wanted to hear from the Minister on, if she’d care to address it. What is the proposition around supporting those very innovative, creative young businesses that haven’t reached pre-profit and who are in a situation where they are helping to drive and create many jobs and that, ultimately, will become very large companies over time? So, on that note, I’m looking forward to hearing from the Minister.

Hon Dr MEGAN WOODS (Minister of Research, Science and Innovation): I think we’re seeing a number of contributions starting to reiterate the same themes and the same questions are coming through, some of which I’ve already addressed. I’ll just start for the benefit of Andrew Bayly, the member who’s just taken his seat, who asked a question around pre-profits. I have addressed that question in an earlier contribution, but the point of this is actually all about those pre-profits. I’d like to reassure that member that this is the first time that we are actually having a comprehensive policy that is going to look at how it is that we can support some of our most innovative companies in New Zealand. So this has a 2019-20 provision for the tax year of 2019-20, and it sets out in post-2020 how indeed those companies will be supported. Obviously, there’s the cash-out tax credit, but I know that the sector and those in pre-profit in the sector are heavily engaged with us at the moment and are a part of designing what that post-2020 support will look like, and I know that they are hugely appreciative of the fact that they get to be part of that design.

There have been questions—which I have addressed also—around small businesses. I’d like to reassure those members who are signalling very valid concerns around this that this is something that, as a Government, we listened to. That’s why we have reduced the threshold of expenditure from the current $300,000 in the growth grant scheme to $50,000 under the tax incentive scheme. This is a scheme that is more directed to small businesses than the scheme it is replacing, and that’s something I have dwelt on in previous contributions, so I won’t dwell on that.

The member asked about prioritisation and public good. What I would like to point out to that member is that this is not an investment about public-good science. This is an investment around innovation in commercialisation. This Government values public-good science. We invest in that, and we invest in that through our strategic science funds. But this is about backing Kiwi businesses to commercialise that science and to take those ideas into economic reality. So this isn’t about investment back at that level.

The fiscal risk is something that has been raised by a number of members, and this is something where they’ve asked how it is that we get to the estimate. I’d just like to clarify that there are between 2,000 and 3,000 businesses that we estimate will be able to have support from the Government under this scheme, as opposed to the 300-odd that got support under the previous Government’s growth grant scheme. So we’re having a tenfold increase, and I can assure you that we’ve done some rigorous modelling around that. The figures on which we’ve based that modelling are from the 2016 Research and Development Survey, and we’ve looked at how the definition would apply across that, how many it would apply to, and what the quantum would be, which I think a member asked a question around. So that’s something that we have done work around.

We certainly have made sure that we’ve built headroom into the funding that is available for this, so that we know that we will be able to support all businesses and that we won’t have to prioritise and tell some businesses that they’re out, because this is not like the previous Government’s growth grant scheme. This is not about the Government picking winners. This is about leaving innovative businesses to do what they do well, and that’s innovate without Government making decisions about whether that is best.

One of the members pointed to a schedule of excluded activities that are covered by provisions in this Part 1; absolutely right, and this is international best practice. So I think an Opposition member asked a question, to give an example, around oil and gas exploration activities—what that would look like. Well, actually, that’s in the schedule of excluded activities, and that is what happens across the world. So there are a number of industries that are in that schedule of excluded activity.

The definitions are something that members have asked some questions around and how it aligns between different pieces of legislation. What we have to realise is that, actually, there are different purposes and different functions of definitions within different pieces of legislation. The purpose of the definition in this piece of legislation is to ensure that we are capturing and measuring the research and development that leads to economic outcome. Statistics New Zealand have to capture a broader range of metrics around that for very good reason: there is no inconsistency or incompatibility of using some different measures. What the most important thing is is, actually, we’ve looked at international best practice. By and large, this is based on Frascati definitions of R & D, and this is what is common within all of our science system. In fact, we would look at that right across how it is that we fund science.

We did listen through the submission process, and we moved away from strict application of the scientific method, but have had to put some rules around that. But I think the most important thing for me as Minister is that we were having a scheme that lined up internationally. Compliance is something that has been raised as well, and one of the things that I would like to point out is—and I have given this reassurance in an earlier contribution—that there are a number of integrity measures built into this bill.

Someone brought up the issue of Australia and the cost blowouts and the lack of compliance there. Officials from New Zealand spent a lot of time talking to their Australian counterparts, who were incredibly giving of their expertise and their experience. Some of it was on what not to do and we really valued that input, and it is a number of the measures that are being questioned by members of the Opposition now. We actually took good advice about how it is that we could put in place the most robust scheme, and that we could ensure one that allowed businesses to get on, to transform our economy, to innovate—not to sit around filling in forms for grants, because that is feedback we were getting very strongly from businesses. They didn’t want Government picking winners. They wanted to be able to get on and do in their business what they did well, and they wanted a rules-based system where they could be treated with the respect within the rules-based system as they are within the tax system more generally. So I am confident that we have the right suite of integrity measures contained within this legislation.

Finally, the one new question that has come up has been about outcomes. We have been very clear of what the outcome of this piece of policy is around and this measure is about: it is about being more ambitious for New Zealand than we currently are in terms of our R & D spend. We languish amongst the OECD in how much we spend on R & D. We spend only around 1.53 percent—I think 1.53 is our latest estimate of what we spend—as a proportion of our GDP. We aim to get to 2 percent within a 10-year period, and this requires that we do things differently. Doing what was previously happening was not putting us on a track so that we could be internationally competitive.

We don’t look to some of the countries that I think we like to measure ourselves against in the OECD; they’re currently in 2 and 3 percent and have ambition way above that. We have to fundamentally change things to even get ourselves to the 2 percent, and this Government is committed to this. We can’t keep doing the same thing and expect we’ll get there, and this is why we’re putting in place a transformational programme that backs New Zealand businesses to spend more on R & D.

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

CHAIRPERSON (Adrian Rurawhe): I’m not going to accept that motion, but I’m going to put the question.

The question was put that the amendments set out on Supplementary Order Paper 204 in the name of the Hon Dr Megan Woods, and the following amendments in her name, to Part 1 be agreed to:

In clause 10, new section LY 1(2)(c), replace “6, and 7” with “LY 6, and LY 7”.

In clause 23, replace “37” with “37B”.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Amendments agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Part 1 as amended agreed to.

Part 2 Research and development tax credits: year 2 and subsequent years

Dr PARMJEET PARMAR (National): Thank you, Mr Chair. I would like to start off with section 68CB, as inserted by clause 43, which is about general approval: “Research and development tax credits: general approval”, which talks, also, about the preapproval process, because, from 2020 onwards, there will be a preapproval process for the tax credit. What we heard before was a big lecture from the Minister in the chair saying that, for grant applications, people have to put in an application; so they have to spend some time filling in that application to access the growth grant. But what’s going to happen with the preapproval process? For the preapproval process as well, people will have to fill out some forms or maybe provide some information in some kind of format for the commissioner to consider that for preapproval. It’s not like the commissioner is going to get a dream—what companies are going to put forward—and will be sending an approval or preapproval to that business without looking through what has been submitted. So of course there is going to be some kind of cost for businesses to submit what is going to be applied for preapproval.

With preapproval, something that is very interesting—and I think it will be good to hear from the Minister; I hope the response is going to be different from what the officials were saying, defending this point—is that there is no time line for preapproval. So, for the commissioner, there is no time line for preapproval for any business when they’re spending their money on research and development. If they are hoping that they’re going to get some kind of incentive, there has to be a time line, because businesses need certainty, and, again, I’m asserting this point of certainty for businesses, because they’re out there taking that risk, spending their own money. It’s not like taxpayers’ money that you can spend without, you know, giving a proper answer about the outcomes that can be achieved. Businesses are answerable at the end of each year to their employees because they want to see that their employees are able to grow and their business is able to grow. They want certainty.

So if a business has applied for a preapproval and they don’t know when the preapproval is going to come, the business will be sitting there thinking whether they should initiate that project—that spending on research and development—or not. So this is what is going to happen when there is no time line for approval. There was a submission when the bill was before the Finance and Expenditure Committee where the submitters said—it wasn’t just from one group; more than one submitter said it—that there should be a three-month deadline for the commissioner to respond to requests to exceed the cap, and this is for exceeding the cap. Also there were discussions around putting a time line around the preapproval process. So for exceeding the higher cap where businesses can get that preapproval so that they know that they can go ahead and spend that money—for that also they need certainty.

So every business, before they go out to spend their money, they need some kind of certainty. What we heard during the select committee process was that imposing in the legislation this kind of deadline for responding to claims is not required. In its administration of the R & D tax credit, Inland Revenue will set a performance standard for processing applications but does not think time constraints should be set in legislation. My question is: why should the time constraints not be put in the legislation? This legislation, to some extent, is quite descriptive; so time constraints should be there somewhere in the legislation or in guidelines because that will help us measure the performance of Inland Revenue, measure the performance of Callaghan Innovation, and help us measure the overall performance of this policy. If businesses have to wait for four or six months, then that doesn’t mean that the policy is as effective as is being claimed by the current Government.

So my point is that there has to be some kind of time line for businesses to know how long they have to wait to get their preapproval—whether it’s about exceeding the cap or whether it is about the general preapproval for their expenses. So a time line will help businesses plan their business activity. It will help them understand what kind of spending they can do on their business, because some businesses could be committing to spend more just because they would be thinking that they are going to get an R & D tax credit, but if it is not approved, they are not going to get that, and then they could actually be putting themselves in financial trouble.

We know that, in New Zealand, most of our businesses are small businesses—96 percent to 97 percent of our businesses are small businesses—and we don’t want to see our businesses getting into that kind of financial trouble just because the legislation doesn’t put any time line for approval or preapproval of exceeding the cap or preapproval spending on—[Time expired]

Hon Dr MEGAN WOODS (Minister of Research, Science and Innovation): Thank you. I’d just like to take a short call to answer some of these questions. Part 2, of course, is quite a narrow part of this legislation—it’s around the year 2 and beyond provisions, as opposed to the other provisions we’ve looked at.

Just in terms of the question that the member Parmjeet Parmar has raised in terms of clause 43 and no preapproval time line within that, I’d just like to offer that member some reassurance that this is an issue that we have discussed, both with IRD and Ministry of Business, Innovation and Employment officials. While there’s not a legislated time line in there, there is an operational standard that will see IRD looking to give a decision within six weeks on this. So this is an issue that we have given consideration to, and this is more rightly put into an operational standard than appearing in the legislation for obvious reasons. Obviously, a fixed time line within there could have some perverse outcomes in terms of the integrity standards that we’re trying to look at. We don’t want to have anything in there that could encourage gaming and poor applications. That is more rightly done within that operational standard that the department will operate.

The other issue that the member brought up—that I’d just like to respond to in terms of certifying and preapproval that will operate in this post - year 2 and beyond provision—is, of course, actually something that business asked for. This was something that we went out before the select committee process when we did the engagement—and a very broad engagement with business, actually. Business came very clearly to us and said, “Look, we want to have provisions in there where we can preapprove.” It’s not like applying for a grant, where every time you have to put the application in. There can be for certification or there can be preapproval for smaller businesses, and this was very much part of our responsiveness to the sector and listening to businesses around what they wanted. So I just wanted to give some reassurance on those questions.

Dr PARMJEET PARMAR (National): Thank you, Mr Chair. Now, moving on to another point that I want to raise—it’s about having certified people that can approve a research and development tax credit. So here—the certificates for research and development coming through certified people—it looks like the Government is creating another layer of people that businesses should be accessing to access research and development tax credits. So businesses already have other expenditures: they have accountants; they have lawyers. So now they will have to go through these certified people—I mean this will be an option—to apply for their R & D tax credit. Here I believe this is a job that the Government should be doing—the various people through Callaghan Innovation should be looking into it—rather than creating another layer, another expense for businesses to access certified people that can approve their research and development expense claim.

So here what is happening is we are creating more cost on business. The first point which I raised in my previous contribution was that, yes, they will have to provide information in some kind of format. It might be different from what is there currently for growth grants, but there has to be some kind of format otherwise the commissioner will know what the commission is going to preapprove. Then this point is about creating another layer where businesses will have to access a tax credit as an option through a certified person that is approved. On the other hand, these people are not going to be part of any appropriate professional body, which was raised during the select committee process as well, because the point was that we want to make sure that these people are bound by professional ethics, so that these people are bound by professional ethics and that they should be part of a professional body. This was actually rejected during the select committee process. It will be good to understand, from the Minister, that it is expected that most R & D certifiers will be members of an appropriate professional body—what does this mean? “It is expected.”—that is the response we got. So expectation doesn’t mean they are necessarily going to be a member of a professional body. So that means the Government is leaving it to them to choose whether they want to be a member of an appropriate professional body.

So the second point that comes is about the penalty regime. Yep, there is a penalty. So the argument we heard was that this is going to be sufficient to ensure R & D certifiers will be acting in a professional, ethical manner. This is only if they are caught—only if they are caught—but if there is another layer created by this Government for businesses that is going to cost them, then why not make it more effective, more assuring? Here it doesn’t give us any assurance that people that will be acting as R & D certifiers, because it is their choice to be part of a professional body or not to be part of a professional body, and the second thing is the penalty regime, which comes in only if they are caught. So the businesses will have to rely on these people—this other layer which this Government is creating, which, in my view, is totally unnecessary. Actually, it should be the Government’s job to ensure that people’s needs—businesses’ needs—for their R & D tax credit claim or refundability are met.

The second point—we have heard a lot from the Minister about growth grants. Growth grants provide money at the start, and that is what start-up companies need—not money at the end. So big companies, yes, they have money, they have resources, they can spend in the start and then claim R & D tax credits at the end of the year, but that policy was focused on providing help at that point when they really need that financial help.

Now, this policy that was put in place by the previous National Government—growth grant scheme, which has proven to be very successful—is going to be phased out, in section LZ 13, where it talks about part-year override of section LY 3(2)(b). There it just talks about part-year, but it doesn’t talk anywhere about part-project. When a project is put forward, it’s not always about the time line; it’s also about the progress of the project, and there could be some simultaneously on-going projects. So it will be good to hear from the Minister on this issue as well.

The question was put that the amendments set out on Supplementary Order Paper 204 in the name of the Hon Dr Megan Woods to Part 2 be agreed to.

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

Ayes 63

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

Noes 56

New Zealand National 55; ACT New Zealand 1; Ross.

Amendments agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand; Ross.

Part 2 as amended agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Schedule 1 agreed to.

Clauses 1 and 2

Dr PARMJEET PARMAR (National): Thank you, Mr Chair. I would like to talk about clause 2(1); that is about Part 1 of this Act, which has already come into force. Here it says, “comes into force on 1 April 2019.” Today, being 30 April 2019, this part of this Act has already come into effect from 1 April 2019. I would actually like to know from the Minister if this was a wise move given that this is such a complicated policy that the Government has put forward. It could have been simplified; it could have provided a bigger picture about their intention to support business research and development. Instead of doing that, they have just rushed to roll-out this policy while the bill is being debated here in the committee of the whole House, and the policy has already come into effect. So they have taken the whole process for this legislation for granted

Now, several businesses would still be waiting for this legislation to go through this House before they start incurring expenses which they believe they will be able to claim an R & D tax credit for. How fair is this for businesses when they know that the policy has already come into effect but the legislation has not gone through?

Our point is that we haven’t seen the full picture, because in this legislation it’s not just that the whole process has been delayed, which, clearly, indicates how disorganised this Government has been around this legislation. The second point is that the refundability provision—which I spoke about, because it is part of this bill—is going to be reviewed again in 2020. So this is such a temporary provision in Part 1 of this Act, which has been implemented from 1 April 2019, which is very unfair for businesses that are spending their hard-earned dollars on research and development. The Government should be giving more regard to the hard-earned dollars that businesses spend on research and development, by making sensible approaches towards these kinds of policies.

Having this policy already implemented from 1 April clearly shows that the Government just wanted to rush it through. I just want to make a political point here that, yes, this policy was put in place before, in 2007, which National got rid of, and then this Government was determined to bring this policy back and they said they were going to bring it back from 1 February 2019, and that is what they have done, even not giving enough time to officials, not giving enough time to people to contribute on where businesses do not have enough tax liable income.

So leaving that part, where the risk is higher for businesses—because the risk is higher for businesses when they don’t have enough tax liable income. That means their profits are not that high because businesses are investing and reinvesting to grow their research and development or maybe to acquire bigger markets. There could be so many reasons why businesses are not able to have tax liable income, but the Government didn’t care; they decided that this Part 1 will come into effect from 1 April 2019 with a temporary provision in there about refundability, which is going to be reviewed as part of their review that is going to be implemented, hopefully, from April 2020—that is what we hear.

So we believe that Part 1 of this Act should be removed—the whole. We would like to see a full picture of this policy so that we can fully understand how this Government wants to support business research and development, because what is happening in Part 1 does not give us that confidence, and we would like to see that the review the Government intends to do should become part of this legislation and it should be only coming into effect in maybe 2020 or 2021, once they’re fully prepared, once they fully understand what businesses actually need, and understand the environment of our businesses here in New Zealand to make sure that the policies are going to suit them.

So one approach is not going to suit all businesses; there are different kinds of businesses that we have in New Zealand, they are committed to doing different kinds of research and development, and they come in various sizes and forms. So, just putting a temporary measure through Part 1, which has already come into force on 1 April 2019, is not doing any justice to these businesses that are spending their hard-earned dollars on research and development.

So I would like to see that this Part 1 is actually removed and that the whole legislation is delayed until the full policy is formed.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Clause 1 agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Clause 2 agreed to.

Bill to be reported with amendment presently.

Bills

Fire and Emergency New Zealand (Levy) Amendment Bill

In Committee

Clause 1 Title

KANWALJIT SINGH BAKSHI (National): Thank you, Mr Chair. I would like to take a call on Part 1 of this bill. Basically, there is only one part. In the bill, as originally introduced, it was supposed to change the date of commencement from 1 July 2019 to 1 July 2021. During the select committee, we went through this bill, and the Governance and Administration Committee proposed some amendments which were adopted at the second reading. In those amendments, one of the main things which was resolved was that this levy regime should be taken care of and a number of provisions should be taken up. At that time, I asked the officials whether they had explored any other options; and I appreciate the Minister acknowledging that when the question was raised during the second reading, and some input was given.

Now, we know that the Minister has introduced a Supplementary Order Paper to extend the date further, from 1 July 2021 to 1 July 2024. So, I have a question for the Minister in the chair: please explain what the reasons are that we are extending this date further, and what options she is considering for implementing these levy changes. I know it is very important that fire and emergency services provide a really good service to us as a community, and I would like to take this opportunity to thank them for their service during the recent incident in Christchurch, where they were really prominent to provide help to the victims.

The Minister may address this question that the levy, which is right now funded through the insurance policies—and we know there are a few issues, that some of the people don’t insure but they get the same service, and there are a number of other issues, also, as the number of call-outs for road accidents is also increasing from time to time. On the other hand, the call-outs for the fire services are declining. So overall we need to understand how the Minister proposes to change the levy regime which is in place. Extending the same levy regime until 2024, there will be a huge surplus. Where will that surplus be used? We need to understand the surplus is also available in the future, and that is important for us to understand—how this money will be used. I hope the Minister will take a call to explain this.

Hon TRACEY MARTIN (Minister of Internal Affairs): I raise a point of order, Mr Chair. I seek leave for all provisions to be taken as one debate.

CHAIRPERSON (Adrian Rurawhe): Leave is sought for that purpose. Is there any objection? There appears to be not.

Clauses 1 to 8

Hon TRACEY MARTIN (Minister of Internal Affairs): Thank you, Mr Chair. Thank you very much. Could I just acknowledge my honourable colleague and the questions that he has asked me—questions that, quite rightly, need to be answered, so thank you very much. So I will take a moment to talk about Supplementary Order Paper 205. If I could just recap, the main purpose of the original bill, as I’m sure my honourable colleague has already mentioned, was to amend the commencement date for the new levy regime, because currently in the legislation, when Fire and Emergency New Zealand was being amalgamated under the previous administration, 1 July was the day for a new levy to commence.

The Fire and Emergency is funded currently on property insurance. Since I sat in the seat, one of the things that has become clearer as the Department of Internal Affairs has been working with insurance companies and insurance brokers while they were planning on the implementation of this new levy is not only that there wasn’t going to be enough time for insurance companies to amend their computer systems and so on and so forth, hence the reason for the original bill, but what has since come to light is the fact that the Department of Internal Affairs was not previously given permission to pursue any other ways for the levy to be collected. Internationally, property insurance or through insurance companies is not the only way for a fire and emergency service to have that levy collected and funded.

There were two things that were really important when I took over this particular portfolio. One was that the levy would be fair to those who were paying the levy for the services that they were going to receive from Fire and Emergency New Zealand. The other was that Fire and Emergency New Zealand had enough funding to do the work that we as a society expect them to do. What came to light, and it was sort of alluded to previously, was that the current implementation, should we go forward with what is in the original bill, would not be fair. It would not be fair, for example, that a very large national property portfolio insured at, say, $4.5 billion against fire and $25 billion against material damage will have their levy rise under what is proposed from $4.7 million per year to $18.5 million per year. Now, that cannot be fair. This would be a large supermarket chain, for example—a very large organisation. But those large organisations also put in a reasonable amount of funding from their own purse to make sure that they meet all the fire restrictions, all the fire alarms and smoke detectors and sprinkler systems and so on and so forth. Under the current levy structure, there is no consideration of the upfront cost to, say, a large company and what they spend to try and minimise the damage or the requirement that they might need for fire and emergency services.

So I have requested and am requesting that the House support Supplementary Order Paper 205 to extend the time frame. The current levy in the current way that it is applied provides enough funds for Fire and Emergency New Zealand to continue the work that it is doing, to invest more in our rural fire service and our volunteer fire service, and to move across from the amalgamation and integration in the way that was originally envisaged by the previous Minister. So I have no concerns at all that they will not have enough funding if we just continue the status quo right now, but I do want to give the Department of Internal Affairs the time to really go through a first principles look at how and who should pay this levy, because I do think that fairness is just as important as the ability to make sure that the service is funded.

The second part of the Supplementary Order Paper is to remove the requirement of the defence force to have to pay the levy, and that is in recognition of the fact that they already have their own fire service and they also put cells on the ground in every emergency—Kaikōura, for example, they were there; Christchurch; Nelson-Tasman fires, they were there. So it’s in recognition that the defence force actually are part of the Fire and Emergency Services, and that they give us a whole lot of support, so therefore to levy them as well—again, we come back down to what is reasonable, practical, and fair. Kia ora.

Hon JACQUI DEAN (National—Waitaki): Thank you, Mr Chair. My colleague Kanwaljit Bakshi, chair of the Governance and Administration Committee, asked the Minister a pretty fair question in his initial contribution, which was what might those funding sources for the levy be? I’d like to reiterate that question to the Minister, and I would like the Hon Tracey Martin to explain to the committee her initial thinking, perhaps, about what other forms of levy options will be considered. Would it be a levy on ratepayers, for example? Well, if that were so, that would require some very careful consideration, and from our point of view, costs on homeowners and always, ultimately, on people who are paying rent will have an inflationary effect. Now, I understand the, you know, ups and downs—if you set the levy at a certain point, you have to gather it from certain places, so there will be pluses and minuses in there—but I do need and would request and urge the Minister and her officials to think very carefully about just who they are going to strike this new levy from.

National does support Supplementary Order Paper (SOP) 205. National supports this work and commends the Minister for her approach to Fire and Emergency New Zealand. In the time that the Minister has been in charge of that role, I think that the changing times for Fire and Emergency New Zealand have been pretty smooth, considering the long amount of time that the change has stood in front of Fire and Emergency New Zealand personnel and volunteers and their communities, which is why I think in agreeing to this SOP to extend the time for implementation of the levy so that the Minister and her officials can develop some other options for the levy, we need to be assured that, while time is agreed to, timeliness of that consultation should be at the forefront of the Minister’s mind, and also the equity issues around just who is going to be levied to fund Fire and Emergency New Zealand.

CHAIRPERSON (Adrian Rurawhe): Just before I give the call, I’m just going to let the member know that I’ve reset his number of calls back to zero, so this is his first call since the leave was taken.

KANWALJIT SINGH BAKSHI (National): Thank you, Mr Chair. First of all, I would like to thank the Minister for her prompt response to the questions raised by myself. I would, again, like to ask the Minister—the present regime is creating a huge surplus and we want to know where that surplus will be used in the future. That is an important part of this levy set-up, which is applicable right now and will be extended until 2024. So if we have got continuous surpluses in the levies, where is that money going to go? So that one clarification the Minister needs to make.

As my colleague the Hon Jacqui Dean has raised, what other options is the Minister considering to replace the present levy regime? That is equally important because the Minister has talked about fairness, and that fairness can only be brought in when there is equity for everyone contributing for this important role. The Minister needs to come up with the answer if she can tell us how she plans that, in the future—what options she has got for collecting the levy in the future for Fire and Emergency New Zealand (FENZ).

Lastly, about the road accidents—that is another avenue where we see there is increasing constant call-outs for FENZ, and they are doing a great job for the community. So if the Minister can address those questions, I’d really appreciate it.

Hon TRACEY MARTIN (NZ First): Thank you very much, again. Thank you my learned colleague for the questions. First of all, to be upfront, I don’t actually have a preference, nor have I made any decision, with regard to where I think this levy should go. I just think that because the Department of Internal Affairs was not given the opportunity to truly have a look at all of the international options that we need to give them the time to do that. I hope that what I can do, from this moment forward, is continue to work with the honourable member and keep him briefed before we get to a stage where any suggestion is put forward to this House, because these services, as you have mentioned, are vital to New Zealanders. So, again, I think this is a place where—if the honourable member and myself can work together and keep in touch with each other so that whatever this House decides on, or whatever I finally bring to this House, we have a consensus that it is fair and that it does what it needs to do.

There are a couple of problems with what we’ve got now. People are able to—and I don’t like the word, but it’s a word that’s used a lot in the documentation—“freeload” by choosing not to insure their property and, therefore, are not paying their levy, but they still benefit from the services. It has increased insurance costs and it’s reduced incentives for people to properly insure their properties, and so they’re under-insuring and that doesn’t help anybody either.

The levy collection is complex to administer for insurers. Now, my learned colleague, the Hon Jacqui Dean, she, quite rightly, mentioned that there is one international way that some countries deal with this which is through collecting the levy component inside property rates. That would be a big step for New Zealand but I think it’s something we have to discuss. It would have to be discussed alongside of the resourcing and the mechanism by which one supported, whether it was local government or—how would that work? It’s a discussion we need to have.

Car registration, for example, could include part of a levy rate, rather than having it on the side. Again, something else we need to discuss. General taxation is used in other nations. We need to put everything on the table and have a really, really good look at this in a timely fashion and, again, I would welcome the opportunity to continue to work with my colleague Kanwaljit Singh Bakshi so that there are no surprises. I appreciate that putting this Supplementary Order Paper on the table after this legislation has come out of select committee is not optimum, and I apologise for that. Timing is everything, I suppose, but I do hope from this moment forward to work more collegially with the member so that he knows as much as I know with regard to the pathway we take this, so that Fire and Emergency New Zealand will be sustainably funded on a fair and relevant basis. Kia ora.

LAWRENCE YULE (National—Tukituki): Can I, first of all, thank the Minister Tracey Martin for being so candid about what she’s wishing to do. But I would like to provide just a little bit of perspective, and support the Hon Jacqui Dean in her comments that have been made, because a lot of this was looked at previously. One of the reasons why the former Government didn’t go with some options, including the rates-based option, was because at the time—and I had some involvement in this—Local Government New Zealand was adamantly opposed to a rates-based system that would fund what was, effectively, a central government agency to deliver fire and emergency services.

It also went through a process at the time where local authorities were prepared to give up their rural firefighting forces and merge them into the central fire and emergency management service on the basis that it was taken out of rates, and it was all going to be funded by an insurance-based product. So my point today, Minister, is probably to say some of this work has been done and has been thought about. The Government at the time made a decision that they didn’t think they wanted to go down that path, which, in my previous role, I supported. I acknowledge the fairness and equity issues, but if you don’t use an insurance-based product there are really only two ways of forcing payment and that is through general taxation or ratepayer contributions.

So we are prepared, on the side of this House, to support the Supplementary Order Paper. I understand the complexity involved in it but I just have a little bit of caution that if people think they’re going to race off to local government and say we’re going to put a rate—that is a really big call. Certainly, local government, in its process of working out what it does and what central government does, is very resistant to taking on a funding collection role for an entity that it has no governance control over.

So Minister, I think—we’re supporting it, as has been said. You’ve been straight, upfront about the timing issues and I appreciate that. There is enough money to keep the thing going so we’re not in any imminent risk. I would challenge you just to think, though, about the New Zealand Defence Force option. I accept the argument you’re placing—in terms of what they do for their own firefighting capacity and how they help New Zealand—but, once again, one of the big issues that local government finds itself facing is a whole lot of Government agencies do not fund rates—Department of Conservation, a whole lot of other things, do not make a contribution to society. So one of the issues I think the officials need to consider in thinking this next stage through is what is the value of the defence force’s firefighting capability in terms of looking after itself but also helping the community, versus what will be the lost income from a rating-based system and whether that’s the right thing to do.

So I think we’re pretty clear on this side. We do wish to be constructive in the dialogue. I’m just trying to raise some issues from a historical perspective for the Minister’s understanding to say that if you get local government over the line that this is a good thing to do, then it’s on the table, but I wouldn’t take that for granted. Thank you.

Hon JACQUI DEAN (National—Waitaki): Thank you, Mr Chair. I just wanted to pick apart a little bit what a levy regime might look like that included levying Fire Emergency New Zealand levy amounts on, and through, local government. I thank the Minister for indicating that it might well be on the table, but it is spoken, and so, clearly, there is going to be some work done on it.

So can I just go through some of the thoughts that I have, together with my colleague Lawrence Yule, who, of course, has been closely involved in this work in the past and has a pretty good understanding. The questions I would have is what is the cost of collection of a levy amount through a secondary arm of Government in local government? Would that mean that for each territorial local authority (TLA), and maybe regional council or maybe not, we don’t know—let’s just stick, for argument’s sake, with just regional councils because that covers every ratepayer in New Zealand. How then do you differentiate between those ratepayers? Will there be a difference between commercial and residential? OK, well if that’s the case then that is getting a little unsuitable for regional councils so we need to discount those and, perhaps, go back to TLAs—

CHAIRPERSON (Adrian Rurawhe): I’m sorry to interrupt the member, but it has come time for me to leave the chair for the dinner break.

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

The question was put that the amendments set out on Supplementary Order Paper 205 in the name of the Hon Tracey Martin to clauses 4 and 8 be agreed to.

Amendments agreed to.

Clauses 1 to 8 as amended agreed to.

Bill to be reported with amendment presently.

Bills

Local Government (Community Well-being) Amendment Bill

In Committee

Part 1 Reinstatement of 4 aspects of community well-being

Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Chair. This is perhaps a good bill to follow the Fire and Emergency New Zealand (Levy) Amendment Bill, because as we left off before dinner my contribution was around the potential which the Minister signalled for the levy collection to also take into account local government ratepayers. My comments just before the dinner break were beginning to raise concerns around the impact on ratepayers—[Interruption] I am in fact speaking to the Local Government (Community Well-being) Amendment Bill, but in the context of the previous bill. My concerns are the same in this bill, where the Minister, perhaps rather than indulge in any fresh thinking on the Local Government Act, has merely reinstated—and it says that in the bill—a part of the bill which had been taken out. So when we get to the title and commencement part of the debate, I signal that I will be calling it the “Tit-for-tat Bill”. I don’t see any fresh thinking in this piece of legislation.

What I merely see is a Minister in a Government who needed to get what they felt were some wins on the board quite quickly, which was to just simply reinstate something which had been removed from the bill. We remain resolute that our focus for local government should be on good quality expenditure on behalf of ratepayers and good quality expenditure should be confined to the provision of good quality services, particularly around infrastructure for local communities. We make no apology for that and that remains our position. The well-beings are being put back into the bill. It sounds great, you know—great applause!—but I’d ask: what does it really mean? What does it really mean? Isn’t it the function of each local authority mayor and councillors and those people who spend the time to attend meetings and submit on various proposals and have their view, as they should do—they are part of a community, so by definition a local authority is the community that it serves.

So merely putting the words back into the bill—I’d like to hear from this Government what in fact that adds rather than “Thank goodness, it fills up the Order Paper for them, which otherwise is looking a little bit thin.” It’s not putting something on to the Order Paper which is new and refreshingly exciting. No, it’s not. It’s simply, you know, hauling something from 2007 and reinstating it. Well, that’s the start and finish of it, from what I can see.

I do go back to my comment that our position was, still is, and always will be good decision-making by local authority mayors and councillors and chief executives and all those involved in providing good quality, well-considered expenditure on those things that their community needs.

I will make further comments around other aspects of this bill in in due time. But I want to return to my first point, which is the point I was raising in another aspect of a piece of legislation which had an impact on local communities, and that was the signalling of Tracey Martin, the Minister, that she was considering placing local government ratepayers squarely in the frame for funding for a fire service levy.

CHAIRPERSON (Poto Williams): Can I just ask the member to come back to this specific bill, please? Thank you.

Hon JACQUI DEAN: Thank you, Madam Chair. So in the context of the local government bill and the impact on ratepayers, that means that there will be a cost to ratepayers. And if there’s one thing that we in Parliament should be doing and should be focusing on, if there’s one thing, that is providing good quality services and infrastructure to ratepayers. But things like the fire service bill and now this bill, in placing the well-beings back to the purpose statement of the bill for no good reason other than they need to fill up the Order Paper, I would say are a threat to that good governance philosophy which local government should hold dear. Thank you.

MAUREEN PUGH (National): Thank you, Madam Chair. I’d just like to make a contribution also to the Local Government (Community Well-being) Amendment Bill in the committee stage tonight.

My colleague the Hon Jacqui Dean has coined a lovely turn of phrase for the title of this bill—I’m sure she’ll speak to it again—the “Tit-for-tat Bill”. Labour introduced these well-beings into the Local Government Act and then in 2012 National took them out. So now Labour is putting them back in again, hence the tit for tat. But the reality is that the removal of the four well-beings—the social, economic, environmental, and cultural well-beings—did not prevent councils from actually doing any of them. It didn’t stop councils or prevent them from taking account of all of those individual well-beings when they were planning or when they were investing. So in actual fact there is very little point in putting them back in, except if we are going to impose a whole other level of compliance and reporting.

I would argue that everything that councils do is actually done via the lens of how the communities and the environment are impacted. So councils make decisions based on the demands of their community, the demands of their infrastructure and growth, and also the impact on the environment. So already the councils are in effect doing what it is that these well-beings are setting out to do without the added compliance and reporting, and I’ll cover that compliance and reporting in a bit more detail.

Every aspect of council activity will need to be addressed and assessed in terms of the four well-beings. We know this because councils have been through this in the past. So I would like to have some assurance from the Minister around what this reporting and compliance might look like once these four well-beings are implemented back into the bill, because I can tell you that this is a huge cost and a huge compliance for local councils, especially for those smaller ones—so just some confirmation of that from the Minister about how that will be reported and assessed once implemented.

I know that there are probably some idealistic reasons for wanting to have these four well-beings back in the bill, and we can assume, then, that if there is deemed to be such a need, there is a problem to be solved. So I would like to know from the Minister what it is exactly that the councils that are not performing at the moment—what it is that we’re setting out to improve or achieve in terms of these four well-beings going back into the bill.

I do recall recently at a select committee process that the Government members on the select committee were adamant that they did not want performance targets inserted into the piece of legislation that we were debating—the bill that we were debating and working on at the time—and the rationale behind not wanting those performance measures or performance targets inserted into the bill was that it would distract from the actual performance of the agencies that would be responsible and that they would focus their attention simply on ticking the boxes rather than focusing on the real issues that needed addressing. So, on the one hand, the Government says, “No, we do not want to have performance targets or performance measures, because they will turn into a box-ticking exercise.” and yet, at another level of legislation, we are doing exactly that. So I think there is probably a little bit of a dichotomy there.

I just wonder how this bill is actually going to encourage anything other than box ticking, whereas I’ve explained previously that the actual implementation of the four well-beings is happening regardless of whether it’s embedded in legislation or not. It certainly has not prevented councils from investing in the things that this legislation seeks to implement, which are things like swimming pools and libraries and sports grounds.

Another aspect that I’d like to explore is how developing these performance measures and reporting against these performance measures will actually be implemented and how we will explain it to ratepayers, as the Hon Jacqui Dean has pointed out, because by default it’s the ratepayers who will be funding this new level.

I also seek from the Minister some confirmation around the consequence of this bill and the need for independent auditing of these performance measures in this bill. I presume that will be done by Audit New Zealand as the independent auditor that most councils do use, and also, in terms of developing those performance measures, will we then be expecting councils to have to employ additional staff to undertake the work of developing those performance measures and then reporting on them? In the previous iteration of this legislation, there was a whole department required to set it up, because the reporting has to be done in such a robust way that there are multiple levels of compliance required.

For instance, we have to be able to prove that the community has some degree of satisfaction with how the council is performing in one particular area, and it may be that this is assessed in some way. Usually there would have to be a community survey, where a survey goes out and the community is asked to grade the performance of the council. There could be up to five levels of performance, as we’ve had in the past. Whether there is intervention required perhaps is an example. The second one could be that they don’t actually meet a target, that they do meet a target, perhaps that they exceed a target, or even that they achieve excellence.

So that assessment has to be done for every single aspect of council activity. I just wonder whether the Minister can give some reassurance to council that this is not going to add extra compliance as well, because if all we’re doing is asking Audit New Zealand to undertake extra work within council—the invoice that is sent to every local government for their audit so far is usually around a six figure sum—and if we’re asking ratepayers then to move to even more added cost, I tell you they will not be happy with that. And I would just like some reassurance from the Minister of Local Government, if I could, that the level of compliance is not going to be onerous and that the performance measures are going to be realistic and simple to comply with. Or is every council going to be asked to develop their own set of performance measures and reports, survey, and then make public those outcomes?

I do then also just want to touch slightly on the purpose of any reporting that Audit New Zealand may do and whether we are looking towards having some kind of a grading system for local government—whether we’re expecting for Audit New Zealand to start ranking local government performance and, if that is the case, then perhaps we need to understand that up front and that would be appreciated. Thank you very much, Madam Chair.

Hon NANAIA MAHUTA (Minister of Local Government): I’d like to take a brief call as we are going into the committee stage of the Local Government (Community Well-being) Amendment Bill and just highlight and recapitulate, really, what local government wanted, which was to restore the four well-beings back into local government legislation because it did give greater emphasis and focus on what councils actually see as their day-to-day tasks, which is beyond roads, rates, and rubbish.

If I come to the reason why we elevated the four well-beings within the purpose of this particular legislation, and Part 1 in particular, it was to ensure that in the current long-term planning cycles that councils are engaged in, as well as in the annual plans, greater focus would be given to the four well-beings council by council as they tried to rearticulate back to the community the things that community wants and sees as essential to their quality-of-life aspirations.

Now, if there was one thing that was highlighted to me very early on when I came into this portfolio, it was the importance of ensuring a broader lens was applied to the role and function of local government and the work that they did. I did hear the question posed around extra costs. While it’s not intended that this will create any further cost, in fact what it does will provide a greater focus and emphasis on what councils generally do on a day-to-day basis—which is beyond roads, rates, and rubbish—to be able to provide for the types of things that help a community grow and thrive.

Let me just highlight a couple of those things, because it might actually help focus why the four well-beings are so important: things like facilities in your community that young people can have access to. In many community engagements, when they were going out and speaking to their community about what they wanted to see—and it’s very, very local and simple for many districts, small communities in particular, who don’t have access to big recreational facilities: a skateboard park, some opportunities for young people to go and play, sports grounds that are enhanced to enable other activities, a recreational facility.

Look, just the other week, I was down in Westland and their recreational facility is a fantastic—fantastic—example of a community facility which has a multi-purpose benefit and is about place making. Now, that was done with a broader ambition in mind, and that’s actually the four well-beings. It didn’t just focus on the aspects that members of the Opposition would have council focus on—roads, rates, and rubbish—but that broader aspiration around bringing the community together, having a multi-purpose facility, fundraising to be able to do added things in the community.

There’s another advantage of having the four well-beings within the local government legislation, and that’s how you reflect what you value in your community. Actually, the creative sector is a big contributor to this. When we look at the way in which communities and districts have demonstrated their relevance and the link of the diversity of their communities—they’ve had art installations and pieces—their art galleries and museums and their public facilities have been a focal point to be able to ensure that the values of that council can be reflected in all sorts of ways. These are the types of things that councils want to be more involved in.

There was also a point made about performance measures. Well, actually, what we want to ensure with councils is that they operate in a best-practice environment—so all the time councils are sharing their experiences, what benchmarking starts to look like when they’re involved in a whole lot of different things.

I was in the Hutt some months ago looking at what they were doing to ensure that the social interaction of their community was going to be more engaged, because they had a proportion of their population that wasn’t engaging in the community and was seen to be, I guess, causing problems. The way that the council responded is outside the ambit—if we were to take on board the views of the Opposition—of that greater well-being aspiration. But I say, more and more, councils need to be involved in the day-to-day fabric of what makes a community tick. That’s why the four well-beings are so important. Environmental restoration projects are just another example of how the four well-beings can create social cohesion and greater inclusion into the way that our councils are engaging with their people.

IAN McKELVIE (National—Rangitīkei): Madam Chair, thank you. It’s amazing how small a world this is, because I remember—almost a lifetime ago, actually—in 2002, when the Local Government Act, or the latest version of the Local Government Act, first came into being. I was a mayor, and I’m pretty sure the Minister in the chair, Nanaia Mahuta, was not far from being the Associate Minister of Local Government, and, the two members beside me, they weren’t even there. But I think—

Hon Member: Who is the stallion?

IAN McKELVIE: —it’s worth making the point—Lawrence—that whilst I can see some very good reasons for encompassing all the well-beings in local government decisions, and I think local government does that anyway, I think the issue that we’ve got with Part 1 of this bill is that bringing the four well-beings so clearly to the forefront really encourages our communities to advocate to their councils for expenditure that really should be taking place from central government not local government. And I think that’s the key issue for us on this bill.

Obviously, I’ve been involved in local government almost longer than I’ve been involved here. That’s long enough. But I think that the issue that we face, and it doesn’t matter what part of government you’re in, is that at the end of the day we have to make decisions and we spend taxpayers’ or ratepayers’ money. And the thing that I found difficult with the four well-beings—as I said a minute ago, I didn’t really mind the four well-beings—was the amount of money or the demand that was placed on councils that probably should have been placed on central government, and, therefore, we, effectively, transferred spending from central government to local government.

So councils have the ability, irrespective of the well-beings, to make decisions around sporting facilities and around social infrastructure, actually, irrespective of what the Act said, and they could have done that. What the 2002 Act did was emphasise councils’ abilities to act in, I guess, all four sectors of the well-beings, but it also gave our community an opportunity, and a whole lot of new people started advocating to council for council expenditure in areas that have never been really advocated before, because if you look at councils prior to 2002—and I could probably blame some of those councils for the rapid rates increases that we faced in the 2000s because they didn’t spend any money at all and now our infrastructure deficit is clearly showing that.

But the challenge, I think, that we had as councils was suddenly we went from being, basically, infrastructure-based councils to being all things to all people. That was the challenge, I think, that the National Party, and the National Government later on, had with the four well-beings. They accentuated expenditure in that area and caused councils, in my view, to go into places that probably central government should have been managing. The moment councils go into those areas, central government, effectively, abdicate and find other ways of managing that expenditure for the local ratepayer. So, virtually, it really causes a transfer, I think, of expenditure from taxpayers to ratepayers, and it is an expenditure that taxpayers should be responsible for not ratepayers. That’s the interesting issue that we have with the well-being, particularly with social well-being.

I know in my time in local Government, whilst I was interested in that area, it was a challenging area for a council to get its head around, because we were in some cases sharing funding with central government to the same entities. Really, I don’t think the ratepayer was responsible for that. I think, at the end of the day, the Government should have been responsible for that and should have maintained responsibility for it.

So that’s the reason, primarily, that we’re opposed to the well-being in the terms that this Government has brought them back into the Local Government Act. I think that whilst, as I said earlier, I kind of support councils’ ability to be general and all things to all people, they can’t be all things to all people with respect to expenditure. There are places they should be advocating to central government in. There are places they should be leading the expenditure in, and social well-being, and to some extent cultural well-being, actually, are not those areas, in my view, and that’s the challenge we’ve got with this.

I don’t know where the right balance is, because there will be a right balance in this, and I’m not sure we’ve ever got to that point. And, obviously, when we get to Part 2, there’s a whole different discussion that will take place. But I find it really interesting this whole discussion. I’ve found, in my time in local government, that the real challenge was to say no to things that, frankly, central government should have been funding when we were getting the demands put on us. Interestingly, I notice in my community now that same demand is still being put on councils, and they’re unable to front with the cash because, simply, they don’t have the resource to be able to fund some of the things that I think central government should be funding. It’s a matter of opinion as to how they fund those. Thank you.

CHLÖE SWARBRICK (Green): E Te Māngai, tēnā koe. Tēnā koutou e Te Whare. It is a privilege to stand and speak on the Local Government (Community Well-being) Amendment Bill because I am incredibly excited about local government. I don’t know if the tone of the debate thus far as heard by members in this Chamber or by members of the public who may be so fortunate as to tune in would hear that same level of excitement resounding across the Chamber, but I hope to bring some of that excitement and passion in my contribution to the debate today. I just wanted to say, first and foremost, that it is frequent in this Chamber that we hear members of Parliament stand and speak about the character of their local communities: what makes their local communities so special; what makes their cities, their towns, or their regional areas so wonderful.

I want to ask members of Parliament—because it was a point raised by Ian McKelvie—about the balance between what local government and central government should do. That there should be greater centralisation, he believed, or he proposed, of funding, or rather of the decisions that are made on the allocation of funding for what are, essentially, local government projects.

For example, I’m from Auckland—Tāmaki-makau-rau proud—and things like lantern festival or pride parade simply would not be funded at a central government level. So if we are to really follow the line of logic that has been proposed thus far by National Party speakers, are we to completely erode any of those cultural or social well-beings that are provided by that form of local government spending? So too are things that we take almost for granted quite frequently in our local communities—the likes of public art, which are maintained, I would note, by local governments.

It was raised by a former National Party speaker as well, the issue of how we rank or how we establish some form of accountability for local governments with regard to these four well-beings that this bill seeks to reinstate. I would ask the member that addressed, or rather raised, these questions: the same question applies to central government—how is it that we rank the performance of our elected members in central government? It’s through elections. If we are not seeking to apply that same standard to our colleagues in local government, then we may as well be upfront about it in that we intend to astroturf over them and remove local democracy, but I do not think that that is the intention of any member of Parliament, perhaps—although, my colleague frequently in yellow, but that’s a side point.

So also the point was raised by National Party members, who were worried about the impact on ratepayers when councils take up these four well-beings, when they look at social, economic, environmental, and cultural well-beings of communities. If that’s the case—if they’re worried about the impact on ratepayers, if they’re worried about the impact of rates and rate rises—then I would, perhaps, like to suggest to my colleagues in the National Party that they may very well support diversification of income for local governments. If we are to compare New Zealand’s performance to other OECD countries when it comes to expenditure at a local government level, internationally the benchmark of Government revenue that is spent at a local government level is 30 percent. In New Zealand, it is less than half of that, at 11 percent. So perhaps that’s where the National Party, the Opposition, should be focusing their energies.

But finally, in my points raised on this Part 1 of the Local Government (Community Well-being) Amendment Bill—that being to restore the four well-beings to the Local Government Act—I just really want to raise the question of why people live where they live, to end where I started off. We all decide to live in our towns and cities and neighbourhoods and communities because of the things that make those places special. I can tell every member in this Chamber, and every member in this Chamber actually probably knows for a matter of fact, that the reason that they decide to live where they live is not simply, solely, an economic decision. They take into account the best form of life that they can have for themselves and for their families, and that is at the core of the restoration of social, economic, environmental, and cultural well-beings in the Local Government Act. Kia ora.

DAVID SEYMOUR (Leader—ACT): Well thank you, Madam Chair. I wasn’t planning to take a call but my friend in green gave me some interesting thoughts, and I got to thinking about subsidiarity and centralisation.

It is true, the member who just resumed her seat is correct, that New Zealand, amongst developed countries, has one of the most centralised systems of government of any of them. In fact, only the United Kingdom, last I checked, spends more of its money in its central government vis-à-vis local government than New Zealand. That is an artefact of our history. We once had provinces, which, interestingly enough, roughly resembled the territories of the five Super Rugby teams. I put it to the committee that that was a much better way to do things. It was subsidiarity on steroids. It allowed local people greater control on how their taxes were spent, but it also created inter-jurisdictional tax competition, which, as we see in places such as Switzerland, can be a great boon to reducing the overall tax burden placed on any group of taxpayers.

I represent the Epsom electorate, an electorate which some people tell me—I don’t know if this is true or not—pays more in net taxation than every single electorate held by the Labour Party, and certainly more than every single electorate held by the Green Party. And why shouldn’t an electorate such as the Epsom electorate—

Hon David Bennett: And New Zealand First.

DAVID SEYMOUR: David Bennett is correct. The Epsom electorate pays more in net taxation than every single electorate held by New Zealand First—he’s correct about that too.

CHAIRPERSON (Poto Williams): I hope there is a point to this, Mr Seymour.

DAVID SEYMOUR: I think as we just debate introducing four well-beings, more centralisation, more dictate from Wellington about how people should run the communities that they love, it is a very good time for this committee to consider the possibility that we got it right in the 1880s, that we got it right when we had provinces and had subsidiarity—that we had it right.

Hon Damien O’Connor: Next it’ll be the Magna Carta.

DAVID SEYMOUR: Well Magna Carta, as the member points out, is a very fine document. We had it right at that time.

Let me say another thing: the Prime Minister has also given me a very important thought in her speech that resumed this session of Parliament. She said that we do things collectively that we cannot provide privately. I can tell you that many people in the Epsom electorate and other prosperous, aspirational people outside that location would like to see local government, in particular, get back to providing genuine public goods—goods that are non-rivalrous, and goods that are non-excludable, that cannot be produced by any private market. We’d like to see them do that. We don’t want to see Auckland Council starting to consider education. We don’t want to see Auckland Council becoming a social enterprise. We want to see Auckland Council providing the roads, the rubbish, the rates, and the public health infrastructure that does not get produced in private markets.

So in conclusion, I want to thank the Prime Minister and I want to thank Chlöe Swarbrick for putting forward some excellent ideas for limiting government in this country, for returning us—they suggested, I’m not sure they meant to, but it came out—to subsidiarity federalism and inter-jurisdictional tax competition, so that those of us who pay the taxes and fund the country are able to have some more say on which of those goods are produced in our local community.

I’d be very keen to see this bill amended in such a way that each electorate has its own taxing power and perhaps its own ruler so it could decide how it used the funds provided by its particular taxpayers. I think that is a superb idea.

I’ve decided that being in agreement with Chlöe Swarbrick is a lot more fun than I could ever have imagined previously. I actually think, in all seriousness, that central government imposing a template of four well-beings on local government is terrible folly. It does reduce inter-jurisdictional competition about what local government can and can’t offer. It does mean that we get frustrated with diminished quality of the real things that we want from local government. It does mean that our rates and our costs of government are higher than they would be if there was more competition amongst government and more flexibility for people to elect local governments they prefer. Thank you, Madam Chair.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Part 1 agreed to.

Part 2 Other amendments

Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Chair. Part 2 of this Local Government (Community Well-being) Amendment Bill concerns some other matters apart from the four well-beings, so, mindful that I’ve got a number of colleagues who are very keen to speak on aspects of Part 2, I’m going to confine my comments to development contributions. Again, this is a revision. This is a going back to where we were before, essentially, around how local authorities can charge for development levies. So once again development levies will be able to be levied on developers for infrastructure such as libraries, swimming pools, museums, and the like.

The amendments that were made in our time confined the number of activities or infrastructure that developers could be levied. So we’re really, again, going back to what was before: not a lot of policy, not a lot of policy development in there. In fact, can I suggest maybe just a quick sharp little conversation, good, tick that one off, get that one on the Order Paper, we can get it into the House, and show that we’re doing things. But actually it’s really just going back.

The sad thing about this particular aspect in Part 2 of the bill is that it might seem on the surface that being able to charge developers, those people who put time and effort and take the risk—it’s a business decision, obviously.

Stuart Smith: Put their capital up.

Hon JACQUI DEAN: Yeah, they put their capital up. They often highly leverage themselves—they’re like any other business. They take the punt and put up land, and sometimes land and building packages. With the reinstatement of the ability for local authorities to charge development contributions for other things, like a swimming pool over here and a library over here and perhaps a portion of the museum, rather than spreading the burden of what needs to be collected by way of rates and contributions for that development and, indeed, for funding other activities of council, what it really does is increase the cost and the price of the section and the home, because the only thing that the developer can do when faced with a development levy on their parcel of 10 sections or 20 or 100, or whatever it is—they build that cost, like they build every other cost, into the price of that section. So what does that do? It’s obvious. The cost of housing increases.

So in this bill that Labour have so very quickly brought out in an effort to be seen to be doing something, the effect of what they are doing is to increase the cost of housing on New Zealanders. I do question a couple of things. Did they think about that? Did they consider that adding cost directly on to developers could only go in one place, or two—two. Developers could stop putting their heart and soul into their business, which is developing properties and maybe, you know, house and land packages. They could either stop doing it—where does that get us?—or they could build the price of that into their property and land prices and their product.

Well, if one is looking for a way to enable New Zealanders to get into their own homes, can I suggest that this is not it—this is not it. I defy any member, I defy the Minister in the chair, Nanaia Mahuta, to get up in this House and convince anyone in New Zealand who cares to listen that loading cost directly on to a developer is going to do anything else except load the cost, then, of course, on to the purchaser of that land and/or land and housing package. Further, I invite the Minister and any member of the Government to justify the loading of costs on to homebuyers in New Zealand when they have spent so much time—so much time—putting the cost of housing as such a strong political issue for themselves. Once again, we see a policy that absolutely flies in the face of what they say. So what we have here, yet again, is “say something and do another.”

IAN McKELVIE (National—Rangitīkei): Madam Chair, thank you. I want to take a call on Part 2 of the Local Government (Community Well-being) Amendment Bill and talk about development contributions, which, for those of us involved in local government in the early 2000s, was the bane of our lives. There’s a very good reason for that, because, interestingly, in the early 2000s—and some of the members of this House won’t remember that far back—development and growth in New Zealand was very slow. Housing growth was slow, section sales were slow, and developments were very difficult to move on. That continued right through until probably 2009-10 or even later.

But the reason I raise that is because the issue with development contributions was that to calculate how you might operate a development contributions regime, you needed to have a timespan that they operated under, because they worked in a manner that—say you had a block of a hundred sections. You’d put a development contribution on that, which then contributed to parks and reserves, libraries, roads, whatever you wanted it to contribute to—well, probably not roads so much, because that’s an issue that’s specifically mentioned in this amendment, but certainly infrastructure, underground infrastructure primarily. That contributed to it in a manner that, I guess, was designed to take the share that the new sections needed to provide to the growth of that community—so, in other words, a bit like being a shareholder in a company. You’ve already paid for your shares, like Fonterra for example; you want new people that come along and contribute to buy shares in the company, and that’s how development contributions kind of worked.

The problem was development at that time was very slow, and because it was so slow, the cost of those development contributions got larger and larger and larger based on the interest calculations that stretched out into the future. So by the time they’d been in place for some time, they were putting a significant cost on those sections that were involved in the development contributions regime. So the National Government decided that that wasn’t the way to go, and they discontinued that. About that time, of course, development properties took off—the sales of properties took off. If that had happened initially with the development contributions regime, it might not have looked as bad or as costly as it turned out to be. That was because of the long-term interest cost that was factored into the development contributions regime.

So it was an interesting idea when it was first brought in by councils, and there were many different methods or regimes brought to bear by councils as well in that; they weren’t all the same. If the systems had all been the same and they’d all been calculated as one, it might have been a better system, but it wasn’t and they were different in every council and city. You could end up in an area like my electorate, where you’ve got six or seven councils where they all may have had—they didn’t all have a development contributions levy, actually, because some of them had no development at all. In fact, the population was diminishing in those days. So they all had a different regime. For people going into those areas to develop property, for example, it was very difficult to understand those regimes, and they were all complicated. That was the reason it was discontinued by the National Government in 2008 or 2009.

I mean, you can sort of see some reasons for bringing this type of system into being, and I’m in favour of this type of system. It’s just a matter of how you manage it so that you don’t get the costs running away on the ratepayers, and that’s the tricky thing. When you think about development contributions, they were initially designed to take the load off the current ratepayers and load it on to, effectively, the new ratepayers, which is not a bad system. If it worked, it would be good, but it’s so difficult, as I said earlier, to calculate how those things work, because the pace of sale of property has a big impact on the impact of the cost of those development contributions on that price of the property. So it was a complicated regime and one that I think some councils got into quite a significant amount of difficulty with. That was the reason for the disbanding of it.

Now, whether it’s right or wrong to bring it back, I’m not so sure. I mean, we’re obviously opposed to it, for the reasons that we disbanded it, but it could be that in different times, this type of system works quite well. I believe it’s a little unfair to expect the current ratepayers of an area or a district to pay for the new ratepayers coming in. They need to pay their contribution to that thing, and that’s what this was designed to do. Whether the system that’s now being implemented in Part 2 of this bill is the right way to bring it about, I’m not so sure, and as a consequence of that—and, I guess, as a consequence of history—we are opposed to Part 2 of this bill and the amendments that reintroduce those development contributions. But it is a complicated system, and it takes a fair bit of understanding. So that’s my contribution to Part 2. Thank you, Madam Chair.

MAUREEN PUGH (National): Thank you very much, Madam Chair. I intend to take a very short call on Part 2 of the Local Government (Community Well-being) Amendment Bill and just have a short contribution around the development contributions. There also used to be another contribution that developers would be asked to make when undertaking a subdivision, new development, and that was the contribution towards recreational facilities. They would cover things like the contribution towards sports grounds or swimming pools or the skate parks that the Minister mentioned earlier.

Now, with these development contributions being defined differently within this Part 2 of the bill, I just wonder whether the Minister would give some consideration to the submissions from the likes of Federated Farmers or, indeed, the Local Government Business Forum, which includes in its membership Business New Zealand, the Electricity Networks Association, Federated Farmers, the New Zealand Initiative, the New Zealand Chambers of Commerce, and the Property Council of New Zealand, who all suggested that local government needed to get its own house in order before it was given any further tools to enable it to access new funding from development contributions. Also, Federated Farmers went on to suggest in their submission to the select committee that the bill should not proceed and that, in fact, the Government needed to be waiting on the upcoming Productivity Commission’s inquiry into local government funding and considering the recommendations from that inquiry before it actually moved ahead with these development contributions.

There seems to be a bit of unease around providing further tools for councils to make further deductions from developers when making these subdivisions. Also, I’d like just a bit of clarity from the Minister about whether these development contributions will be voluntary, whether there will be an expectation that they will be implemented, and whether discretion will be given to councils on whether to implement them. I know, as my colleague Ian McKelvie mentioned, that in some areas there is huge pressure on infrastructure when major developments occur, but in other areas—in some of those smaller areas like in the West Coast - Tasman electorate and in some of those smaller areas—those councils actually welcome development, and even in my own experience, I chose not to make development contributions compulsory as a mechanism for encouraging development.

So we don’t want to throw the baby out with the bathwater when we are debating these types of bills, because it is not horses for courses. Not every council is made equal with its major urban counterparts, and we just need to be cognisant of the fact that there will be a differential across the country in the need for these development contributions.

I would also suggest that when we’re talking about the kinds of things that development contributions may be used to fund in terms of infrastructure, perhaps it is better addressed through the mechanisms inside of the Resource Management Act (RMA), and we may need to be looking further at the RMA process rather than looking at the Local Government Act 2002 in terms of how we manage those developments. They are so intricately intertwined, I would suggest, that resource management and these development contributions need to work in parallel, and I just ask the Minister if she has given any consideration to that as well. With that, that’s the end of my call.

Hon NANAIA MAHUTA (Minister of Local Government): Just in response to some of the issues raised, the current narrower definition of “community infrastructure” has been in place since the 2014 amendments. Supplementary Order Paper 200, which I’m introducing, inserts a new clause 15 in Schedule 1AA—as members are aware—as a transitional arrangement. The clause will allow territorial authorities to recover development contributions for public amenities constructed before the bill comes into force, subject to additional transparency requirements. Councils will not be able to collect development contributions on public infrastructure that did not qualify under the 2014 definition until the bill has received Royal assent and councils subsequently amend their development contribution policies.

Territorial authorities who wish to recover development contributions on this infrastructure will be required to list the asset’s total cost, the proportion of the cost it wants to recover through development contributions, and the amount that is attributed to consents during the intermediate period, which cannot therefore be recovered through development contributions in the schedule of assets of the territorial authority’s development contributions policy—and there’s a key point. The councils, as members are aware, will consult on their development contributions policy and make it very clear to the community what the extent of the policy is and what it can cover and what it doesn’t cover. So the transitional provision will add, in addition to that, extra transparency criteria requirements to ensure that the community is very well aware of what can be attributed to community infrastructure.

Now, the point was made also about why we didn’t wait until the Productivity Commission placed its report and recommendations in the House, and that’s a point well made. However, it’s also salient to note that a member on that side of the Chamber did mention—and I agree—the approach of using development contributions as a tool that councils can draw on to attribute cost and seek those costs from developers. I think that if the criteria is transparent and if the community understands and is able to participate—as are the developers—on the development contributions policy, then that, in my mind, only strengthens the added advantage of having a tool such as this.

The question was put that the amendments set out on Supplementary Order Paper 200 in the name of the Hon Nanaia Mahuta to Part 2 be agreed to.

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

Ayes 63

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

Noes 56

New Zealand National 55; Ross.

Amendments agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Part 2 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 200 in the name of the Hon Nanaia Mahuta to insert a new schedule be agreed to.

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

Ayes 63

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

Noes 56

New Zealand National 55; Ross.

Amendment agreed to.

Clauses 1 to 3

Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Chair. Just very briefly, as we come to the end of this committee of the whole House stage, clauses 1 to 3, which are the title, the commencement, and then, of course, we move to the principal Act. I think that the bill will go through because the numbers are there on behalf of the Government, and the Opposition do oppose the changes in this bill.

The arguments that have been promoted this evening—particularly by the Minister in the chair, Nanaia Mahuta—I have not been convinced by. To try and convince anyone that with regard to development contributions, a long exposition on the transitional rearrangements isn’t an argument, and then, really, advancing the argument that “Oh well, the citizens of a community, including developers, always have the opportunity to engage in the development of a development contributions policy.”—well, that doesn’t prove anything. It just describes a process.

I think that underlines the paucity of good policy work that has gone into this bill, and there is nothing new in this bill. There is nothing here that advances affordable housing. There’s nothing here that actually advances the interests of people living in local communities. All it does is, indeed, use that tit-for-tat principle, “Well, you took it out so we’re going to put it back in.”, and if that is an example of good policy development on behalf of this Government, then I’m afraid it only gets a bare D.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Clause 1 agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Clause 2 agreed to.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Clause 3 agreed to.

House resumed.

The Chairperson reported the Taxation (Research and Development Tax Credits) Bill, the Fire and Emergency New Zealand (Levy) Amendment Bill, and the Local Government (Community Well-being) Amendment Bill with amendment.

Report adopted.

Bills

Corrections Amendment Bill

Second Reading

Hon KELVIN DAVIS (Minister of Corrections): I move, That the Corrections Amendment Bill be now read a second time.

While the legislation governing—

Matt Doocey: “Mr Slushy”.

Hon KELVIN DAVIS: He shouldn’t have said it. I knew someone from the National Party was going to raise the trigger word “slushies”. Why on earth Simon Bridges thought that he should inject himself into the slushy debate is beyond me. It goes to show that there is no passing car too small for Simon Bridges to start barking at. What an absolutely silly thing to do. I was going to let it go. I was going to let it go, but, no, as soon as I stood up, they had to raise the word “slushy”. David Bennett—he’s got more brains than Simon Bridges. David Bennett—he had nothing to do with the whole slushy debate. He decided to stay right out of it and, instead, Simon Bridges threw himself under the bus. What a stupid thing to do.

I was going to let it go, but no—I’d better get on with the second reading. Way to go, Matt Doocey, good start—good start.

Anyway, while the legislation governing corrections is working pretty well, the Corrections Amendment Bill will make a number of improvements to the safe, humane, and fair management of people in custody, to prisoner discipline, and to prisoner safety. It’s important to note that the Corrections Act and, therefore, these amendments relate to how prisoners are managed in prison, and it’s not about the numbers of people entering prison. As members will be aware, the Government is undertaking a broader reform programme to create a more safe and effective criminal justice system—[Interruption]—one that those guys over on the other side there are totally opposed to, and yet let me say that the prison population has reduced by 7 percent in 12 months, something that that side there never ever believed was at all possible.

As the members across the way there will be aware, the Government is undertaking this reform programme to create a more effective criminal justice system that improves public safety and better supports victims of crime, that meets our obligations to Māori, and that builds confidence in the criminal justice system. As first introduced, the bill contains 16 proposals covering a broad range of issues, and I would like to acknowledge the work of previous Ministers of Corrections because many of the proposals were developed under their stewardship. I would also like to thank all those people who made submissions on the bill during the select committee process. I believe that there were 17 submitters, which is fewer than usual, but the fact of the matter is, I believe, that that was more than made up for because of the quality of the submissions that were made.

Many of the submitters had very constructive submissions with suggested changes that I consider will have improved the bill. I also wish to take the opportunity to thank members of the Justice Committee for their work and their diligent consideration of the bill.

Unfortunately, consensus could not be reached on some important adjustments on the bill and, therefore, the bill in front of us is no different than what it was when it was introduced last year. One of these adjustments relates to prisoners vulnerable to self-harm, and I consider this to be the most important proposal of the bill.

We know that more than 90 percent of prisoners, at some stage in their lives, have a diagnosis of drug or alcohol addiction, or a mental health diagnosis and that many of them enter the corrections system with those undiagnosed illnesses or addictions. So the Government is committed to improving mental health outcomes for prisoners. Not only will the new build at Waikeria Prison include a new, specialised 100-bed mental health facility, which is the first of its kind in New Zealand, but the bill will improve the care and oversight of those who are vulnerable to self-harm. The bill will require prisoners to be assessed on arrival, have appropriate supervision, and have an individualised care plan that outlines the approach to address the prisoner’s risk of self-harm.

To support this approach, corrections is also investing $25 million into piloting new intervention and support services. That includes having a team of clinical specialists and a new model of care and taking a more therapeutic and long-term approach with vulnerable prisoners. Understandably, there were a number of submissions to the Justice Committee on this proposal, with significant support for its intention.

However, some concerns were raised over the use of strip-searching to detect items that might be used to self-harm and how we ensure it maintains a person’s dignity and self-respect, and these are legitimate concerns. Strip-searching can be distressing, particularly if a person has existing mental health issues or is, in fact, a survivor of sexual violence. The use of strip-searching, however, must be balanced against the consequences of actually failing to detect an item on someone who is vulnerable to self-harm or suicide attempts.

The safety of both prisoners and the staff is paramount. As the bill currently stands, at-risk prisoners must undergo a strip-search when first placed in an at-risk cell and every time they return to the at-risk area from another area of the prison. That means that there could be a person who is at risk that has to have numerous strip-searches on any given day. However, officials advised the committee that recent operational improvements to the model of care provided to people vulnerable to self-harm means an individualised approach to strip-searching can and should be introduced instead. This seems a sensible yet safe approach that will reduce the impact of strip-searching on vulnerable prisoners.

As the select committee could not agree on this revision, it is my intention to introduce a Supplementary Order Paper ahead of the committee of the whole House. This would give effect to an individualised approach which outlines the occasions on which prisoners at risk of self-harm must be strip-searched to ensure their safety.

The second proposal I wish to discuss in more detail relates to police jails. The bill currently provides an authority for corrections to declare spare capacity within a police jail to be part of an already established corrections prison. This would allow corrections to operate such facilities with corrections staff that are appropriately trained in custodial roles. The purpose of this provision was to provide corrections with added insurance against unexpected stresses on prison accommodation—in other words, because under the previous Government the prison population was rising so quickly and so rapidly, under their regime they were at risk of actually running out of prison beds for prisoners, and they needed to have another option, which was spare police cells. The police cells aren’t actually appropriate. They don’t have the proper ablution facilities and there were a number of concerns about the use of them. However, because of the great work that this Government has been doing, the prison population has reduced, plus, with the builds that are occurring, we should have more than adequate capacity, and it will reduce the concern over the use of police cells.

This provision was originally developed as an option of last resort for short periods of extreme capacity pressures. However, like I said, because of the decline in the prison population, there is a decreased likelihood that prison cells will need to be used, and in the longer term, as I’ve said, the completion of the new builds will add the additional capacity.

Because of this, it’s my intention to remove the clauses relating to the police jails provision through a Supplementary Order Paper. There were also a number of minor revisions suggested by submitters and officials that I find compelling and, therefore, worthy of introduction via a Supplementary Order Paper as well. These—there are about half a dozen—relate to (1) placement decisions for prisoners with young children, (2) information provided to prisoners upon entry to prison, (3) the use of mechanical restraints during hospital visits, (4) particular search powers, (5) disclosure of recorded phone calls to intelligence and security agencies, and (6) the delegation of a health centre manager’s powers.

Before I finish, I want to address one criticism made by the National Party MPs in the committee’s report back. The National Party view outlined in the report to the House references a provision that placed an expectation on prisoners to participate in rehabilitation. This was a provision requested by the previous Minister of Corrections. There is no question that rehabilitation is an integral part of the corrections system, so to help—

Hon Dr Nick Smith: Why take it out?

Hon KELVIN DAVIS: If the member just waits, he’ll find out why we’ll take it out. To help prisoners live a crime-free life upon release, corrections allocates significant resources towards assessing offenders and providing programmes according to their risks and needs.

Hon DAVID BENNETT (National—Hamilton East): Thank you, Madam Assistant Speaker. Isn’t that interesting? The Minister of Corrections could spend only 20 seconds on rehabilitation. The biggest thing that can be done for a prisoner is to rehabilitate them, and yet that Minister spent nine minutes and 80—nine minutes and 60—

Hon Members: Ha, ha!

Hon DAVID BENNETT: Well, my maths might not be right, but there’s worse maths in this room—9 minutes and 40 seconds. There’s actually worse maths in this room, which we’ll come to soon, but that member could spend only 20 seconds on rehabilitation.

Why have they taken rehabilitation out of this bill? Why has the Minister done that? The Labour members have got plenty of time to now follow on from that member’s speech and answer that question: why have they taken it out? That was the fundamental part of the legislation that Louise Upston put forward, and yet this member has taken out the most important part of the legislation. He’s left all the other bits—all the rats and mice that people can see potential in and see some reasonableness around—but the rehabilitation was the actual core of this legislation, and that’s gone.

It just shows that there is no sense of wanting to rehabilitate prisoners, because we’ve seen a reduction in the rehabilitation budget in our Budget last year. That has been reduced from what it was projected to be. They reduced that rehabilitation funding in the Budget last year. We know that it’s going to be reduced again this year, because the member over there has to make savings within the system. Because he has to make these savings, he’s going to cut down on the rehabilitation schemes within the Budget—isn’t that true, Minister? We look forward to seeing that coming out in the Budget, because the Minister started his speech with one fundamental line—which is quite interesting, coming from the Labour Party—“It’s not about the number of prisoners entering prison.” It’s not about the number of prisoners entering prison, when their whole policy is to reduce the prison population by 30 percent.

Their whole policy is a numbers policy. It’s not to see a reduction in reoffending. It’s not to see increased rehabilitation. It’s not to make sure that those prisoners will actually have a full and rewarding life outside of prison and actually contribute to our communities and to keep people safe. The Labour Party is only concerned about numbers, yet the Minister, when he stands in his speech here, says “It’s not about numbers.” when that’s all they are talking about.

The Minister says there’s been a 7 percent reduction in the prison population. Now, my maths before wasn’t great, but this Minister’s maths isn’t great either, because that 7 percent isn’t taken on the number of prisoners there were at election day; this is on a date sometime in the past since then. If we want to go back to what the Labour Party actually promised, it was a 30 percent reduction of prisoners on election day. On election day: 10,400 prisoners. That was the briefing to the Minister: 10,400. It’s not some much higher number that the Minister uses to come to his 7 percent reduction.

Isn’t it convenient that there’s suddenly been a reduction? But when we go back to what the Minister promised when the Minister promised it pre-election: 30 percent—

Hon Kelvin Davis: Yep, 7,300 in 15 years.

Hon DAVID BENNETT: Over 15 years now. We’ve got plenty of time. Well, he’s had a year and a half, and what’s the prison population? It’s over 10,000 again—it’s back over that. He’s tried everything he can to let people out. He’s let them go out on bail at their first hearing. He’s made sure that—

Hon Kelvin Davis: I don’t make those decisions.

Hon DAVID BENNETT: Pardon?

Hon Kelvin Davis: I don’t make those decisions; a judge does.

Hon DAVID BENNETT: Oh, you don’t make those decisions. Have you ever talked to anyone in the bail centres?

Hon Kelvin Davis: No. The judge—

DEPUTY SPEAKER: Actually—

Hon DAVID BENNETT: Never? Oh, I’m sure he has.

DEPUTY SPEAKER: Order! Order! I don’t need to talk to anyone, and could you please come back to the bill.

Hon DAVID BENNETT: Well, part of the bill—and the speaker before me talked about this—is around police jails. They’ve taken that out, and the rationale for taking that out is that they don’t need it because the prison population is reducing—that’s their rationale. Well, the reality is it’s now over 10,000. It hasn’t reduced by 7 percent, as that Minister said, and he’s tried all the easy things he can do.

Hon Kelvin Davis: Yeah.

Hon DAVID BENNETT: Yeah. He has tried all the easy things. Now the tough stuff has to be done. At some point—that’s right; he’s agreeing. Well, how are you going to reduce it by 30 percent if the tough stuff needs to be done? The tough stuff is letting more prisoners out, changing the bail laws, changing the sentencing laws—all those things that Andrew Little will not admit in this House to doing.

They will not admit that they are going to do those things. They’ve had a year and a half, they’ve had hui and they’ve had meetings, and they haven’t done it. The Minister has agreed that the tough stuff’s still to come. Well, the public out there need to know what that tough stuff’s going to be. We don’t want to go to the next election and have the Government hiding behind what it plans to do after the election around sentencing and bail. We want to know up front what that tough stuff’s going to be, because if there’s this magical promise out there that can be achieved about numbers—as the Labour Party has said—then be honest with the public. What have you got to hide?

Hon Kelvin Davis: Who’s hiding?

Hon DAVID BENNETT: You are. You won’t actually give the legislation. Now, come forward and tell us that tough stuff. We want to see it. The reality is that there has been nothing done to stop reoffending once prisoners get out of prison, and that is still very, very high. There has been a reduction in rehabilitation within the prison system, which is a key thing for prisoners and keeping our community safe, but there has been—and we admit this fully—all this work about reducing numbers. It’s not actually about changing people’s lives and it’s not about making our country safer for the victims out there. It’s all about numbers, and what’s actually happening—

Hon Kelvin Davis: The crime rate’s going down.

Hon DAVID BENNETT: Well, if the crime rate’s going down, you should have a lower prison population anyway, Minister. The crime rate’s been going down for a while, but the other thing, Minister, is that what is happening now within our prison population—which has been increasing in the last few months—is that we are actually getting tougher prisoners in there, and l. Look at what that means for corrections officers—

DEPUTY SPEAKER: This relates to the bill—how?

Hon DAVID BENNETT: Well, it’s the police jails bit, which they’ve taken out, which relates to prison capacity.

DEPUTY SPEAKER: You need to actually relate that to the bill.

Hon DAVID BENNETT: OK. So when we look at what’s happening now with corrections officers, time and time again, they are being assaulted and taken advantage of because the prisoners that are in prison now are actually the tougher prisoners, because they’re letting out a lot of the easier prisoners and leaving the really hard ones in there, and that’s creating an environment which is not safe for people working in that environment. The corrections officers’ association has been to that Minister around that, and we are not seeing any response from that Minister.

We are in the year of transformational delivery from this Government, and yet the prison population is over 10,000, so why, then, did they take out the police jail cells from this legislation? If we are in a transformational Government that’s in its year of delivery, why don’t we see rehabilitation in this legislation? Why don’t we actually see the clauses that were there originally, which were in the best interests of prisoners, corrections officers, and victims and the community?

This Minister is passing legislation through today that has been the highlight of his ministerial role as the Minister of Corrections, but none of it is his work. It was all done by Louise Upston. He’s taken out the two major bits of this legislation. That’s all he’s done—he’s taken out the two major bits—and we are left with a rising prison population—

Hon Kelvin Davis: Oh, God!

Hon DAVID BENNETT: Well, the Minister cannot deny that the prison population is increasing. It has in the last few months and it will continue to do so, and we do not see any attempt to get to that final, end goal, because they won’t do the hard stuff. They took the hard stuff out of here, and they won’t do the hard stuff in Parliament.

RAYMOND HUO (Labour): Thank you, Madam Deputy Speaker. The beauty, or agony, of listening to the contributions of the National members of the Parliament is that they’re willing to talk about anything but the bill. The Hon David Bennett is usually a good member, but—[Interruption] I am too kind—barking at every parked car has become a new normal. So that’s the reason.

Let’s get back to the bill. This is one of the 20 bills that the extraordinarily busy Justice Committee has considered. The Corrections Amendment Bill introduces a number of changes, and many of those changes are minor adjustments to the principal Act and do not fundamentally change the way people in custody are managed or how the prisons are operated. The purpose of this bill is to promote operational best practice or technology advances in the corrections system and also to clarify some legal ambiguities.

I thank the officials, advisers, the Parliamentary Counsel Office, and, of course, the submitters. We received and considered 17 submissions from interested groups and individuals, and we heard oral evidence from eight submitters.

There are a number of issues that are worth noting: first of all, the powers and functions of health centre managers. Clause 6 of the bill provides the authority for health centre managers to delegate their powers and functions, but delegation can only be to a registered doctor or nurse. The current proposal in the bill was developed to address a particular situation where health centre managers are not on site, such as weekends and evenings—that part is reasonably easy to understand. However, the introduction of a new model of care for prisoners who are at risk of self-harm has highlighted the limitations with the current provisions for delegation.

For example, there may be instances where the regular health centre manager may not be the most appropriate person to provide mental health advice, and, instead, they may wish to partially delegate the powers and functions relating to mental health services to someone with a mental health background on an ongoing basis. Under the new model for care for prisoners who are at risk of self-harm, other mental health professionals such as psychologists or psychotherapists may be employed. However, as currently drafted, a delegation could only occur if someone is a registered doctor or nurse. This is, obviously, an oversight. The Department of Corrections advised the committee, and the Justice Committee followed their advice and recommended introducing new provisions to enable the health centre managers to delegate to a broad range of health professionals. Instead of the term in the bill as introduced, we are going to replace the reference to a registered doctor or nurse with the new term “registered health professional”. “Registered health professional” is already a defined term in the principal Act.

The second issue is with regard to the review of mother and baby placement decisions. Since September 2011, the Act has provided for mothers with children who are less than 24 months old to be able to apply to have those children with them in prison. The chief executive of the department has a statutory authority to approve a mother’s request to have her child in prison. However, if an application for such a placement is declined or if it is decided to end such a placement, there’s no statutory right to appeal the decision. The bill addresses this issue by introducing a statutory review process. We recommend amending the bill by requesting that the department tell a mother the reason why an application was denied or why a placement has ended, as well as the process for having such a review and for having such a decision be reconsidered.

There are other matters that I wish to talk about more at some later stage of the debate, such as imaging technology searches to detect contraband, prisoners’ knowledge of disciplinary offences, and also the prisoners’ right to write letters and their potential implications for certain people—for instance, for those who have protection orders under the Domestic Violence Act 1995. I commend the bill to the House.

Hon MARK MITCHELL (National—Rodney): Thank you, Madam Deputy Speaker. It’s a pleasure to take a call on this, the Corrections Amendment Bill. It is unusual—and I just want to acknowledge the Minister—that in the Minister’s opening speech to the House we didn’t really hear much about rehabilitation. I know that he’s committed to rehabilitation. I think the whole House recognises that within our criminal justice system and within the corrections system, rehabilitation is a critical part of the solution—being able to get people out of prison and integrated and having successful lives back in the community again. I don’t understand at all—and maybe one of the speakers after me can stand up and explain it, because the Minister didn’t—why the clauses around rehabilitation have been taken out of the bill. This was a critically important part of this bill.

This Government’s funny. When this Government came into power, they very quickly congratulated themselves on a lowering of the prison numbers, and yet every other metric that goes wrong gets blamed on the Opposition. Now we’re starting to see the numbers rise again. I would put it to the Minister that they’ve become so obsessed on numbers and releasing people and getting them out of prison and transferring the risk back into the community that, actually, they’re losing focus on what really matters, and what really matters is around rehabilitation. It’s around identifying the best way to be able to rehabilitate people and get them back into the community.

The other puzzling thing about this bill is that they’ve taken out the flexibility that was going to be provided around using police station cells. You know, from experience myself, there’s a big cell block at the Auckland Central Police Station. It was always underutilised. It used to be staffed by police jailers, and it probably still is. But, actually, if you had pressure on corrections facilities, it gave you the flexibility to be able to treat that as a corrections facility—to actually be able to use cells and give prisoners their own cells. For whatever reason, you’ve decided with this bill to remove that and take away the ability to have that flexibility inside the system. Why would you do that? It seems counterintuitive, because what you’re saying is that you’re backing yourself to be able to lower the numbers. What if you don’t? What if you don’t lower the numbers?

DEPUTY SPEAKER: I’d ask the speaker not to bring me into the conversation.

Hon MARK MITCHELL: Sorry, Madam Deputy Speaker. You’re right, and I apologise. So I put this proposition to you, because the Minister, again, talked about criminal justice reform. We haven’t seen any indication yet in terms of where the criminal justice reform is going. We’ve had the conference that you put on that had a massive cost blowout and brought people together that were already actually talking with justice and the justice sector.

We’re now 18 months into this Government. We still have no indication as to what’s happening with these reforms. The only indications that we have had were very early on, with the repeal of the three-strikes legislation, which, of course, they realised was deeply unpopular with the public and they had to move away from that. Their own Labour justice Minister got thrown under the bus by their coalition partner. The only other indication that we’ve had is a weakening around sentencing, bail, and parole laws, and if that’s what’s going to happen, then, quite simply, you’re going to be releasing back into the community more people that should actually be in jail, that should be getting rehabilitated, and that are a risk to the community. We are going to have a tragedy. That’s going to happen. I can predict it right here and now, if that’s the road that you’re choosing to go down in your reforms to the criminal justice system.

The Minister actually admitted it—he said most of this bill was put together by the Hon Louise Upston. Could I acknowledge her and the work that she did as the Minister of Corrections. She was deeply passionate about the work that was undergone.

But if your idea of reform is to come back to this House and tell us that you are going to weaken our bail, sentencing, and parole laws and that what you’re prepared to do as a Government is transfer that risk back into the community, then we’re not going to support that. If you come back to this House and you show that there’s been some thoughtful reform done in our criminal justice system and we can see the benefit of it, then I assure the Minister that we will support that. But up until now we’ve seen no indications, we don’t know what work’s going on, and, like I said, we’re now starting to head towards the middle of the second year. So I’d expect to see something come through shortly. Thank you very much, Madam Deputy Speaker.

DARROCH BALL (NZ First): Thank you, Madam Deputy Speaker. It’s a pleasure to rise on behalf of New Zealand First in support of the Corrections Amendment Bill. I’d just like to concentrate on the departmental report summary and the main points that it brings up, but first I’d like to go into the comments made by the National Party in their minority view but also in the House tonight.

I can’t believe how rich it is, coming from the National Party, talking about how important rehabilitation is—in fact, Mark Mitchell said, “What really matters is rehabilitation.” Over the almost decade that that party was in Government, they didn’t spend one second on rehabilitation—not one second on rehabilitation. Not only that, but every single year they were in Government, the prison numbers went up and up, to a point where they went to a record level, to a point where they got this country into a place where we have to spend over a billion dollars on a prison. When the reoffending rate was skyrocketing, when the prison population was skyrocketing, they didn’t want to mention one little bit about rehabilitation. Now that this side of the House has got the prison population going down—they don’t like that, because it’s working over on this side of the House—they want to stand up and start talking about how important rehabilitation is. It’s just a bit rich, coming from the National Party.

One of the issues with their minority view—and, to be fair, I wasn’t sitting on the Justice Committee, so I’m happy to be corrected, but words matter in this House. They’ve made two points. One of them is around rehabilitation, which we’ve spoken about. The other one’s about police jail cells. They’re saying that both these provisions have been removed from the bill. But if those members over on that side of the House want to actually read the bill that’s in front of them, nothing has been removed from the bill, and they should know that—Mr Mitchell should know that, being on the Justice Committee. I’m not actually sure how the National Party minority view got submitted and got accepted, because the words matter. Nothing has been removed from the bill.

The other thing that I wanted to mention—

Hon Mark Mitchell: The Minister doesn’t look so sure about that.

DARROCH BALL: Read the bill, Mr Mitchell.

Hon Mark Mitchell: Ask the Minister. Check with the Minister.

DARROCH BALL: Read the bill—just read the bill.

Hon Mark Mitchell: He’s right there.

DARROCH BALL: Read the bill—read the bill. One of the other things that the National Party members who have stood up and spoken tonight have been talking about is rehabilitation, and they said that all we’re worried about is the numbers, but what they don’t understand is that the prison system and the population of the prison and the prisoners themselves are the end of the justice system. If the National Party had any inkling about the solutions to reducing the prison population, they would know that it doesn’t hinge on just one piece of legislation in regards to rehabilitation within the prison itself; it’s everything that happens before that.

There are a number of very important areas that the National Party failed at in Government, and their most important ones were the youth justice system, the unemployment issues that this country had under the National Party, the addiction issues that weren’t treated in communities and that led to the prison population, and the mental health issues that were not treated or focused on by the National Party and that increased the prison population under that Government. So I think it’s very rich, the attitude from the National Party about the way that this Government is tackling the prison population. All we hear is criticism from that side of the House when we’re trying to reduce the prison population in more than just one way—in more than just one way.

The use of prison cells was the second point that was brought up by the National Party in the minority view, and I think that it’s important for the members opposite to understand the purpose of why that provision was there in the first place—and it still is in the bill—but why the Minister has indicated that he will be putting in a Supplementary Order Paper to remove it. The question is: do we still need that provision in the bill as it stands?

The minority view that the National Party has submitted—and they have said it tonight in the House as well—is all about the Minister of Corrections having the flexibility, if needed, to make the jail cells come under corrections. But do we still need that provision, and what’s the purpose of the provision? In the departmental report it states that that provision’s purpose is to provide the department with extra capacity, so it’s got nothing to do with the ability of the Minister to have flexibility. It’s about the extra capacity. What’s already been explained is that the prison population has already reduced. We are being very successful, on this side of the House, at reducing the prison population—by 7 percent—and that trend will continue.

I think that it’s important also to look at one of the submitters on this very issue, and it’s the Independent Police Conduct Authority. They argue that while the practice in a previous term was necessary, including it in the bill would actually serve to normalise the practice. That’s a very important conversation that needs to be had—and the National Party need to understand this—about the purpose and what the unintended consequences of doing that and including it in the bill would be.

It’s already been said that there are a number of main changes in this bill, and all it is is allowing the prison management and prison guards to do their job with certainty in legislation, mostly. I think that one of the important changes is the new disciplinary offences that have been created. One of the most important ones is that it would create an offence for a prisoner to have contact with, or attempt to have contact with, someone in breach of any court order or direction. Currently, as it stands, such contact would only be a disciplinary offence if it was offensive, threatening, abusive, or intimidating. I think that’s an important inclusion. It’s also bringing in an offence about the use of psychoactive substances.

So the majority of the actual amendments in this bill are minor ones and don’t actually change the current operation. They just give certainty for the prison officers to do their jobs. But there are also some important ones in there, and that’s why New Zealand First will continue to support this bill.

Hon MAGGIE BARRY (National—North Shore): Thank you, Madam Deputy Speaker. I rise to speak in the second reading of the “Corrections Amendment Bill - lite”.

What a missed opportunity this bill is. As others have acknowledged, the Hon Louise Upston put a great deal of work, and time, and effort into reducing the likelihood of prisoners going back inside by providing them with rehabilitation, and providing them with drug treatment within the jails. There were some very substantial discussions that were had in the last Government about doing that, so this is just incomprehensible to us, on this side of the House, and it’s is why National did not support the bill in the Justice Committee in any way, shape, or form.

There are some minor technical arrangements that have been changed here. There are some that will provide certainty in new technology. There are elements of this that we do support. The new technology we learnt a great deal about. The department is using imaging technology, but it’s been very difficult to do so because of privacy safeguards. But, actually, it was explained to us at select committee that with the very invasive nature of some of the searches that were needing to be done, the imaging technology, with the right privacy provisions and so forth, does provide for a better experience for the prisoners and also the corrections staff, and, I think, for better outcomes generally. If people are going to bring in contraband that’s tricky to find, the imaging technology will help. So after the work was done at the select committee—we certainly listening there to what needed to be done to use it—the fact that it would be able to be used as a replacement for mandated strip-searches of prisoners was the bit that we took particular notice of and decided was useful.

But we’re getting more into release than rehab, and I think that this bill has really wasted some proper opportunities to turn people’s lives around. I don’t imagine for a moment that the Minister had that in his mind with this legislation and with what was removed, but I do think that this is an ongoing challenge that we really need to do more about when they are literally captive. We need to offer prisoners far more incentives, and even requirements, to do the kind of rehabilitation that focuses on what has got them into that sort of problem in the first place—making very bad decisions about their lives, which has got them into jail.

So, I guess, when we look at this, we see what’s not here as much as what could be here. I think that this bill is not going to deliver what that Government has said it wants to do, which is to reduce the prison population by 30 percent. It’s not going to happen, because you are continuing with the missed opportunities that this bill presents and not addressing the real cause of the problems of offending. I really think that that is deplorable.

So we sat there, probably with increasing sadness, as we considered this bill and thought about what might have been, and thought about how this lite bill could have done a whole lot more. Had it had the courage, had the Minister had the courage, had that Government had the courage—

DEPUTY SPEAKER: Order! Order!

Hon MAGGIE BARRY: —to really address the main fundamental issues, this could be a bill that would change lives and change the direction of the corrections experience in New Zealand, but it has missed that opportunity.

So we don’t support this bill. We oppose it, but we do so with regret. We would have preferred to have been here united in this House—which happens rarely—to try and improve the rehabilitation of prisoners. This bill fails to deliver that, which is why I do not support this bill.

GOLRIZ GHAHRAMAN (Green): Thank you, Madam Deputy Speaker. This bill essentially includes a number of different types of amendments to the way that we run prisons and the way that we administer them. I won’t address every single detail in the bill, but I will start by speaking about the requirements that it introduces in terms of the management and segregation of prisoners at risk of self-harm.

We know that over the past five years, 30 people in our prisons have committed suicide and one in five attempted suicide. That’s compared to 5 percent in the general population, which is still high. We know that our prison population generally suffers from incredibly, heartbreakingly high rates of mental illness, brain injury, and trauma. So knowing that the population that we hold in our prisons contains people that are, actually, at incredibly high risk of self-harm and that come to our prison system with a history of their own types of victimhood, it is important that at this point we’re going to introduce some management plans and some requirement that they be accommodated in ways that take account of the risk that they have of self-harm. Some of the requirements are that an assessment of self-harm risk be done on new entrants into our prisons. It’s incredible that that wasn’t already a requirement. There’s a new requirement in this bill that ongoing assessment of self-harm risk is done and a health plan is implemented for those prisoners that are identified to be at high risk of self-harm, and that accommodation that they are put into is deemed to be appropriate based on that plan.

Unfortunately, the Justice Committee wasn’t able to reach agreement on one aspect of the self-harm treatment approach to prisoners at risk, and that was in terms of their strip-searching. Officials advised that as the bill stands, the requirement to strip-search prisoners who are at high risk of self-harm might not be appropriate because it may actually be traumatic, and, in particular, in terms of those prisoners who have suffered things like sexual abuse, it may be particularly re-traumatising. They recommended that an individualised approach be taken in those cases to balance both the risk that they have something on them that may be used for self-harm, with the risk of re-traumatisation making them more at risk of that harm. So the Minister has—rightly, I think—indicated that he’s going to introduce Supplementary Order Papers to give effect to the advice of the officials and to protect against that.

The next thing that I think is something to be celebrated in this bill is that it creates new chief executive powers to review, at the request of a mother who is a prisoner, the decision not to allow her to keep her baby in placement with her. We know—and the Children’s Commissioner constantly does remind us—of the need to accommodate mothers with new babies because of all of the kinds of damage that can happen if attachments are broken at that young age. Attachment disorders lead to all sorts of other mental health issues like anxiety, depression, and other harms that come down the way. So to allow for mothers and babies to be together where the mother is, for whatever reason, incarcerated is something that will benefit New Zealand, actually, in terms of minimising the harm that the whole family, the whānau, and the community suffer when one person—especially a new mother—is held in prison. So, hopefully, with the review provisions, this will allow for fewer of those cases in terms of the separation of mother and child.

There is also the provision made here—and this probably relates back a little bit to the strip-search provisions under the self-harm risk prisoner segments—that allows for imaging technology to be used for any prisoner where a search is now necessitated. So that is a far less intrusive, far less traumatic experience. Again, whether or not a prisoner is deemed to be at high risk of self-harm or not, we know that the prison population is filled with people who have suffered trauma. So to maintain a sense of dignity in our prisons is important, and the self-imaging provision allows for that.

To turn to one last issue, the bill provides for certain offences to be created, and one of those is for anyone in prison contacting someone in breach of a court order. Presently, that is only an offence if the contact is akin to an abusive type of contact. But we know that in terms of, in particular, domestic and sexual violence victims, any kind of contact from an offender or an abuser would be particularly traumatic. Those types of contacts may actually be positive from the prisoner’s perspective, but they’re incredibly traumatic and are in breach of a court order. So they should be an offence in our corrections regime, and that’s being created.

One of the other things that came out of the select committee process—but the select committee wasn’t able to reach agreement on it—is the appropriateness of police cells being treated as corrections facilities, and the officials advised that that would not be appropriate. We know that police cells are not usually deemed appropriate for long-term detention. Some of the reasons for that are the lack of exercise facilities, the size of the cells, and the fact that cell-sharing among many prisoners is often used, so they breach a range of rights and welfare issues of prisoners. The Minister has also, rightly, indicated that he would introduce a Supplementary Order Paper to mitigate against that. In fact, he’s indicated that because we are now operating within a much broader review of our system to bring down the prison populations, that use of police cells is in fact not going to be necessary.

So the Government’s commitment to reducing the prison population, acknowledging that evidence shows that the prison system isn’t, in fact, particularly effective in keeping anyone safe, has resulted in this reduction of our prison population. An evidence-based approach has resulted in a lessened need for us to use police cells, which breach different and other rights and make our prison system less effective and less safe. So I also will welcome that change at the committee stage. I do commend the bill to the House.

Hon Dr NICK SMITH (National—Nelson): There is nothing as cancerous to the political process as politicians saying one thing in Opposition and doing exactly the opposite in Government, as is done in this bill. I want to call out both the Green Party and the Labour Party, and particularly Minister Kelvin Davis, on the bill in his name around the issue of shared bunking, because when I was in Government there was a constant chorus from Mr Kelvin Davis that double-bunking was a great evil.

I actually searched on the parliamentary Hansard and I have found 36 quotes from Kelvin Davis extolling the virtues of single cells in our corrections system. In fact, the Green Party in their policy specifically said that they would ban double-bunking.

Let’s come to the bill. It replaces the existing law in clause 66 of the Corrections Regulations. The existing law says that as far as practicable, prisoners will be accommodated in single cells, and then it sets down the exceptional circumstances in which they might have double cells. That was the law that National operated for nine years and it was heavily criticised by members opposite.

So what does the Minister’s bill do? Let me read it. Now, rather than saying that in all practicable circumstances it shall be a single cell, it says that a prisoner “may be accommodated in in a shared cell unless the prison manager is satisfied” that there is some special reason. What sort of double standard is that? How can the Green Party look voters in the eye and say “Trust us.”, make over—and I’ve got the number—24 press releases criticising double-bunking, and then roll down to the Parliament and vote for a bill that changes from a law that puts the presumption in favour of single cells to giving corrections open slather for double-bunking?

The leader of the Green Party has just walked in, and I would love to hear his explanation as to the damage his party is doing to its reputation as a party that people can trust. Its manifesto, its policy to the electorate, said that it would oppose double-bunking, but it is now voting for a bill that changes the presumption in the law to do the exact opposite.

But what is even more extraordinary is actually the Minister of Corrections. I’ve checked his number of press releases. He should have a look, because it was on the Labour Party website. There are actually 22 press releases in the name of Kelvin Davis indicating his opposition to double-bunking. How can he have the audacity to come to this Parliament and sponsor a bill that does exactly the opposite of what he says? I think this issue is very practical. What more practical issue could you have than whether you share a cell or whether you do not? I ask Mr Kelvin Davis and I ask the Green Party: what’s changed that you have broken your word to New Zealanders? I also note—

Hon Kelvin Davis: More beds available—more beds available.

Hon Dr NICK SMITH: Oh, I seek leave for Mr Kelvin Davis to be able provide an explanation as to this reversal of policy.

DEPUTY SPEAKER: Leave has been sought. Is there any objection? There is objection.

Hon Dr NICK SMITH: So the Minister interjects, offers to give an explanation as to this giant backward flip on one of the core issues in corrections policy, and his own Labour colleague objects to him providing that answer. So I simply challenge the next Labour member to get to their feet and answer the question as to why they have done a super backward flip on the issue of double-bunking, an issue that they railed against for nine years and are now changing the law on in exactly the opposite direction. Here’s my new challenge for the Green Party: your policy specifically says—and we share the values—that we need to put far more emphasis on the rehabilitation of our prisoners. We’re with you on that, and what the original bill had provision for is requiring a rehabilitation plan for every prisoner.

Now, what happens to Governments when they get into office? I’ve been there: officials come along and say “Now, Minister, don’t put it in the law. Trust us. We’ll have a rehabilitation plan for every prisoner.”, and I see every previous and current Minister having a little chuckle. Why don’t we put in the law a requirement on corrections for every one of our 10,000 prisoners to have a rehabilitation plan? Wouldn’t that be what we would want to do if we were serious about the issue of reducing reoffending rates and ensuring that corrections does what it says in providing for that rehabilitation?

National will be reintroducing the original amendments to the law that were in this bill to provide for rehabilitation, and it will be a test of the Green Party, again—just like on double-bunking—as to whether it is a party that will again break its word in this important area of corrections policy. Here’s the problem: in almost every area of endeavour, whether it’s climate change, whether it’s housing, whether it’s road safety, or whether it’s justice, there is this almighty gulf between the promise and the performance of this Government. This bill is a damning indictment on both the Green Party and the Labour Party in that on the most contentious issue in the area of corrections—on double-bunking—they are doing exactly the opposite of what they said they would do.

DEPUTY SPEAKER: The next is a split call.

Hon PEENI HENARE (Minister for the Community and Voluntary Sector): Thank you, Madam Deputy Speaker. Wow! That member—Dr Nick Smith—talks about what’s cancerous to a politician’s career and says that in Opposition you say one thing and in Government do another. Well, I put to that member and that side of the House that after their nine years in Government, our prison system reached a crisis point, a crisis point where we almost ran out of capacity—almost ran out of capacity.

I lay a very simple formula before this House tonight—a very simple formula—and if that side will listen, they’ll understand why, in the famous words of Renée Geyer, we are heading in the right direction. It goes like this: a reducing prison population frees up more beds. Add to that that more beds are coming online. Therefore, we no longer have the capacity issue that saw that side of the House campaigning on a new, billion-dollar mega-prison, and what did the public say to that? “We don’t want that.” The public said that there has to be a better way, and I am proud that the Minister of Corrections, the Hon Kelvin Davis, is making sure that our prison system, the corrections system in this country, is actually fit for purpose and actually does what the general public expects of it.

It isn’t simply about building more beds, higher walls, stronger locks—no. In fact, mention was made on that side of the House about rehabilitation, so allow me to expand on the words of the Minister this evening. There is no question on this side of the House that rehabilitation is an integral part of the corrections system—no question whatsoever—to help prisoners live a crime-free life upon release. Corrections already allocates significant resources toward assessing offenders and providing programmes according to their risks and needs and their ability to be responsive to the programme.

There are a number of reasons for this. Firstly, there are already requirements in the Act for corrections to assist in and provide access to rehabilitation and reintegration through the provision of programmes and other interventions—that’s pretty clear to me. It makes sense to me.

Secondly, an explanation clause has no operative or legislative effect. Essentially, this renders it meaningless as it does not affect any behavioural change and has no enforceability—no behavioural change and no enforceability.

What are we setting out to do here? What are we setting out to do here? We are setting out to make sure that those who enter into our prison system have the rehabilitation services that they need. Guess what? They already do. Simply putting something in a piece of legislation doesn’t make it at all enforceable, nor does it force behavioural change.

Thirdly, prisoners also already have a strong incentive to participate in rehabilitation programmes through parole requirements to receive early release. An expectation clause does not alter that.

We offer, again, thanks to all those who submitted on this bill, because it was made rather clear, as mentioned by the Minister, that while there was a small number of submitters, the quality was really strong. It was made very clear from those submitters that what we are doing currently, not just in this bill but as a Government, looking forward into the future for those of the prison population, is the right thing to do. That side asked for a vision and a plan. We have one.

We acknowledge that mental health and drug and alcohol addiction are serious issues for the prison population. So what does this side of the House do? We make sure that there is a facility available for that—beds available for those who need that service. That side is asking for a vision. They had nine years to do it and didn’t. On this side of the House, within one term, we have already made available beds for mental health services and drug and alcohol addiction services, something that that side only ever spoke about and did nothing about. I’m proud that this particular piece of legislation is but one piece of a larger work programme from this side of the House to make sure that the prison population continues to decrease and, more importantly, does so safely, and that those who enter into the prison system come out on the other side better people.

CHRIS BISHOP (National—Hutt South): A very senior member of this House by the name of Steve Maharey used to have a saying “That’s the sort of thing you say in Opposition, not what you say in Government”, and that is exactly what the Labour Party and the Green Party are like when it comes to this bill. When they were in Opposition, double-bunking was the end of the world. It was a disaster. It was a breach of human rights. We had to get rid of it. Rehabilitation was the way to go. And now what do we have? Well, we have a poorly performing Minister, who has been given all of the work by Louise Upston and the National Government, turning up into the House, and somehow he has managed to make a good bill deficient. Somehow, with the best of intentions, he has managed to make what was actually a series of sensible progressive reform changes to our corrections system worse, because he has made it easier to do to allow cell sharing and double-bunking and he has taken out the rehabilitation components of the Corrections Amendment Bill.

It’s exactly as my colleague Dr Nick Smith said: it’s all very well to talk in Opposition, but a lot harder to do the mahi in Government. Actually, that’s what the Labour Party is finding, because it’s all very well to say “We’ll have 100,000 homes.”, “We’re going to eradicate child poverty.” and “Climate change is our nuclear-free moment.”, but governing is harder, and it actually requires doing real work. It requires a Minister who knows what they’re doing, and this one does not. So the Labour Party in Government is discovering that it’s not as simple as simply spouting rhetoric and talking in feel-good ways and talking in buzzwords. Actually, it’s a lot harder. So we have this bill, which is generally sensible, but makes it easier to double-bunk.

Frankly, I don’t know how the Green Party can sit there and vote for this piece of legislation. The Green Party likes to get on their high horse at every available opportunity, and, frankly, even when there aren’t available opportunities they like to climb on that high horse of moral righteousness and probity and they like to lecture those of us in Parliament about how only they have the true path to greatness and virtue and all of the things that are great and well in the world, yet we have the Green Party here—Chlöe Swarbrick and James Shaw are in the House—and, in a few minutes’ time, they are going to vote to make it easier to double-bunk.

I just want them and their supporters out there—who I know are listening at 9.41 p.m. on a Tuesday night—to reflect on the tawdry Government they have become a part of. They need to reflect on what exactly they are getting out of this arrangement, because they are having to vote for a bill that makes it easy to double-bunk and that has removed the rehabilitation requirements in the legislation, and what do they get for that? They get a climate change bill that’s stalled, they get a bit of extra money for conservation, and they have to prop up Winston Peters as Deputy Prime Minister. The Greens need to reflect on the tawdry deal they have done and the lack of leverage they have in this relationship. I just make that point as an aside and say that they should be ashamed to vote for themselves.

I do want to pick up on a comment that Darroch Ball made, because that’s the other thing about the Greens: they have to sit there and vote for a Government where Darroch Ball has more power than they do. That must be a very depressing prospect when one wakes up in the morning.

Darroch Ball made a series of pretty outrageous statements. Darroch Ball said the last National Government did nothing about rehabilitation. Well, a few facts for Darroch Ball: when the National Government came into power in 2008, very, very little money was spent on literacy and numeracy, and I actually looked these statistics up the other day. Do you know how much the literacy and numeracy budget for prisoners went up when National was in Government? I couldn’t believe it. It was 500 percent—500 percent. It quintupled—it quintupled.

The reason for that was that the National Party recognised in Government that it is exactly as Kelvin Davis likes to talk about: it’s giving prisoners the skills, so when they leave they can go out and get jobs and transition into the workforce so that they don’t go back into prison. When we came into Government, very few prisoners—in the hundreds; not even in the thousands—were getting literacy and numeracy support. Madam Deputy Speaker, I know you know a lot about this: a succession of National Ministers pumped money into that, and, actually, the National Party is very proud of what it accomplished in Government. It’s just a shame—it’s just a shame—that what could have been a good vehicle for further reform and further rehabilitation efforts were lost by this deficient piece of legislation.

DEPUTY SPEAKER: I was so entranced by what you were saying that, sorry, I forgot to give you a warning bell at one minute.

So this is a split call, too? Is ACT wanting to take its—

DAVID SEYMOUR (Leader—ACT): I yield my call to Rino Tirikatene. If I can just say that if something goes up 500 percent, it doesn’t quintuple; it sextuples.

RINO TIRIKATENE (Labour—Te Tai Tonga): We’ve had Mr Bennett tonight, who didn’t know how many seconds were in a minute, and now we’ve had that contribution.

I’m delighted to speak in support of this bill at its second reading. I want to acknowledge the Minister of Corrections, the Hon Kelvin Davis, for his work in bringing this bill to the House and putting in place the changes in practice within our prison system that have long been called for and which have been implemented through this bill. I want to acknowledge him because we’re seeing the results already: a 7 percent reduction in the prison population since we have taken power as a coalition Government. That’s a massive impact, and especially for Māori, because Māori, as we know, are over 50 percent of the total prison population. So that is an important achievement, and I do want to acknowledge the work of the Minister in that regard.

But I want to just first of all address the two issues which the Opposition have been waxing lyrical on in their contributions this evening. We’ve heard about the rehabilitation—these elusive provisions around rehabilitation. They were never contained in this bill. It was never part of this legislation. Whatever they may have created or drafted when they were in Government, they should have implemented it.

There’s no point crying crocodile tears now around some supposed rehabilitation programmes and the like. They were never part—

Hon Dr Nick Smith: Why did you take it out?

RINO TIRIKATENE: They’re not part of this bill, so it’s totally erroneous what you’re talking about. It’s not part of this bill that our Minister has introduced. I think they’re in some sort of—

Hon Meka Whaitiri: Denial.

RINO TIRIKATENE: —yeah, denial—denial around what might’ve, could’ve, should’ve happened. You had nine years to do it and failed to do anything about it. So it’s a bit rich to have all this fake emotion around rehabilitation programmes and where are they when it was never ever part of this bill. If they were part of whatever, that side should’ve done it when they were in Government. So that’s a big red herring. It’s a big red herring, what they’re talking about.

What we’re debating in this bill, and what we debated, is unchanged, unfortunately, from when we spoke at the first reading. From when it was introduced, there was no mention of anything around rehabilitation programmes, so let’s stick to this bill. Let’s stick to this bill, and please don’t try and provide some sort of distractions which are totally irrelevant to the bill that we’re debating.

So getting back to this bill, I want to—

DEPUTY SPEAKER: That would be good.

RINO TIRIKATENE: —acknowledge the Minister, firstly, for the measures which we are taking around at-risk prisoners—prisoners at risk of harm. I want to acknowledge the proposed expansion of providing a more tailored, individualised—[Interruption]

DEPUTY SPEAKER: Can we just stop the crosstalk, please. Your colleague is actually trying to speak.

RINO TIRIKATENE: Thank you. I want to acknowledge the work of the Labour members of the committee, the Government members, which has actually led to expanding recommendations, which will provide actually more protection, care, and individualised support for those prisoners that are at risk of self-harm.

Let me switch back in the time I have remaining to the issue of the double-bunking, which Mr Nick Smith has raised. I’ve been reassured by the Minister that double-bunking numbers under his watch have actually gone down since we have been in Government. Those numbers are down. So, again, a totally erroneous argument is being raised by the other side around “Oh, we are permitting the use of double-bunking.” It has been a practice, but it’s been reducing under our watch, and it will continue to as we have seen a steady decline—that 7 percent reduction—and, likewise, less use of that provision. So the results are actually being achieved.

We’re not focused on just numbers, though—we’re not just focused on numbers. We’re about delivering results. The results are reflected by the numbers, and so I want to acknowledge Minister Davis, again, for his outstanding work in this portfolio and for presenting this bill, a very sensible bill, which is going to help in the operational procedures and the handling of prisoners within our corrections system. We know it’s desperately needed.

We know there are a range of other measures within here—let me see—around safer searches, searching for contraband and the like, through modern X-ray imaging, and other measures like that, and the ability for mothers who are caring for their children, their babies, to have a right of review of decisions around when that may end. I think that shows that we have a heart within our Government as well within the corrections system in terms of all of the different procedures that we are implementing through this bill. So I want to acknowledge the Minister once again for his work.

I’m saddened that the select committee was unable to reach a consensus on this bill. Here we are debating it at its second reading and the bill is exactly the same as it was at its first reading. But I am heartened that the Minister will be producing a Supplementary Order Paper (SOP) at its committee stage which will put into effect the recommendations that the Labour members of the select committee have so helpfully contributed, as likewise in this bill, through their contributions and their hard work that were conducted at that stage. Unlike the other side, who are preoccupied by fantasy rehabilitation provisions and other erroneous arguments which were never part of this bill, our side of the House has gotten on with the job and made some helpful contributions, which will be ultimately implemented by the Minister through his SOPs in later stages where we will approve this bill.

With that, I just want to acknowledge the Minister, once again, and the work of our Government in this bill, and I commend it at the second reading. Kia ora tātou.

CHRIS PENK (National—Helensville): Thank you, Madam Deputy Speaker, for this unexpectedly early opportunity to contribute to the debate on the Corrections Amendment Bill at this, the second reading. [Member receives note] I’ve got a message to pass back to my colleague, but I might leave that for later. We’ve heard discussion on both sides of the House relating to the good, the bad, and the ugly of this bill. I’ll touch briefly on each of those, with the good, of course, being the positive stuff that’s in the bill—largely a result of good work from the previous Government—the bad being the positive work that hasn’t been reflected in this but has been removed, and I’ll provide the ugly.

Moving on quickly to the explanatory note of the bill, looking at the general policy statement, it’s pretty hard to disagree with the broad intentions of it. It’s saying that it’s “designed to improve the ability of … (the department) to safely and humanely manage prisoners:”—for example—“improve discipline and safety:” of prisoners, and their fair treatment as well. I think the only objectionable thing in that is the doubly split infinitive—“to safely and humanely manage prisoners”—but, really, the key point there is what’s not said. It’s the Boyzone approach to legislative change: they’ve said it worst by saying nothing at all about rehabilitation. Colleagues on this side of the House have already touched on that, and that’s the theme to which I’ll return in my remaining time.

I should note, of course, being the second reading, that we’re principally concerned with reporting back from the select committee. I wasn’t a member of the Justice Committee, I think, for any of the deliberation or consideration and so forth, and I’ve done my best to understand the back and forth by reading the various reports and statements and so on. It’s been more confusing, not less, to have heard some of the debate from the other side of the House about the comings and goings of the legislative process. I suppose it’s inevitable in something that’s got the word “Corrections” and “Amendment” in it, that there’ll be some confusion about what’s the starting point and what’s in and what’s out, but it seems, in any case, pretty clear that Supplementary Order Papers will be put forward by the Minister which will have an effect, I suppose, of making it a better piece of legislation in his mind. But, certainly, the state of it as we see it in front of us now is not one that we are ultimately able to support.

On the subject of rehabilitation, as has been mentioned, technically, it’s to restore something to a former condition—perhaps to working order and so on—and that, of course, is a very worthy aim in relation to prisoners, those who find themselves detained at Her Majesty’s pleasure in the system. It’s been, certainly, the philosophy of those on this side of the House through our time in Government—not least of all your good self, Madam Deputy Speaker, in a ministerial capacity, I’m aware—to really focus on the importance of doing so not only for the benefit of those individuals themselves but also society more generally as a whole. Rehabilitation, I suppose, could be summed up by the phrase “Do the mahi, get the treatment.”, if you’ll excuse that slight play on the more usual statement around the value of that hard work that will pay off—just a little note to the Hon Peeni Henare, whose contributions I always enjoy.

But in relation to the explanatory note of the bill not having the weight of operative provisions, it can be the case, of course, that the explanatory note can be used to interpret substantive provisions so that, for example, a management plan that’s described in the Act itself as amended could actually be interpreted as a treatment plan or rehabilitation plan—perhaps by a slightly activist judge, I suppose—if it was made clear in the explanatory note that that was the purpose of the legislation.

Anyway, that’s a reasonably technical detail, which, at 9.53 on a Tuesday night, I’ll leave at that, and I’ll just return to the point, I suppose, about the shared cells—so-called—in the legislation, aka double-bunking. I’ve actually done a bit of double-bunking myself in my previous life on submarines and containers as well—on an oil terminal in the Northern Arabian Gulf—so I can speak highly of the experience, but not too highly, I hasten to add. Of course, the point that Dr Smith makes around the reversal of the presumption—whether double-bunking will be a valid option in any case—is a very well-made one.

So I encourage members opposite to think on that, and particularly in the context of statements that they’ve previously made, again as highlighted by Dr Smith. At that point, I leave my contribution there, adding only that on this side of the House, we feel unable to support the bill in the form that it’s come back from select committee.

Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you, Madam Deputy Speaker. Can I say that it is a huge pleasure to stand up and speak on this bill, which is yet another leap forward in corrections, on top of the fantastic and pragmatic work that the Minister of Corrections has done to date. I think what this bill shows is that it’s not all about the rules; it’s also about how those rules are implemented on the ground.

I must say that when I was put on the Justice Committee and this bill was before us, I resolved that I should exercise my right as an MP and go and look at the prisons so I knew exactly what I was talking about, and I have done that. I would challenge all MPs to go and do that so that when they talk about double-bunking, they can say that they’ve seen a cell with two beds in it—the cells that are used—and then make their own judgment as a human being as to whether that is a humane way to incarcerate a person. I must say that while it is certainly incarceration—and incarceration is not pleasant by any means—it is humane, those cells. The regulations and the Act set out the basis for that kind of imprisonment so that the dignity of the prisoners is still preserved—so that there is enough space in those cells for two prisoners to be kept there.

So what we have here is not the wishy-washy position that existed under previous legislation, but we are front-footing it and saying quite clearly that it is appropriate to have shared cells, and not only that, but it also makes clear that residential-style accommodation is appropriate as well. What we see if we go to prison is, ideally, a transition. From a sometimes very high - security imprisonment or high-security imprisonment—which is, I must say, pretty brutal, as it must be—those prisoners transition over time to a freer situation where they are able to mix with other prisoners in perhaps a shared cell, although, as the Minister has repeatedly said, under this Government, the amount of prisoners that are sharing cells is diminishing as we speak. The prison population is falling year on year because of the steps that have been taken in this Government.

So what we have is a pragmatic and honest approach to what’s going on, and I must say that the other thing I was very impressed with was the mother and child unit at Christchurch Women’s Prison. I must say, it gave a real sense of hope to see these women, who had, obviously, fallen foul of the law, caring for their children and finding in that real meaning, and they were also being taught how to care for those children in accommodation which was very much like a social housing unit, where there was a community. So when children are not able to be placed with their mothers, or that is the decision that’s made, there’s an ability for that to be revisited.

Also in there is the ability to revisit the placement of people away from whānau, because we know that those connections—and this is the wider point—are important for when people get back into the community and when people return to family, to whānau, and when we have people who are placed near family, they can maintain those connections. So in this situation, we have a much more humane approach.

Further, there is the fleshing out of the management of prisoners at risk of self-harm, so that they also can be dealt with humanely. They can be dealt with in a way which takes into account their special needs and they can be isolated appropriately and dealt with with the appropriate dignity, and the Minister himself talked about the need for being cautious around procedures like strip-searches, which are of themselves traumatic.

So this is an excellent piece of legislation. It’s legislation which really tidies up and takes prison management into the 21st century. It also makes interface as well with the practice of prison, and I think that’s a very important matter. I commend this bill to the House.

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

Ayes 63

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

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Bill read a second time.

The House adjourned at 10 p.m.