Wednesday, 25 March 2026

Wednesday, 25 March 2026

The Speaker took the Chair at 2 p.m.

Start of Sitting Day

Karakia/Prayers

BARBARA KURIGER (Deputy Speaker) (14:00): Almighty God, we give thanks for the blessings which have been bestowed on us. Laying aside all personal interests, we acknowledge the King and pray for guidance in our deliberations that we may conduct the affairs of this House with wisdom, justice, mercy, and humility for the welfare and the peace of New Zealand. Amen.

Visitors

Kiribati—Public Accounts Committee

SPEAKER (14:01): I’m sure that members would wish to welcome the Public Accounts Committee from the Kiribati House of Assembly, who are present in the gallery.

Presentation

Papers

SPEAKER (14:01): No petitions have been delivered. A paper has been delivered for presentation.

CLERK (14:01): Creative New Zealand amended statement of performance expectations 2025-26.

SPEAKER: I present the report of the Controller and Auditor-General entitled Supporting people in immediate housing need. Those papers are published under the authority of the House. No select committee reports have been delivered to the Clerk for presentation. No bills have been introduced. The House comes to oral questions.

Oral Questions to Ministers

Prime Minister

Question No. 1

CHLÖE SWARBRICK (Co-Leader—Green) (14:01) to the Prime Minister: E tautoko ana ia i ngā kōrero me ngā mahi katoa a tōna Kāwanatanga?

[Does he stand by all of his Government’s statements and actions?]

Rt Hon CHRISTOPHER LUXON (Prime Minister) (14:02): Yes.

Chlöe Swarbrick: Does the Prime Minister agree with Fitch, who have recently downgraded the country’s credit outlook, that our economy has “a substantial dependence on energy imports” and, therefore, an increased vulnerability to shocks like the one New Zealanders are currently facing, and, if so, can he see that increasing our reliance on fossil fuels makes us less resilient?

Rt Hon CHRISTOPHER LUXON: I think the Fitch report highlights again why financial discipline is so very, very important—and good, responsible economic management in volatile and uncertain times. It’s a good reminder of why this Government has taken on board the mistakes of the COVID management plan, which led to a 32-year high in inflation and a tripling of our debt. That is what this Government is very conscious about as we navigate this fuel crisis.

Chlöe Swarbrick: How much has the global price of liquefied natural gas (LNG) increased since the start of the US and Israel’s war on Iran?

Rt Hon CHRISTOPHER LUXON: I don’t have that number right at hand today, but I just say to you that, yes, there is no doubt about it, LNG prices have increased around the world.

Chlöe Swarbrick: Will his Government’s billion-dollar decision to build an LNG import terminal make our country more or less reliant on energy imports?

Rt Hon CHRISTOPHER LUXON: Well, no disrespect, but that is a member who delivered a failed energy policy—[Interruption]

SPEAKER: Just a moment, Prime Minister. We want to hear from the Prime Minister, not the cheerleading crowd from the back.

Rt Hon CHRISTOPHER LUXON: With all respect, as I said, that is a member who, as part of a former Government, delivered a failed energy policy that saw this country making a rather unique transition from domestic gas to imported international coal. It had a Lake Onslow project at $17 billion—$8,000 for every single household in the country—that led to an $800 megawatt per hour price in wholesale electricity prices. What we are doing, as I’ve previously explained, is we’re dealing with the dry-year risk, lowering the risk premium, and therefore wanting to lower power bills by $50 for every household.

Chlöe Swarbrick: Does he agree with the Infrastructure Commission, who warned, “Importing LNG may be a commercial option for some, but it isn’t clear that it would lower average electricity prices”, and, if so, why is he committing billions of dollars of New Zealanders’ money to a project that won’t even lower their bills and will increase our vulnerability to fossil fuel shocks like the one we’re currently experiencing?

SPEAKER: You can ask a question; you can’t make a statement like that in a question. The Prime Minister may respond.

Rt Hon CHRISTOPHER LUXON: Well, I just disagree with the assertion in that question.

Hon David Seymour: Did banning oil and gas exploration within New Zealand’s territory make us more or less dependent on energy imports, and, if less, what is the Government doing about it?

Rt Hon CHRISTOPHER LUXON: Well, it meant that New Zealand is the only country I know of that’s making the rather unique transition from domestic gas to international coal, and, in the process, worsening emissions. But that is a function of a failed Labour-Greens energy policy.

Hon David Seymour: Does burning coal—[Interruption]

SPEAKER: Sorry, just a moment.

Hon David Seymour: Does burning coal to generate electricity increase or decrease New Zealand’s emissions—something that I would have thought would be of great concern to the other side of the House?

Rt Hon CHRISTOPHER LUXON: I think, actually, burning international, Indonesian coal is about twice as bad as using domestic gas.

SPEAKER: [Interruption] Chlöe Swarbrick—and no one else.

Chlöe Swarbrick: What will it take for him to cancel this billion-dollar, fossil-fuel dependence - fostering LNG infrastructure, if not calls from economists and experts to can the project and instead invest that money in renewables?

Rt Hon CHRISTOPHER LUXON: Well, I just would say in response to the second part of the question that this is a country experiencing a renewables boom. We are seeing a huge investment in renewables. Just think about this Government: you know, we’re in the process of approving a project in Southland that will deliver renewable energy to 100,000 homes, which the Labour-Greens Government didn’t approve. So, you know, we have a renewables boom under way—that’s great—but we also have to manage dry-year risk and take the risk premium out and lower power bills for people.

Finance

Question No. 2

DAN BIDOIS (National—Northcote) (14:06) to the Minister of Finance: What recent reports has she seen on New Zealand’s fiscal position?

Hon NICOLA WILLIS (Minister of Finance) (14:07): As I mentioned yesterday, Fitch Ratings has confirmed New Zealand’s foreign currency rating at AA+ but revised the outlook from “stable” to “negative”. Fitch is concerned about delays in fiscal consolidation and debt reduction, due to weaker than expected economic growth. It observed that conflict in the Middle East poses further risk to the New Zealand economy, citing inflationary effects from fuel imports and a broader global weakening. A negative outlook is a warning; it is a reminder of why keeping a tight rein on spending, getting back to surplus, and bending the debt curve over is so important, even when global events make this more challenging.

Dan Bidois: What has the Government been doing to get the books back in order?

Hon NICOLA WILLIS: Over the past two years, the Government has pursued a balanced fiscal strategy: lifting investment in front-line services like health, education, and law and order, while charting a credible path back to surplus. That increased investment has largely been funded from savings elsewhere across Government. In total, we have made $43 billion worth of savings across the last two Budgets, with further savings planned in Budget 2026. Any slippage in our fiscal targets has occurred because of forecast revisions outside the Government’s immediate control, not because of discretionary spending or revenue decisions. Unlike the last finance Minister, I stick to my operating allowances.

Dan Bidois: What is the impact of the Middle East conflict on the Government’s books?

Hon NICOLA WILLIS: It is one thing—

Hon Carmel Sepuloni: How bad was it before?

Hon NICOLA WILLIS: “How bad was it before?”, Carmel Sepuloni asks. It was very bad under Labour, and New Zealanders voted in recognition of that. It is one thing to consider what this conflict means for the New Zealand economy—and there is a lot of uncertainty about that, and I recommend that members look at the Reserve Bank Governor’s speech from yesterday, as she talks about these issues in a very considered way—and it is another step again to work out the impact of the conflict on the Government’s books, both on revenue and on expenses. Treasury’s next fiscal forecast will be released alongside the Budget in May, and I expect a number of different scenarios will be presented. What I do know is that this conflict won’t result in a windfall gain of hundreds of millions of dollars in extra GST, as some have alleged; that is simply economic illiteracy.

Dan Bidois: How prepared is New Zealand for an economic shock?

Hon NICOLA WILLIS: New Zealand is vulnerable to economic shocks, natural disasters, and global events—as we are seeing starkly at the moment. New Zealand can deal with such shocks. What I would say is that we have a lot less room than we did a few years ago because our rainy day fund essentially got emptied out over COVID—and the rainy days keep coming. [Interruption] Net core Crown debt rose markedly as a proportion of GDP, and forecasts made before the Middle East conflict showed debt getting close to the debt—

SPEAKER: Sorry, that’s got to stop. Just sitting in your seat and yelling at the top of your voice makes the person yelling look a little bit ridiculous and disengaged. The member will finish the question with no comment from the rest of the House.

Hon NICOLA WILLIS: Net core Crown debt rose markedly as a proportion of GDP, and forecasts made before the Middle East conflict show debt getting close to the debt ceiling of 50 percent of GDP—that is the debt ceiling recommended by Treasury. In the future, it would be much better to go into the equivalent of a global financial crisis or Canterbury earthquake with debt comfortably below 50 percent of GDP rather than uncomfortably above it.

Prime Minister

Question No. 3

Rt Hon CHRIS HIPKINS (Leader of the Opposition) (14:11) to the Prime Minister: Does he stand by all of his Government’s statements and actions?

Rt Hon CHRISTOPHER LUXON (Prime Minister) (14:11): Yes.

Rt Hon Chris Hipkins: What would trigger a move from response level 1 to response level 2 on the Government’s fuel emergency response framework?

Rt Hon CHRISTOPHER LUXON: The member will be informed about that as we announce that towards the end of this week.

Rt Hon Chris Hipkins: How many days of fuel supply would New Zealand need to have left before the Government moved to level 2 on the fuel emergency response framework?

Rt Hon CHRISTOPHER LUXON: As I just said in my first answer, that will be revealed later this week.

Rt Hon Chris Hipkins: How will the Government prioritise fuel supplies to critical customers under level 2?

Rt Hon CHRISTOPHER LUXON: Again, I’ve got nothing further to add to my previous answers.

Rt Hon Chris Hipkins: Will petrol stations be expected to check the eligibility of critical customers at level 2; if not, how will the Government ensure that critical customers are prioritised?

Rt Hon CHRISTOPHER LUXON: As I just said to the member, the phases of our National Fuel Plan and how they will be considered will be discussed on Friday.

Hon Chris Bishop: Can the Prime Minister confirm that Ministers are giving careful consideration to many of the issues raised by the Leader of the Opposition, because what the New Zealand public deserves is a thorough, comprehensive, evidence-led plan rather than just sound bites?

Rt Hon CHRISTOPHER LUXON: Yes, and that’s why, as we have previously foreshadowed in statements, we will talk about our National Fuel Plan on Friday.

Rt Hon Chris Hipkins: Who will determine who is a critical customer, and how will people be informed whether or not they are one?

Rt Hon CHRISTOPHER LUXON: Look, I appreciate the member’s questions, but, as we’ve just outlined, we were taking the development of a National Fuel Plan very seriously, and we will outline our approach to that on Friday.

Rt Hon Chris Hipkins: Will petrol stations be prohibited from supplying petrol and diesel to non-essential customers under level 2, and, if not, how will they ensure that essential customers are prioritised?

Rt Hon CHRISTOPHER LUXON: I thank the member for his question, but I refer him to my previous answers.

Rt Hon Chris Hipkins: Why, after almost a month since the war in Iran began, can the Government not answer basic questions about its own response framework that was published over two years ago?

Rt Hon CHRISTOPHER LUXON: Because, unlike what we observed under a previous Government, we have learnt the lessons of COVID mismanagement. We are making sure that we are doing it appropriately and with industry on board, and we will deliver that, as I said, on Friday, as we foreshadowed last week.

Rt Hon Winston Peters: Point of order. I wonder, Mr Speaker, if you would allow the Prime Minister to answer that question again, this time so we can hear him giving the answer and not being shouted down by the questioner?

SPEAKER: That’s something I could consider, but I’m not going to.

Infrastructure

Question No. 4

RYAN HAMILTON (National—Hamilton East) (14:14) to the Minister for Infrastructure: What updates has he seen on the Fast-track Approvals Act?

Hon CHRIS BISHOP (Minister for Infrastructure) (14:14): Excellent progress: after just over a year, fast track has consented 14 projects in total, and 20 projects have expert panels appointed. Including referred projects, there are 43 projects currently progressing through fast track up and down the country. As we face an uncertain global context, with large impacts on us here at home, there’s never been a more important time with growth-enhancing regional and national projects around the country.

Ryan Hamilton: How long are these fast-track projects taking to consent?

Hon CHRIS BISHOP: On average, it’s taking 128 working days for decisions on substantive applications from when officials determine an application is complete and in scope. I’ll give you one example: Green Steel, a recently approved steel manufacturing plant, using—listen up, Chlöe—recycled steel, said it would have taken a minimum of six years to take the project through the Resource Management Act (RMA) consenting process; under fast track, just seven months. Kings Quarry said that using fast track instead of the RMA saved them three years in consenting time. Their project was approved in just over six months. These are great projects for New Zealand and are saving time and money.

Ryan Hamilton: What benefits do some of these approved fast-track projects bring?

Hon CHRIS BISHOP: Applicants have to explain the level of regional and national benefits they will deliver. Take the Green Steel project, which I know the member who’s asking the question is interested in: they expect it will create about 200 skilled jobs in the region. Arataki, the new housing development in Hawke’s Bay—200 new residential allotments—estimates it will create over 630 jobs over the five-year development period during construction. There are many other projects, with many other jobs attached to them, that I look forward to updating the House on in due course.

Justice

Question No. 5

Dr PARMJEET PARMAR (ACT) (14:16) to the Associate Minister of Justice: What recent announcements has she made regarding alcohol law reform?

Hon NICOLE McKEE (Associate Minister of Justice) (14:16): I recently introduced the Sale and Supply of Alcohol (Improving Alcohol Regulation) Amendment Bill to the House. This bill makes a series of changes which will free New Zealanders and businesses from the stranglehold of red tape and support economic growth. Changes within the bill will make the licensing process fairer, make it easier to host events, and cut the red tape affecting everything from hairdressers to major concerts.

Dr Parmjeet Parmar: What will be the impact of these changes?

Hon NICOLE McKEE: These changes will deliver clear benefits for Kiwis and Kiwi businesses. They restore businesses’ certainty by stopping out-of-area objections to licences, returning the system to fairness and practicality. They support communities by making it easier to host events and empowering clubs to serve the wider public, should they choose to change their licence. They also strengthen safeguards around rapid alcohol delivery to protect against sales to minors and intoxicated people. In short, these reforms cut red tape, back local decision-making, and take practical steps towards keeping our communities safe.

Dr Parmjeet Parmar: What support has she seen for these changes?

Hon NICOLE McKEE: I’ve seen strong support for these changes. Hospitality New Zealand chief executive Kristy Phillips has said that “the proposed changes are common-sense amendments” and that they “return some balance into what has become an arduous process.” The Brewers Association of New Zealand executive director Dylan Firth said the bill represents “a practical step toward modernising New Zealand’s alcohol laws.” New Zealand Winegrowers chief executive Philip Gregan voiced his support for limiting licence objections to those within the same council area, stating that “This is a sensible change that ensures that a business cannot have its licence impacted by unconnected objectors.”

Dr Parmjeet Parmar: What changes are being made to the objection process for liquor licence applications and renewals?

Hon NICOLE McKEE: The bill limits objections to those who live or work in the local council area or within 1 kilometre of the proposed licence. I’ve spoken with business owners dealing with objections from the other end of the country and even some from overseas, creating real cost and uncertainty. In one case, a venue spent $45,000 preparing for a hearing that the objector didn’t even turn up for. Objections should reflect the views of directly affected people who live in the community who cannot simply opt out. This change restores a basic principle: those who live with the consequences get a say; those at a distance do not. I thank Dr Parmjeet Parmar for her strong advocacy on this issue.

Dr Parmjeet Parmar: Supplementary, Mr Speaker.

SPEAKER: Well, OK, but we’ve got to tighten up.

Dr Parmjeet Parmar: How does this bill tie into the Government’s other reforms impacting the sale and supply of alcohol?

Hon NICOLE McKEE: The ongoing hospitality sector regulatory review, announced by the Hon David Seymour, is likely to recommend further complementary reforms and I look forward to its final report. I’m also aware of a member’s bill proposing changes to the Act. My bill does not address those issues, but I welcome those proposed reforms, particularly the amendment from my colleague Cameron Luxton which will ensure hospitality venues can remain accessible to make the most of the opening of Christchurch’s new stadium. Together these reforms paint a very bright future for the hospitality sector.

Hon Kieran McAnulty: Point of order. As much as I welcome commentary in this House on amendments to my member’s bill, that is not a matter for the Government. The question was: what is this Government doing? They shouldn’t be talking about members’ bills.

SPEAKER: Well, that’s true, apart from the fact that she explained that it wasn’t a part of her bill, but she did, as a Minister, welcome the amendment. I don’t think that’s too far out of order. It certainly calls attention to the member’s bill, which a lot of people might, now, be interested in reading.

Hon Kieran McAnulty: Well, she didn’t mention it but now she has, so it’s perfect.

SPEAKER: That’s good.

Energy

Question No. 6

Hon Dr MEGAN WOODS (Labour—Wigram) (14:21) to the Associate Minister for Energy: Does he stand by his answers to oral question No. 7 on 24 March 2026?

Hon SHANE JONES (Associate Minister for Energy) (14:21): Yes, including that the past Labour Government made a reckless decision in approving the closure of the Marsden Point refinery.

Hon Member: Repeated lie.

SPEAKER: Can I just stop you there—no more of that. That’s quite enough.

Hon Kieran McAnulty: Well, no more of that.

SPEAKER: I’m sorry—if you want to debate it come into the Chamber and debate it in the proper fashion. Don’t make those accusations.

Rt Hon Chris Hipkins: Point of order, Mr Speaker. A Minister cannot begin a question answer with an attack on the Opposition, particularly when that is simply not true. Shane Jones continues to assert something that is not true. The Labour Government did not approve the closure of Marsden Point; it was a private business.

SPEAKER: Yes. I think people understand that, but the question was: did he stand by all his answers? And he, then, basically quoted himself.

Hon Dr Megan Woods: Why did he tell the House yesterday there was no budget for a diesel reserve, when officials had identified a surplus of almost $50 million in the fuel levy fund, rising to around $110 million by 2025, specifically there to pay for fuel resilience measures like the diesel reserve?

Hon SHANE JONES: Yes, the former Minster did leave some squiggles on a Cabinet paper. There was, however, no well-developed proposal and, I just want to remind the House, that it was September 2021 when the Labour Cabinet approved the closure of the refinery, and then it took until—

SPEAKER: No—sorry. You can’t make an accusation like that. The Cabinet paper may well have considered a matter like that, but I doubt it’s got the word “approved” or “disapproved” on it.

Hon SHANE JONES: Speaking to the point of order.

SPEAKER: You’re making a point of order.

Hon SHANE JONES: Oh, so, I’d like to make a point of order.

SPEAKER: Yes. Very good.

Hon SHANE JONES: Could we ask the Clerk to consult the dictionary and confirm that the matua is correct: “agreed” need not mean “offering permission or consent”. I took the good liberty of consulting that great paragon of knowledge, the dictionary, before I came here.

Rt Hon Chris Hipkins: Point of order, Mr Speaker.

SPEAKER: We’re on a point of order. Yes, we’ll do that—it’ll be interesting.

Rt Hon Chris Hipkins: On the definition that Shane Jones is now creating, the McCain Foods factory, the Wattie’s factory, the Kinleith factory, the Winstone factory have all been closed—

Hon SHANE JONES: Point of order.

Rt Hon Chris Hipkins: —by this Government.

Hon SHANE JONES: Point of order. Point of order.

SPEAKER: Speaking to the point of order.

Hon SHANE JONES: I can assure the House I have presented no Cabinet paper agreeing with the closure of Wattie’s or the closure of McCain Foods, but I can table a Cabinet paper where they agreed to close the refinery.

Hon Dr Megan Woods: As of today, how much money sits in the petroleum or engine fuel monitoring levy memorandum account?

Hon SHANE JONES: That account is dedicated to a range of expenses, and if the member would like to write me a letter without squiggles, I shall provide a detailed answer.

Hon Dr Megan Woods: Why did he claim yesterday that 700 million litres of storage was closed down at Marsden when hundreds of millions of litres of fuel are stored at Marsden Point today and that the real loss of fuel security was his decision to cancel a 70 million litre diesel reserve?

Hon SHANE JONES: Sadly, New Zealand is labouring under a shortage of capacity to store fuel. You cannot lay that problem at any other place than the feet of that woman, who approved the closure of the refinery.

SPEAKER: No, sorry; you know that under the Standing Orders you can’t make that sort of accusation to the House, and I’d ask you to withdraw that.

Hon SHANE JONES: I withdraw it.

Rt Hon Winston Peters: Point of order. Mr Speaker, with the greatest respect, if you read the document in 2021 it is as plain as daylight they are being asked “What are the consequences if we make this decision? Will it be a crisis for this country?” or words to that effect, and they said no. That’s an approval of closure and we’re not going to stand by here and turn a document of evidence into something that we can’t use.

SPEAKER: Well, that’s a very interesting offering to the House, but, as the member will know from long standing, no one Minister is responsible for a Cabinet decision.

Hon Dr Megan Woods: Why, when Marsden Point still has capacity to store hundreds of millions of litres of fuel, did he not use the existing tank farm to support a 70 million litre Government diesel reserve but instead chose to scrap Labour’s fully funded strategic reserve of diesel?

Hon SHANE JONES: As night fell on the last Labour Government and as they fled from their Cabinet offices, there was a half-baked proposal—unfunded, incomplete—and in the interests of good constitutional Government, I couldn’t take that forward in that incomplete state.

Andy Foster: What reports has the Minister seen regarding the transition of Marsden Point from a refinery to an import-only terminal, and what is the difference in storage capacity between the terminal we have at the moment and what Marsden Point would have delivered?

Hon SHANE JONES: For the benefit of all the New Zealanders listening to this exchange: Marsden Point has approximately 700 million litres of storage. Sadly, most of it will require recommissioning as a consequence of the last Government approving of the closure of Marsden Point. But I can confirm—

Rt Hon Chris Hipkins: Point of order, Mr Speaker. Mr Speaker, the fact that the Government of the day considered a report on the implications of Marsden Point being closed by its private sector owners does not mean the Government approved of it, and the continued assertion of that by a current Minister of the Crown is simply not true. Unlike a Government that does not consider the closure of McCain Foods or Wattie’s, or Winstone, or all of those factories that are closing, our Government did consider the implications of those things. But lack of intervention to prop up a business that was closing anyway does not mean the Government approved of that business closing.

SPEAKER: And I think that’s quite a reasonable proposition.

Hon Dr Megan Woods: How can he claim there was no budget, no proposal for Labour’s diesel reserve that had not only tens of millions of dollars available for funding it but also had a legislated change to make the levy available and a Cabinet decision to start work on procurement?

Hon SHANE JONES: I have taken the liberty of speaking to the CEO of Port Taranaki, one of the entities that was involved with what the Hon Megan Woods is referring to. Sadly, that CEO has confirmed to me that such a proposal could never work because of the regulatory unwillingness of the last Government to make it easier for such a thing to be developed, and the only reason that the member is talking about 70 million litres of storage is because she closed 700 million litres down.

SPEAKER: Question No. 7, Rawiri—[Interruption] Well, I’ll tell you what; I’m not putting up with that sort of chipping from the sidelines. As soon as a question brings in a party’s name and a party’s actions, you get a political response. That’s what that was, and I’m not interfering with that. I didn’t interfere with the question; I could well have stopped it.

Hon Kieran McAnulty: Point of order, sir.

SPEAKER: It had better be a good point of order, because I’m at the end of it.

Hon Kieran McAnulty: We weren’t complaining about the political response. We know that if there is a question with a political bent to it, we should expect a political response. But what we do expect is Ministers—when you have just agreed with the point of order made by Chris Hipkins that the assertion that the previous Government closed Marsden Point is incorrect, and he then turns around and ignores that and says it anyway, we are going to express concern about that.

SPEAKER: Well, I would invite you to—

Hon Member: Point of order.

SPEAKER: No. I’d invite you to read the Hansard answer and you can come and discuss it with me if you want. The way I heard it was not quite the way you’re putting it.

Prime Minister

Question No. 7

RAWIRI WAITITI (Co-Leader—Te Pāti Māori) (14:31) to the Prime Minister: Does he stand by all his Government’s statements and actions?

Rt Hon CHRISTOPHER LUXON (Prime Minister) (14:31): Yes.

Rawiri Waititi: Why has he condemned Iran’s response but refuses to condemn the United States and Israel for the illegal invasion of Iran, which killed over 1,500 people and injured 20,000 more?

Rt Hon CHRISTOPHER LUXON: Well, we’ve canvassed this over recent weeks. As I said, these are independent actions by the US and Israel, and it’s up to them to explain the basis for their attacks.

Rawiri Waititi: Why has he refused to condemn the perpetrators of Operation Epic Fury when the Minister of Finance, Nicola Willis, has stated clearly yesterday afternoon that “Operation Epic Fury and its resulting fallout is hurting Kiwis.”?

Rt Hon CHRISTOPHER LUXON: Well, that is true. The conflict is hurting Kiwis with higher fuel prices.

Rawiri Waititi: Does he dispute the claims made by NATO Secretary-General Mark Rutte when he indicated that New Zealand would be sending military support to the region; if so, will he categorically rule out sending any military support to this illegal bombing campaign that is killing Iranian civilians every day?

Rt Hon CHRISTOPHER LUXON: We have not been asked or there have been no proposals put to us about any military engagement. We are very focused on actually responding to this conflict and the impact that it has on Kiwis. That’s where our focus is.

Education

Question No. 8

Hon GINNY ANDERSEN (Labour) (14:32) to the Minister of Education: How many times has she used Government resources to direct people to party political sites?

Hon ERICA STANFORD (Minister of Education) (14:33): Yesterday, for the first time, I included, in a sector email, an embedded link to a ministerial video that I created especially for teachers. The ministerial video was mistakenly uploaded to the wrong site. When brought to my attention it was resolved within about 15 minutes, and an email to the sector was sent this morning with the correct link to the same video.

Hon Ginny Andersen: Can she specify what the “human error” was: uploading the video to the National Party YouTube channel or sending out the email with a video link directing teachers to the National Party site?

Hon ERICA STANFORD: Well, as I’ve already said, there was a mistake in the uploading of the video to the wrong site. It was rectified within about 15 minutes of me being made aware of it. It was human error. Of course, I take responsibility for all of the things that happen in my office, as you would expect.

Hon Ginny Andersen: Did she authorise the email that was sent out in her name; and if not, who did authorise and send the email out from her office?

Hon ERICA STANFORD: The email was sent out from my office, and as I’ve already stated in the previous answer, I take responsibility for everything that happens in my office. This was genuinely a human error and it was rectified as soon as it was brought to my attention.

Hon Nicola Willis: In her role engaging with parents whose children are in the education system, does she find their focus is more on who authorised an email in error, or on lifting the reading, writing, and maths achievement of their kids?

Hon ERICA STANFORD: Parents and the sector are more interested in how we are reforming the education system with a clear, laser focus on raising achievement in reading, writing, and mathematics. The real question around this email was what was it about. It was about the new Student Monitoring, Assessment and Reporting Tool, which is an assessment tool that for the first time in this country will be consistently used across the country to measure reading, writing, and maths over time so that we can raise achievement and close the equity gap.

Rt Hon Winston Peters: Supplementary question.

Hon Chris Bishop: Supplementary question.

SPEAKER: The Rt Hon Winston Peters.

Hon Chris Bishop: Oh!

Rt Hon Winston Peters: Can I ask—you won’t be disappointed. Can I ask, please, Minister, how does this temporary brief oversight for a few minutes compare with the over $52 million bribe through the Public Interest Journalism Fund?

SPEAKER: Well, in so much as the Minister has some responsibility around this—

Rt Hon Chris Hipkins: Point of order, Mr Speaker. A member of the House cannot accuse anyone of bribery. It’s a fairly big accusation to put in a question in the House.

SPEAKER: I’m sorry, but I didn’t—once again, I’ll say that I’ve had proper speakers fitted here, I have hearing assistance, and I did not hear that word “bribery”. If it was used—can the member indicate if that word was used?

Rt Hon Winston Peters: It was used, and I stand behind it.

SPEAKER: Right, that’s OK—good. Then we’ll have the Hon Ginny Andersen.

Rt Hon Chris Hipkins: He has to withdraw that—you can’t let that stand.

SPEAKER: Yeah, I think that is right. You do have to withdraw that comment.

Rt Hon Winston Peters: Withdraw what? That they got paid $52 million when they signed up—

SPEAKER: No, don’t do this.

Rt Hon Winston Peters: —but only if they ran a certain narrative.

SPEAKER: Right—

Rt Hon Winston Peters: What do you call that?

SPEAKER: The member has been here a reasonable period of time and he knows that it’s not appropriate to accuse anyone in this House, either as an individual or a party or a former Government, of bribery. That is a long-held point here. I’ve got the Clerk currently assisting me in getting the appropriate Speakers’ ruling, and I would in the meantime suggest that the member simply withdraws it, or that he withdraws from the House.

Rt Hon Winston Peters: Point of order, Mr Speaker.

SPEAKER: No, no. What—

Rt Hon Winston Peters: Would you ask the Clerk to follow what was said, because they immediately accepted that the word “bribe” applied to them. I didn’t say it was them, but they thought it was them, and therefore that’s why they objected. Now, that’s the difference that the Clerk of the House should be able to tell you about.

SPEAKER: Yeah, good. Well, I think that the member has got an instruction from the Speaker: he must make an unqualified withdrawal for a personal reflection—Standing Order 121. Are we doing that or not?

Rt Hon Winston Peters: Well, I apologise for having referred to a bribe—

SPEAKER: OK.

Rt Hon Winston Peters: —and—

SPEAKER: No, that’s it.

Rt Hon Winston Peters: —and—

SPEAKER: No, no, you can’t qualify it.

Rt Hon Winston Peters: —and some members of the House think that it belongs to them.

SPEAKER: It can’t be qualified. I’m sorry, Mr Peters. You either just, without qualification—

Rt Hon Winston Peters: All right, I apologise for the first part.

SPEAKER: Good—right—and withdraw. Withdraw and apologise—simple words. Mr Peters, withdraw and apologise.

Rt Hon Winston Peters: I’ve withdrawn the second part, and I apologise for the first part.

SPEAKER: Right. We’re going to leave it at that. [Interruption] We’re leaving it at that.

Hon Ginny Andersen: When was she informed that an email sent out in her name with a National Party YouTube link embedded in it was sent out to all primary and intermediate school principals in New Zealand?

Hon ERICA STANFORD: I was made aware of the error late last night, after 9 p.m.

Hon Ginny Andersen: When did she inform the Prime Minister that she had used Government resources to distribute a link to the National Party YouTube channel to all school principals? [Interruption]

SPEAKER: Good—now, just a moment. Before I call the Minister, the House will be quiet and it will listen to the question in silence.

Hon Ginny Andersen: When did she inform the Prime Minister that she had used Government resources to distribute a link to the National Party YouTube channel to all primary and intermediate school principals in New Zealand?

Hon ERICA STANFORD: When I was made aware of the issue last night after 9 p.m., I of course called the Prime Minister’s office to explain what had happened and to make sure that we rectified it within a few minutes.

Hon Chris Bishop: In the middle of a global fuel crisis, is it her habit to bother the Prime Minister with matters like the subject of this question?

SPEAKER: No, that would be a question in the nature of a personal interest; we’re not taking that.

Hon Ginny Andersen: Who removed the video from the National Party YouTube channel at around 10 p.m. last night? [Interruption]

SPEAKER: No, no. We’re going to hear the question again because questions are heard in silence. When we are all silent.

Hon Member: Another reshuffle.

SPEAKER: I beg your pardon?

Hon Ginny Andersen: Who removed the video from the National Party YouTube channel at around 10 p.m. last night?

Hon ERICA STANFORD: I don’t know the identity of the exact person that did it. I think the key thing, though, is that when we were made aware of it we realised there was an error, we took it down, and this morning we put up exactly the same ministerial video on the correct channel, explaining to teachers that for the first time there is an amazing new smart assessment tool to be used twice yearly to measure student progress in reading, writing, and maths; the first time this country has seen a freely available nationally consistent tool required to be used so that we can raise achievement and close the equity gap.

SPEAKER: Yeah, good, that’ll do it.

Hon David Seymour: Has the Minister considered engaging a private detective to get to the bottom of this weighty matter—who did it, who took it off the YouTube channel, and how do we make sure it never happens again?

Hon ERICA STANFORD: While I understand that—

SPEAKER: No, in this case a yes or no would be satisfactory. We’ll take it as a no. Sit down, and we’ll have the Hon Ginny Andersen.

Hon Member: Humiliating!

SPEAKER: When the House is quiet.

Hon Ginny Andersen: Is she concerned that there is a pattern of behaviour—[Interruption] Can we start again?

SPEAKER: I’m sorry, it’s going to be a long afternoon because all questions are heard in silence.

Hon Ginny Andersen: Is she concerned that there is a pattern of behaviour with her and her office regarding email distribution, that she herself has previously described as untidy and not best practice?

Hon ERICA STANFORD: I know that the member is very excited about her very first question as education spokesperson and would love a great conspiracy, but unfortunately there is not one here. But I look forward to her next question abut something that is relevant to achievement.

Hon Chris Bishop: Who is better at managing emails: her or the former education spokesperson for the Labour Party? [Interruption]

SPEAKER: That’s going to be the end of a number of supplementaries from the Government today.

Health

Question No. 9

Dr VANESSA WEENINK (National—Banks Peninsula) (14:43) to the Minister of Health: What recent progress has been made against the Government’s health targets?

Hon SIMEON BROWN (Minister of Health) (14:43): The latest quarterly results for October to December 2025 show encouraging improvements across all five Government health targets, with more New Zealanders accessing care faster. Despite a challenging quarter, Kiwis are spending less time in our emergency departments, there are shorter waits for elective surgeries and first specialist assessments, faster cancer treatment, and more children fully immunised by the age of 24 months. While these results are encouraging, we know there is still more work to do. You cannot manage what you don’t measure and, through our health targets, we remain committed to driving improvements and ensuring wait times reduce for patients.

Dr Vanessa Weenink: What progress has been made in reducing wait times for elective surgeries and first surgical assessments?

Hon SIMEON BROWN: We are seeing encouraging improvements across elective surgeries and first specialist assessments: 62.2 percent of patients are now receiving their first specialist assessment within four months, up from 60.6 percent the same time the year before; while 64.5 percent of patients are receiving their elective treatment within four months, up from 59.2 percent the same time the year before, showing clear improvements. Importantly, we have also delivered more care to more people, with 179,816 first specialist assessments carried out in this quarter, up by more than 11,000 compared to the same time the year before; and 51,513 elective treatments, up by more than 4,500 compared to the same time the year before. That means thousands more New Zealanders are being seen, treated, and supported to get back to work, back to their families, and back to living their lives.

Dr Vanessa Weenink: What improvements has he seen against the other health targets?

Hon SIMEON BROWN: We have also seen strong gains across the other health targets. Faster cancer treatment has improved, with 87 percent of patients now receiving treatment within 31 days of a decision to treat, up from 85.9 percent the same time the year before. This means that patients are getting timely access to lifesaving care when it matters most. Childhood immunisation rates have also lifted to 82.9 percent, up from 77 percent the same time the year before. This represents more Kiwi children protected from preventable diseases, ensuring they are given a healthier start to life. Shorter stays in emergency departments has also seen an improvement, with 74.2 percent of patients being admitted, discharged, or transferred within six hours, up from 72.1 percent the time the year before.

SPEAKER: Question No. 11—

Dr Vanessa Weenink: I’ve got a supp’.

SPEAKER: I know you have, but it’s Greg Fleming, question No. 11.

Ricardo Menéndez March: Question No. 10.

SPEAKER: Question No. 10? You’re quite right, yes.

Child Poverty Reduction

Question No. 10

RICARDO MENÉNDEZ MARCH (Green) (14:46) to the Minister for Child Poverty Reduction: How many parents, if any, of the 169,300 children living in material hardship will receive the full $50 increase to the in-work tax credit?

Hon LOUISE UPSTON (Minister for Child Poverty Reduction) (14:46): The $50 increase to the in-work tax credit is targeted at low and middle income working families with dependent children. Inland Revenue estimates that around 143,000 working families with dependent children will get the extra $50 a week in full. We introduced this support package at pace to provide immediate support in a fast-moving situation. It is particularly focused on working households with children. According to the latest figures from Statistics New Zealand for 2024-25, 48 percent of children in material hardship are in working households. This support we are providing is intended to be timely, temporary, and targeted at those most in need.

Ricardo Menéndez March: Why are more than half of the parents relying on income support, including some of our poorest, excluded from the relief announced yesterday?

Hon LOUISE UPSTON: To quote from the Minister of Finance’s press release from yesterday, “The policy is carefully targeted to families in the squeezed middle—parents who are working hard for a living, are not eligible for main benefits, and yet have modest household incomes with which to support their children. We know these families will be hit particularly hard by the global fuel-price shock. We are delivering them timely relief.”

Ricardo Menéndez March: Are families in poverty also squeezed, and, if so, why is she not really seeing any relief for them?

Hon LOUISE UPSTON: If the member had read the Minister of Finance’s press release, he would have also seen that on 1 April beneficiaries do get a rise directly in line with the cost of living.

Ricardo Menéndez March: Is she aware that the legally and annually required $12 increase to jobseeker support, indexed to last year’s inflation, is much less than $50 a week?

Hon LOUISE UPSTON: Yes, it is $20, not $50.

Ricardo Menéndez March: Is $12 extra enough to meet the additional costs of fuel and other living expenses, or does she expect people living in poverty to get further into debt simply to survive?

Hon LOUISE UPSTON: Our Government is very clear about the fact that what is happening in the Middle East is having an impact on many New Zealanders, with the fuel-price pressure that they are facing. We are also very clear that any response needs to be targeted, timely, and temporary, otherwise every single person in New Zealand would be affected by inflation going up again.

Education

Question No. 11

GREG FLEMING (National—Maungakiekie) (14:49) to the Minister of Education: What changes has she announced to the Education Review Office’s school reports?

Hon ERICA STANFORD (Minister of Education) (14:49): Last week, I announced an overhaul of the Education Review Office’s (ERO) school reports. From term 2 this year, parents will have access to clearer, more useful information about how their child’s school is performing. For too long, ERO reports have been dense and complicated to read and understand, often failing to show how schools are doing and where improvement is needed. The new ERO reports will focus on student achievement, progress, and engagement, with clear measures, visual summaries, as well as more detail in the back end.

Greg Fleming: Why has she made these changes?

Hon ERICA STANFORD: If we are serious about a world-leading education system, then we need to be clear on how we get there. High-quality, clear reviews from ERO are a critical part of ensuring that all parts of our system are prepared to intervene, to respond, and to support our schools to excel. This helps the ministry to best direct resource and reduce the postcode lottery of school quality and performance. This is what parents care about.

Greg Fleming: What will be in the new reports?

Hon ERICA STANFORD: The reports will provide a snapshot of school performance across 14 areas including literacy and numeracy, school achievement, attendance, equity, and provision for learners with additional needs. These are clear areas and categories that will give school communities clarity on what’s working, celebrate success, and feed back on what needs improvement. Reports are focused on capturing the value schools add, recognising progress and improvements that learners are making, and not just a point-in-time judgment.

Economic Growth

Question No. 12

REUBEN DAVIDSON (Labour—Christchurch East) (14:51) to the Minister for Economic Growth: Do the 350 job losses at Heinz Wattie’s and the closure of the McCain factory in Hastings contribute to economic growth; if not, why not?

Hon NICOLA WILLIS (Minister for Economic Growth) (14:51): Let me first acknowledge the member’s new role. I also want to note that it is a very difficult time for anyone affected by these proposals—workers, growers, and contractors alike—and my thoughts are with those involved. Support is available from the Ministry of Social Development, including help with finding new employment and income support for those who are eligible. In terms of what it means for economic growth, changes at individual firms are part of much bigger movements in the economy that determine whether it is growing or not. It is worth remembering that 2.9 million New Zealanders are working in jobs across the country, and that this rose by 15,000 in the last quarter. While the last few years have been challenging for many manufacturers, the Performance of Manufacturing Index has shown the manufacturing sector, as a whole, expanding each month since the middle of last year.

Reuben Davidson: How will the closures of Wattie’s and McCain contribute to the growth of unemployment, which is already at a 10-year high of 5.4 percent?

Hon NICOLA WILLIS: Well, I’m always concerned for those who become unemployed in these situations. However, what the member needs to understand is that the unemployment figure reflects both new jobs that are created and jobs that are lost, and it is the case, in any modern developed economy, that while some firms close, other firms open, and while some businesses reduce their workforce, other businesses expand their workforces. It is the overall balance of these factors that determines the unemployment rate.

Reuben Davidson: How many of these hundreds of Kiwis who are losing their jobs does she expect to move to Australia?

Hon NICOLA WILLIS: Well, I haven’t had any advice on that.

Reuben Davidson: Is it acceptable that many Kiwis are facing job losses, rising unemployment, and increasing living costs, all while last year’s annual GDP growth rate was just 0.2 percent?

Hon NICOLA WILLIS: I think the member is confused; he’s referring to a quarterly growth rate for the fourth quarter of the year. What the member needs to understand is that the very reason this Government is so galvanised in our efforts to grow the economy is because we recognise that that is where good-paying jobs come from, that is where rising incomes come from, and that is where the increased productivity that delivers a higher standard of living comes from. In order to be a country that delivers these things, we need to grow our economy, and that is what we are focused on.

Reuben Davidson: Is it appropriate for her to continue to be the Minister for Economic Growth, considering she is not actually growing the economy?

Hon NICOLA WILLIS: Well, yes, and I would refer the member to the Statistics New Zealand website—it’s easy to find on Google—which shows that the economy grew in the last calendar year.

Rt Hon Winston Peters: Can I ask the Minister, when was the last time she heard someone measuring GDP growth on just three months’ results?

Hon NICOLA WILLIS: Well, he’s new to the role; let’s give him a break.

SPEAKER: That concludes oral questions. We’ll take a few minutes for those who need to leave the House to do so—a few seconds, I should say.

Sittings of the House

Extended Sitting

Hon CHRIS BISHOP (Leader of the House) (14:55): I move, That the sitting of the House today be extended into tomorrow morning for the continuation of: the second reading of the Local Government (Auckland Council) (Transport Governance) Amendment Bill, the committee stages of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, the committee stage of the Online Casino Gambling Bill and the Antisocial Road Use Legislation Amendment Bill; the third reading of the Public Finance Amendment Bill; and the second reading of the Financial Markets Conduct Amendment Bill.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 53

New Zealand Labour 34; Green Party of Aotearoa New Zealand 13; Te Pāti Māori 5; Ferris.

Motion agreed to.

Government Business

Debate on Budget Policy Statement

SPEAKER: The House comes to the debate on the Budget Policy Statement 2026 and the committee’s report on it. Can I, before I call that debate, remind members that it’s not a wide-ranging debate. It’s not a general debate. That’s to be found in Speaker’s ruling 141/2. It’s based on the Budget Policy Statement and the committee’s report on it. I repeat again: it is not a Budget debate, nor is it a general debate.

CAMERON BREWER (Chairperson of the Finance and Expenditure Committee) (14:57): I move, That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2026.

As chair of the Finance and Expenditure Committee, I’m pleased to kick off this Budget Policy Statement (BPS) special debate as we look ahead to Budget 2026. The BPS was released on 16 December last year, alongside Treasury’s 2025 Half Year Economic and Fiscal Update, which it draws on. As is required by the Public Finance Act 1989, the Minister of Finance must present a Budget Policy Statement setting out the Government’s fiscal strategy and its broad goals and policy objectives. The BPS released late last year, effectively, commences the Budget cycle.

The committee was very pleased to have both the Minister of Finance and the Secretary to the Treasury before us on these matters on 28 January. We also received a number of written submissions and heard from many submitters as well.

The Government’s overarching goals for its term in office are: to build a stronger, more productive economy that lifts real incomes and increases opportunities for New Zealanders; to deliver more efficient, effective, and responsive public services to all who need them and use them, and particularly to restore law and order and improve health outcomes and educational achievement; and to get the Government’s books back in order and restore discipline to public spending.

GDP data has shown the economy growing 1.1 percent over the last half of 2026, but the conflict in the Middle East has now introduced a lot of uncertainty into economic and fiscal forecasts. The conflict is already having a negative impact on the New Zealand economy, most directly through the price of fuel, and we don’t know how significant that will be and how long disruption will last. One thing is for sure: this conflict has reinforced how important it is to have sounder books, at least, to deal with economic shocks and natural disasters.

In Budget 2026, to be delivered on 28 May, the Government will focus on delivering a sustainable pipeline of infrastructure investments, addressing New Zealand’s longer term productivity challenges, keeping tight control of discretionary Government spending while funding a limited number of priority Government policy commitments, supporting the delivery of core public services such as healthcare, education, and law and order. This Budget Policy Statement makes it very clear that New Zealand is in a challenging fiscal position. The Crown’s books have deteriorated since 2019 as expenses have risen faster than revenue. The increase in expenses as a percentage of GDP is due to a combination of factors this statement makes very clear: discretionary policy decisions, the impact of COVID-19 and weather events, the economic downturn, cost increases above those in the rest of the economy, and demographic changes in higher borrowing costs. New Zealand’s operating deficit is now structural, so it will not resolve itself as this economy recovers.

Fiscal consolidation is required to bring revenue and expenses back to balance and start reducing debt. Spending restraint over the medium term is key to realising this strategy, and spending restraint is realised by setting budget, operating, and capital allowances. The operating allowance is the amount of net new operating funding in each budget. The operating allowance for Budget 2026 has been set at $2.4 billion. Pre-commitments mean that there is only $1 billion per year left to be allocated from the operating allowance for Budget 2026. But now, Budget 2026 has the Iranian conflict as a backdrop. Yesterday, we all saw the Government pre-commit up to $373 million of the Budget 2026 allowance to provide temporary, targeted, and timely support for nearly 150 working families.

Dan Bidois: One hundred and fifty thousand.

CAMERON BREWER: One hundred and fifty thousand—thank you, Mr Bidois—working families. Health, education, defence, and law and order will be priority areas in the Budget, as I’ve canvassed. And as the Minister of Finance confirmed in her appearance to the Finance and Expenditure Committee (FEC), over half of the new money in Budget 2026 will go into health.

The Government has a deliberate, medium-term approach to fiscal consolidation. The alternative approach to Government spending and debt would only further delay a return to surplus and see debt blow out completely. In fact, as the Hon Nicola Willis said at the release of this Budget Policy Statement back in December, “Without this disciplined approach, this year’s deficit would be $25 billion and debt would be on track to blow out to 59 percent of GDP.” Now is not the time to borrow and hope.

In contrast, over the last two Budgets, the Government has made cumulative ongoing savings of over $11 billion a year. One significant policy success in 2025 was Investment Boost, and we covered that off in this Budget Policy Statement report from FEC, page 10, “Anecdotally, the Minister told us that Investment Boost has allowed businesses to bring forward projects that might not have occurred otherwise. As an example, she pointed to an Ōtaki business that was going to expand its commercial kitchen because of the initiative.” Of course, investment boost is where businesses conduct 20 percent of the new asset’s value from that year’s taxable income, on top of normal depreciation. It has been a significant policy success out of Budget 2025. Rest assured, there will be no splashing the cash in Budget 2026. While the Iranian conflict changes the 16 December 2026 Budget Policy Statement considerably, we as a country are in the strongest position we have been for several years for New Zealand to weather these events.

On this side of the House, we are very proud of our finance Minister and the work, in particular, that she has done and the reassurance she has given New Zealanders in recent weeks that this Government is ahead of the game as far as dealing and managing all it can with the international conflict and the challenges it brings, particularly around fuel price escalation.

Six years on, and as Treasury’s Long-term Insights Briefing and the latest royal commission report confirmed, if you splash the cash in the name of kindness, it has hugely negative consequences for New Zealand and the cost of living—and the cost of living. And, Mr Speaker, can I remind you what those two reports confirmed: $60 billion was borrowed and spent during COVID-19, and $30 billion of that was on non-direct COVID expenditure—half of it not directly related to COVID, yet it was put out as part of the $60 billion COVID response and recovery package.

This Government’s fiscal strategy is to keep a tight lid on new spending, find savings across Government, and keep debt under 50 percent of GDP, before bending back the debt curve downwards. Other parties, as we have heard, opposed all savings—opposed all savings. They want to bring back expensive programmes and spend and borrow more.

SPEAKER: No, that’s not—just back to the report.

CAMERON BREWER: But now is not the time. This Budget Policy Statement is the best evidence we have of how quickly things can change, and how careful and considered this Government needs to be, and will be, as we tread through this year and beyond.

Mr Speaker, you need to know that there’s only 64 sleeps until Budget 2026—mark it on your calendar: 28 May. I commend the 2026 Budget Policy Statement to the House.

Hon Dr MEGAN WOODS (Labour—Wigram) (15:07): Budget Policy Statements outline the goals and objectives of what will be in the forthcoming Budget. At our committee, we got to examine that, and it was a very telling objective, because as well as outlining those goals and objectives of the upcoming Budget—between those huge books of lines of numbers—what we see is the values of a Government: what it is that a Government sees as its priorities and what it thinks needs to be prioritised. After all, that is what a Budget is: it is a Government laying bare where it decides to spend money.

If we have a look at the context in which this Government is going to deliver this year’s Budget, we had the Minister of Finance say that it would be a responsible Budget. Well, let’s have a look at any marker that we would look at for that. We have GDP that is lower than it was two years ago. That will be a context for the delivery of this year’s Budget. We have unemployment that is higher now than it was two years ago. We have business liquidations higher now than they were two years ago. We have the number of children in poverty higher now than it was two years ago. And our economic outlook from our credit agency, Fitch, has been downgraded under this Government. This is the context that this Budget Policy Statement needed to be examined in—that we were examining a set of statements about what this Budget is going to contain, knowing that there are more people without work, there are more people finding it tough, there are more people who are losing their jobs, and we’re being downgraded by our credit agencies. That is the context in which this will be delivered.

One of the things that we know, and something we hear every day from people, is that the system is not working for them. Things are getting harder. National, before the 2023 election, went around telling everybody that things were going to get better. But, instead, they’re finding they’re getting worse.

They’re finding it harder to put food on their table. They’re certainly finding it harder to fill the car with petrol. They’re finding it hard to get by on a day-to-day basis, and this is not a Government that has a plan to help them. Certainly, the Budget Policy Statement laid that bare for everybody to see.

We had the chair of the Finance and Expenditure Committee say that the Minister of Finance came and said that this is not a Government that is going to operate on borrow and hope. Well, this is a finance Minister who has borrowed more we did when we were in Government, and the only strategy that she seems to have is hope, and that has been no more evident than what we’ve seen over the last three or four weeks as New Zealand has navigated a cost of living crisis. There does not seem to be a plan beyond hope—a hope that things will resolve themselves.

Ryan Hamilton: Point of order. Just regarding the Finance and Expenditure Committee’s report on the Budget Policy Statement, I can’t refer to the hope context that the previous Minister—

SPEAKER: No, you’re quite right. I was just having a quick look at what the statement is, and I was about to pull the member back to that, and in terms of wider Government policy, it’s not a wide debate and it’s not a general debate.

Hon Dr MEGAN WOODS: Speaking to the point of order, I was responding to a debating point raised by the chair of the Finance and Expenditure Committee in the first speech in this debate. I did not raise it for the first time in this debate. The chair of the Finance and Expenditure Committee did.

SPEAKER: I listened very intently to what the chair of the Finance and Expenditure Committee had to say, because of the instruction I’d given to the House at the start of the debate. I think that while you may say that you were responding, you were responding extensively and I would suggest you come back to the debate in point.

Hon Dr MEGAN WOODS: Absolutely. One of the things at the back of the select committee’s report on the Budget Policy Statement is a list of the public submissions that we heard on the Budget Policy Statement. Not only does the select committee get to have time with the Minister of Finance and with Treasury officials, to interrogate the Budget Policy Statement, we also invite the public to submit on it. We received a wide range of submissions and these are summarised in this report.

I think it is important in this debate that the views of a number of those submitters are made clear. If we have a look at some of the submissions we heard, there certainly were some key themes that came through. We heard from the Salvation Army, a particularly comprehensive submission about how they did not feel that the Budget Policy Statement that the Minister of Finance and the Government put out was going to do anything to fix the cost of living crisis that New Zealanders are facing. It certainly wasn’t going to allow people who are struggling to make it better—people for whom life was getting harder, not better, and they came and talked to us extensively about that. They wanted to see stronger and broader social investment alongside the fiscal strategy, which they felt was sorely lacking from the Budget Policy Statement as it was presented.

We also heard from the Royal College of Pathologists of Australasia, who came along. We were told by the Minister of Finance in her Budget Policy Statement that health is going to be a priority. What we had is this group of medical professionals coming and telling us they had a workforce crisis. What they did not see in the Budget Policy Statement was anything to reassure them that this was going to be fixed.

We also had the opportunity to ask the Minister of Finance what the plans were around the broader workforce of the health system. We asked the Minister of Finance when she appeared before the committee whether or not it was her plan to hire all the nurses that New Zealand was training, whether or not we were going to put into our health system those people that we were training, and she could not give us that reassurance. She could not say that as a country we would take on all our graduates, and instead what we’d see are New Zealand – trained graduate nurses getting on the plane with the tens of thousands of other young New Zealanders who are leaving the country because they do not see a future here. It is no wonder when our own Minister of Finance, before the select committee, cannot give that reassurance. We are in danger of becoming a training ground for Australia when it comes to our medical professionals, and we would like to have seen the Minister of Finance give that reassurance.

On this side of the House, we have a plan built on long-term investment, on shared prosperity, and good jobs that keep our young people in New Zealand and don’t send them fleeing for the nearest airport. We also heard from the Minister of Finance around productivity, and from the Treasury; productivity growth was something that we talked about at length at the Finance and Expenditure Committee. I think one of the things that is laid bare is the sole plan that National and the coalition Government have for increasing our productivity is Investment Boost. I think what people have to understand is that over a 10-year period, this is 1 percent growth. This is something that we talked about at the Finance and Expenditure Committee. The Minister of Finance certainly came and, without having any data, shared her “anecdata” with us. When you actually drill down to what the Treasury projections were, it’s 1 percent growth. That is what is meant to be feeding New Zealanders’ hope. It certainly isn’t feeding wage growth, because we also heard about that. We will continue to see New Zealanders doing it tough and things getting harder for them and not better.

We then heard about what the growth prospects for the country were. Over the last few days—well, actually, the last months—we’ve heard from Ministers and particularly from Shane Jones that it was Labour that allowed Marsden point to close. Actually, first of all, it was that we did shut down Marsden Point; when it was pointed out that was a complete fabrication and he got pulled up on that, he shifted his language to say that we allowed it. Well, by Shane Jones’ logic, Oji Fibre Solutions, Smithfield meatworks, Winstone Pulp, Carter Holt Harvey, Heinz Wattie’s, and McCain Foods have all been allowed to be shut down by this Government. That is on this Government, using Jonesian logic. That is what he allowed to happen.

The only difference is that in Government, when we saw something shutting down, as a Cabinet, we discussed it; we took a paper to Cabinet, and we said, “What are the implications for New Zealand? We need to put a plan in place to respond to that.” Have we seen this Government do that? No, we have not.

Ryan Hamilton: Point of order. I’d just bring us back to the report from the Finance and Expenditure Committee on the Budget Policy Statement. The member is talking about things, and their Government’s policies and positions, which are clearly beyond the scope—

ASSISTANT SPEAKER (Maureen Pugh): That is the Speaker’s call. Just let me get settled in my chair so that I can catch up on the debate.

Hon Dr MEGAN WOODS: Thank you. This is exactly what we discussed in the Budget Policy Statement: unemployment and what the plan was to fix it. The difference between their Government and ours is that when we saw something happening, we discussed it as a Cabinet. But what have we heard from this Government? Crickets. Nicola Willis tells people it’s bad luck, basically, if they lose their job—“Oh, well.” There is no plan. For us, it is imperative that we do have a long-term plan, we do invest in our future, and we set up a reason for our young people to stay—not something we have seen from this Government.

FRANCISCO HERNANDEZ (Green) (15:18): Thank you, Madam Speaker. I rise to oppose the Budget Policy Statement. This Budget Policy Statement was hopelessly out of date and out of touch even just four months ago, when it was issued. It’s painfully obvious now, in today’s context, that it reflects a fundamentally out-of-touch Government that is completely all at sea on how to build a modern, productive, resilient economy, despite the words in the Budget Policy Statement aiming to that effect.

No Government is as ill-prepared to tackle the crisis that we are facing today, and the Budget Policy Statement will serve as an autopsy of just how badly this Government has failed to prepare us for this crisis. In the short term, they’ve failed to prepare us, with our Minister of Foreign Affairs naively reflecting that the war will end much more quickly than people are thinking. He said that a fortnight ago, and the terrible war shows no sign of abating any time soon. This naivety has meant that the Government has wasted crucial time. Rather than taking the crisis seriously, they have failed to prepare New Zealand in a meaningful way. With their meagre package of support being funded—$373 million—out of the operating allowance—that’s the link to the Budget Policy Statement, Mr Hamilton—with their meagre package of support reaching only a fraction of families and missing out some of our more vulnerable communities.

Years from now, when the inevitable royal commission of inquiry comes to exhume the corpse of this Government and the corpse of this Government’s failed response to this crisis, I bet it will show that this Government missed the boat and spent a few critical days dithering, thanks to this Trump-loving, MAGA hat - wearing, Aotearoa-hating, New Zealand First, ACT, and National coalition. Their short-term failure to adequately prepare New Zealand would, perhaps be more forgivable if they had spent the last few years making Aotearoa a more resilient and independent place.

Unfortunately, their record of failure is reflected in the Budget Policy Statement. The Budget Policy Statement does not mention the word “resilience” or the phrase “climate change” even once. Instead, it sets out, as its goal, narrow financial metrics which reflects this Government’s ultra-constrained fiscal strategy, and they would admit to that; they palter that as their point of pride. These three points are: to reduce Crown core expense towards 30 percent of the GDP, return headline operating balance measures back to these surpluses, and the 40 percent target for net Crown debt.

This Government, like the French generals of World War II, are fighting the last war. They’ve learnt the wrong lessons from the COVID crisis and their narrow focus on preventing core Crown debt from increasing means, that, in practical terms, it is actually everyday New Zealanders and the poorest New Zealanders that are bearing the economic pain for this crisis. The absence of any measures that they’ve proposed, as either short-term intentions or long-term objectives that would increase New Zealand’s resilience, is deeply indicative of how unprepared they have left our country to deal with this crisis.

We know that this New Zealand First – Act - National coalition have fundamentally sabotaged every effort that would have broken Aotearoa New Zealand’s dependence on fossil fuels—that’s discussed on page 6 of 10 of the transcript. In energy, they cut the Regional Energy Transition Accelerator, they scrapped the energy-efficiency rebates, they scrapped the ban on new fossil fuel baseload generation, they scrapped the Government Investment in Decarbonising Industry funding, they removed the renewable energy target, they cut funding for the Warmer Kiwi Homes scheme. In transport, they cut the Clean Car Discount, they scrapped the sustainable biofuels obligation, they cut all the programmes that would have provided vehicle kilometres travelled by passenger cars to providing alternatives, and they cut passenger transport subsidies and made public transport much more expensive for everyday New Zealanders. The impact has been—well, we’ve seen the catastrophic effects that their Budget Policy Statement will further submit—that electric vehicle sales have crashed from over a quarter of sales in 2023 to less than 10 percent in 2025. We are far behind in the world: in Australia, one in five cars sold are electric; in China, one in two new cars sold are electric. The global average is one in four new cars sold are electric, but, unfortunately, Aotearoa is lagging far, far behind due to the policy decisions that this Government has made and confirmed in this Budget Policy Statement.

By 2030, we could have saved 1.3 billion litres of petrol just from the Clean Car Discount and the feebate discounts alone. In real-world terms, it means that the prices are rising faster than they would have otherwise because there are more petrol and diesel vehicles on the road than there would otherwise have been if this Government hadn’t come in and slashed and burned all of the climate resilience measures the previous Government had introduced. I mentioned all these things, because there is nothing in the Budget Policy Statement that mentions or reverses cuts to these programmes. I mention this because we source most of our fossil fuels from overseas, and the Government removing measures that would have enabled New Zealand to generate our own renewable energy is another step that locks us into dependence to fossil fuel sources that are always vulnerable to fuel shocks.

Let me be clear: fossil fuels, whether it’s here or overseas, will always lock us into dependence to the global price of overseas fluctuation of the oil markets. Even net oil producing countries, like the US, are suffering from the oil shock because the price of fossil fuels is determined by the overseas market. Now, we can see this analogy in the fact that even though our Aotearoa grows enough food to feed 50 million people, the price of food has still skyrocketed and continues to skyrocket here.

If the Budget Policy Statement that locks us in has been a disaster for our resilience and our climate response, it has also been, likewise, a disaster for our economy. I quote from the Half Year Economic and Fiscal Update: “Overall activity has fallen more quickly than it did following the global financial crisis in the late 2000s. Per capita GDP fell 5 percent from its peak in 2022, compared with a fall of 3.9 percent over the 2008 to 2009 period.”

Unemployment is reaching the levels of the great financial crisis. I remind the House that these projections were generated even before the Iran war started. The economic conditions have changed so much since this Budget Policy Statement was drafted that we recommend that the Government tear it up and start all over again. We would recommend that, but we know that they would produce exactly the same documents as they do now, because this document, and this Government’s wider philosophy, is emblematic of this Government’s response to the crisis. It is a Budget Policy Statement of cuts, it is a Budget Policy Statement of austerity masquerading as discipline, and it is a Budget Policy Statement of failure. Nothing makes this clear—that this Government has learnt nothing and forgotten nothing—than in their so-called response to this fuel crisis, which they funded, partly, out of the operating allowance of $1 billion that this Budget policy document refers to.

The meagre amount that the Government is offering, only to a few households in New Zealand, is a drop in a bucket of what it takes to fully address this crisis. Let me be clear: putting a financial package of assistance to 150,000 families out of 1.78 million households in New Zealand—where not even every one of those 150,000 is getting $50 a week—is not enough. Beneficiaries, students, and many working people who do not fit these narrow criteria have been left out. There have been zero attempts in this package to ensure that incentives that actually reduce for fuel conservation and decrease the cost of living, are aligned or even if they reach a broad amount of people.

What’s worse is: who pays for this targeted relief? This Government has chosen not to impose a windfall profit tax and, instead, has stated outright that the Government will pay for it through taking from the operating allowance. What this means is that the Public Service, which has already had its capacity eroded through cuts and that they’ve seen doctors cleaning beds and doing admin work, will get even more and more gutted. The $1 billion operating allowance is not even enough to keep up with inflation, and it’s been eroded with this Government’s meagre measures to deal with the COVID crisis. Meanwhile, the same corporations and big elites that price gouged ordinary people will have free rein to make the same mega-profits that they did during COVID.

If the Greens were in Government, this Budget Policy Statement would deliver relief for real people who need it the most, a payment to adults who are below the median income, and free universal public transport because Aotearoa deserves—

ASSISTANT SPEAKER (Maureen Pugh): The member’s time has expired.

Hon DAVID SEYMOUR (Deputy Prime Minister) (15:28): When that guy got up, I thought, “I wonder why the Green Party don’t let him give more speeches?”, now we all know!

I want to bring the debate back, away from the sound bites and slogans, towards this document that we’re debating: the Budget Policy Statement and the Finance and Expenditure Committee’s report on it. There’s a lot of numbers in here that may be out of date given the changes in the last few weeks, but I think it’s important, as a starting point, that people actually know what the Government’s doing and what it’s spending. If you go through it, there’s a table here that says that in 2018-19, the Government was spending $87 billion—the core Crown expenses—and you say, “What is $87 billion?” Well, if you divide by the number of people, it’s around about $17,000 for each person in this country. You think of a family of four, well, that gives you a about $68,000 being spent by the Government on their behalf. I just want to start with that because that’s where we were in 2018-19. Since then, the amount being spent has gone up to $142 billion. That means we’re now spending, per person, about $28,000—$17,000 a person six or seven years ago, up to $28,000 a person now. If you take a family of four, well, that’s actually, help me here, about $112,000 of Government spending on that family.

I just want to start with those basic facts, because when you get the people over on the other side and there’s all this, “Oh, it’s all slash and burn”—it’s like a high school debating club; “They’re the capitalists, and we are the caring people”—just come back to the fact that, under this Government, the Government is spending $141 billion. That is something like $112,000 on a family of four. Of course, it averages out—it’s not the same for everyone—but I make the point that when people get up and say they want to spend more taxpayer money on something, well, first of all, we’re already spending a lot and throwing money at every problem hasn’t worked.

In fact, you can see the amount that expenditure has increased in the last six years. New Zealand superannuation has gone up $8.6 billion. Welfare benefits has gone up $8 billion. Health has gone up $12 billion in the last six years. These are really big increases in the amount that is being spent, but one of the most interesting amounts is the amount that’s gone up in the finance cost. We’re now spending on interest about $10 billion a year. That, again, if you take it down to an individual person, is about $2,000 a person just on the Government’s interest on its debt. And you think, “Wow.” Go back to a family of four: that family of four has got about an $8,000 interest bill that the Government is paying, interest on debt that we’ve taken out for every four people.

Now, why is there so much interest on the debt? Because there’s an awful lot of debt. The net core Crown debt sits at $182 billion. When the Labour Government got in, it was about $60 billion. We’re still in deficit—it has grown a bit under our Government—but they, basically, borrowed $100 billion in six years. Again, I just want to say to people who say, “Well, if only the Government spent more money”—we get these guys who say, “We’re more generous. We would spend more.”—the fact is that, actually, they borrowed an extra $100 billion. They said, “Oh, we had COVID.” Sure; we can debate whether that was well managed, but the issue is this: we hear the Public Service is run down. They started with 47,000 in the Civil Service; they finished with 65,000. They hired another 18,000 people. They increased the amount they spend by about $60 billion a year. They increased the amount of debt they have by about $100 billion. They added about $20,000 of debt per family.

You sort of say, “Gee, surely throwing more money at the problem can’t be the solution?”, because, if spending more taxpayer money was the solution, wow, these guys would have fixed health, they would have fixed education—they would have fixed everything. The infrastructure would be perfect. There would be no potholes in the roads. The truth is that they spent all that money and they just didn’t get the results, and some of the evidence of what they spent and how expenditure has increased in the last few years is contained in this document. I think it’s important to get those kinds of facts and figures out there. The question is: what are we going to do about it?

Our challenge is to make sure that we get better value for money from every single dollar, and where we start is that we give ourselves an operating allowance. That’s in this statement, and it says we’re only going to increase spending by $2.4 billion of new money. Now, that’s interesting, too. There’s a figure in here—I think it’s Figure 4—about the operating allowances over the years. In 2022, after COVID was largely done, they had a $5 billion operating allowance. They did lots of big ones like that, lots in the threes and fours, lots of really big increases in spending. That’s why we’re now in this position. We’re committing to an operating allowance of only $2.4 billion.

When you consider the population is growing, and inflation is still going to some extent, it means that we have to drive efficiency. That’s why we do things like setting targets. We set targets for the number of people that get immunised against MMR, because that really matters. We set targets for the number of children that are actually regularly attending school, because I would say that that matters more than just about anything. We set targets for the amount of violence, and the Government publishes the results on its website, and just about all of them at this point are going in the right direction. We’ve got less violent crime: 49,000 less in violent crime. We’ve got more students attending school. Every school term we’ve been in Government, we’ve actually got better results. By setting targets and measuring the results, instead of throwing money at the problem, we’re actually getting better.

We’re also making sure, by keeping that operating allowance at $2.4 billion, that the rest of the economy has time to catch up with the Government. That’s why this forecast says that the percentage of the economy that’s going to be spent by the Government—well, it started out at 34 or 35 percent when we came in; it was 32.5 percent last year, 32.8 percent forecast this year, and it’s forecast to get down to 30 percent by the end of the decade. We’re actually making sure the Government takes a smaller portion, a smaller share of the economy, and we’re making sure that we get the results in health and education and safe streets and things that make a difference. I think that really is the contrast and the choice that New Zealanders have.

Now, they can make great videos for TikTok. I’m not going to try to compete with them there, but the question is—

Francisco Hernandez: You’re not even on TikTok?

Hon DAVID SEYMOUR: He says I’m not even on TikTok. I am, and I’m sorry that you haven’t found my account yet! I’ll put some economics up there, and maybe some advice for public speaking. You might learn something, buddy. It would help you a lot. The fact is that we need to have more than sound bites and slogans and TikTok accounts, or whatever he thinks he’s on. I think he’s probably on a few things, actually!

What we need to do is ensure that we get responsible government, and that is: crunch down the amount we spend, free up cash for Kiwi households to spend on their own needs, because they’ll spend it better than we will—I can guarantee, no matter which side of the House is in power, people spend their own money better than any politician—and make sure that when people do need the support of quality public services, we are improving the quality of the services they receive. It’s only then, with that sort of management, that people can have a place worth staying, a place where they feel the situation is stable, that their efforts will make a difference, and that they can build a life in this great country and they’re not worried about what’s going to happen if the other side gets in and just runs away with the company credit card again and racks up a whole lot of debt that they’ll be left paying off for a very long time.

Speaking as the leader of the ACT Party, I’m immensely proud of the savings and the improvements that we’ve managed to drive: Karen Chhour, in youth crime; the attendance that I’ve been responsible for; the improvements in medicine funding; but also the savings that we’ve been able to drive. We estimate that if you gave your party vote to ACT in the last election, you actually saved $57,000 for the taxpayer. If you take the number of votes we got and you divide that by the amount that ACT Ministers can point to saving, there’s no other party that can say, “If you give us your party vote, we’ll save the taxpayer $57,000.” It’s got to be a good deal, and it’s free to vote. It’s the sale of the century, actually! That is the kind of diligence and care for the taxpayer and their money and their hard work and their time that the ACT Party brings to this House.

I commend the committee for its report. I commend our Minister of Finance for the Budget Policy Statement. We’ve got a lot more work to do, rolling up our sleeves as we go through some tough times with this energy situation and conflict in the Middle East. Thank you, Madam Speaker.

Dr DAVID WILSON (NZ First) (15:39): I rise on behalf of New Zealand First and as a member of the Finance and Expenditure Committee. I commend this bill to the House, and I also commend—

Dan Bidois: Budget Policy Statement.

Dr DAVID WILSON: Sorry, our Budget Policy Statement. I also commend our chair for the excellent speech he gave. And thank you to the leader of the ACT Party for a number of measures in there and a number of indicators that have pointed us in the right direction. This lays the ground for me. Thank you very much.

The Budget Policy Statement in December 2025: slow and steady, getting the fundamentals right, getting things back in order, not flirting with modern monetary theory—actually, theory is sometimes replaced by “ferry”—like the previous Labour Government’s long, largescale asset purchasing programme, COVID spending, half of which was helicopter money creating inflation, debt, and asset hikes, with real house prices having left the room.

December 2025: a long way to go, recovering from the economic disaster of the previous Government but with some life signs emerging at that point. Let me remind you: employment was increasing, business confidence was improving, inflation had halved, the official cash rate had halved, mortgage rates nearly halved—mainly because, you know, the banks have to make a bit of profit along the way, whether the things are going good or getting bad, but that’s something we can live with so far—return to operating surplus by 2028/29, and that wonderful policy Investment Boost, which was already gaining traction.

So there were some life signs there. That was then; this is now. What a difference a quarter makes; a new old war. There’s a quote from the Guardians of New Zealand Superannuation: never seen a bubble burst when the world is talking about a bubble; they generally come when no one is expecting it. That’s what’s happened here. Immediate effects: energy crisis, longer-term challenges. The Strait of Hormuz carries a multiplicity of trade categories, not just oil. We need to be prepared.

Luckily, this Government has a diversity of expertise and it watches and listens before it acts. Fancy that; shore up and shorten supply chains—Singapore, South Korea, Japan—manage relief while addressing inflation, still addressing inflation, family tax credit from within our already extremely tight operating budget. Look to alternative fuels and buddy up with Australia. That’s a great start, don’t you think?

Debbie Ngarewa-Packer: No, not if it’s dirty.

Dr DAVID WILSON: I didn’t think you would. Where to from here, and what can the public expect from us? Well, we on the Government side are, broadly, a centre-right coalition of the three; you’ve got our friends, the libertarian neoliberals down the end there; got our friends on the in the middle here who are the steady and straight company.

Cameron Luxton: You’ve got to love the self-description; let’s hear it.

Dr DAVID WILSON: Yeah, well, you can come back later. And then you’ve got us, the nationalist economists, economic growth from building from the bottom. We’re not the same. We’re not the same, but we know how to implement in a coalition agreement. No one can deny that; we always win that competition.

Many of my friends and colleagues have asked me “Why did you join New Zealand First?” Regional development; yes, we get that, but it’s bigger than that. Many will know that I’m a fan and I hope you can look up the meaning of this: endogenous economic development. Go look it up if you don’t understand what it is. New Zealand First is a nation-building party, building on our own resources, our own assets, our own wealth, our own businesses, our own globally competitive advantages in our own people, to make us great again.

So on the nation-building theme, part of that is building resilience and security into our economy. We’ve been working hard on those things for many years, which is why we have reacted so vociferously on the closure of Marsden Point, and the member across the aisle opened this argument and therefore I will respond. When I first arrived in Northland and to head up the regional development agency, the first thing I noticed was the strength and depth of their secondary industry. The second thing I noticed was Northlanders’ extreme resilience and can-do attitude. They may have had a verbal stoush now and again, but then they got on with it and got things done.

I like that. I think that may be why they reserve judgment on the Aucklander that just arrived—the newcomer—when I said no, I’m not writing another strategy, we’re forming an action plan with projects on it and we’re going to implement them, and we did.

Marsden Point; let me give you a few clues, on the other side of the House—

ASSISTANT SPEAKER (Maureen Pugh): Mr Wilson, as it relates to the Budget policy.

Dr DAVID WILSON: Yes, it relates to the energy crisis, Madam Speaker, thank you. The closure of Marsden Point was a heavy hit for Northland. Built between 1961 and 1964, it created huge employment opportunities then and in the 60-odd years that followed. Many companies owe their genesis and their growth to the refinery. It accounted for between 7 and 10 percent of GDP in Northland when I was there, with around 1,100 jobs dependent directly on the refinery, and another 2,400 in supplier services and contractors. It supplied 70 percent of New Zealand’s fuel supply and 40 percent of New Zealand’s total energy supply.

It survived and supported New Zealand through the energy crisis of the 1970s when interest rates went far beyond 20 percent and inflation was rampant. It survived through many business cycles, extreme fluctuations in oil prices. It is one of the most efficient small refineries in the world. Good, hard-working, skilled people, and along comes project Te Mahi Hou. I wonder if you can remember that or even have heard of it.

Fast forward 50 years to 2015 and 2016, the Te Mahi Hou project, circa $365 million to upgrade the refinery. Part of that upgrade was a new continuous catalytic converter delivering increased efficiency, increased production, and reduced greenhouse gas emissions. Local company Culham Engineering headed a consortium of local suppliers including McKay electrical, Rudolphs engineering, United Civil, beating out international competitors for that contract to finish on budget and before time.

That’s right, Northlanders delivering for themselves, employing 440 people during that construction. That was only seven years ago and the closure was devastating for Northland, not least of which was the 300-odd highly skilled workers that left our shores and hit a myriad of contractors and suppliers at that time.

I’ve heard recently that sweet crude produced in Taranaki was not able to be used at Marsden Point. At the time of that project, I heard one wag say, “Look, we take Indonesian mud and turn it into jet fuel.” Do you seriously think that the expertise in Northland would not be able to rejig the converter in times of crisis like these? Not seven years after the upgrade, Labour has been complicit in what I would call economic vandalism. Let me channel one of the leaders of the Labour Party—the Hon David Lange, in one of his finest moments: I can taste the sulphurous sanctimony in your breath. Thank you, Madam Speaker.

DEBBIE NGAREWA-PACKER (Co-Leader—Te Pāti Māori) (15:48): Tēnā koe e te Pīka. First of all, I’d like to stand on behalf of Te Pāti Māori not to commend this the Budget Policy Statement (BPS) 2026 to the House. It’s not a committee that I’m on, but it’s been really interesting listening to the various sides of debate and understanding the complexity of the figures and what it is that we have before us as a nation, and notwithstanding the challenges of fiscal discipline. What we are here talking about to our people is the decisions that have been made on how they get to live their lives every day.

So I’d like to give it a little bit of personality and heart because I think at the end of the day, what we are discussing here is are the goals that the Government has decided—and there are three: economic productivity, public services, and fiscal discipline—going to help improve ordinary New Zealanders’ families out there struggling and working really hard lives. What we have seen is that for the struggling families, there is actually no relief coming from the focus, certainly on this BPS. What we see is that there is no cost of living relief signalled, that there is going to be no new transfers of income support; flagged. That’s problematic for a whole lot of New Zealanders because what we have experienced in the last year and this promise of when the world gets better and productivity increases, it’s going to trickle down and your income is going to improve.

In fact, what we’ve survived in the last couple of years with this Government is $21 billion worth of cuts; 116 programmes cancelled; about, I think nearly half of, what, $12.8 billion ripped from the pay equity system.

We’ve seen wages for women, nurses, teachers, and carers all under attack. We’ve seen lunches cut for tamariki. We’ve seen $32.5 million for Māori housing supply cut. We’ve seen Māori health inequities cut. We’ve seen landlords given $2.9 billion and we’ve been seeing a whole lot of axes and cuts across nurses and the standard of care inside the health system. We’ve seen 90-day trials come back.

I’ll go back to what that means for people on the ground. It’s silent for those who have been left behind and who have been really tolerant and patient, being told “Work, work, work, work, and it’s going to get better.” There’s nothing in here that we’re seeing that’s going to get better. In fact, what we’re seeing also is that the BPS ignores the whole energy security system or lack of energy security that we have. We heard that.

We’re in a crisis. We’ve been in a cost of living crisis. We’re now in a fuel crisis. We’re in a whānau resilience crisis. There’s nothing that’s happening here to show that for all our discipline, all the cuts we’ve endured from this Government, that it’s going to get better for anyone else. Certainly, yesterday’s relief package showed that. What we’ve seen is millions have been left out—millions of ordinary New Zealanders who are students, who are superannuants, who are workers, who are in between jobs, who are on benefits. It’s not that they’re lazy but the mere fact that they’ve been made redundant or are unwell.

What we needed to see is that the Government was going to give some inspiration, some kaha to the rest of Aotearoa to say that it’s going to get better—it’s going to get better—but we haven’t. We could have seen a renewable energy input into this resilience to say that, actually, if we invest in solar roofs at scale, we could at least relieve some of you, but there has been absolutely nothing. It’s asking us to live the same way, this living of austerity that has been forced on the whole of Aotearoa.

It’s easy, because behind every one of these decisions are families who are going hungry. We’ve got now I think 640,000 living on the poverty line. We’ve got women who have been asked to hold back on their whole equity claim. We’ve got kaumātua rationing their dialysis because they can’t afford to go. We’ve got first-home buyers whose KiwiSavers have been raided. We’ve got communities who have been told to give up your reo, your culture, housing programmes, health authority, and the Government is calling this responsible.

Where is your heart for your people, your people that stand up during COVID, during the climate crisis, including the fuel crisis? How long are you going to expect us to continue to say, “Carry on. It’s going to get better.”? It’s going to get better when you’re making decisions that are actually looking after—and they’re political choices. You’re politically choosing poverty and hardship for people to live with. That’s what this BPS shows. It’s really clear what this Budget is. Again, we’re going to have another year of looking after the wealthy, and it takes from those who have the least. That’s unacceptable. It’s hard out there, and I suggest some of you get out of this House and see how real people are living on the ground.

RICARDO MENÉNDEZ MARCH (Green) (15:53): There is one funny myth that the Government members want us to believe when they speak about this document, the Budget Policy Statement, and that is that there is not enough—that there is not enough to ensure that no one goes hungry; there’s not enough to guarantee everyone a warm, safe home to live in; that there is not enough to ensure that we can guarantee a job to everyone who exits training and goes into the workplace; that there is not enough to guarantee a thriving education for every tamariki growing up in this country.

The way that politicians from the Government side have spoken about the intentions of their Ministers represented in this very document would lead you to believe that we’re a poor country, and yet we’re actually the wealthiest we’ve been as a country. But the decisions outlined in the Budget Policy Statement, as well as decisions that have been announced since, represent a Government that is not interested in ensuring that the resources that are out there get to those who need it the most. It is a Government that is preaching to families that it is time to tighten their wallets because times are getting tough while they have allowed landlords to get richer, while they have allowed the wealthiest in our country to disproportionately benefit from their tax cuts, while they parade cuts to public services.

This is a Government that claims to care for the squeezed middle while completely disregarding the crushed bottom, people who, while this Budget Policy Statement was being drafted, were already struggling to make ends meet. We know this. The statistics from the Government’s own side show that more people are requiring assistance from Work and Income to make ends meet.

Despite page 7 of the select committee’s report on this issue of saying that the Government has focused on initiatives to lower unemployment, we’re seeing record unemployment. We are seeing an increasingly high level of young people without a job, and these are the very same people that the Government has intentionally excluded from the relief package in light of the fuel crisis exacerbating the cost of living crisis that came as a result of the war in Iran, waged illegally by the United States and Israel.

It’s telling that the Government keeps telling us that they must run austerity Budgets to get to a surplus, that they must reduce Government debt without actually acknowledging that it is going to be low-income families who will disproportionately pay the price. Every time that Governments across the world try to reduce Government debt by cutting public services and support for the poorest, they pass on the burden to households. We’re already seeing this. Credit card debt is high. People are getting more and more into debt with Government agencies simply to make ends meet. Everyday people on the breadline are the scapegoats of this austerity Budget Policy Statement.

They do not care if families go hungry so long as they can parade a surplus, and not all spending and cuts are made equal. We’ve got a Government that seems quite happy to spend on some of the most expensive roading projects we have ever seen, while refusing to invest in things like rail that will actually better prepare us for economic shocks like the ones we are seeing right now. This is a Government that would rather lose revenue in order to give landlords more money and while allowing beneficiaries to go hungry.

I simply do not buy this myth that there isn’t enough. There is enough, and a Budget Policy Statement that genuinely recognises that there is enough for everyone would be committed to ending poverty by taxing the wealthy few, by taxing excess profits that corporations are making while everybody else is struggling.

This Budget Policy Statement represents a Government that is not ruling for the many but for the few. They keep talking about the squeezed middle without even supporting the vast majority of them and leaving the crushed bottom behind who will be getting further into debt and risk getting further and closer into homelessness, as we are seeing out in the streets. A Green Party Budget Policy Statement would look exactly the opposite of what we’re seeing in here and would put our communities front and centre, as opposed to the Government’s wealthy mates.

RYAN HAMILTON (National—Hamilton East) (15:58): Well, it never ceases to amaze us that we hear about new turns of phrase from the Green Party. It’s always “Tax more. Spend more.” Now, we’ve learned about the crushed bottom. I didn’t know such a thing existed. I thought yesterday after the Minister’s announcement, we were actually doing more for the people in socio-economic hard times by $50 a week to support those who are having more stress under rising fuel costs. But nevertheless, no doubt we’ll hear more from Mr Menéndez March about the crushed bottom.

The Budget Policy Statement, and, of course, the Finance and Expenditure Committee report on it, provided some very clear insights at the end of last year. Obviously, those things are in a very dynamic state at the moment, but I think it’s important for context that we reflect on the goals that relate to that Budget Policy Statement, to build a stronger, more productive economy that lifts real incomes and increases opportunity for New Zealanders; that delivers more efficient, effective, and responsible public services to all who need and use them; to restore law and order; and to get the Government’s books back in order and restore discipline to public spending.

Now, the Greens might call our Budgets austerity and say that they’ve got more money to spend but on this side of the House, we refer to it as disciplined spending and good fiscal management. Also the Budget Policy Statement priority statements are supporting the delivery of core public services, such as healthcare, education, law and order, and keeping tight control of discretionary Government spending.

We heard from Minister Seymour earlier about the operating allowance at $2.4 billion, and we’ve kept that locked for the next few years in the Budget. That’s actually quite a restrained operating allowance, but we have to be disciplined and still providing a bit of a buffer, of course. “Addressing New Zealand’s longer-term productivity challenges” and “Developing a sustainable pipeline of infrastructure investments”—those are the Budget Policy Statement goals and the priorities. You can see constantly through this House, we’re talking about those priorities in all the policies and things that we’re implementing. It’s important that there’s a consistency there.

The other thing I really wanted to draw attention to in the Budget Policy Statement was the fiscal strategy. “New Zealand is in a challenging fiscal position.”—and this was, obviously, of course, before the Iran fuel situation broke out—“The Crown’s books have deteriorated since 2019 as expenses have risen faster than revenue”. I’ll just draw attention to that year—2019, 2020—and we know who was in Government at that time. “The increase in expenses as a percentage of GDP is due to a combination of factors: discretionary policy decisions, the temporary impact of the COVID-19”—and I’ll return to that later, but I think it’s important to give context, because this Budget Policy Statement obviously builds on those challenging times that we inherited.

The other thing in particular I thought is worth mentioning in the Budget Policy Statement is performance plans. Now, “Performance plans are plans for each government department—and the Crown entities that fall under them—to deliver public services within existing baselines”, and I think that’s a really key point. “The default assumption for performance plans is that there is no new funding.” You might think, “That sounds very sensible. When did performance plans come to be?” Well, 2024—so another key year, and that was under the direction of a Minister of Finance where she said, “We must be clear about trade-offs, identify performance and delivery risks and set out how these risks will be managed. They are a tool that puts the focus on medium-term sustainability and lifting performance within existing expenditure, rather than on annual Budget initiatives.”

This context is really important, because while the Opposition will say we’re not doing enough or we’re not spending enough or there’s too much of an austerity Budget, the context we inherited was bleak. The interest alone we’ve heard about is $10 billion a year—enough to fund five Government departments on its own. It’s vast—it’s vast. We don’t like to continue to look in the rear-view mirror. We want to be a positive Government that focuses ahead, and we are, but it’s really important the context is set, because we have got to manage the Budget that we’ve got and work within those very real constraints.

Today’s debate on the Finance and Expenditure Committee’s report and the Budget Policy Statement comes at a time, obviously, of real uncertainty for New Zealand and real responsibility for this Government. The economic landscape has shifted significantly in recent months, and we’ve got to adjust. The Fitch rating, we just heard, obviously, was looking at New Zealand’s position a little bit more negative, which just shows the important work we’ve been doing over the last two years. I can only imagine, if we hadn’t taken such restraint on our debt and our management and the savings over consecutive Budgets, we would be in real trouble.

That COVID waste comes home to roost, with nearly $30 billion not even related to pandemic spending. I think of the large-scale asset programme, which left us with $10 billion of debt; the lump-sum payment, which sent payments out to French backpackers and dead people; and, of course, the shovel-ready projects, where there weren’t any shovels anywhere near it—they’re still at Mitre 10 and Bunnings waiting to be picked up. That’s the context we find ourselves in.

Despite these challenges, there are also signs of resilience in our economy. The most recent GDP data shows the economy grew 1.1 percent over the second half of 2026, and that is welcome. That is showing confidence is returning to business, to the manufacturing industry, particularly to the South Island, which you’ll be pleased to hear, I’m sure, Madam Speaker.

I’d also like to talk about the economic and fiscal outlook, which was referenced in that Budget Policy Statement. The Half Year Economic and Fiscal Update (HYEFU) shows the economy is recovering from a time of a prolonged downturn, with GDP expected to grow and unemployment forecast to decline from early 2026. Tax revenue forecasts reflect lower nominal GDP, with total tax revenue to be $1.7 billion over the forecast period. Core Crown expenses are forecast to decline gradually as a share of GDP, reaching 30.5 percent by 2029 and 2030. Net core Crown debt is projected to peak at 46.9 percent of GDP. Those are very high figures, and we’d like to see them a lot lower, but it’s going to take time. That’s why the upcoming election is going to be critical for New Zealanders, to ensure that we keep on track and deliver for Kiwis as per those objectives and goals I referenced earlier.

Obviously, now, in the last four weeks, we’ve had some real headwinds in Iran. The conflict in the Middle East has introduced a new level of uncertainty, and that was also referenced by the Reserve Bank Governor yesterday. We don’t know how long this disruption will last, but that’s why we’ve been working so hard as a Government to build some resilience, some good management—because we know that a rainy day will come, and it has come, and we’re dealing with it today.

Yesterday, the Government pre-committed up to $373 million from that Budget allowance I spoke of to provide temporary, targeted, and timely support for working families—$50 is a significant amount when you think of the price of fuel in the last few weeks. But I want to emphasise: temporary, targeted, and timely. Those were the key learnings of the Treasury document through the COVID royal commission that we’ve learnt as a Government. We’re taking those learnings from the gross spray of money that the previous administration had, and we’re trying to do it in a way that doesn’t create inflation, that doesn’t ratchet debt and doesn’t create a permanent expansion of the welfare system. I’m sure, as you’re aware, once you give something to someone, it’s very hard to take back. We’ve looked at that process very diligently and are very responsible stewards as Government.

Our fiscal strategy is clear. We will keep a tight lid on new spending. We will continue to find savings across Government, and I reference again those performance plans, where our Minister of Finance has said to Ministers and their officials, “You must, if you want new money, then try and replace it with old money. We’ve got to live within our means.” We will continue to find savings across Government, because every dollar we spend must deliver value for taxpayers, and we will keep debt under 50 percent of GDP before bending it back downwards. This is the only credible path to restoring New Zealand’s fiscal health. It is the only way to build resilience.

I just want to contrast what we hear from other parties in the House. They’ve opposed every savings initiative we’ve tried. They opposed our fast-track legislation, which was increasing renewable energy, solar farms, tax relief for New Zealanders that hadn’t been done in 14 years—every savings initiative we’ve tried, they shut it down. It’ll be interesting to see—I think Labour’s going to support us with our recent announcement, which is fantastic. We’re doing the right thing.

Hon Dr DEBORAH RUSSELL (Labour) (16:08): I want to draw the House’s attention to the date. It’s 25 March. As Tolkien fans will know, that was, in fact, the day that Frodo—well, actually, Gollum—finally got the One Ring into the Crack of Doom and the realm of Sauron fell and it became the New Year ever after.

But that’s not the significance of this date, really—not today. In fact, the significance for us is that way, way back in 2020, 25 March was the eve of the COVID lockdown. The COVID lockdown—first one—started at 11.59 p.m. on 26 March. Of course, the Budget Policy Statement for that particular year’s Budget had been delivered in December 2019. Between the delivery of the Budget Policy Statement and the actual Budget, the world had changed, and so it was very hard to prepare a Budget in those circumstances.

Of course, a similar thing has happened this year. The Budget Policy Statement was delivered in December—I think it was December.

Dan Bidois: 16 December.

Hon Dr DEBORAH RUSSELL: Thank you. The Budget is due to be delivered in May. Between those two dates, the world has changed.

There is a significant impact in the world of the current events. Now, it’s interesting listening to the members on that side of the floor saying that strategies and tactics need to change and that events overseas have a dramatic impact on New Zealand, because seemingly, when we were governing during COVID, that was not allowed. Somehow, it was all to happen magically and there was to be no impact on New Zealand from COVID. It’s a little bit hard to know where to go with that; either we tell them to ignore what’s going on overseas and just carry on—but we all know that would be irresponsible—or we actually acknowledge that world events do of course impact on New Zealand significantly. I think we need a little bit of humility from that side about what might or might not affect New Zealand.

Looking at the Budget Policy Statement, which was delivered by the Minister of Finance last year, I want to draw the House’s attention to some of the issues that sit in here. First of all is the ongoing discussion about a structural deficit. We know from people like the International Monetary Fund, the World Bank, and our own Treasury that New Zealand faces a structural deficit—that over time, the amount of Government expenditure is projected to exceed the amount of Government revenue by quite a significant margin. We have a real issue as to what to do about that. Now, this Budget Policy Statement makes a proposal as to how to manage that: it is to cut and cut and cut—to cut expenditure.

The trouble is that what that Government came in and did is they cut revenue as well. That means that expenditure needs to be cut even further. We are seeing the impacts of those cuts now: the children who get inadequate lunches at schools; the healthcare system that is overloaded because people are using hospitals as a primary care source rather than being able to go to their own doctor. We see it in the increased number of people who cannot afford food and who are going to food banks. Those cuts have had a real impact. We need a better solution to the structural deficit than just cutting and cutting and cutting and cutting. Careful supervision of Government expenditure is always important, but blanket cuts, as put in place by that Government, mean that eventually we cut to the bone—and that is what is happening with that Government.

The Minister’s statement goes on to talk about the economy recovery, and that’s dubious. There’s been a lot of talk of green shoots, but it was, I think, a 0.2 percent growth in GDP over the entire last year, and it was negative before that, and inflation is now creeping up again. The statement says the economy is recovering from a deep and protracted downturn, and the question has to be: what caused this? When this party was in Government, when we delivered the pre-election fiscal update, that pre-election fiscal update was predicting substantial recovery by now. But on their watch, that has turned into anaemic GDP growth. It has turned into increased people on unemployment and it has turned into more and more families seeking assistance. It’s because that Government does not know how to support the economy.

The problem with shutting down construction projects willy-nilly, just because Labour started them, is that that cuts down jobs, it cuts down small business, and it cuts down the cycle of money through the economy. Cutting construction projects cuts the economy. They need to consider being good Keynesians; in a downturn, the standard Keynesian rule is to spend in order to support the economy. The standard Keynesian approach is that, and yet they rejected it entirely. That is a problem with their fiscal management. When we talk about why there has been a prolonged and protracted downturn, the responsibility for that rests with their Minister of Finance.

If we go on to the report of the Finance and Expenditure Committee on the Budget Policy Statement, I want to draw particular attention to two areas of it. One is around rising energy costs as a key contributor—a key contributor—to the difficulties in the economy. We need a fix for those rising energy costs. We need something that is better than just importing liquefied natural gas. In fact, the way to provide resilience in the energy sector—the way to ensure that we have enough generation—is to go much faster down the renewables route. It is to ensure—

Ryan Hamilton: Fast track.

Hon Dr DEBORAH RUSSELL: —that we get much more wind and solar power distributed on households, and then to use to some of our existing facilities—our hydro lakes down south, our geothermal power—as our firming. That leaves the peaking, and there are ways of fixing that. They shout back at us “fast track”. We had a fast-track process; they repealed it. We could not support their fast-track process because it abandoned the environment, and, frankly, we can do both. We can do the economy and the environment and fast track. We must consider the environment. What was wrong with the fast-track process that we had in place? Nothing, except that Labour did it, and so they flipped it. That was such a retrograde step, and it was a retrograde step that has contributed to the downturn in the economy.

I want to draw our attention to one final area in the select committee’s report. It was an area that the Minister didn’t bother to address in her Budget Policy Statement, but the select committee did its job and brought this issue to attention. That is what on earth we are to do with climate change. We hear this great line from that side of the House that the market’s going to sort it all out—well, that’s not happening, is it? Emissions are continuing; we are losing our way on methane; we actually need to ensure that we get our climate emissions down. At the moment, the emissions trading scheme is not working to drive change on the climate. But the Minister didn’t address any of that, let alone address some of the ways that Government could act to help industry and to help households to move away from fossil fuels. In fact, that Government has been investing in fossil fuels, investing in increasing emissions. What a ridiculous thing to do. Perhaps in the short term, that might pay off, but the long-term costs that they are leaving to our children and our children’s children are reckless.

In terms of what is going on in this economy, the Minister of Finance has delivered us a prolonged and protracted downturn; the Minister of Finance has delivered us cuts; the Minister of Finance has delivered us children going without meals; the Minister of Finances have given us superannuitants who are only having two meals a day. The Minister of Finance is a failure, and this Budget Policy Statement just reinforces that.

NANCY LU (National) (16:18): As a National Party member of Parliament, and as a member of the Finance and Expenditure Committee, I rise to support the Budget Policy Statement, and I do so with a very clear message: absolutely no to the spending, spending, spending on reckless projects like the last Government. This Government will not repeat the mistakes that left New Zealand with an inflation outbreak, with a cost of living crisis, and with public finances under immense strain.

The Budget Policy Statement is not just a pre-Budget formality; it is a statement of the values of this Government. It says that this Government will back core public services, will keep control of spending, and will restore the fiscal discipline of Government. Budget 2026, which will be delivered on 28 May 2026, will focus on health, education, law and order, and careful stewardship of public finances. That is the right approach, and it is opposite to the loose, undisciplined habits that got our country into the trouble we have now. Let us be honest about New Zealand and what we have learnt. We have learnt that, as a country, and as a Government, there is a difference between emergency support in genuine crisis and the continuing of spending as though there are no consequences. The Reserve Bank said, last October, that during the pandemic, aggressive fiscal and monetary support helped avert deeper harm, but that the combined responses ultimately contributed to an inflation outbreak.

Treasury’s long-term insights briefing, highlighted by the finance Minister last August, examined the way the Government finances were used during and after the COVID period and said that the responses wound up costing NZ$66 billion—NZ$66 billion is not a small policy error that the last Government can simply brush off. This is a massive lesson learnt, written by billions of New Zealand dollars that we could have spent on healthcare, on education, on infrastructure, on houses, on roads, on energy.

With higher prices, this is the suffering that we have now: with $66 billion splashed into the economy, it fuelled inflation, higher prices, and years of pain and pressure that now our generations of New Zealanders, and our future generations, have to suffer. Who pays the price for this? It is New Zealand. It is New Zealanders, all of us sitting in this room right now, and all of our children. It’s families at the supermarket. It is mortgage holders at the bank. It’s small businesses now having to pay more for freight, more wages, finance costs, and energy costs. When Government floods New Zealand with spending and then fails to turn the tap off, inflation does not remain in a line in the economists’ charts. It hits kitchen tables. It hits supermarket aisles. It pushes up the cost of living for New Zealanders. It forces interest rates to go higher and higher. It pushes the prudent, and rewards nobody in New Zealand. That is the bitter lesson of the post-COVID period. While the opposite side of the House wants to forget this and wants to sweep it under the carpet, this side of the House is determined not to forget it, and most New Zealanders out there will not forget or forgive.

The Reserve Bank’s February 2026 Monetary Policy Statement says that inflation pressures are still being worked out of the system in New Zealand, with spare capacity only now just helping to reduce the domestic inflationary pressure and offset the persistent effects of past—past—high inflation. That tells its own story. That damage from the COVID and post-COVID period have not vanished overnight, and this is why the fiscal strategy now, in the Budget Policy Statement announced last December, matters so much.

This Government’s Budget Policy Statement says clearly that one of its core goals, as a Government, is to get the Government’s books back in order and to restore discipline in public spending.

Now, the latest Budget Policy Statement also says that Budget 2026 will support core public services while maintaining tight control on discretionary spending. That matters because, just very recently, Fitch Ratings have now placed New Zealand’s AA+ long-term credit rating on a negative outlook. The finance Minister, the Hon Nicola Willis, has explicitly said—and she was right to exactly underline what that means for the fiscal pressure. If our rating goes down, it adds to the increased pressure in our interest costs. In other words, now the world is watching New Zealand, the market is watching New Zealand. The lesson from what we have learnt in the post-COVID period is very obvious: if we want resilience, credibility, and room to respond to shocks in New Zealand, no matter if they’re average or large shocks, we as a Government need to be disciplined.

The timing of the lesson could not be more important. As noted by most speakers before me, as our economy has just begun to grow again, the conflict in the Middle East has created new, unexpected, unprecedented, historic, and huge uncertainty and huge risks.

Statistics New Zealand actually showed GDP, and the previous speaker, the Hon Dr Deborah Russell, who mentioned only just one quarter of the growth—very, very selective in her speech, that she failed to mentioned the 0.9 percent growth in the September 2025 quarter, then followed by another positive-growth quarter of 0.2 percent in the December quarter. Together, that is 1.1 percent growth in the last half year of New Zealand. That is welcome. That is growth. That is evidence by Statistics New Zealand.

But the Reserve Bank Governor also warned—just yesterday, actually—that the conflict in the Middle East now is likely to mean higher headline inflation pressure in the near term and will somewhat weaken the growth momentum that we have finally developed through the green shoots, through Government control of spending, and which finally supported New Zealanders and small businesses to have the confidence to grow again. After the two years of work that we’ve put in to this, to see finally that growth momentum—what happened in the Middle East and what is happening right now have now just put a weaker growth momentum into New Zealand.

Now, what kind of Government do we want to be when we look at what’s happening around the world? We cannot be a Government who turn around now and say, “Actually, let’s throw caution away. Don’t worry about it, and bring back all the old habits and just spend, spend, spend and just let inflation go.” That is a reckless Government—that is a reckless Government. The Labour Government have demonstrated what reckless spending will do to the New Zealand economy in the cost of living crisis, and it pushed up inflation. That’s what the previous speaker was asking for. She’s asking for a no to the cut, cut, cut; she’s asking for more spending, spending, spending.

This is something that we, as the National Government, have learnt: we have learnt that discipline is not cruelty; discipline now in our Government spending is actually about protecting New Zealand, to give Government headroom to act when the next shock arrives. This is particularly important for New Zealand as we are a country that is exposed to natural disasters, obviously to global brutality, obviously to trade disruptions. So if we spend everything now, when the time is politically convenient, then we will be left with nothing—that when times are genuinely hard, we are left with nothing. This is why the National Government’s response this week has been a particularly right one. Not splashy, not permanent, not performative, but temporary, targeted, and timely support for 143,000 of the working families with children, to support them through this very tough time, through the in-work tax credit.

Now, our Government is very explicit: our support is designed to help households facing the fuel price pressure but without making inflation worse for New Zealand and without further driving up the Government debt. That is the difference between helping people or simply using it as an excuse to abuse spending.

I hereby support the Budget Policy Statement. It is the right statement at the time because it reflects discipline, maturity, and lessons that the National Government have learnt. We are here to support New Zealand through this tough time in the economy, through exactly what we need to be doing for the entire country to make sure that we are supporting all the families, particularly those who are suffering from the higher cost of living pressure, particularly with the Iran crisis. So I commend the Budget Policy Statement to the House.

CUSHLA TANGAERE-MANUEL (Labour—Ikaroa-Rāwhiti) (16:28): Tēnā koe e te Māngai o te Whare, otirā tātou katoa. It’s a privilege to stand for the Labour Party to make a contribution on the Budget Policy Statement and Half Year Economic and Fiscal Update.

The opening remarks referenced the Minister of Finance stating that Budget 2026 will be a “responsible Budget”. Let’s reflect upon what responsible budgeting has looked like for Māori under this National-led Government so far: Te Aka Whai Ora, the Māori Health Authority, gone; cuts to Māori housing; cuts to Māori trade training budgets; cuts to Māori education programmes; cuts to Māori economic development programmes; removal of references to Te Tiriti o Waitangi; Progressive Procurement, which contributed $900 million to Māori business and the Māori economy, and therefore New Zealand, gone. Programmes which had a direct impact on affordability and the quality of life for whānau across Aotearoa, who we know are already doing it tough, were slashed—slashed to the tune of $1 billion. One billion dollars of targeted Māori funding was cut—that is what responsible budgeting looks like under this National-led Government.

The economic context provided in the report acknowledges a decrease in the 2023 Treasury GDP forecast for 2026, from $304 billion to $289.6 billion, which is a decrease of 4.7 percent since the Pre-election Economic and Fiscal Update. When I hear “GDP”, I think instantly of the Māori economy. The impressive growth of the Māori economy’s contribution to GDP from $17 billion, or 6.5 percent, in 2018, to $32 billion, or 8.9 percent, in 2023 is widely discussed in this House, but, sadly, it is not valued or, indeed, emulated.

The Māori economy grew from $69 billion in 2018 to $126 billion in 2023. That growth has come from very little. They have grown assets which are not merely commodities that can be bought and sold, but taonga tuku iho—treasures to be managed for generations. That’s responsible budgeting. Iwi and business have all done it in their own unique way, but with one common value at the centre: people—he tangata, he tangata, he tangata.

I’m reminded of a whakataukī: “Mā te huruhuru ka rere te manu”—“Feathers give the bird flight”. That whakataukī has become synonymous with money these days. However, we understand that there are many forms of feather, many ways to give a bird flight: a warm, dry home, a good education, gainful employment, and the ability to afford the basics. The Government will argue that Māori still have access to these things under this Budget, but the fact is that cutting $1 billion of targeted funding has deprived Māori of the opportunity to provide services in our way and to thrive as us within our own systems, and, frankly, it’s deprived non-Māori from having the experience and benefiting from that.

This is a targeted attempt to clip our feathers, and it will not succeed. I want to acknowledge all the iwi, hapū, and community organisations who are thriving in spite of all the cuts and who will continue to do so in spite of this Government, not because of it. The Labour Party see you. We have a plan for the future which absolutely includes the thriving Māori economy and thriving Māori community. Labour is ready with a plan and ready to work with hapū, iwi, and whānau Māori.

STUART SMITH (National—Kaikōura) (16:33): Thank you very much, Madam Speaker. It’s a pleasure to speak on the Budget Policy Statement and the Finance and Expenditure Committee’s report on it, and I congratulate the chair and the committee members. I think that Cameron Brewer has done a great job on reviewing that—fantastic.

I’ll come to the issues in there, and, actually, I will just start off—I think it was mentioned before—by saying that this is the beginning of the Budget process coming up, with this Budget Policy Statement. It sets out what the Government hopes to achieve, and I’ll go through those points in a minute, but I wanted to address what the Te Pāti Māori speaker gave us. In short, her speech was about saying that the Government’s role is, essentially, to hand money out to different groups. Ironically, that’s not the case, and it was almost as though the Government has money that it gives out, but the Government doesn’t have money. It raises money from taxes or it borrows, or it does a combination of both, and one of the things that I think is quite important to understand is the size of the debt that we currently owe as a country.

It is a significant amount of money and we are actually trying to get on top of that, but a big part of that came about over the COVID period, when we borrowed $60 billion, $30 billion of which didn’t go to COVID expenses. We’re now paying the price for that, and it’s a big price. We’re paying $10 billion in interest now, and that’s in a year. That is the combined expenses of the New Zealand Police, the Department of Corrections, the Ministry of Justice, the Customs Service, and the New Zealand Defence Force. What could we have done with that to expend that money in other areas of Government? That money doesn’t come just out of anywhere. It’s a significant issue for us to address, and why is that important? Because one of the things that New Zealand is really known for is its low sovereign risk.

That is very important, because when we borrow money, that’s based on the premise of how we’re going to pay it back, and that’s where the sovereign risk comes in. Unfortunately, our good reputation for our sovereign risk profile was trashed with the summary announcement of the oil and gas ban some years ago. Now, I know from some contacts in the finance industry how that has directly affected New Zealand. One entity that I know of was lining up an investment from money markets, and they were told, “No, we’re not going to give you that money any more.” It was all signed off and they cancelled it, and they said, “Look, mate, you had one thing going for you. It was low sovereign risk, and you don’t have that any more.”

That is why it is so important that the Budget Policy Statement and Budgets are actually very fiscally restrained and responsible, because that adds cost to our borrowing. It definitely adds cost to everything that we do in New Zealand, and it is really important for the health of our economy. What does the health of the economy mean? It means jobs, food on the table for people, and having people being looked after in the way that we would expect.

The main priority of this Budget—and the thing that mostly stands out for me in the Budget Policy Statement—is to deliver more efficient and effective core public services. Well, that is a great thing to have as a priority, particularly the focus on health, education, and law and order.

Now, if we look at those particular areas, we’ve already made a great start on that by setting health targets. Everything in every business and endeavour has targets, and so why shouldn’t health?

Education: an hour of reading, writing, and maths—fantastic. That’s the future that we’re investing in and we should focus on that, and the feedback from the schools and from parents is that that has been such a hit that children are making real progress in the confidence that they are growing, and we’re growing really good Kiwis out of that.

In law and order, we have had great work by Mark Mitchell and the team, and the Hon Paul Goldsmith. There is a fantastic amount of work that they’ve done in that area. People deserve to feel safe in their homes, and they should be able to go to the supermarket and not see people run through the checkout with a trolley full of groceries and not pay for it. That is stealing from everyone, and so we stand by that.

This is a fantastic Budget Policy Statement—

ASSISTANT SPEAKER (Maureen Pugh): The member’s time has expired.

Hon GINNY ANDERSEN (Labour) (16:38): Thanks very much, Madam Speaker. Thank you for the opportunity. New Zealand has a moment of urgency when we look at what confronts us right now. I think that it’s important that in this Budget Policy Statement (BPS), which outlines really clear goals and objectives that will guide the Government’s decisions in the forthcoming Budget, it shows the short-term fiscal intentions but also, importantly, the long-term fiscal objectives and strategies. That’s what I’d like to focus on today, because there is a real lack of long-term fiscal objectives in any kind of strategy in the long term that this Government has offered New Zealand. That is really the key reason why we have such a high level of uncertainty, both in our business community but also in the homes of families who are just trying to make ends meet on a day-to-day basis.

The level of uncertainty that has been brought about by this Government not having a plan for the future has become absolutely heartbreaking for many families up and down the country. The 2026 BPS says that the Government will focus on “supporting the delivery of core public services such as healthcare [and] education”. But we know that there have been significant cuts right across the Public Service that have directly impacted on the types of those essential services that families desperately rely on. Being able to go and get good quality healthcare without having to have a huge fee is something that most families would love to see—what we want to see.

Also, they’ve talked a lot about tight control of discretionary Government spending, while funding a very small amount of Government policy commitments. But I think it’s important to note that we need some really good examples—tangible examples—that people who may be sitting at home or listening in could understand, because when this Government talks about “wasteful spending”, they never really provide some good examples of what that would be. So I’ve got some really good ones. One is going to have the ribbon cut on it by—probably Chris Bishop, I’m guessing: that would be the shared pathway in Eastbourne; $15 million of COVID funding went into that “wasteful spending”. Also, the beloved RiverLink project, a key infrastructure project in the Hutt Valley—that also received very “wasteful” COVID spending. And Te Ara Tupua, the significant piece of infrastructure between Wellington here and out to the Hutt Valley, right along the harbour way into Petone: that also received that “wasteful spending” that’s being referred to.

So we can be assured; we’ll make sure we line up with you hecklers when that ribbon gets cut to remind this Government that when it talks about “wasteful spending”, they’re very quick to turn up, to cut the ribbon and claim the glory and say that they’ve done good things—because those infrastructure projects, they were long-term thinking. They were good plans that gave people in the Hutt Valley jobs. They gave local businesses an ability to make kai for those workers, and they sustained a local economy that actually looked after people and gave them opportunity. Those were all the side benefits to the key pieces of infrastructure that they also funded through that “wasteful” COVID spending.

What has happened since then? What has happened since then is we’ve seen a change: instead of having jobs created, instead of having local businesses sustained through all the stimulation that those projects had, we’ve seen cuts. We’ve seen significant projects cancelled by this Government, and that has sustained record job losses in our construction sector. Over 20,000 workers have left the New Zealand construction sector, because project after project was canned. Massive investment under way for Kāinga Ora social housing builds, for school rebuilds, for health rebuilds—all of that good work that was under way, that was canned, that was put on ice and that was cancelled. What was the direct result? We saw an exodus of construction workers going to Australia.

Part of that: the Wellington local economy saw those jobs—and on top of the pain of that construction sector downward-spiralling, we saw thousands of Public Service jobs also gone, 10,000 jobs across the Wellington region. What has that done to our local economy and Wellington and the Hutt Valley? That has meant that businesses have liquidated at record numbers. That’s mum and dad businesses who have built their lives and their livelihoods that have then gone under.

A local business in Petone operating for 20 years. Soprano—fantastic local business, a family; the husband and wife actually met there as waiter and waitress. They bought the business, they brought their kids up in their business. That was their life. They sustained that business right through the pandemic, and they kept going. But do you know what they couldn’t withstand? This National Government and the cuts that it did to Wellington and our region. It could not withstand, and it is heartbreaking to see people’s lives and livelihoods wilt before their eyes because this Government is more interested in cutting and serving—self-serving—their own interests than actually providing a meaningful future for families here in New Zealand.

It’s really heartbreaking to see that happen, but what’s important to note is that what we want to see is a long-term fiscal plan; things like KiwiSaver, enabling people to save—and not just increasing the person’s increase, as this Government’s solution is. People are already having to withdraw their KiwiSaver because of hardship. This Government’s response is, “Oh, pay some more, but we won’t.”—so people continue not to save for their future.

New Zealand Superannuation Fund: it’s that Government over there that actually stopped the Government contributions to growing our future nest-egg for this nation, and it’s previous Labour Governments that restarted that and enabled us to grow a super fund that can work. It’s having those assets, having them and keeping them in New Zealand hands and making sure we work smarter, that provides a real future for our country—one with foresight, one where we can make our assets work for us smarter, and to have deeper capital markets here in New Zealand so we can back smart Kiwi businesses instead of watching them go offshore.

We can list business after business in New Zealand that get to a certain level and can’t sustain investment here in New Zealand, and they get snapped up and they go off to other countries. Not only do we lose that great intellectual property here in New Zealand; we lose all of the opportunities of our young people training and getting experience and growing, and we lose all of that potential and that financial gain—because we need to be able to back Kiwi companies, keep them here, and keep them growing for us.

But what do we see? We see Wattie’s closing down. We see McCain’s closing down. Those growers in Hastings, those growers in those areas, where are they going to put the veggies now? This Government has no answers. They are, in fact, hollowing out local economies region by region. It’s the big business, it’s the big end of town, that reap those rewards—not our small growers, not those people just trying to be able to make enough to make ends meet and to make, actually, a profit in their businesses, because there is very little support for a long-term way of figuring out how we’re going to make those things work.

What we’ll see is we’ll see cheaper products that are manufactured offshore being dumped in our markets, and there will be no way out—of getting on top of a supermarket duopoly—if we are shutting down our own growers and our own local processing of our own kai. There are no answers from those members opposite on how to keep good Kiwi businesses here and grow them—because we have a future fund, and our future fund is focused on growing our assets to back our people and keep our futures here, because we want a future for our children in New Zealand.

We’re not prepared to say, “Just go off to Australia and find a higher-paying job over there. You just go off and go to another country.” Record levels of New Zealanders are, sadly, giving up hope, packing their bags and leaving, never to come back, because this Government provides no long-term vision for what they’re going to do to make Kiwis’ lives better here—to make those lives affordable, to make sure you can actually be able to pay your rent, to pay your mortgage, to put some fuel in the car, and to be able to have a decent life here in New Zealand. They are more than happy to pass bill after bill and watch legislation drive down workers’ wages, drive down our ability to have a good life here.

This is a tough time for our country and the world, and what we need right now is a Government with some heart, and over there we have a lacklustre bunch who are self-serving and only interested in serving their own short-term gains and not really caring about the future of Aotearoa New Zealand.

DAN BIDOIS (National—Northcote) (16:48): Well, that was a great general debate speech—but pity this is not a general debate; this is a debate on the Budget Policy Statement (BPS). I have a copy with me if the previous speaker actually wishes to read it and reference it in her speech.

But let’s get back, and it’s my privilege to round off this two-hour debate on the Budget Policy Statement, which is a formality as part of the Public Finance Act. The Minister of Finance tabled this document in the House on 16 December alongside the Half Year Economic and Fiscal Update, and I would encourage members to read this; this is a very important document to go alongside the BPS.

It has been noted today that the last few months goes very quickly. I do wish to speak about where we’ve come from, from the fiscals, where we are, but, more importantly, where we’re going in light of the recent conflict in Iran and the economic consequences of that. The first is what we inherited. Our nominal public debt when National took office more than doubled under the previous Government to $155 billion. That was about 2.5 times the previous debt that we left them when they came into office in 2017.

Let’s continue: the operating balance before gains and losses Budget deficit for the 2023 year was $10 billion. It was 2.5 percent of GDP, and Treasury said that that was one of the highest Budget deficits in the OECD. Now, I say this because if you want to reduce the debt levels that this country has, you first need to close the deficit. The harsh facts of the matter are that we are still in deficit as a country, but that is largely thanks to the deficit that we have been left and inherited from the previous Government.

Let’s continue on. The inflation level of this country was at 7.3 percent. Thankfully, that’s been over halved, but the future does not look bright. The annual bill or the interest cost of servicing that debt—let’s look at that. When we were voted out in 2017, we had about $2 billion of annual debt interest. That increased by $5.2 billion to about $8 billion by the time we came back into office. That’s $8 billion a year that we’re just paying alone to service the debt. But that was then, as David Wilson said; this is now, and the situation looks somewhat different 2½ years into our first tenure in office after a few tough years. Inflation is down, as I said; GDP growth, we had about 1.1 percent over the second half of 2026. The finance Minister was running very, very tight operating allowances. She found about $40 billion in savings to date and we were on track to bend the debt curve down by the 2028-29 year, but we did hear very clearly from Treasury officials that fiscal consolidation has not happened. I say that because the other side likes to say we’re cutting spending, we’re cutting the civil service, but the harsh reality is that spending is still growing. We are still spending far more than we’re taking in as a Government. Treasury officials have sounded the alarm bells. I remember sitting in the Finance and Expenditure Committee and hearing very clearly from Iain Rennie that fiscal consolidation has not happened. So we’ve got a lot to do as a Government, and I would rather trust this side of the House any day with that objective than that side of the House with that.

Now, I want to turn now to the challenges that we face, because, of course, in the last few weeks, things have moved quickly and the fiscal and economic challenges that we face as a result of the conflict in the Middle East are serious. I wish to bring members to the attention of a speech that the Reserve Bank Governor gave a few days ago, which outlined those fiscal and economic impacts closely.

Now, of course, those impacts depend on when that conflict ends and also the ability for the Strait of Hormuz to return to somewhat normal levels of production. The governor has said very clearly in her expectations—

Hon Rachel Brooking: Oh, is that talked about in the document you’re just waving around?

DAN BIDOIS: —and I do mention this because it is part of the budget fiscal policy around inflation expectations. Come and have a look at it, but the inflation expectations in this document are wildly different to the inflation expectations that New Zealand faces today because of external events—nothing to do with this Government. We are taking the events in the Middle East as given.

The governor has said very clearly that inflation will rise in the medium term, that the economy will grow less than it has been forecast under the BPS and that will put strain on the fiscals in its entirety. The Minister of Finance has said today, “Look, actually, on balance, the net impact on the balance sheet is not going to be positive.” For most New Zealanders—those two that are watching at home—the Government is not making money out of this crisis. On balance, the impact on the Government’s books will be negative.

It is that backdrop that sets the scene for the Budget to come later on in May, which will show a negative impact on the Government books. That has already been alluded to in the ratings of external agencies such as from Fitch Ratings, which has put New Zealand on negative watch. I say this because New Zealand has near on $200 billion of nominal debt and that has an interest attachment to that. That interest is dependent on the yield that investors wish to—basically, the risk premium that investors wish to lend to us. Over the last few weeks that risk premium has gone up and we should expect it is going to make a difference to the Budget that is going to be announced in May.

So what does this all mean for the people at home? Well, what this will mean is we’re going to need a Government that maintains fiscal prudence. I certainly wish to acknowledge the $373 million package that the finance Minister announced this week to reach those really struggling low and middle income New Zealanders—about 140,000 according to chairman Cameron Brewer and Minister Simon Watts. But we can’t afford to give money out left, right, and centre, and, you know, not everybody’s going to be happy with that announcement, but I think that will go some way to helping the most vulnerable people in our communities deal with the oil shock that we face, but we have to maintain this fiscal prudence in the future. That means making sure that we constrain spending as much as possible and that we maintain the momentum to get fiscal consolidation actually under way and happening because the risk premium that we pay on the debt is dependent on investors saying and having confidence in us getting back to surplus. If they don’t have confidence in us getting back to surplus, then we’re going to be paying more for the debt that we currently have.

In the last minute of this debate, I want to finish on a positive, which is: this Government does have a plan and that plan is all about going for growth. We actually have positive momentum heading out of this BPS, starting into this year, and that will serve us well dealing with the oil shock that we have. Now is not the time for profligate spending, taxing and borrowing, and hoping that that will get through it. It’s actually a time for good fiscal prudence, of which this side has in spades. I look forward to the campaign ahead and campaigning for a better, brighter fiscal future for this country, for our kids, and for our grandkids. I commend the BPS to the House.

A party vote was called for on the question, That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2026.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 53

New Zealand Labour 34; Green Party of Aotearoa New Zealand 13; Te Pāti Māori 5; Ferris.

Motion agreed to.

Bills

Appropriation (2024/25 Confirmation and Validation) Bill

Second Reading

Hon SIMON WATTS (Minister of Revenue) (17:00): on behalf of the Minister of Finance: I move, That the Appropriation (2024/25 Confirmation and Validation) Bill be now read a second time.

A party vote was called for on the question, That the Appropriation (2024/25 Confirmation and Validation) Bill be now read a second time.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 53

New Zealand Labour 34; Green Party of Aotearoa New Zealand 13; Te Pāti Māori 5; Ferris.

Motion agreed to.

Bill read a second time.

Local Government (Auckland Council) (Transport Governance) Amendment Bill

Second Reading

Debate resumed from 24 March 2026.

Dr TRACEY McLELLAN (Labour) (17:01): Thank you, Madam Speaker. We are nearing the end of this debate, and the Local Government (Auckland Council) (Transport Governance) Amendment Bill has been largely agreed upon by all parties in this House, but there’s still quite a bit to talk about here. Let’s have a little bit of a refresh on where we got up to last night. There are a few specific points that I would like to make, both in summary of the main points but also in acknowledgment of all of the submitters and all of the work that’s gone on behind the scenes.

I would like to acknowledge the work of the Transport and Infrastructure Committee and also acknowledge all of the work that the staff do, not only on this bill but on all of the bills that go through this House. This was an interesting bill insofar as the origins and the impetus for it largely came from the Auckland Council itself, and I also acknowledge that there will be a plethora of staff members who would have worked on this plan for quite some time before it even made its way to this House—so I acknowledge them as well.

This is a piece of reform that’s largely grounded in a clear problem, which is good because we don’t always see that in this House. Sometimes, when Government bills come to this House, it’s not always obvious what problem they are trying to solve. This bill responds to two longstanding issues—those being redressing, or rebalancing, or refixing, depending on how you view it, a lack of democratic accountability; and also the poor coordination that has tended to happen across agencies over the long term when dealing with issues of transport. Auckland’s size, I think, makes those issues all the more visible and a little bit more salient, but they’ve certainly been building for quite some time. It’s not just change for the sake of change; it’s actually trying to fix some structural problems that actually do impact on final outcomes.

Obviously, we are supporting this bill, and we enjoyed going through the process. Whether or not I would call it localism, I think, is still up for debate. We heard that term being used in previous contributions yesterday. I think it does at least provide some clarity and not just control, so we are supporting this bill because it comes from that perspective. We do think that localism is good, and it’s always good to provide that clarity. More than that, it also delineates and makes very specific who’s responsible for what. Under the old model, the decision making essentially sat at arm’s length, and accountability, I think it’s fair to say, didn’t always naturally follow from that. These were changes that were made by a previous National-Act Government in establishing Auckland Transport, but bringing these functions back now under elected members feels like the right thing to do. It strengthens, we believe, both voice and responsibility.

Another thing that was brought up, both during the process at select committee and in previous contributions, is acknowledging that the 30-year plan, I think, is one of the most important shifts. Often, the focus is on governance structures, which is all very well and good, but the long-term planning piece that sits behind this is also just as important. The 30-year transport plan, in particular, that’s jointly owned by council and Government is intended to try to fix some of the stop-start nature of the reality of investments when they can get a bit of steam up and a bit of wind under their wings and then not progress in the way that would be advantageous.

There was widespread for this from the submissions. It wasn’t universal, and there were some submissions that certainly raised some concerns, and I’ll go through those shortly. All of the submissions were very, very welcome and, I think, actually helped inform some of the changes that were made in select committee, as you’d expect. There’s a deliberate balance between expertise and democracy, and that was one of the tensions that was resolved during the process. It was one of the more interesting tensions, I should also add, because some people who were supportive of this bill were really supportive of bringing decision making back to elected members, and others also valued the technical expertise that could be found in a different model. There is a way to achieve balance, and I think we worked quite hard in the select committee process to achieve that.

The bill tries, as I said, to strike that balance by retaining Auckland Transport as a council-controlled organisation, and they now have a mandate to look after public transport delivery. There are, I think, some valid concerns about how specific that is and how much detail has been provided and how that will actually sort of play out. At this point, it’s a watching brief and shifts that strategic control, which I think is important, back to council. The balance here is the important thing.

As was mentioned last night by my colleague Tangi Utikere, the local boards have been empowered via this bill, but with some trade-offs. The move to give local boards that statutory transport power, I think, is significant. It could and it should strengthen that local voice, particularly when we’re talking about roads, speed limits, active transport, and things like that that, actually, communities know best for themselves. Submitters did also raise some concerns, though, that there was the potential that some of that decision making could become fragmented across, I think there’s 21, local boards. There will be some work needed in that sphere to make sure that that decision making doesn’t become fragmented, and that will be a legitimate challenge for local decision making, but I think vesting that local decision making with those boards is a good outcome.

Another major reform that I think is worth just reminding ourselves about is the fact that, ultimately, it is Aucklanders who will judge whether this works or not. There were a few other—I’m hesitant to term them minor details because, actually, from a practical point of view and from a logistics point of view, they’re actually quite significant. They weren’t necessarily the headline issues that submitters made their submissions on. We received 47 submissions in all; 23 were in support and 23 opposed it. That might seem like it was relatively sort of split, but when you analysed what the commentary was in those submissions, there were lots of themes where people were very supportive and agreed. Certainly, the 30-year transport plan was one of those. Supporters also emphasised accountability through elected members, and we’ve heard several people from both sides of the House make contributions about how that might play out in real life. There was some mixed views on how concerns about fragmentation could play out, but, overall, submitters didn’t just express these views. As I said, I think that really did feed into making the improvements that were necessary, and the select committee is quite pleased with the final output, so to speak.

Some of those changes that were made, or a couple in particular, were about specifying what would happen to essentially excess land and not just letting public land simply fall away and disappear because it wasn’t made explicit where that should go. So that is named, namely with the NZ Transport Agency and KiwiRail—that has made that explicit, just to have that safeguard and also ensuring that the committee, and therefore the entity, still comes under the Ombudsman, which I think is really important as well. There are a few other smaller ones, like making sure the transport plan is available and in accessible formats, making sure that the by-law - making process actually functions in practice. There was some lowering of the threshold, so that decision makers must have regard to freight and public transport rather than meet an overly high bar. But overall, whilst I said these weren’t necessarily headline grabbers, they still matter and are still worth mentioning.

So what came through very clearly was that there’s broad agreement with some very good feedback that we were able to tweak through the select committee process. On the basis of that, we think that the bill creates the conditions for a much more accountable and better system. Thank you.

CAMERON BREWER (National—Upper Harbour) (17:12): It’s great, as an Auckland MP, to be able to stand up and support this Local Government (Auckland Council) (Transport Governance) Amendment Bill at its second reading. This is the Government that’s making Auckland Transport more accountable to Auckland ratepayers. It’s transferring most of Auckland Transport’s functions back to Auckland Council. This is the Government that’s establishing an Auckland Regional Transport Committee—council and Crown working collectively, members appointed from each side—on a 30-year integrated transport plan for the region. This is the Government that will ensure that Auckland Transport has good governance, great strategy, and planning, with it all—mostly—going back to Auckland Council. It’s a great day in the reform of Auckland Transport. I commend the bill.

Motion agreed to.

Bill read a second time.

SPEAKER: I declare the House in committee for consideration of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, the Online Casino Gambling Bill, and the Antisocial Road Use Legislation Amendment Bill.

Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill

Committee of the Whole House

Part 1 Annual rates of income tax

CHAIRPERSON (Greg O'Connor): Members, the House is in committee for consideration of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, for further consideration of the Online Casino Gambling Bill and for consideration of the Antisocial Road Use Legislation Amendment Bill.

We’ll start with the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill and the debate on Part 1. Part 1 is the debate on clause 3, “Annual rates of income tax”.

Hon Dr Deborah Russell: Mr Chair, thank you for allowing me to set the scene for this part of the of the bill and the debate. The bill in front of us is the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill—

CHAIRPERSON (Greg O'Connor): Sorry to the member. sorry. Sorry, I’ve just stopped a little bit short of an instruction to the House—I know that she will be rearing to go, but I’m sure you’ll get that back to where you were.

This is the debate where the debate on tax rates should take place, but the vote on any proposed amendments to the tax rates will take place in Part 2, which amends the Income Tax Act 2007. Standing Order 352 requires that the annual taxing provision be considered separately. The question is that Part 1 stand part.

Hon Dr DEBORAH RUSSELL (Labour) (17:15): Mr Chair, thank you. I’m delighted to have the opportunity to set the scene for this committee stage and for this debate on Part 1 of the bill. This is an interesting bill, the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, and there’s a lot of real substance in it that we will want to discuss.

Just to run through some of the substance that’s in there that we will get to in later stages: there’s rules around digital nomads, there’s adjustments to the foreign income, foreign investment fund rules—really good ones—some great measures around employee share schemes, income from the sale of excess electricity, some good work on GST and joint venture rules; some stuff that we don’t agree with on information sharing, but we’ll get to that; and a couple of Amendment Papers, one which has some changes to the thin capitalisation rules; and some pretty interesting changes to student loan rules which haven’t been signalled anywhere else—so there will be a bit of a discussion on that. And then, of course, Amendment Paper 590, which is the one that puts in place the Government’s policy, announced yesterday, of adjusting the in-work tax credit rate and amount. We’ll need to have an extensive discussion on that in Part 2 when we get to it.

Part 1 sets the annual tax rates and it’s a constitutional requirement that—couple of things here: first of all, this bill must be passed, must be signed into law before the tax year ends. Now, the tax year ends on 31 March and, counting on my fingers, we’ve got the rest of tonight and tomorrow morning, which is officially part of tonight, for the committee stage, and then, all going well, I understand that the third reading will be tomorrow afternoon on what will technically be Thursday—if the committee stage is finished by then. I notice the Minister is grimacing at that thought. That becomes complicated because if we don’t get through the committee stage today, if we go into tomorrow—and I don’t mean tomorrow morning; I mean tomorrow afternoon—we cannot then have the third reading, and the next time the House is sitting is on 31 March. For the third reading, it would have to be some pretty interesting sleight of hand to get everything into law on that date. So this committee stage is pretty important, and it has to be done by 31 March.

The second interesting constitutional aspect of this committee stage debate is that when we debate Part 1, that’s the stage where, actually, by convention, we get to have a fairly free-ranging discussion about fiscal policy and about tax rates, about the Government’s structure of its tax system and what it is and isn’t doing within its tax system, who it’s working for, who it’s not working for, the gaps in the system, the things that could be done better in the system, where we also get to have a look at the tax rates that are set and discuss whether or not they are appropriate and they are meeting the Government’s needs. So it’s the one time every year when we get to talk about the tax system in a holistic fashion, not just clause by clause by clause through an Act but in a holistic way talking about, I guess, the entirety of our tax system. So it’s a debate that I would encourage every member of this House to participate in. It is actually important to us, constitutionally, and it’s something that I hope I would see members from across the Chamber participating in with plenty to say.

So, having set that scene, for what we are doing in this Part 1—

Hon Dr Megan Woods: Good scene setting—good scene setting.

Hon Dr DEBORAH RUSSELL: Thank you. Thank you, Megan.

I do want to focus on the nature of our income tax system in New Zealand. In New Zealand we tax income and we tax it through the Income Tax Act; we tax consumption of goods and services through the Goods and Services Tax Act; we have various other levies, which are taxed through their own Acts and they’re not unimportant; they’re just not the focus of this particular debate.

We’ve actually got a fairly good income tax system. It’s well-regarded worldwide; it’s fairly clean; there are very few special rules in it giving special treatment to people. That’s a rather helpful thing to have in a tax system. The more little special rules that are sitting there, the easier it is for people to circumvent the intent of the tax system. Mr Chair, if I could continue? We don’t want to have those special rules.

The problem with our income tax system, in some ways, is not so much what it does tax as what it doesn’t tax. As I said, it taxes income—it taxes salary and wages. Every single penny that the cleaners who clean our offices earn is taxed on their wages. Every single penny that a supermarket checkout clerk earns is taxed. I was going to say that every single penny that a hard-working accountant earns is taxed, and that’s going to be true if they’re in a salaried job—and it is almost certainly true because accountants are a bit too clever to go around playing jiggery-pokery. It’s probably true of what people earn if they’re working on a contract basis in an accounting firm. There are lots of people who pay income tax on every single penny they earn, and that would include most of us here in this House—in fact, I would think all of us. But there’s a whole set of increases in value, whole sets of economic income, whole sets of gains that people get that are not taxed. I’m referring, over here, of course, to untaxed capital gains.

This is actually a really worrying gap in our tax system. What it means is if you’re earning income in a form that can be characterised as capital gains, then you—I shouldn’t refer to you, Mr Chair; I’ll revise that wording. If a person can shift their income from being in the nature of salary and wages or sales coming into a business and so on—that kind of taxed income—and shift it into capital gains, then it is no longer taxed. They just have to recharacterise their income—that’s one way of doing it. Another way of ensuring that a person pays less tax on their economic income is to earn that economic income through the growth in value of untaxed assets.

A classic way we do that in this country is through rental properties. The structure of the way we’ve taxed capital gains has actually encouraged people to invest in rental properties. It has encouraged people to invest in rental properties, which is unproductive investment. Sure, it provides a home, but if it was owner-occupied rather than rented out, there would still be a person living in it. It encourages people to sort of say, actually, I won’t put my money into a firm, into a business, or into a start-up and maybe earn a really good return off that. Because there is a tax advantage to rental properties, people put their money there, and they put it into unproductive investment. That’s a real gap in our tax system, and it’s not just a gap in our tax system that distorts investment decisions. It’s actually a deeply unfair problem in our tax system, and it is deeply unfair because someone who sits on an asset and gets the value in it just out of it sitting there pays much less tax on their economic income than our cleaners, our baristas, our supermarket checkout clerks, and so on.

People will say, of course, that rental property owners do pay tax on their rental properties. They earn rental income, and from that they can deduct expenses, and they’ll pay tax on the remaining balance. They’re quite right; they do pay tax in that way on the ongoing income they earn from the rental property, which comes in every week or every fortnight or every month as rent from their tenant. What they do not pay tax on is on the unrealised gains—on the gains in value of their rental properties. As of today, if you bought a rental property 20 years ago for $500,000 and you sold it today for maybe $1.2 million—because that’s the kind of increases we’ve had in value over the last 20 years—that $700,000 gain would be untaxed. It would be completely free in the seller’s hands. That does seem to be unfair.

Now, if anyone was going to adjust the rules around this, of course you’d do it on a forward-looking basis. You wouldn’t go back to revisit decisions people made 20 years ago. It’s nevertheless something we need to start paying attention to in our tax system.

CHAIRPERSON (Greg O'Connor): I’ll just say at this stage that I very much enjoyed the 101 on tax, and it was good context and background for what’s to come. However, I did note that there weren’t any questions or any interactions with the Minister through that, for which of course, I remind members, we are actually in the committee of the whole House. What I’ll be looking for is perhaps a little more interaction. I’m aware it’s wide-ranging, but it is a debate rather than a wide-ranging lecture, shall we say.

Hon Dr MEGAN WOODS (Labour—Wigram) (17:26): Thank you, Mr Chair. That’s a very wise piece of advice that you’ve given from the Chair, as always. I do also point out that there is a convention with this debate and with Part 1 of this debate—and I think my colleague Deborah Russell made that very clear—that this is the part of this Act that sets the tax rate for New Zealand. By convention, Part 1 has always been an opportunity for members of this Parliament to debate not only the tax rates but the policies that sit behind the various tax rates. I think it is important that this Parliament wouldn’t deviate from that very long-held convention about Parliament having the chance to scrutinise the thinking that lies behind the tax rates, which are set out in a schedule specified in Part 1 of the Act.

CHAIRPERSON (Greg O'Connor): And debate in question.

Hon Dr MEGAN WOODS: Absolutely. This is the committee of the whole House stage, and there will be questions.

One of the things that we know in terms of the policy that sits behind this that domestic advice that comes through both Inland Revenue and also the Treasury—and I’ll be asking the Minister some questions around that. We also have, intersecting with this, some of the other advice that we’ve had coming through in terms of the World Bank advice around New Zealand facing a structural deficit—i.e., we’re paying more in expenditure than we’re collecting in Government revenue. This is baked into our fiscal path. Obviously, when there’s a problem—when you’re spending more than you’re taking in—you’ve got a choice. You can cut spending, or you can get more income. This is the policy decision that a Government faces.

Now, this is a Government that has chosen to decrease spending, and that’s having a significant on health, homes, and jobs. We saw that with policy decisions that were made around interest deductibility for landlords. We’ve also seen that the Government has chosen not to increase revenue. In the 2024 International Monetary Fund (IMF) report on the New Zealand economy, one of the things they talk about is that to achieve objectives, reform could combine comprehensive capital gains, land value tax, and changes to corporate income tax. It’s not just international organisations like the IMF that are giving this advice; we’ve seen our own Treasury here start to talk about the fact that we need to broaden the tax base and we should be considering a capital gains tax.

One of the questions I’m putting to the Minister around Part 1 and the policy that lies behind those tax rates is: what thinking did the Minister give to revenue-raising measures when putting together these tax rates? What we’re seeing is that this is very focused on income tax rates, this part. As my colleague the Hon Dr Deborah Russell pointed out, every cleaner that goes off and does their work, they have to pay their income tax, and every other worker in New Zealand has to pay their tax. What consideration, in terms of thinking about the revenue inside of the equation, did the Minister give to broadening that base and to thinking about taxing things other than income? If he didn’t consider any advice on that, why did he not consider any advice on that, given that Treasury has been indicating that there are benefits to New Zealand in going down this path and broadening that tax base? Whether or not he has seen any of the advice that I suspect Treasury has been giving to the Minister of Finance, but whether the Minister of Finance has been sharing that advice that Treasury has increasingly been putting through in terms of the revenue side of the equation and the kinds of ways in which we could broaden that tax base; any other policy work that the Minister asked for in the context of New Zealand having this spending more than we’re bringing in equation; and what work the Minister has been doing from a policy perspective to think about how we even that up. I’d be interested to hear the Minister on those things.

Hon SIMON WATTS (Minister of Revenue) (17:30): Well, thanks very much, Mr Chair, and thanks for the opportunity to answer a question. Yeah, a lot of consideration in regards to revenue methods. The primary method that we’re focused on is growing our economy so that we can grow the revenue of every business and every household in this country. That’s been a major focus of this Government, and one of the ways we achieve that is through a broad based - low rate tax system. I receive a wide range of advice from Treasury as part of my role.

Hon Dr DEBORAH RUSSELL (Labour) (17:31): Mr Chair, thank you for your guidance as to this debate. It is an important one about the tax system and about tax rates; not just the detail of the actual tax rates—and for good reason because it is the only time we debate it.

I do want to follow on from something that my colleague the Hon Dr Megan Woods has talked about and that is whether Government is raising sufficient revenue. Now, we have seen—and I think I have it written down here—some words from the IMF report on the New Zealand economy from 2024. Quoting from them they say, “New Zealand would benefit from a more efficient, equitable, and sustainable tax system. New Zealand already has one of the most efficient goods and services tax systems globally.” —tick, which is great—“However, tax policy reforms are needed to promote investment, and productivity growth, increase the progressivity of income tax, and mobilize additional revenue in response to long-term fiscal challenges. To achieve these objectives, reforms should combine comprehensive capital gains tax, land value tax, and changes to corporate income tax.” So that’s a pretty challenging set of taxes that the IMF has raised as something that we should be considering for our tax system.

I just want to talk about that need. It’s been well documented by the IMF, by the World Bank, and by Treasury that New Zealand has a structural deficit, a baked-in deficit between what is collected in Government revenue and what is baked in, in terms of spending or what spending projections are. Now, it’s worth remembering that a lot of the spending in New Zealand is non-negotiable: it can’t be changed. We actually need to spend on health, we need to spend on education, we need to spend on welfare. This is what New Zealanders have told us we need to do as a Government since the 1930s. People talk about having bipartisanship across the aisle—and there are things we agree on. The interesting one is this one: there is a great social compact in New Zealand around health and education and housing, and those systems all cost. That’s the sort of baked-in spending we have that can’t simply be cut and cut and cut or adjusted.

So we have this ongoing fiscal deficit, and the interesting thing is that there’s a couple of things we can do to fix that structural deficit. One is we can cut, and the other one is we can try to increase Government revenue. Now, actually, probably a bit of both is in order. We always know that we can find ways to save, but, actually, even with doing that, we still need better sources of Government revenue.

So I would like to understand from the Minister to what extent he has considered where else he could raise revenue from. It’s interesting that he’s not the Minister of taxation, right? Taxation is very, very important, but it’s not the only source of Government revenue. There are other ways to raise income for Government. It could be looking at royalties; it could be looking at investment; it could be looking at—what else might the Government do? Actually, it’s sometimes a wee bit hard to think, but they could—

Hon Dr Megan Woods: Well, they sell things.

Hon Dr DEBORAH RUSSELL: They sell things. They can do that too. There’s all sorts of things that Government could do. I want to know to what extent the Minister, who is charged with maintaining the revenue system, has considered these sorts of issues. So that’s a question.

Alongside that, it says we need a comprehensive capital gains tax. Now, the interesting thing is that there are some forms of capital gains sitting in the income tax system itself already. If we look at the land transfer rules, they’re sitting in there; they’re a form of capital gains tax. The brightline test is a form of a capital gains tax. The financial arrangements rules are a form of a capital gains tax. It might be interesting for the members of the Opposition to learn that the current foreign investment fund (FIF) rules are actually a wealth tax, but the proposed change in this bill of the revenue account method is actually a capital gains tax. So there’s quite a lot of stuff already sitting there which has a mix of capital gains through the income tax system.

This does create some problems because it means we’ve got a real mishmash of rules sitting in there around what is capital and what is income and what gets taxed—[Bell rung] Mr Chair?

CHAIRPERSON (Greg O'Connor): Ms Russell can carry on, but she’ll be moving quite quickly towards a question or some sort of interaction with the Minister.

Hon Dr DEBORAH RUSSELL: So I’m asking the Minister to what extent the Minister has considered, instead of having all this mishmash of different rules sitting in the income tax system which are actually capital gains taxes—whether he has considered getting rid of those rules and instead of that, having a whole separate clean set of capital gains tax rules? Now, that would be quite a substantial reform to the income tax system. It would tidy up the kind of quite creaky rules that are sitting in there. If you want to understand how creaky the rules are or how hard it is to adjust them, it is really looking at the FIF rules and the extent to which the Inland Revenue and the legislators have now tried to work the revenue account method rules backwards into the existing FIF rules. It’s become more and more complex. Now, one way to deal with that kind of complexity would just be to have a comprehensive capital gains tax. So has the Minister considered that?

In terms of other forms of taxes that could increase the much-needed revenue base for New Zealand—after all, gentlemen, roads don’t grow on trees—has he considered a land value tax? A land value tax would be a way of increasing some of the revenue that could come into the Government’s accounts. It could be used very deliberately to fund some of the activities. So has the Minister considered perhaps using a land value tax?

Then, the interesting one in here is changes to corporate income tax. Now the company tax rate is set at 28 percent. From what the IMF has said, I’m assuming that they might favour an increase in the company tax rate. Now, that’s interesting because often we get told that what we ought to be doing is in fact reducing the company tax rate because that would encourage more inwards investment into New Zealand. Now, that’s a debatable point—it’s an empirical question as to whether or not that would actually happen—but the interesting thing around that is that a couple of years ago, in 2022, in its long-term insights briefing, the Inland Revenue prepared a really good long-term insights briefing on looking at the extent to which New Zealand’s tax rates hampered investment and productivity in this country. It was a really good briefing. It was deeply inconvenient to us as a Government at the time, but I’m looking at it now and thinking, actually, it’s really worth looking at.

So I’d like to know from the Minister if in setting the company tax rate for this year—and the Minister has chosen to set it at 28 percent—he has given any attention to that long-term insights briefing that Inland Revenue prepared in 2022, and has he picked up any of the ideas from it as ways to think about the corporate income tax rate and whether changing it in some fashion or changing some of the rules around that would actually increase investment into New Zealand and would increase productivity in New Zealand? Both critical questions for our economy.

Hon SIMON WATTS (Minister of Revenue) (17:39): Thank you very much, Mr Chair. If anyone wants to see the points of difference between the sides of the House, in regards to tax policy, one only needs to play back: has the Government considered a land value tax? No. Has the Government considered a capital gains tax? No. Has the Government considered a death tax? No. Has the Government considered a whole lot of taxes that one wants to make up off the cuff? No. We are a broad base – low rate party. We are not looking to increase tax. We are looking to increase economic growth, and that is the priority on this side of the Chamber.

Why have we not considered a capital gains tax? Well, we don’t want to tax capital, because of the surprising fact that capital assists us to grow our economy. If you tax capital, you do not grow your economy. I will leave it at that, but I don’t think one needs a lecture around whether we are considering more tax on this side of the Chamber. The answer is no. We are focused on growing our economy.

In regard to the corporate tax rate, yes, we did consider, as part of the assessment when we put in place Investment Boost, whether we would be better to reduce the corporate tax rate or do another alternative. We selected to do Investment Boost, because Investment Boost is a targeted mechanism in order to ensure that the benefit goes to those who most need it. We are a party and a Government of fiscal discipline. We think about where we spend taxpayer money—because it’s not our money; it’s taxpayer money—and the Investment Boost was the most targeted way to achieve that and deliver economic growth. I am very comfortable that we have made prudent and fiscally disciplined decisions when we’ve made policy decisions around our tax. Thank you.

Hon Dr MEGAN WOODS (Labour—Wigram) (17:41): Thank you, Mr Chairman. I know my colleague the Hon Dr Deborah Russell has a very sharp follow-up question from the Minister’s contribution.

There are two things that I’m interested in learning about from the Minister around this, because, of course, as well as the company tax rate, within this, the trustee tax rate is also set, and that is at 39 percent. Now, I wouldn’t dare to delve into the changes to the disclosure rules around trusts that are further on in the bill—that will be for much later in this Wednesday, whenever this Wednesday stretches to—but what I do want to know, in this part of the bill, around the rate is whether or not there was any consideration, alongside those changes to the disclosure rules around the trustee tax rate, whether or not the Government looked at either raising that or lowering that, and where, within the whole system, they thought that should sit?

Of course, as my colleague Dr Deborah Russell identified, this is the Minister of Revenue, not the Minister of taxation. This is about where you balance up how much money the Government’s bringing in as against the programme of work that they want to spend it on, so one of the things I would like to know is whether or not the Minister of Revenue was considering what revenue might come in from asset sales and whether or not there would be revenue that would come into that side of the Government ledger from that way. I’m also interested to learn, from the Minister sitting in the chair—when he ruled out the taxes that the Government had ruled out, he, of course, didn’t list a gas tax, which the Government has gone on to implement—whether or not that levy was considered on the revenue side of the equation.

Hon Dr DEBORAH RUSSELL (Labour) (17:43): I want to pick up on a couple of things that the Minister has mentioned in his response just now, and they’re quite important. We’ve been challenging the Minister on various taxes and asking him why we didn’t have a capital gains tax, and the Minister asserted that we have a broad based – low rate tax system. That’s what he believes, and, I guess, in some ways, looking at the income tax rates we pay, they are comparatively low compared to other jurisdictions. Our top income tax rate sits in at 39 percent. I believe that, in Australia, the top income tax rate is 45 percent. They, of course, have a different tax scale from us. At the bottom of their tax scale, they have a tax-free band, and so, with the way it works out, it probably all comes out in the wash. Nevertheless, we have a broad based – low rate tax system, the Minister said.

The problem is that that’s just not correct. It’s simply not correct. I agree that the rates are on the low side—they’re not the lowest, by any means, but by no means are they the highest, either—and the point of having lower rates is that—I guess Ronald Reagan believed in this, didn’t he?—if you lower the tax rates, people just pay their taxes, instead of looking for every way to avoid them. Mr Chair, I know that you and I will remember the days of the 66 percent tax rates, and, when those were lowered, actually, the income tax rate collection rate went up in New Zealand. Yes we do have lower rates now, but we do not have a broad base. I think it’s just not correct to claim that we have a broad-base tax system. Now, we’ve got a pretty good GST system, which is very broad; it covers virtually everything, so that consumption tax, I think, is a pretty good consumption tax. As I said before, the Income Tax Act—the income tax itself—is actually a reasonably clean income tax, but the problem is that it’s not so much what the income tax applies to; it’s what it’s not applied to.

Now, the Minister asserted that we have a broad based – low rate tax, but I do not see how that can be consistent with his assertion that we should not have capital gains. If we’re not taxing capital gains, it is not a broad-base system, so I’m just going to invite the Minister to walk that one back. We have a low-rate system; we do not have a broad-base system. That’s kind of a contradiction there, so I’m going to ask the Minister to say how he reconciles that broad based – low rate—

Ryan Hamilton: Point of order, Mr Chair. Mr Chair, I know it’s well within your remit to discern that I’m not challenging the scope, but I am questioning, unless the member has an amendment she’s speaking to, she’s not even asking a question related to Part 1.

CHAIRPERSON (Greg O'Connor): This is a broad-based part of the bill; but, also, I would invite those on my right to wonder, if they play any sport, whether their trying to influence the referee really does help with the decision making in the end or whether they’re probably best to leave it to the referee and not risk, probably, a perverse outcome to what they are actually seeking.

Hon Dr DEBORAH RUSSELL: Thank you, Mr Chair. That’s the first challenge—a lack of capital gains versus broad based – low rate. I’d like to know how the Minister reconciles that.

Then, the Minister talked about—and he brought this into the debate at this stage—their immediate write-off tax policy, their accelerated depreciation rate. It’s the policy they brought in on Budget night, whereby firms that invested in a new asset could get an immediate write-off of 20 percent. That has great cash flow impacts. No one ends up paying any more or less tax; it’s just got a really good cash flow impact. He said that Investment Boost has been a “real success”.

The problem is, I’d like to know how he knows that. There’s no data—there is no data as yet—so it’s a very real question to the Minister: how can he make that claim? Now, I know there’s anecdotes—

Hon Dr Megan Woods: Anecdata.

Hon Dr DEBORAH RUSSELL: —anecdata, and I know that there has been a pretty small survey done by the Inland Revenue Department to say that Investment Boost is being used—Mr Chair? Mr Chair?

CHAIRPERSON (Greg O'Connor): Deborah Russell. Again, Ms Russell, we are still looking for some fairly pointed points.

Hon Dr DEBORAH RUSSELL: Here comes the pointed question, I promise you, Mr Chair. Here is the thing: we have assertions and anecdotes, we have a survey, but the Minister said that Investment Boost has been a success. I want to know what the Minister is basing that on. We know that the Inland Revenue Department hasn’t collected the data yet, because the income tax year hasn’t ended, so there is no data available from the Inland Revenue Department. On what grounds can the Minister say that that policy is a success, unless lots of people have just been saying, “Oh, it’s very successful. Oh, it’s very successful.”? That’s no measure of success. I’d like to invite the Minister to just give us some evidence as to why he thinks that Investment Boost has been a success.

Hon SIMON WATTS (Minister of Revenue) (17:49): Well, thanks, again, for the second question in regards to this committee of the whole House. The answer in regards to asset sales is no. The Government has not considered that and is not considering that at this point. The context in the question around Investment Boost—again, it provides a targeted intervention which, in effect, has an overarching effect to reduce the broader rate of tax that businesses pay, which is important.

More broadly, in regards to the question around capital gains tax, the member will be aware that New Zealand has a brightline test that is for individuals that, in effect, have residential property, that look to build and sell that within a two-year period. They are subject to tax. That is already in the law. We don’t have a policy to tax people’s homes. We don’t have a policy to tax people’s farms or their baches—which I appreciate the member is keen to do all that, or a 66 percent tax rate, which seems to be on the agenda; we’re not doing any of that. The context of our focus is on making sure that we are broad based – low rate, to encourage economic growth.

Dr CARLOS CHEUNG (National—Mt Roskill) (17:50): I move, That debate on this question now close.

FRANCISCO HERNANDEZ (Green) (17:51): Thank you, Mr Chair. I just want to quickly check: is Schedule 1 covered in Part 1 of the debate? Part 1 makes references to Schedule 1 of the Income Tax Act. Before I proceed with the questions that I wanted to ask, I just wanted to check that point; otherwise I’ll do a general, broader—

CHAIRPERSON (Greg O'Connor): No, it’s not in this. When we’re talking about Schedule 1, we’re talking Schedule 1 of the Income Tax Act.

Hon Members: Mr Chair?

CHAIRPERSON (Greg O'Connor): The Hon Megan Woods.

FRANCISCO HERNANDEZ: So my questions—sorry, I believe I still have the—

Hon Dr Megan Woods: Sorry, I think my colleague still would like to continue to talk. I’ll take my call after him.

CHAIRPERSON (Greg O'Connor): Oh, sorry. Carry on Francisco Hernandez.

FRANCISCO HERNANDEZ: Thank you, Mr Chair. Now that I know that it doesn’t reflect Schedule 1, I’ll keep my points and questions broader based in keeping with your instruction that this part of the debate is necessarily broader than previous parts. I think when we do get to Part 2, I’m really looking forward to the clause by clause debate around it, and I’m looking forward to the many amendments that we’ll draft around this.

My question is around the imposition of the income tax rate. We know in the statements that the Minister of Revenue has made in the introduction that the Minister wants to realise a broad-based system with fiscal responsibility. We know that there will be an Amendment Paper that gives tax discounts. Has there been any consideration done to, essentially, raising the tax rate of the top income bracket, to make sure that the changes the Government is making don’t lead to any kind of changes in the operating allow?

We know that it’s going to cost them $373 million out of the existing operation allowance, which only has $1 billion, I believe, left, out of the original $2.4 billion. I think that’s really significant because that $1 billion is expected to cover not only inflation costs but any potential additional spending that might come.

I was wondering whether there is also scope in the annual rates of income tax, besides raising the potential top tax rate for this bracket. Is there scope in Part 3, in the income taxes that it’s amending, to potentially put on, like, any super levies, in addition to the top bracket, for example? Is there scope in this part, in section BB1 of the Income Tax Act, to further create new top tax brackets at the very top? Conversely—

CHAIRPERSON (Greg O'Connor): That is in Part 2. Any amendments to the actual tax rates will be dealt with in Part 2.

FRANCISCO HERNANDEZ: It’s not covered in BB1, with the schedule?

CHAIRPERSON (Greg O'Connor): About setting of the tax rate, yes. Carry on.

FRANCISCO HERNANDEZ: OK, so it is relevant. OK. Cool.

CHAIRPERSON (Greg O'Connor): Just the actual rates themselves.

FRANCISCO HERNANDEZ: OK, yes. I’m talking about the actual rates.

My other suggestion is that it’s been a longstanding, I guess, anomaly of the New Zealand tax system that we don’t have a tax-free threshold bracket; other countries, like the UK, have it—I believe they’ve got it set at 14,000. I feel that amending section BB1 to introduce a tax-free income bracket would be a really good way to deliver immediate, quick, targeted relief for families. I think that’s actually one of the core components of the Green Budget—we ask for a tax-free threshold. I feel like that would really capture some of the low income and it would deliver that in quite a targeted way. Now of course it would capture some people on the top income tax bracket, as well, but combined with the suggestions that I made earlier to introduce potentially the tax rates on the existing top tax rate—bring that up—and also the other one which is to potentially create some new tax brackets higher up the bracket.

So, just to reiterate, the three suggestions that I had were: a new top tax income bracket, raising the existing top tax bracket, and also potentially creating a tax-free threshold as a way to create immediate and good relief for New Zealanders as we go through this fuel crisis. Thank you.

Hon SIMON WATTS (Minister of Revenue) (17:55): No. Quite simply, the Government is not considering increasing taxes for hard-working Kiwis; quite the opposite. We’re wanting to create a broad based - low rate tax system to encourage economic growth.

CHAIRPERSON (Greg O'Connor): Members, the time has come for me to leave the Chair for the dinner break. The committee is suspended until 7.30 p.m.

Sitting suspended from 5.56 p.m. to 7.30 p.m.

CHAIRPERSON (Greg O'Connor): Members, before the dinner break, we were debating Part 1 of the bill. This is the debate on the “Annual rates of income tax”.

Hon Dr MEGAN WOODS (Labour—Wigram) (19:30): Thank you, Mr Chair. Just thinking about where we were at before the dinner break, we’re on Part 1, where we’re talking about the rates of income tax and the revenue side of it but also the policy decisions that sit behind there.

I may be mistaken, but from my recollection, the Minister of Revenue has yet to answer my question about trusts and whether or not there was any policy thinking around the rate of taxation applied to trusts, given that there were some quite major changes in other parts of the bill—and we’ll come to that when we get to those parts. But given that there were some other major changes around the disclosure laws, I would ask whether there has been any thinking about changing the 39c trusts rate and whether or not that was done there.

The other thing is that the Minister introduced into the debate in his contribution the idea that we have this broad-based tax system in play. One of the things that I was sitting here thinking about was what would be really good for us to know in the committee stage is whether he has looked at international comparators to look at whether or not New Zealand really did have this broad-based tax base, and, if so, what were those international comparators that he looked at and that he might compare us to. We can see there that we have rates at 10.5 percent up to $15,600, and then the rate at $180,001 and above is 39c in the dollar. How does this compare to other tax jurisdictions, and particularly OECD tax jurisdictions, that we would normally compare ourselves to?

The other question is in terms of the other forms of revenue that were considered. I’ve asked the Minister about that because, of course, in Part 1 this is a broad and reasonably free-ranging debate around the policy. I mean, when we’re thinking about where to set the tax rates, it’s always a trade-off between other forms of revenue that a Government might be able to bring in, and so, for example, I asked the Minister did he think about selling things off and whether that was something that came into his thinking.

CUSHLA TANGAERE-MANUEL (Labour—Ikaroa-Rāwhiti) (19:32): Thank you, Mr Chair. Tēnā koe e te Minita. I just want to pick up on some of the kōrero that follows on from my contribution to the Budget Policy Statement debate earlier, and I want to start with the Māori authorities’ tax rate and about maintaining that. On the surface, that will provide some stability for Māori authorities, who, as we know, often deal with multiple-owned land and multiple-owned assets, which already make it harder to create a profit from, and while that may provide some predictability, has any thought been given to targeted incentives for further development and growth for Māori authorities? Also, while we’re talking about that, given the significant contribution that the Māori economy makes to the growth of this country and the contribution that it makes to the GDP of this country, was there any meaningful consultation with iwi, hapū, or Māori businesses around this bill?

Furthermore, we know that Māori households are more likely to be in the lower to middle income earning ranges and that Māori are highly represented in sectors severely affected by cost of living increases. What other considerations in terms of targeted taxes, etc., were given to support not just Māori businesses but Māori workers who may be impacted by tax bracket creep?

What, if any, targeted consideration was made to support the growth of Māori authorities? Also there has been some discussion around Investment Boost and the positive initiative that that is for business. Often, e te Minita, a lot of Māori-owned businesses are small businesses, and therefore they don’t have the capital to invest in new assets. What, if any, consideration has been given to support them?

Hon Dr Megan Woods: Oh, Mr Chair.

CHAIRPERSON (Greg O'Connor): The question—

Hon Dr Megan Woods: No, no—Mr Chair.

CHAIRPERSON (Greg O'Connor): You just made it, Dr Woods.

Hon Dr MEGAN WOODS (Labour—Wigram) (19:35): Thank you, Mr Chair. I’m just reminding the Minister of Revenue that there are still some unanswered questions in this part. The trusts rate is a question that I am interested in. I’m going to have no other opportunity at any point in this bill to ask the Minister about the policy considerations that meant that the trusts rate is at 39c, given that we have had some quite major changes to other bits of the trusts law, and also there were the other revenue measures that were considered by the Minister in bringing this together.

I think that it is important. We’re going to come to some quite fundamental changes that are happening in the tax system through this amendment bill. I would ask the Minister to use this opportunity in this very broad-ranging debate that we have around Part 1 to answer those questions, and these are live questions that are sitting on the table for the Minister.

Hon SIMON WATTS (Minister of Revenue) (19:36): Thank you very much, Mr Chair. Just in regard to some of the questions on Māori authorities and consultations, the Finance and Expenditure Committee did a wide range of consultation, including with iwi Māori organisations. That input is part of that process.

With regard to the Investment Boost product, one of the questions was with regard to how the tax incentive models that we’ve done benefit Māori businesses, obviously Investment Boost applies to all businesses in New Zealand, including Māori businesses, irrespective of size—I think the member asked about the size of businesses and their ability to have capital, etc. Well, that applies to, say, a sole trader who is a plumber, for example, right through to large, corporate businesses, and of course that applies to everyone within the broader economy.

Earlier this evening, I answered the question around asset sales. The Government has no plan to undertake asset sales.

There was another question in regard to a comparison of where we sit versus international peers. There’s good literature on the context of benchmarking around where New Zealand sits against other international players. Our GST model is considered to be one of the leading consumption tax models in the world because of its low level of exemptions, and when you take into account Investment Boost in conjunction with our corporate tax rate, our effective rate for corporate taxation is very much aligned with the OECD average. Thank you.

Hon Dr DEBORAH RUSSELL (Labour) (19:37): Thank you, Mr Chair. I do want to assert another line of questioning for the Minister just in respect of attempts to ensure that New Zealand has sufficient revenue to pay for the things that New Zealanders, over many generations, have expressed that they want—you know, health, welfare, education, and so on.

Look, one of the substantial changes that has happened around income tax since the current Government came into power has been a whole lot of changes that have renewed the tax preference for residential rental properties. Amongst other things, the current Government has changed the brightline test from a 10-year brightline test to a two-year brightline test. It has put back in place full interest deductibility for rental properties, even when a large part of the interest expense is actually related to the untaxed capital gain on rental properties, rather than on the current income earned by rental properties, and that cost has made a substantial hole in the Budget.

We note that the Minister of Finance, even under her ridiculous OBEGALx measure, is still continuing to run losses for many years, and so what it does bring to mind is whether the Minister considered reversing the reversal of those changes. At any stage in his consideration of this bill, did he consider putting back in place an extended brightline period, which would have removed at least some of the tax preference for residential rental property? Did he consider revisiting the interest deductibility rule; and even if he didn’t want to go as far as the previous Government did and remove interest deductibility entirely, given that in order for an expense to be deductible, it must be associated with assessable income—and, of course, a large part of the income on residential rental properties is not assessable because it’s untaxed capital gains—did he consider maybe doing a fifty-fifty on interest deductibility? Both those measures would have reintroduced a bit of revenue to the Crown accounts. It would have helped to reduce the deficit faster. It would have meant that perhaps the Minister of Finance didn’t have to increase borrowing. She’s borrowed more than we ever did in the short two years she’s been in office, so they feel like a very long two years.

I just want to know what consideration the Minister gave, if anything, to actually trying to boost the amount of revenue that the Crown earns by removing some of the tax preferences around residential rental properties.

TANGI UTIKERE (Labour—Palmerston North) (19:40): Kia orana, Mr Chair. It’s a pleasure to take a call on the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill. I understand that we’re on Part 1. This is the first chance I’ve had to ask the Minister of Revenue some questions around this.

Part 1, as I understand it, looks to identify what those basic rates are when it comes to income tax. One of the responsibilities that I have is the Labour Party spokesperson for transport, so to me, this is about setting the rates by which the money would come into the Government coffers, and basically the prioritisation process that the Government would have.

Now, obviously, when it comes to the rates that are set by this particular bill, that would determine how much in terms of income tax is paid, effectively, and the Government then has available to its disposal to utilise. When I look at the rates that are contained, as I understand it, in the schedule, the ranges are there. My question for the Minister, firstly, is given that his own colleague, Chris Bishop, has indicated in the transport space that there is a significant deficit in terms of an ability to be able to fund what the Government’s transport priorities and budget are, whether he is satisfied that the rates that are sat within the current ranges identified in this particular schedule, referenced by Part 1, are appropriate to meet that need.

Now, I assume, given the Government’s position on this—and this is relevant because transport is a key area of the Government’s expenditure, and income tax that is generated through these specific bands and rates in the schedule are part of the way in which the Government can receive income to be able to undertake its expenditure.

Now, there will be many options, not just in terms of transport and the roads of National Party significance, but if we look at school buses and the inability of the Government to be able to provide revenue to perhaps meet all of the needs for school buses—and those are just two examples in portfolio areas that do make a real difference to communities. So the question to the Minister is has he considered or did he seek any advice around the shortfalls specifically in the area of transportation projects and the ability for the Government to be able to meet those particular needs in order to determine that the rates that were set as contained in those tax thresholds were appropriate, or would he be open to suggesting any changes in that particular space? If not, why not?

Hon SIMON WATTS (Minister of Revenue) (19:43): Thanks very much for those questions. So earlier on, we had some questions around the trust tax rate. The member will be aware that there is a trust tax rate of 33 percent for trustee income of a threshold of $10,000 or less. That was put in play a number of periods ago.

In regards to Māori authorities, again, the tax rate there is 17.5 percent. It reflects the income earned by most Māori authority members, the equivalent rate, and the Māori authorities are also on the tax programme for the broader Government to consider.

In regards to capital gains, no consideration of capital gains tax, no consideration of taxing people’s homes or other assets of that regard. We have a brightline test which deals with that, as has already been answered in questions earlier.

To the points around transport, obviously, the Minister of Transport is actively looking at ensuring that we have appropriate funding to undertake the broad range of transport projects required to drive economic growth.

NANCY LU (National) (19:44): I move, That debate on this question now close.

Dr LAWRENCE XU-NAN (Green) (19:45): Thank you, Mr Chair. There are two areas I want to check with the Minister of Revenue. Of course, in this case we’re referring to the Income Tax Act 2004, but specifically Schedule 1 of that. I think one of the questions I want to check with the Minister—and thank you, Chair. I do understand that this is my first call for this particular part.

I mean, one of the things that we discussed, Minister, during the second reading, actually, was a comment made by Dr David Wilson. It was around the difference between tax base and tax rate. I think that was a really worthwhile conversation to be had. I think one of the things that was suggested there is that you do catch more with honey than with vinegar in terms of tax rates, and that the higher tax rate doesn’t necessarily mean more coming in. But I guess in the context of Part 1—and so I’m looking specifically at section 1, “Annual rates of income tax”—one of the things that we have seen that was really successful overseas and particularly in Australia is having a tax-free threshold.

That has been something that proportionately speaking, it balances out in a way that it benefits people who are on lower income more so than people who are on higher income. I wonder if that has been a consideration when it comes to Part 1 of this bill.

But I think also moving on in terms of when we’re looking at income tax around superannuation, which I believe is clause 10 of schedule 1, it’s also important to note that as we’re seeing with the annual income tax rate, seniors have been hit particularly hard when it comes to any of the changes and particularly what we see in terms of cost of living. Has there been any consideration around adjustments to the tax rate for the Superannuation Fund, in particular, to relieve seniors in terms of some of that particular entitlement? So those are my two questions for the time being. Thank you.

Hon SIMON WATTS (Minister of Revenue) (19:47): Just in regards to the question around the tax-free threshold, no, we haven’t considered that. The primary reason is that while that mechanism is in play in some jurisdictions overseas, it is not targeted. What I mean by that is that individuals on high incomes will also get the tax benefit of, in effect, paying no tax at a band of zero income to whatever the threshold is set. Therefore, our view is that having a low rate – broad based approach ensures that there is appropriate coverage for all taxpayers to ensure that they pay their reasonable amount of taxation revenue.

Dr LAWRENCE XU-NAN (Green) (19:47): Thank you, Mr Chair. I really appreciate that response from the Minister. But I guess the question is considering we do have a progressive tax rate, one would assume that regardless of how high your income becomes, you’re always going to the bottom tier, and you’re always going to have the benefit of that lower tax bracket.

Therefore, if you do introduce a tax-free threshold, it’s the same thing with what we have now in Table 1 of section 1 of Schedule 1 of the Income Tax Act 2007. People who are on a higher income will still enjoy that 10.5 percent between $0 to $15,000. It will be no different than if they enjoy that as a tax-free threshold, but of course, if you change some of the tax settings in a way that the higher tax threshold might be adjusted, it actually—again, proportionally, as we see working in Australia, people who are on a lower income actually get more in their pocket than people on higher income. Then I just want to check with the Minister in terms of that clarification and also my other question regarding superannuation.

Hon SIMON WATTS (Minister of Revenue) (19:48): The member raises an interesting point, but it’s important not to compare different countries and like for like in the taxation system. The other element of consideration is the broad base of the welfare system in which New Zealand also operates in conjunction with our tax system. You have to look at those two parts in a totality of a system and the benefits that that provides through to individuals. One can’t look in isolation at the tax system versus other jurisdictions without considering the other aspects such as welfare.

MILES ANDERSON (National—Waitaki) (19:49): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Motion agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Part 1 agreed to.

Committee of the Whole House

Part 2 Amendments to Income Tax Act 2007, and Part A of Schedule 1

CHAIRPERSON (Greg O'Connor): Members, we come now to Part 2, it’s the debate on clauses 4 to 106—“Amendments to Income Tax Act 2007”—and Part A of Schedule 1. The question is that Part 2 stand part.

Hon Dr DEBORAH RUSSELL (Labour) (19:51): Thank you, Mr Chair. Just setting out what this particular part deals with: amongst other things, digital nomads, the RAM—revenue account method—for foreign investment fund rules, some new rules for employee share schemes, some rules around the income for the sale of excess electricity, and then a couple of Amendment Papers.

The Minister of Revenue’s Amendment Paper 559 deals with a number of issues, some of which are in this part. For this part of the bill, the Amendment Paper covers some rules for new water organisations, and it also, importantly, I think, covers some really interesting new rules around thin capitalisation. So we do want to discuss those in reasonable detail because they have not been discussed at the Finance and Expenditure Committee.

The other Amendment Paper will come into our discussion once we get to around about clause 79 of the bill. It is an Amendment Paper which puts in place the measures needed for the policy that the Government announced yesterday around increasing the amount of money that some families can receive under the in-work tax credit to help with some of the cost of living issues at the moment, particularly precipitated by fuel prices.

So there’s a whole lot of stuff to work through. We will want to spend quite a bit of time on that last Amendment Paper because it’s quite a significant Government policy. Even though the actual tax changes are minimal, I think there is no other place to discuss the Government policy except here. So we will want to do that.

However, as is our usual practice, we want to move through this bill quite carefully, clause by clause. It’s a complicated bill, in some ways, with clauses that amend, obviously, a number of differing main Acts.

So what I want to start with is in Part 2, clause 5B. As far as I can tell, it changes the way that an asset is depreciated if a taxpayer has claimed Investment Boost but then has changed the way the asset is used. So it’s gone from partial use in a business to full use in a business or from full use in a business to partial use in a business. The obvious example of an asset that would function like that might be a vehicle—would be an obvious one for that sort of thing to happen.

The first question there, though, is that this is an entire rewrite of section CC 15. So it’s quite a substantive change to the Investment Boost rules. So I guess that’s, in part, because—I mean, it’s unsurprising we get these big changes in Budget night legislation; not everything is perfect the first time through, and it does need to be worked on. But I do want to understand why you did need to do that entire rewrite of the section. In particular, I want to understand—so why it needed to happen. But I looked at the replacement CC 15(1)(c), and it says “the change of use means the amount of the deduction the person would have been allowed under section DI 5 if the section were applied as if the income year were the income year in which the change of use occurs is less than the deducted DI 5 amount.” I feel like saying, “And in English, that says what?” So I wonder if the Minister could just disentangle exactly what that replacement section CC 15(1)(c) actually means, because it is quite confusing.

Just one other question—Mr Chair, I will request an extra call, but I won’t take the full amount of time, I promise, just to make sure I get there, but I just want to deal with this bit here. I’m looking at the change of use. It says, “When this section does not apply:”, and it says this section doesn’t apply, so you don’t have to change around all the stuff in the accounts and in this that and the other, when there’s “less than [a] 25% change in use”. So I can see the formula there, and the formula does seem to work. What I’m interested in is: why a 25 percent change in use? Why not a 33 percent change in use? Why not a 20 percent change in use? Why not a 50 percent change in use? I’m hoping that there’s more to it than someone just sticking their finger in the air and saying “25 percent.”

If the Minister could just clarify those questions around clause 5B of the bill. Mr Chair, I didn’t need the extra call.

Hon SIMON WATTS (Minister of Revenue) (19:56): Thanks to the member for the question in regards to clause 5B. So this is a clawback of Investment Boost deduction following a change of use. This was actually something that the Finance and Expenditure Committee discussed in response to officials’ feedback, and made a change which is reflected in the legislation.

There was a question around why there was a rewrite. In effect, the rewrite was undertaken to provide greater clarification in regards to the way in which this section was drafted. The push of the change, primarily, is, and probably the best example is to think about a commercial building—for example, serviced apartments—that can be easily converted to dwellings, and that’s an example that the member’s referring to around what you’d see as a change of use.

The proportionality is 25 percent because that’s the—or more, which is important because that’s considered to be what would be a material change of use, based on the feedback from officials.

Hon Dr DEBORAH RUSSELL (Labour) (19:57): I’m just going to want to stick with that materiality thought for just a moment. Back in my auditing days—long gone, thank goodness—something which had made less than a 5 percent difference was deemed to be immaterial, something over 10 percent was deemed to be material, and in between was the judgment zone. So that materiality of 25 percent seems a little high, to me. I just wonder if the officials did any fiscal analysis into that or any modelling of what the actual fiscal impact of that would be, because that could make quite a difference there.

So, just for the Minister in the chair, we’re talking about the materiality. So, again, 25 percent was deemed to be the material level, but, as I said, that just doesn’t quite stack up with the sorts of definitions of “materiality” we might have in other spaces. I’d like to know whether there are other places in the Income Tax Act which have different levels of materiality. One of the nice things we can get, from time to time, is a little bit of consistency. So just if we could have a wee bit more on why 25 percent is deemed to be the material level.

Hon CHRIS PENK (Minister for Building and Construction) (19:58): Thank you, Mr Chair. Good evening to members of the committee of the whole House. I thank the Hon Dr Deborah Russell for her contributions, including those which I was able to catch on Parliament TV prior to relieving my colleague and friend the Hon Simon Watts.

I understand that 25 percent is considered a reasonable threshold that would remove compliance costs where there was a small change in use. So, while reasonable minds can disagree to where one draws the line, of course it’s necessary to draw the line somewhere and it was felt that that was reasonable threshold at which to introduce that.

Hon Dr DEBORAH RUSSELL (Labour) (19:59): Mr Chair, thank you. I think the Ministers in the chair have adequately answered the questions that I had there around clause 5B, so thank you very much for that.

The next set of questions that I wanted to move on to were in clause 7. Clause 6 we’ll deal with later on when we get to discussing the revenue account method and the foreign investment fund. In clause 7, and this is going to relate to some of the discussion we had in Part 1, is to do with capital distribution amounts and it says in the formula that we’re replacing capital gains with net capital amount and deleting capital losses. It’s a deeply confusing thing. I just want to ask a question here: does this mean that we actually have capital gains taxes in the tax law already? Is this yet another example of—something I referred to in Part 1—the confusing morass of capital gains taxes which actually do exist already in our income tax law, or is there just something I’m missing here? So if you could just clarify that, whether or not we are actually talking about some form of capital gains tax here.

Hon GINNY ANDERSEN (Labour) (20:00): Thank you very much, Mr Chair. Following on, I do have a question for the Minister in relation to clause 8 within the bill. I understand that this specifies those great things we all get sometimes on our birthdays or for presents, those gift cards—it specifies that gift cards won’t be treated as part of income subject to pay as you earn, unless, of course, the employer chooses to do so. I understand that later clauses in the bill ensure that the cards are in fact subject to the fringe benefit tax (FBT), if I’m correct, and that’s in clause 21, further on in the bill.

This applies to, essentially, open loop gift cards. So what I would really like to hear from the Minister is some sort of further specification as to what is actually classified as an open loop gift card. If he could provide a particular example, that would be of use. Also, if an open loop card is like money, why would they not be included as employment income, just like other forms of money? If he could speak to that, that would be really useful.

If in fact one of these open loop cards is like money and it can be spent anywhere, which many of those cards are open—it’s not just to one particular shop like The Warehouse, you can use it in multiple different outlets; and a closed loop card would be only spent at one particular place, such as Whitcoulls, one particular place only—what about gift cards that are limited to shops in a particular geographic area, such as a mall? Queensgate mall in Lower Hutt—you can buy one of these and you can buy anything within that vicinity—which of those two does it fall into?

What I would be really interested to know from the Minister is wouldn’t an easier way to do this be to treat them as like employer-provided accommodation rules where employer-provided accommodation is taxed through the pay as you earn system instead of the FBT system? So it does seem to be that there is quite a reasonable level of complication. People already, you know, do get a level of frustration when that gift card isn’t used in time, but what is really the specification he can give people in terms of where they fall in the system and how this legislation treats open loop gift cards.

Hon CHRIS PENK (Minister for Building and Construction) (20:03): Thank you very much, Mr Chair. I’ll just acknowledge the question posed by the Hon Dr Deborah Russell in relation to the politically fraught area in which she has invited me to stray regarding “capital gains taxes” (CGT). Of course, as the member herself will know and will indeed be much more au fait than me given her academic background in the subject of taxation, there are such things as taxation on gains, notwithstanding that they might not have that label of CGT. Of course, famously, in the case of residential property where income is derived from the sale of a non-primary home, the questioner’s intention as to whether one purchased the property for the purpose of onselling—one might call speculating or flipping—and of course it’s difficult to gauge intentions so there is a test that is easily knowable, a bright line, hence the name, of course, that brightline test. So I don’t wish to open a general can of worms in terms of the desirability or otherwise—Dr Russell—of capital gains tax, but, simply, the purpose of clause 7 is to elucidate that the reference to capital gains tax should be read as a net amount, and therefore the amount that the company can distribute tax-free on liquidation.

In terms of the clause 8 - related questions of your colleague the Hon Ginny Andersen, of course the policy balance to be struck in relation to fringe benefit tax generally is how to treat a benefit that goes from the employer to the employee, whether it should be regarded as income tax and therefore attract that manner of taxation on the one hand, and therefore do we inadvertently disincentivise the provision of such—I suppose—bonuses, to use the phrase possibly incorrectly. Certainly, in terms of encouraging small business and hospitality uptake by businesses and the generosity of bosses, we don’t want to preclude that.

In terms of open loop gift cards more specifically, my understanding, and I have to say that I’m not particularly au fait with the area, is that it’s in the nature of a Prezzy Card, which is a particular brand of gift card but in the nature that you can load credit, effectively, and that’s then usable at most if not all establishments, in the same way that credit cards might be usable almost universally.

Hon Dr MEGAN WOODS (Labour—Wigram) (20:06): Thank you, Mr Chair. I appreciate the answer that the Minister in the chair, the Hon Chris Penk, has just given. And I do appreciate that the Minister sitting in the chair is filling in for the Minister of Revenue, so it does make it somewhat difficult for us to interrogate policy intent and thinking processes behind that, but, none the less, this Parliament does need to interrogate that and it does need answers on it.

I think one of the questions—I appreciate the Minister’s answer there around gift cards, and I think we all now understand, after going through this bill, the difference between an open and a closed loop gift card. I guess the question that remains outstanding is whether or not there was policy consideration of treating them all the same—of bringing them in. So why is it different if you get the Westfield card versus the PAK’nSAVE gift card? What differentiates these cards and why are they going to be treated differently? What was the policy intent and what were the considerations that led the Minister to make these decisions? Because I think they are pertinent questions. I think we can all understand why it is that we do need to consider gift cards within our tax system. It could be a way to circumvent taxation rules. I still also think that the consideration about considering them through the PAYE system—if that is the policy intent, then why was it not considered to do it that way rather than the fringe benefit tax (FBT)?

I think we do need more discussion around that because what we’re saying is these gift cards could be used instead of paying someone wages and salary, therefore we need to tax them. But why, then, is it coming through the FBT system and not through the PAYE system? When policy was being discussed, was there a difference between the bonus being paid in form of these, or these been given in lieu of wages—was there any attempt to differentiate the different ways in which a business might attempt to use gift cards as a form of payment to employees? What was the consideration that was in behind that? Because I think we can all appreciate that if someone is paid $10,000 in Westfield vouchers as a bonus, that’s somewhat different than them receiving their weekly wages in the form of either open or closed loop gift cards.

So we need to understand more of the thinking behind that because it is a change. It’s a change that needed to happen within our tax system, but it’s one we need to understand. Thank you.

Hon Dr DEBORAH RUSSELL (Labour) (20:09): Thank you, Mr Chair. Thank you to the Minister for his answers to questions; I think they’re very assured, and clearly he’s auditioning to be Minister of Revenue himself when he’s promoted to Cabinet in due course.

Just a further thought I want to carry on with these gift cards. It does puzzle me—it’s something that my colleague the Hon Ginny Andersen touched on—as to why aren’t these just being treated through the PAYE system. Look, there’s a fascinating little wrinkle in the fringe benefit tax (FBT) rules that employer-provided accommodation is left out of the FBT rules. You’d think it would be a fringe benefit, but it turns out that because farmers on-farm had provided accommodation for many years to employees and things like that. There was already a pretty good set of rules for including accommodation in taxation via the PAYE system, so why disturb a good thing when it’s working well?

I mean, it raises a whole set of issues around FBT, which we’re not going to traverse here, as to why we aren’t doing that with all fringe benefits—doing it through the PAYE system, because it could be done. But particularly these gift cards. The interesting thing about the gift cards is that, unlike a lot of fringe benefits, they’re very easily valued. There’s a very distinct value to them. If a person gets a Prezzy Card, it’s worth $100 or $50 or $20—the value is very, very clear. It’s the same thing for the great majority of closed-loop gift cards too. There is straightforwardly a value on them; there’s no need to go through the kind of complicated rules that we have with vehicles: the days that they’re in use and what they’re being used for, and so on. There’s no need to go through all the sorts of—even the type of salary-sacrifice stuff that goes on. There are all sorts of complications with the way we calculate FBT, but not for gift cards, again, because they are straightforward.

I do want to understand if consideration was given to just doing it straightforwardly through the PAYE system. It would have been a perfectly good way to it. Actually, I hope it’s something that a future Minister of Revenue might investigate.

Hon CHRIS PENK (Minister for Building and Construction) (20:11): Thank you, Mr Chair. I’m grateful to the Hon Dr Megan Woods and the Hon Dr Deborah Russell for their comments and their questions around fringe benefit tax (FBT) versus PAYE as different mechanisms by which we could achieve, essentially, the same aim.

My understanding is that, from a compliance viewpoint, the change gives employers the choice whether to treat a bonus—just to use that term generically—under PAYE or as a fringe benefit tax - relevant bonus, so to speak. The distinction would be whichever the employer were to find easier. Certainly, from the point of view of small businesses, compliance costs, including as to tax administration, are avoided wherever possible, not in the sense of avoiding taxes, of course, but in avoiding the administration associated with that. There’s a disproportionate effect of regulation, including in relation to taxation, where a small business might not have an in-house accountant and might be doing the accounts, so to speak, on the kitchen table, perhaps surrounded by hard-copy receipts. Certainly, to make life easier for them, to give them the choice as to which is the easier from a compliance perspective is, we think, helpful.

Just to close the loop on that discussion about the closed-loop gift cards—if you’ll excuse me—these are already subject to fringe benefit tax. The change in this legislation is to align the treatment with that of open-loop cards.

As for the policy intent that Dr Woods has invited me to expound further upon, my understanding is that there was a pretty full consideration about some of these broader policy aspects, but it’s not necessary to raise or to reconcile all of those, I suppose, certainly with all the differing views that might be out there in terms of the way that we could treat FBT versus PAYE in our system.

REUBEN DAVIDSON (Labour—Christchurch East) (20:13): The Minister in the chair, the Hon Chris Penk, may think that we’ve talked about gift cards a lot, but, as someone who sat on the Economic Development, Science and Innovation Committee when we were considering the subject of expiration dates for gift cards, I’m sure the Minister is aware that it’s now come into law that the universal date for those gift cards has to be a minimum of three years.

It was a significant shift. There were a lot of gift cards that were being issued with much shorter expiration dates, and a number of people sitting around the table at that select committee, but also probably in the Chamber tonight, have examples in their lives of gloveboxes and top drawers and parts of their desk that have got gift cards that are no longer worth anything at all. What we’re seeing with this shift to a three-year standard expiration date for open-loop and closed-loop gift cards is that the potential for their use is quite likely to change over this next financial year. Has there been any consideration given to, or modelling requested by the Minister around, what those changes or trends are likely to look like as a result of a shift in the expiration dates, by law, of gift cards—the minimum expiration date—and, therefore, the behaviour of use of those gift cards, particularly in the workplace?

Employers could, potentially, purchase those in much larger quantities. They don’t need to worry any more about the fact that they may expire within a short period from when they give them to an employee. Employees may see a greater value in those gift cards because they have a longer expiration date on them. They may well be more likely to be inclined to want or to request to receive those by way of payment for works rendered or as a bonus for additional tasks or objectives realised in the carrying out of their employment or the tasks put upon them by their employer.

Really, the questions for the Minister would be around what considerations were given to changes in behaviour, to the use of both open- and closed-loop gift cards, potentially, by the general public, but also by employers, who may choose to use those now to different extents and in different ways to how they were previously used in the workplace. I’m really interested to hear.

Hon CHRIS PENK (Minister for Building and Construction) (20:16): Thank you to Reuben Davidson for the questions about gift cards. I’ve got a couple of questions myself, actually: “Why can I never find the damned things when I need them?” Secondly: “Why does the period of time come up so quickly?”

He’s right, of course, to reference that change. I think it was universally agreed around the House, following a member’s bill by our colleague and friend the Hon Melissa Lee, that three years can certainly go very quickly as a period of time. I’m well aware of that now as a first-term Government Minister.

Hon Dr Megan Woods: Ha, ha! Three years goes fast.

Hon CHRIS PENK: Three years goes very fast, doesn’t it? Well, not when you’re in Opposition, Dr Woods. Isn’t it funny how time sort of travels differently according to the side of the House one is on?

Certainly, from the point of view of consideration, it seems to me that we’re in a new regime now, in terms of gift cards having a minimum expiry period, as the member has observed. Therefore, that was sort of known, that was factored in, in terms of policy discussion around how to treat gift cards—again, referencing that fringe benefit tax (FBT) versus PAYE discussion. I’m advised that treating open-loop cards under PAYE is more complex because it requires a gross up for things like student loans, KiwiSaver, etc., which is fairly complicated.

Going back to the point that was raised around employer-provided accommodation, obviously rural settings are one such instance in which they occur—certainly it’s an important area for employees of the New Zealand Defence Force—but those rules predate FBT rules and the question is, I think, probably unlikely to fit within the scope of the bill, given that we’re not really straying into that sort of area, given that it is existing policy.

CHAIRPERSON (Greg O'Connor): I write down the names of members and the clauses they talk to. I’ve got lots of names on clause 8, which would indicate to me that we are probably bogged down. The Hon Dr Deborah Russell will un-bog us, I hope.

Hon Dr DEBORAH RUSSELL (Labour) (20:17): A very relevant point. I understand that Dr Woods does have one new question on that particular clause, and it is quite an important one, but I will move on, myself, to clause 9.

What clause 9 is: again, it’s an entirely new section being inserted into the Act, and it’s “Reimbursement of employee expenditure for benefit”. What happens here, as far as I can tell, is that what it’s trying to deal with is where an employee incurs an expense—and the expense is for their own benefit, all right—but then the employer refunds them the amount. Now, that’s going to be an amount of money received by the employee. Technically, it falls into the definition of income, all right? That is employment income of the employee.

Let’s think about this. An example of this would be perhaps—and it happens—if an employee goes and gets a flu vaccination and has to pay for it but the employer refunds that amount, or an employee goes and pays the fees for a gym subscription and the employer refunds the amount. Because it’s an amount received in money, it fits into the definition of “income”. What this clause is doing is something perfectly sensible, which is saying, actually—so that’s going to count as income in one form or another, and it could be treated as an unclassified benefit in the fringe benefit tax (FBT) rules or it could be treated as employment income and taxed through the FBT rules, and the employer can choose to do that. This is all perfectly sensible law, and I rather like it. But what I am confused about is why we need this in the first place. You’d have thought that people would have been getting this right all along.

Actually what I was thinking is: was there something going on here? Was there some mischief going on here that needed to be shut down? That was my immediate thought on this clause. Was there a little bit of something just a little bit skanky going on—a bit skanky—which happens, or maybe people not even doing it deliberately but it’s just a practice that’s built up and people, employers and employees, particularly, I guess, in small businesses or smaller ones, weren’t quite aware of what they were doing and the tax implications of what they were doing?

That’s perfectly possible. Lots of people do actually get their tax all wrong from time to time, not because they are trying to get it wrong but because they just make a mistake, and usually Inland Revenue is perfectly happy to help them to sort it out without any penalties as long as people fess up. Was there a particular mischief going on in this space? That would be interesting to know.

Dr LAWRENCE XU-NAN (Green) (20:21): Thank you. Mr Chair. I do have one question on clause 8 before I move on to clause 9.

CHAIRPERSON (Greg O'Connor): I’ve got a little space here.

Dr LAWRENCE XU-NAN: I want to thank the Minister, the Hon Chris Penk, for his commentary. Again, as we heard in previous bills around the extension of gift card expiries to three years, I think one of the things I found the strangest, as a Chinese person, is that we tend to give out red packets with actual cash in it, which is eternal—you don’t lose the value on that—whereas, coming here, you pretend to know someone by buying them a gift card, for the same value but with an expiration date, which to me was always the weirdest and wildest thing that’s different from my culture.

The question I have is around new section CE 1(2B)(b), inserted by clause 8. This is a change after the select committee, I presume, and it’s completely different from what was there before, because it says, “benefit in money does not include a gift card unless—the provision of the card has a purpose or effect of defeating the application of the Child Support Act 1991.”

Now, for the Minister, in terms of context, one of my first jobs was working at child support at Inland Revenue. It was of a highly contentious environment because, when payments involving children are involved, either spouse tends not to conduct themselves in a way that is most conducive to the benefit of the child. I guess, in this case, when you’re tracking PAYE and you’re deducting child support through PAYE, it is easy to track, but if you’re doing it and considering gift cards as benefit in money, how then would you be able to track that when it comes to the application of child support, to say that that person has indeed given me a gift card valued at the equivalent amount that is comparable to what I should be receiving as child support? I think it’s more about, I guess, how one would prove that that gift card has been given.

My next question is following on from the Hon Dr Deborah Russell’s question around clause 9. I’m specifically looking at new section CE 1BA(4), which is “Exclusion: payments for certain work-related meals”. Again, we’re seeing a level of specificity in this bill around certain benefits, and work-related meals in certain professions are reasonably common—if you work late—but so is work-related travel. My question is: why are work-related meals considered but work-related travel—if it’s travelling back home late in the evening, etc., which I’m sure anyone in the legal profession can sympathise with—is not part of this? Those are my two questions.

Hon CHRIS PENK (Minister for Building and Construction) (20:24): Thank you very much. I might have to take a moment to consider and be advised upon the second point, but the first that Dr Lawrence Xu-Nan makes: firstly, a nice reference to the red packets, very topical around the time of Lunar New Year—红包, I think. Good luck to Hansard with that one!

I think clearly his role in relation to child support and IRD is a very taxing one, but I don’t think there is any change proposed, in terms of the legislation, that would alter the status of the equivalency of gift cards versus income.

The most straightforward answer, in terms of the question from the Hon Dr Megan Woods: I don’t think there’s any particular mischief that was contemplated that needed solving, in terms of the receipt of money being treated somehow differently from income regularly.

Hon Dr MEGAN WOODS (Labour—Wigram) (20:25): Thank you, Mr Chairman. I do just have one very specific question on clause 8 to return to. One of the things that the Finance and Expenditure Committee (FEC) are very well served by officials on, when we examine tax legislation, is the very thorough bill commentaries that come out of IR. I’d like to thank officials for the work they do on that. It goes through a number of the clauses.

One of the things with the gift cards in the bill commentary—that’s on page 145, just for the officials who are helping out—“The proposed amendment would take effect for benefits provided on or after 16 April 2025.” Now, this is highly unusual in tax legislation, to have a retrospective provision within that, which is going to count from 16 April rather than being forward-looking from, say, 1 April 2026, given that this bill will come into effect on 31 March, if it passes. Isn’t that correct, Dr Russell?

Hon Dr Deborah Russell: That’s right.

Hon Dr MEGAN WOODS: 31 March 2026. Why are we having some retrospective provisions within this legislation? I think that’s something we’d be keen to understand.

Also, for the Minister, given we’ve just caught that one, when I flip over to the bill commentary on clause 9, which my colleague the Hon Dr Deborah Russell has just been discussing, which is the equalisation of fringe benefit tax (FBT) and PAYE in clause 9, that is taking effect from 1 April 2026. I would like to know from the Minister whether there are any other clauses in the bill that have retrospective application? We’ve noticed it in this one clause, in clause 8, but are there any other clauses there too?

Just in terms of this bill commentary that IR provided to members of FEC, it actually gives some really good real-world examples of the ways in which some of these provisions in these clauses could apply. For clause 9, which has just been given, there’s a very good example of Spiderwebs Comix Limited employee Adrian, who works hard over the weekend and is told to take his partner out for dinner, up to the value of $400, to thank him for the work that he’s done in terms of working at a time when he wouldn’t normally. This was “to salvage the stock”—the example that’s given in the example. He goes out and the bill is $380 and he is reimbursed for that amount. Spiderwebs treats this amount as a fringe benefit and accounts for FBT on the amount as an unclassified benefit.

What would happen if the employee loses the receipt? We know that this is often something that happens in terms of this—that the employer has said, “Go and knock yourself out; take your partner out for a slap-up meal, up to the value of $400.” Would they have ended up paying the fringe benefit tax on the full $400 amount if that was the verbal or written agreement that was between them? We know that lost receipts are quite a thing within the tax world, and has consideration been given for how you’d account for just the kind of scenario that IR has provided in the bill commentary?

CHAIRPERSON (Greg O'Connor): Dr Deborah Woods—sorry, the Hon Dr Deborah Russell.

Hon Dr DEBORAH RUSSELL (Labour) (20:28): For the clarity of the committee, it’s the Hon Dr Megan Woods, the Hon Dr Deborah Russell, and the Dr Lawrence Xu-Nan.

CHAIRPERSON (Greg O'Connor): And clause 8!

Hon Dr DEBORAH RUSSELL: This is not a clause 8 question. I want to go on to clause 10.

Now, clause 10 is associated with employee share scheme rules, which we are going to want to talk about later on. I will want to talk about the substance of those rules later on, but I just want some clarity. Anyone who is reading through this would go—looking at clause 10, what has section CE 7B, which is amended, it’s got a little definition there: “liquidity event date”. I have great respect for that tax drafting team, but they’ve come up with a little soubriquet here, and I just want to know exactly what that is. What is a “liquidity event date”?

I’m sure there’s an answer there somewhere on that. “Bless”, I always think, when I see things like that, but I would like to know exactly what it is.

Hon Andrew Bayly: IPO.

Hon Dr DEBORAH RUSSELL: Well, if Mr Bayly would like to participate, I’m sure he’s very welcome.

Hon Andrew Bayly: It’s a simple answer.

Hon Ginny Andersen: Mr Bayly has had a liquidity event today.

Hon Dr DEBORAH RUSSELL: Ha, ha! Ha, ha! [Member resumes seat]

Hon Chris Penk: You caused that!

Hon GINNY ANDERSEN (Labour) (20:30): I feel responsible to stand up and take a call, seeing as I caused that. I’d like to reassure you—

CHAIRPERSON (Greg O'Connor): I’m not sure I should be rewarding you, but you have the call.

Hon GINNY ANDERSEN: I would like to, first of all, reassure you, Mr Chair, that I will not ask any questions about gift cards, Prezzy Cards, or any other form of cards. But I do have a question in relation to clause 9 because there’s a whole new section in there, “New section CE 1BA inserted”. It provides, specifically, when an employer pays an amount to reimburse an employee for an expenditure the employee has incurred for benefit. There’s been some discussion on this in terms of whether it’s a dinner, it could be a gym membership, it could be even things like glasses—like if you need spectacles, that can be charged back.

What I’m concerned about is we haven’t really understood from the Minister what the problem is that is being fixed. I have not heard that back. Given the context of this Government in terms of some of the legislation already passed in terms of undermining workers’ rights—we’ve seen an absolute plethora of bills through this House that have fundamentally stripped away some of the core rights that workers have fought hard to attain over the decades; whether we want to go into all those details, probably not. But my question is: given that history and given that reputation that this Government has for undermining workers’ rights, did they identify a particular employee benefit that they would like to erase, and is that part of the rationale or part of the problem that we’re trying to fix here?

Then again, and as we were talking about whether it could be a—that point we just made before; we still don’t know what the liquidity event would be. Is it going out to the pub? Is that included in a liquidity event? If your employer takes an employee out to the pub and then wants reimbursing afterwards, is that a liquidity event? I’m not sure. Could you please specify.

Hon CHRIS PENK (Minister for Building and Construction) (20:32): I wish I could provide more guidance on the lost liquidity date issue that the Hon Ginny Andersen mentions. I feel like we should accord her an honorary PhD just to get the real benefit of the “Dr, Dr” joke going. I was thinking the liquidity question was actually an even worse pun than my musings that I hadn’t been brave enough to make about fringe benefit and how my understanding is that’s the advantage when one brushes one’s hair forward.

On the serious point that’s raised, I think by the Hon Dr Megan Woods, regarding retrospectivity, the point there is that the date is that on which the commissioner issued public guidance that altered the treatment of open loop cards and see that PAYE should be used to account for these, so it’s really aligning with that real-world understanding of the treatment. So for the legislation to sort of look to that date and provide that certainty and alignment seems, to me, appropriate. And that’s the case wherever such dates arise in the bill.

In terms of the loss of receipts following a “slap-up meal”, it seems to me that that’s, number one, an unfortunate incident, but I think there would be the usual understanding about how one would treat that. Of course, the best guidance that I can possibly give viewers—should there be any left at this point—would be, simply, to hold on to your receipts. If an outfit is called Spider Web, you’d think that they would be online rather than operating on the basis of paper receipts, but you never know. I think that’s all the points that have been made that have not yet been answered.

Although, actually, coming back to the meals point that Dr Lawrence Xu-Nan raised, clause 9 refers to meals in a way that ensures that the current rules around limitation on reimbursement of meals elsewhere in the Act be circumvented through the fringe benefit tax rules.

Hon Dr DEBORAH RUSSELL (Labour) (20:34): I note that this part goes from clause 4 to clause 106, and we’re at about clause 13 and there is a very substantial Amendment Paper that we must discuss, but we haven’t reached it yet.

I just want to go to clause 11. Clause 11 includes trustees in a list of people who don’t get taxed when they get a gratuitous payment. I was puzzled by this. I sort of thought, “Well, what is this about?” I just want some clarification here. Trustees are usually paid for their services. It’s normally a straightforward income-earning opportunity for trustees, or what they earn is normally, actually, taxed. I thought about this and I thought this is maybe to do with being the trustee of an executor of an estate. Now, it’s often the case that in a will, a person will make an extra payment to someone who is going to act as the executor of the will or act as a trustee for it, and that sort of happens. So you can imagine in a family where one child, who perhaps is an accountant or lawyer or has some expertise in that space, is asked to be the executor of the will or has that kind of trustee-type role, but then there is no payment for it but there’s an extra amount provided in the will—not actually as payment for it but as recognition that they’ve done it. So I just want to clarify that that’s the sort of situation that we have in mind there so that they are not taxed on that service that they are providing.

Mr Chair, if no one else is—I could carry on with some other questions. I do want to move on to something quite substantial now, in the context of this bill, and that is the work on—I want to go to clause 15, inserting new sections CW 22B to CW 22D. It’s a really important new section. It’s a policy section, and it inserts new sections that deal with digital nomads. Digital nomads are the people who come and live in New Zealand for a while, they work here but they’re actually just kind of working remotely from their normal place where they live. Now, it’s a little complicated as to how all of this works; there’s a whole set of sections in here. New section CW 22B makes that income exempt from taxation in New Zealand. That’s fairly straightforward. New section CW 22C brings—oh, I’ll just leave that for the time being. New section CW 22D actually does the work of exempting digital nomads by setting up new definitions in the Act, and this is where it gets interesting.

A whole lot of the machinery of the Income Tax Act sits in the definitions, which sit in Part Y of the Act, and the particular rules around residency sit in Subpart YD. In order to make sense of all this, we actually have to jump forward to clause 98, which sets up a new definition—now that’s on pages 63 to 65 of the bill, which is available on the Table. So what is to be done over these digital nomads? People who are in New Zealand, they’re here living somewhere, doing all the things that people do, visiting all the sites, but they’re also working from home. The standard definition for when someone gets caught in the income tax net here in New Zealand, I think it’s 183 days—officials will correct me if I’ve got that number wrong; 183 days in a 12-month period. What we’ve gone for is a digital nomad is someone who is in New Zealand for, I think, no more than 275 days in an 18-month period. So what I want to understand from that; now, the 275 days, if you take an 18-month period then—sorry. That’s exactly the same proportionality; you know, 275 days in an 18-month period is the same proportionality as 183 days in a 365-day—no worries with that. But why 18 months?

So I’d like to know from the Minister what policy advice he got, what understandings he got from officials as to why 18 months—18 months as opposed to two years, 18 months as opposed to three years, because the proportionality could have been done quite easily. I guess there’s a point at which someone really does become a resident rather than a non-resident for tax purposes, but why 18 months is my first question around the digital nomads.

Hon Dr MEGAN WOODS (Labour—Wigram) (20:39): I have some questions also on the same clause, and it is around the digital nomad work. Again, I want to go to the bill commentary and the substantial analysis that is put into this part of it. The question I had also is: why does there seem to be this bespoke definition that is out of kilter in terms of the time that needs to be here? It doesn’t line up with other tax law. I think that it is incredibly difficult for what we need to understand.

The other thing that I’m not clear from reading through this is: why not a tax resident instead of a resident? There doesn’t seem to be alignment of language through various things.

One of the things that this bill attempted to was grapple not only with digital nomads but with the influencers. There’s an influencer tax in here as well, which is something that, I think, stretches the bounds of how we understand it in terms of someone coming here for a very short period of time to promote something in New Zealand. Some very good examples are given—one of them as an influencer paid by a New Zealand agency to showcase New Zealand. Josh is a New Zealand citizen who resides in Australia—they want to make this as complicated as possible. He’s a world-renowned travel influencer with a strong following on social media, mainly from his art deco community and his knowledge of 1920s and 30s architecture. A New Zealand tourism agency is keen to promote New Zealand’s art deco heritage, and they contract Josh to come to New Zealand to produce. Because Josh has been paid for promotional services by a New Zealand business, he would not meet the definition of a non-resident visitor. Remember the complexity here—Josh is also a New Zealand citizen who resides in Australia, so we’ve sought to make this as complicated as possible.

I think it is incredibly important that our tax system turns its mind to how it is we deal with these situations and how tax might be applied. One of the things I’m not clear on is: is there alignment with other OECD countries? Of course, these are, by definition, a global network of earners who will go to various jurisdictions. I’m sure Josh doesn’t save his art deco knowledge just for New Zealand, but he’ll go and moonlight in other countries too. How is it that his income in those countries is treated? Is New Zealand entering into something where we can see some synergies across the countries that we would compare ourselves to normally in a tax context?

Then there’s another example that’s put in here, and that’s an influencer paid by an overseas client to promote their brand. Ben is a New Zealand citizen residing in Milan. Ben has been a well-known lifestyle fashion influencer with a significant following. While in Queenstown, Ben arranges promotional services for an Italian boutique trousers brand. Because that is not a New Zealand business, the promotional services are provided to his overseas client. Therefore, Ben meets the definition of a non-resident visitor. We can see this is getting very, very complicated quickly because he is a New Zealand citizen and he’s residing in Milan—not in Australia as Josh was—but he is being paid by an overseas brand, so, therefore, he meets the definition of a non-resident visitor.

I’d just like to know if there were alternative ways of treating someone in Ben’s situation that were put up from a policy perspective—were other ways of thinking about how that may be treated in terms of income?—and whether the Minister of Revenue received any advice on that. Again, much like the situation that Josh found himself in, does this put Ben into a situation where, if he goes and promotes trousers in other places in the world, he might be taxed in a similar way? Where does it sit in international tax law, and how might there be alignment between various jurisdictions?

Hon CHRIS PENK (Minister for Building and Construction) (20:44): Thank you, Mr Chair. I think—in the case of Ben, now of Milan; and Josh, whose art deco expertise is apparently in such hot international demand—it’s worth observing that while the nature of their digitally nomadic activity might be that they end up being treated differently in different nations—OECD or other—the Minister of Revenue received good advice about different jurisdictions’ treatment of these kinds of policy areas. It’s not for me to offer a view on whether all of those other OECD nations have exactly the same regime—I suspect strongly the answer is not. Nevertheless, international alignment and particularly thinking about ways that the matter has been treated successfully in other tax jurisdictions, I’m certain, would have been forefront of the Minister’s mind when he was considering that, along with the coherence with other aspects of New Zealand’s tax code.

Hon Dr DEBORAH RUSSELL (Labour) (20:45): Madam Chair, thank you. Continuing with the discussion of digital nomads, which was one of the major policy pieces of this bill, one of the things that happens here is that a person is living in New Zealand, residing in New Zealand—they’re here for up to 18 months; it’s quite a long period of time—and, in that time, they are earning an income from overseas, and they are paying taxes overseas. The concern here is not that they’re not getting taxed, right? These people are paying tax fairly and reasonably.

The difficulty with this is just that we have a group of people who are coming and living in New Zealand, driving on our roads, using our hospital system, enjoying the protection of the fire services and the emergency services—they’re pretty safe because this is mostly a fairly safe country, protected by our police, and so on—yet because of these rules, they won’t be making a contribution to our tax base. Of course, they will be paying GST on whatever they consume in this country, but actually ordinary New Zealanders pay GST too, and, probably, we pay more than digital nomads because everything is based here for us.

There is a concern here that by not taxing the digital nomads—and these are people who have more than exceeded the amount of time that you have to be in a country before you’re ordinarily counted as a tax resident. It’s not so much they’re not paying tax, it’s just that they’re not paying tax towards their place, their standing, or their whatever in New Zealand. We want to be able to accommodate these digital nomads; I guess the feeling is that they are spending some of their money here, but New Zealanders spend their money here too. There is an issue here: just to what contribution do they make to New Zealand in return for all the benefits they get from New Zealand?

The other thing sitting here is I’d like to understand whether the Minister of Revenue got any policy advice or any analysis of the value that digital nomads bring to New Zealand. Literally, how does it increase our GDP, and is it worth it? What is the balance of costs and benefits here? Now, I get the point we do actually want to be hospitable to people; we actually do want people to come to New Zealand and to enjoy our country. I suspect that most of the people who come as digital nomads, if they’re working remotely, are going to be highly educated and well-paid people and things like that. They’re people whose company, I’m sure, we would all enjoy as being part of our country for a while. Nevertheless, I trust the Minister can see the point there. I would hope that there is a financial benefit to New Zealand out of this, given that we are enabling them to remit all their taxes to an overseas country.

Hon CHRIS PENK (Minister for Building and Construction) (20:48): Thank you, Madam Chair. I’m grateful to the Hon Dr Deborah Russell for her points regarding digital nomads. Of course, she’s right that we are giving up, in a sense, the income tax that these people might otherwise be paying to New Zealand. Then again, there’s also benefit to New Zealand in the way that digital nomads oftentimes will promote New Zealand, including in the influencer example that we’ve had brought forward tonight. That’s part of the general policy discussion.

Of course, the member quite rightly points out that GST is applied to the goods and services that such visitors—digital nomads—spend here. Of course, to the extent that we are attracting visitors to be digital nomads and in a way that they might not have otherwise visited New Zealand—certainly as tax residents here—there’s an additionality that we have, by the fact that they’ve come here, feeling enabled to do so, and earned money, perhaps prolonging their stay and enabling them to spend more money here. I think there’s a certain logic to that.

Going back to the point that the member had raised around the 18-month period versus the 12-month period, as she rightly notes, the proportionality is the same—roughly one in two days. The 18-month period, I’m happy to advise, relates to the general visitor visa period.

Hon Dr DEBORAH RUSSELL (Labour) (20:50): I note that this is a long and complicated part of the bill and we have yet to discuss the Minister’s significant Amendment Paper, particularly Amendment Paper 590 and Amendment Paper 589, but before we do that, there is other stuff in this bill we need to discover; issues that the Minister—various Ministers—touted as excellent measures.

I want to move on to clause 19—

CHAIRPERSON (Barbara Kuriger): Just before you do—I agree with the member: there’s still substantial in this bill, but I’d like the questions to be more concise rather than building too much around the questions. If we can stick to the point—from everybody not pointing to any particular member—but, to this side, there is a bit left to traverse. Thank you.

Tom Rutherford: Less preamble, more amble.

Hon Dr Megan Woods: Take a call.

Tom Rutherford: I tried.

Hon Dr Megan Woods: Going to call another closure.

Tom Rutherford: How do you know?

Hon Dr Megan Woods: OK, take a call then.

Tom Rutherford: I was trying.

Hon Dr Megan Woods: You are very trying.

Hon Dr DEBORAH RUSSELL: Are we finished?

Tom Rutherford: No—no, no, no.

CHAIRPERSON (Barbara Kuriger): I’m finished. You can go. I don’t know if Mr Rutherford’s finished, but I have.

Hon Dr DEBORAH RUSSELL: Thank you. OK, so I want to move on to clause 19 and it’s a really interesting clause—as all clauses in tax bills are. It introduces new section CW 61B, “Income from the supply of excess electricity from dwelling”. This is a great measure. What it, basically, says is if you’ve got a solar array on your roof, you’re generating electricity, and you’re selling some of it back—electricity you mostly use in your own home, but then you sell any surplus back to the grid—you’re not going to get taxed on the income you earn from selling it back to the grid. It’s an excellent measure and, I guess, this is a question as to some of the reasoning behind this. Obviously, it’s a tax simplification measure. It makes life easier for individuals because they’re not having to deal with the tax system—to keep records and all those sorts of things. It’s also a simplification because if individuals are earning that income, they could also take deductions in some ways, and that could be quite complicated. But what I’m interested in is the bit that we argued for at select committee: “occupied as resident of the property”. This was something that came from a variety of submitters that they said, “Well, hang on a second. We’ve got to be careful that landlords don’t derive the extra income benefit. It needs to go to the people who are actually the users, the ones who have the connection to the grid.”, and so on. And so the dwelling has to be occupied as a residence by the person, so a landlord couldn’t do it.

In the select committee, and here in the House, those of us on this side of the House just saw this as a fairness measure, but the Minister’s officials, in particular, seem to see it as a simplification measure. They didn’t want people claiming the deductions, so, in a sense, they rejected the fairness argument, and they went for the claiming deductions argument—whatever. But actually, I just want to know what side of that the Minister falls on—because there’s a bit of a difference there. So does the Minister regard this just as a fairness measure; that it has to be occupied as a residence by the person? Does the Minister agree with the amendment that was put forward by the select committee and the reasons that the select committee did it; or does he tend more to go to the official side of that one where they say it was around deductions?

Hon CHRIS PENK (Minister for Building and Construction) (20:54): Thank you, Madam Chair. In terms of the reason for that excess electricity provision and feeding back into grid, I think it’s worth noting there are good public policy reasons that we want to encourage that kind of provision. And, of course, excess electricity is the very definition of a good problem to have. I don’t think one needs to land on the side either of fairness or the deduction in simplicity type argument. There can be different ways and different routes at which we arrive at the same point, and it seems that that is what has taken place with the select committee making this recommendation and it being accepted.

In terms of the point around digital nomads, without wanting to belabour the point, oftentimes they’ll have their own health insurance, so there’s less of a burden that they might impose on the New Zealand purse—the public purse of Kiwis proper.

And in terms of the advice on the impacts of the policy, I understand there is limited data in terms of remote workers in New Zealand and, therefore, only limited analysis was possible.

Hon GINNY ANDERSEN (Labour) (20:55): I’d like to leap ahead in the bill, if so permitted, to the clauses 33 to 35. In 33 to 35, there are a series of amendments here that all pertain to the Investment Boost rules. Now, these, as we so vividly remember, were introduced in Budget night legislation 2025—the same Budget that scrapped 33 pay equity claims—that was passed under urgency. And, now, we see a series of amendments to Investment Boost. It’s unsurprising, but we do need to ask for feedback from the Minister and IRD, if necessary, why these amendments are necessary so soon after passing the legislation. Could it have been—I’m interested to know from the Minister—could have the same outcomes, such as fairness for taxpayers, come through, potentially, some of the Commissioner’s discretion—like, why is legislation required for these changes?

Some of these changes—we have replaced section DI 4(a) in there, where it expands the meaning of the improvement and extends it to “all asset classes including petroleum and mining development expenditure”. So my question, in relation to that replaced section, is: why do we need to expand improvement to “alteration, extension, or repair”? Is there a potential reason? Did Shane Jones ask for that? I’m not sure. I’d love to know if there’s a particular reason why we need to expand that definition.

Now, there’s been another new section in there as well, immediately after that, which is in DI 4B, and that expands the immediate 20 percent write-off under that Investment Boost provision—provides it to be extended to farm development expenditure, petroleum development expenditure, and mining development expenditure. My question to the Minister is: with expanding that 20 percent write-off under Investment Boost, could this result in double deductions? Has that been considered by officials and has he received any advice as to whether that could result in double deductions and a double cash flow advantage? Have those issues been considered when those series of amendments have been made in and around Investment Boost?

Hon CHRIS PENK (Minister for Building and Construction) (20:58): Thank you, Madam Chair. I’m grateful to the member for inviting me to breach the Cabinet manual by describing whether it was what one might call a “Shane Jones special” or perhaps other Ministers were particularly attached to the idea of the amendment that’s been described in relationship improvement extension, and, of course, as the Government’s policy position, that this was a change worth making, and so it was proposed in legislation.

And then to her prior point about whether commissioner discretion could have been used in lieu of amending the Act: of course, the commissioner, powerful an individual as he or she inevitably is, nevertheless, they cannot act in an ultra vires manner—that is to say in a way that’s outside the law of the land—and nor should we have in tax legislation, so far as possible, “Henry VIII” provisions where we’d simply allow, in effect, the primary legislations provisions to be changed in a way that doesn’t reflect the will of Parliament, as evidenced, for example, through the committee of the whole House process.

In terms of the 20 percent threshold or the deductibility that kicks in, in terms of Investment Boost, my understanding is there’s no prospect of double-dipping, but if there’s any further to say on that, then I’m sure my colleague and friend, the revenue Minister himself, will be sure to provide that to you.

CHAIRPERSON (Barbara Kuriger): I’m going to call Tom Rutherford on the trust that this is a genuine call.

TOM RUTHERFORD (National—Bay of Plenty) (20:59): I move, That debate on this question now close.

Hon Dr MEGAN WOODS (Labour—Wigram) (20:59): Thank you, Madam Chair, and mine is a very quick call. It is on clause 19, the residential supply of excess electricity, that my colleague has spoken to. Much like the clauses that sought to deal with digital nomads, this again is another clause that is trying to position our tax law to be relevant and deal with what is happening around us at the moment.

The examples that are given in the commentary to the bill, I think, are quite useful. There’s one which shows how it doesn’t need to be complicated when we’re dealing with a rental arrangement, around where the benefit would fall between the tenant and the landlord and the fact that the tenant wouldn’t have to file for those purposes. But the question I have for the Minister of Revenue is: what would happen if that solar was instead via a virtual power plant working in a situation where there was effectively arbitrage going on, and that someone with a battery was actually selling back at a profit and doing it at quite a commercial scale, but it was on residential properties that essentially were using that for the purpose of generation. Is there a threshold where this would be seen as beyond the intent of the legislation, which is to simplify the rules for tenants and for landlords—and it is something we utterly support, but we can see that there potentially could be a different way it would be used—and whether or not the Minister received any advice on that, and whether that’s something that he has asked his officials to ensure that there is some way of monitoring that that is not the case.

REUBEN DAVIDSON (Labour—Christchurch East) (21:01): Thank you. Madam Chair. I just want to circle back to clause 15, which we did—

CHAIRPERSON (Barbara Kuriger): I’m not really in favour of going backwards. I’ll allow you to do it this once and then the team needs to be organised about going forwards, OK?

REUBEN DAVIDSON: Thank you, Madam Chair. The reason that I’m wanting to look at it is because there is, in that, an exclusion that says explicitly that this section does not apply to the income of a public entertainer. Whilst I applaud the moves to create a system that better supports digital nomads—and that’s quite a forward-looking, which you’re a fan of, and future-focused industry initiative—what it doesn’t take into account is the crossover between public entertainers and digital nomads, and these are significant.

Many of the examples cited are around influencers or people who create content for digital platforms. While they’re doing that, that content in its purest form would qualify for digital nomad consideration, and therefore the implications in this bill around the tax requirements. However, if they were to host or be present at public events where they provided a service—potentially a ticketed service—then all of a sudden they arguably have become a public entertainer, but they could also fall under the category of a digital nomad.

Where that becomes even more murky is that some of these people wouldn’t see the genre or the content that they’re creating, online or in real life at ticketed events, as being entertainment. They could in fact see it as being commentary; they could see it as being news and current affairs analysis, or news and current affairs, as simple as that. All of a sudden, they’re no longer a public entertainer as such, but they are still arguably falling into the exclusion category from the digital nomad category that was explicitly set up to support them.

So the questions, really, for the Minister of Revenue are: who decides whether someone is a public entertainment or, for want of a better term, a digital nomad; what happens when someone is both; and what advice, if any, or reports did he get to understand how many times this might happen, how many people it will affect, and the amount of work that would be required to operate, essentially, a split system between the newly proposed digital nomad taxation structure versus the established public entertainment structure?

Hon SIMON WATTS (Minister of Revenue) (21:04): A couple of quick answers to the questions in regards to that. “Public entertainer” is a defined term within the Income Tax Act, so the member can look at that when he reads the legislation.

The question around solar—the question was around thresholds. The way in which we looked at that is “Is that a business?” Well, the exemption around income tax is simplistic, but if a business wants to be able to, on the other side, claim deductions for the capital cost of the equipment and such as that, then it would be, in effect, subject to income tax on the revenue gained from the electricity that it exports back into the grid. So it’s either one or the other, and most businesses such as farms will be taxable entities and therefore claim a deduction and therefore pay tax. For everyone else—normal residential households—they’ll be exempt. That keeps it very simple, because we want to encourage more residential solar and batteries across New Zealand.

Hon Dr DEBORAH RUSSELL (Labour) (21:05): Thank you to the Minister for his answers. I’d like to thank the Minister who was previously in the chair, the Hon Chris Penk, for his answers, and I say to the Minister of Revenue, who is currently in the chair, that the Minister who was previously in the chair did a very good job. But we did want to wait to discuss the Amendment Paper 560 until the Minister, who is currently in the chair, was actually back in the chair, so at this stage we want to move on to discuss Amendment Paper 560. Now, for the benefit of my colleagues, I put 590 on my notes; it’s actually 560.

Hon Dr Megan Woods: We know what you mean.

Hon Dr DEBORAH RUSSELL: Great, thank you.

This is a really important Amendment Paper, and the reason it’s important is that is the Amendment Paper that puts in place the Government’s move to increase support for families by a $50 boost to the in-work tax credit. The particular policy change was announced, I think, on Tuesday. We know the legislation’s come through today. This is the one opportunity this committee has to examine the policy behind this change and to work through some of the possible wrinkles in it. We do have a number of quite technical questions which we will get to, particularly from people who are very, very familiar with the way that these tax credits work.

In terms of Amendment Paper 560, my understanding is—and people, I’m sure, will correctly if wrong—this basically increases the in-work tax credit by $50 a week for a year or—and this is announced as policy though it’s not in the legislation—until the price of 91 petrol is below $3 a litre for

Hon Member: Four weeks.

Hon Dr DEBORAH RUSSELL: —four weeks in a row. So there’s a whole set of questions around that. The idea is to just increase support at a time when we know that fuel prices are increasing. Time limit is an obvious thing to do for this and to make it very clear that it’s a time-limited benefit. The $50 increase will be in place until the earlier of 1 April 2027 or that date set by Order in Council.

There are a set of questions around that threshold of $3 a litre for four weeks—it’s 91 octane. But what we need to know is where that’s going to be measured. As we know, for those of us who used the Gaspy app, we can actually see the price of petrol up and down the country, and it varies substantially around the country. Apparently, the cheapest station is the Gull station in Mangawhai; interesting to know. There’s also a very cheap one down on State Highway 1, as well, and things like that. But the petrol price can vary across petrol stations. So that below $3 a litre: is that just one station in one place at one four-week period, or is it an average across the country? What kind of flexibility is—so there is a set of questions in there which I think New Zealanders will want to know the answer to, and this is the one opportunity we’ve got to get this answer—from a Minister—as to just exactly how that $3 a litre is going to be judged.

Sensibly, they said it’s on 91; that is, I think, a reasonable compromise between the price of diesel and the price of 95. But just how, exactly, is that going to be judged? So that’s the first question to the Minister. My colleagues have other questions. It’s also $3 for four weeks, but if there’s a four-week period ticking along and it goes above $3 for just one day, is that enough to reset the clock? These are serious questions; people will need to know them for their own planning. So I’m looking forward to the answers from the Minister.

Hon SIMON WATTS (Minister of Revenue) (21:09): Yeah, very happy to answer that question. The member the Hon Dr Deborah Russell may be aware that Ministry of Business, Innovation and Employment (MBIE), at the moment—which is the lead agency in regards to providing advice around fuel security—has mechanisms to capture, in effect, the average price of fuel across the different liquid fuels available in New Zealand, in this case 91 octane. MBIE will be calculating that information and providing that information through for consideration. It will take, in effect, an average based on all of the fuel outlets across the country in the context of determining that price.

In regards to the timeline, the advice around four weeks is a reasonable period of rebalancing. We have to acknowledge that there’s a lot of volatility out there at the moment, but a four-week period of stability under that threshold would indicate a structural reset of the price point, which, on that basis, means that the temporary intervention is no longer required.

Dr LAWRENCE XU-NAN (Green) (21:10): Thank you, Madam Chair. Following on from the initial questions by the Hon Dr Deborah Russell, I think this is a good time for us to sort of examine this part at length, noting that this particular amendment, Amendment Paper 560, has no departmental disclosure statement. It also doesn’t have a regulatory impact statement, and it does affect people quite significantly. While I do understand the context in which this is being brought to the committee of the whole House, the question that we ask initially, when we’re looking at any sort of policy decision, is what is the policy basis for something like this in terms of both the scope of this particular policy, but also in terms of the amount?

One of the things we want to check is, if we have a situation where the child impact statement was conducted, would the increase of $50 a week meet the requirement of a child impact statement where children would not be further disadvantaged as a result of this? Was there any demographic analysis in terms of whether this is going to be equitably applied to different groups of people? As we know, when it comes to something like this, Māori, Pasifika, migrant communities, refugees, disabled communities, rainbow communities, etc. are most likely going to be affected by something like this. I would like to know, in lieu of having no additional information, if the Minister minds walking us through some of the intent.

Looking at the specific amount—this, in particular, is an adjustment to section MD 10 of the Income Tax Act. I’m looking at clause 79C of Amendment Paper 560 inserting new section MF 4L(3)(a)(ii) and MF 4L(3)(b). The reason I pick up on those is that if we are looking at this starting on 1 April 2026, the $5,070 and also the $780 is crossing over from what we see in the existing section MD 10. Therefore, that amount as a baseline has not been adjusted to the Consumers Price Index or any form of inflation, which means it is not $50 a week; it’s less than that because, naturally, you would assume that you would be adjusting that—I would hope.

One of the things that the Minister mentioned today in her answers to oral questions is that the increase, if you’re looking at normal adjustment, is $12 for an individual and maybe $20 for a couple—noting that couples are more severely punished as a result of this. The question is, if that is the case for an individual—let’s ask another question: is the $50 a singles’ rate or a couples’ rate? Further to that, if the $50 is a singles’ rate, that’s an effective increase of only $38 if you consider inflation. Would that be a correct assumption? I’m going to leave it there as to those broader questions.

Hon CARMEL SEPULONI (Deputy Leader—Labour) (21:13): Thank you very much, Madam Chair. It’s great to have the opportunity to take a call. One of the things that we are very cognisant of is that when you change anything with Working for Families, there are often interactions. One of the interactions that we’re concerned about is the accommodation supplement.

I’m going to keep this very brief: I’m wanting to know from the Minister how many people out of the 143,000 who are set to gain from the $50 a week—or the supposed $50 a week—are actually going to have their accommodation supplement deducted as a result of the increase to the in-work tax credit? I’m also wanting to know from the Minister if there are any other interactions with other parts of the system where there will be deductions made. Perhaps, on one hand, yes, the in-work tax credit is going to go up, but on the other hand, people will lose something like a percentage or a proportion of their accommodation supplement. Therefore, I’m also wanting to know how many of the 143,000 people that the Minister of Finance has said are set to gain $50 a week will actually gain the $50 a week. I can imagine that many of these low-income working households are actually eligible for the accommodation supplement because of the wage band that they fall in, so I’m just trying to get some transparency on the actual amount that they will receive and whether there are any other interactions where they could potentially lose that we need to know about in the House.

Hon Dr MEGAN WOODS (Labour—Wigram) (21:15): Thank you, Madam Chair. My questions for the Minister also pertain to Amendment Paper 560, given that this is a very serious topic. I thank the Minister for answering question because we will have a few of them, which is to be expected.

My questions are around the thresholds that are set through the Order in Council. We know that this measure is going to be in place for a year or if there is a sustained period of petrol being priced over $3 a litre. My questions are: what happens within that 12-month period if we experience flows in and out, over and above that $3 threshold? I note that the Minister has also said that the four-week period is probably enough for us to say there’s been a structural shift in the price of petrol, but what happens if, over those 12 months—it’s conceivable—we see three or four cycles of this that go over the four-week period? Is it the intent of the Government that every time we go over that threshold this will start again, or is it a one-time measure, and the first time that we come out of the period of more than four weeks below $3 a litre, the measure will be taken off the table? Or will it just be triggered each time we have that, and what is the plan around that?

The other question is, of course, that none of these triggers or thresholds are in the legislation. This is to be done through Order in Council, through a different instrument, so I think it’s very important that the House considers this really carefully at this point. One of the things I’d like to know is, has the Cabinet and have Ministers discussed whether or not there could be changes to the $3 trigger that is going to sit within the regulations? Is there a scenario that Ministers have discussed where it could be that, OK, we come out of one, we might raise that to $3.50, for example, for the next period—that you’ve got to go X number of weeks with petrol at that level of price before we bring this measure back into place?

Could it be that Ministers have discussed that if we’ve got a period of time where petrol has only gone down to $2.97, there’s actually not much more relief for families, and it’s an on/off switch with this measure? If it’s just slightly below $3, there isn’t that support for families or for the people who are going to benefit from it. Have Ministers discussed whether or not a sustained period of time just below the threshold that they’ve set may mean that Ministers do seek to change that through the mechanism they have through the Order in Council?

Hon SIMON WATTS (Minister of Revenue) (21:19): Thanks very much, Madam Chair. Just in regards to the question from the member in regards to the criteria that will be put in place in regards to the payment, the legislation and the amendment that is putting through this tax bill is only in effect a one-way trigger. What that means is that, in a scenario where we go from where we are to a period where the fuel price is sustained at a rate below $3 a litre for a period of four weeks, at that point, that will crystallise a decision point around a stop date.

If a stop date occurs and then, subsequently, we move back into a threshold where the fuel price is sustained over $3, then, in effect, we will be into a scenario where it will require further legislation to, in effect, trigger a consideration around whether this payment mechanism is reintroduced or not. The purpose of this is very targeted in the context of temporary relief, based on the fuel prices we have put in place in the legislation scenario, and we will need to reassess that, as you would expect, depending on the circumstances that are around.

Hon Dr MEGAN WOODS (Labour—Wigram) (21:20): Thank you, and I thank the Minister of Revenue for those answers. I think that’s useful information that we’ve learnt about how this is going to operate.

My follow-up question from that is: what additional measures are being put in place, other than what’s already there, in terms of the Commerce Commission and the fuel price monitoring of the Ministry of Business, Innovation and Employment, to ensure that there isn’t a perverse incentive for fuel companies to, say, keep the price of fuel at $3.01, which will mean that this additional income flows to families, with the idea that they may, in their calculations, decide that there will be more money available for people to fill up their cars, and that they will sell more of their product if that money is kept flowing? So what will be the additional monitoring mechanisms that will be put in place to ensure that that is not the case?

Hon SIMON WATTS (Minister of Revenue) (21:21): The Minister of Commerce and Consumer Affairs and the Minister for Energy—being myself—have already clearly indicated to the broader fuel market that the regulator, which is the Commerce Commission, is monitoring pricing and ensuring that it is appropriate, in accordance with the costs that fuel companies incur. That mechanism is already in place, and as part of that process, we expect that the regulator will be monitoring this situation to deal with the scenario which the member has set out at this point. We don’t have any evidence to indicate that fuel companies are responding in that way.

CHAIRPERSON (Barbara Kuriger): The Hon Carmel Sepuloni. I want to make sure the questions we have now are still related to the Amendment Paper 560, and that’s fine. I just don’t want to move on to something else and then go back.

Hon CARMEL SEPULONI (Deputy Leader—Labour) (21:22): No, I’m definitely still related to the Amendment Paper 560 because I haven’t got a response from the Minister yet on the question around the accommodation supplement, and any other interaction—

CHAIRPERSON (Barbara Kuriger): He’s just waiting for some advice.

Hon CARMEL SEPULONI: Well, just to elaborate on that particular issue whilst the Minister is waiting for some advice, I think it is important to note for the House, and I’m sure the Minister has got this information, that the accommodation supplement is abated at 25 percent when their income is above the income threshold. There is, of course, the risk that the $50 a week will push people beyond that threshold, which then, of course, means that they have their accommodation supplement deducted.

I want to be really clear about what I’m asking for. So 143,000 people, I believe the Minister of Finance has said, are set to gain $50 per week from the increase to the in-work tax credit; I want to know how many of them are likely to be receiving the accommodation supplement and therefore have a deduction from their accommodation supplement as a result of the increase to the in-work tax credit. Alongside that, I want to know from the Minister, then, the exact number of people who will actually receive $50 additional each week, taking into consideration that for many there will be a deduction from the accommodation supplement. I think it’s important just to have that transparency, because some of the families out there who have heard this through the media will be thinking that they will be $50 per week better off, not knowing that the interactions that occur with the system, including the accommodation supplement, means that that won’t actually be the case.

Just to add to that question, though, it would be interesting to know what the offset is here. The Minister has said, I believe, that it’s going to cost the Government around $333 million for the increase to the in-work tax credit, but clearly there will be an offset, because they will be saving money from the accommodation supplement side of things, and potentially other interactions. I would also like to know what the Government is saving from those offsets.

CHAIRPERSON (Barbara Kuriger): The Hon Willow-Jean Prime. Just before I take the Hon Willow-Jean Prime’s question, I just want to remind the people to my right that this is the first time today that the Opposition have actually seen this Amendment Paper 560, and it’s an Amendment Paper that is new on the Table, and I want to make sure that these questions are fleshed out. The Hon Willow-Jean Prime.

Hon WILLOW-JEAN PRIME (Labour) (21:25): Thank you, Madam Chair, and thank you for that point that you make. I want to say that because there is no regulatory impact statement, there are some questions and some details that we are particularly interested in. I support the contribution that has been made by the Hon Carmel Sepuloni about the accommodation supplement. But what I also want to ask the Minister of Revenue about is to understand what advice the Minister was given about people who work and receive a benefit. Yep, that’s right—they work part-time and they receive part of a benefit. The Government is framing this income support as being about supporting low-income workers—that’s been done through the in-work tax credit—and that it goes to low-income working families with children. But what is often overlooked is that many people on benefit are actually working. You can be working 20 to 30 hours a week and still be getting a part benefit, and therefore you are not eligible for the Government’s support here. So these are low-income families with children who are working and receiving a part benefit, and we assume they will not be eligible, because they are on a benefit, for this Government’s support.

So the question I want to ask the Minister is: what advice did they get around those families? I also want to know how many low-income workers there are who are on the part benefit who are missing out—they are working, they have children. So how many are working part-time, have children, but are going to be missing out on this? Can I please have the Minister’s answer.

Hon SIMON WATTS (Minister of Revenue) (21:27): Yes, thanks, members, for those questions. You’ll appreciate that we’re currently reviewing the income tax legislation. The accommodation supplement is administered by Work and Income, which is the Ministry of Social Development, which is outside of the scope of this legislation. The questions in regards to numbers of individuals would need to be answered through that agency.

It would be fair to say, and I just want to remind members, that the benefit we’ve outlined relates to 143,000 families, and obviously there is a different composition in the context of families across the board and those around the eligibility. I’m not being difficult; I’m simply recognising that the answers to the questions you’re asking are not within the scope of the bill.

ARENA WILLIAMS (Labour—Manurewa) (21:28): Thank you, Madam Chair. My question is to the Minister of Revenue. Given his answer, what advice has he had on the interaction between the in-work tax credit for those families who are also receiving either a main line benefit or one of the other supplements, given that I assume that he’s well aware, and he would have received this advice before, that those two things offer people who are working, and who also receive support, two different options about what their support is.

His Government has chosen here to put money into one side of that equation. That is a side of the equation which will affect probably thousands of families, because they will be better off moving on to the in-work tax credit and away from the benefit. That might be a policy decision that he has made, but he owes the House an account of how he made that decision and how many people are affected by that. Because if there are thousands of families—like my friend Holly, who messaged me today about whether she would be better off moving on to the in-work tax credit—there are people who are affected by that decision right now, and this is a temporary support.

His Government isn’t proposing to spend $373 million in every year; it is, in fact, proposing to do that in a temporary way. So those people who are wondering whether it’s better for them to move on to the in-work tax credit and receive the benefit that the Government is putting into that side, without any regard to those people who are also receiving support and are working just as many hours, and really, really hard, and not getting ahead—why do they not receive this support?

If that is his policy decision, then he should defend it. He should tell this committee why he wants those thousands of people to move on to this different kind of tax credit because he thinks that’s worthy and good—but it’s temporary, so they should then look 12 months down the line, and move back on to some other form of support. Why is it that he has made that policy decision—with no regulatory impact statement and no departmental disclosure—about how many people are in that situation and what the effect on their income will be at the end of the week? Why won’t he account to this House about why he has made that decision?

I also have some questions about how many young people are affected by this. Minister, have you asked your officials what the impact of this decision will be on the child poverty targets and what the impacts will be when it dries up? This support also accounts for much of the support that you committed at the time of the election, in National’s fiscal plan, to put money and investment into those things which, actually, materially improve child poverty in New Zealand. This has used up that funding. This might be the decision that the Government has made, but the House is owed an account of why there have been decisions made which will impact on the child.

Will this improve the child poverty targets? It might, in fact, because more money is going to some of those families, and that is a good thing. What happens when it dries up? What happens at the end of this policy, when you’ve used that money and not got in targeted support for those children who do have the impact of child poverty in their lives every day? We all have signed up to targets that we wish to change and improve, and this Government has made changes to them to suit its decisions and its trajectory on those. Even still, even if we take this Government’s child poverty targets, we should understand how this decision is going to impact those and who the children are and what households are going to miss out because of this decision and the prioritisation of this particular impact on the in-work family tax credit.

Hon CARMEL SEPULONI (Deputy Leader—Labour) (21:31): Thank you, Madam Chair. Just reflecting on the Minister’s answer, previously, about the accommodation supplement, saying that that is the responsibility of the Ministry of Social Development and out of scope out in relation to this bill; I actually find that inconceivable, having been a Minister for social development, having worked with the Minister of Revenue, and knowing full well that advice goes to Inland Revenue on the impact of any changes and where there will be interactions that see a reduction in support in other areas. I need to ask the Minister: is he telling this House that, at no point, has he received advice from the Minister or Ministry of Social Development on the impact that the increase in the in-work tax credit would have on the accommodation supplement? I find that very difficult to—I don’t want to say—believe, but I’d be very concerned if the ministries were not sharing that advice.

I also want to point out that although the Minister of Revenue is in charge of this legislation, it does have to go to Cabinet, and sitting around the table is a Minister for social development who, surely, is giving voice to the social development side of things and, in this instance, to the impact that an increase in the in-work tax credit would have on the accommodation supplement. I am also surprised—or would be surprised—if the Minister of Finance was not aware that there would be a reduction of the accommodation supplement when the in-work tax credit was increased.

There are lots of questions about the Minister and his engagement with the relevant Ministers and ministries. I don’t think that it’s fair or acceptable to say that any interactions between Working for Families and the Ministry for Social Development is out of scope of this legislation given the impact on these families.

Hon SIMON WATTS (Minister of Revenue) (21:34): Look, I appreciate the member’s observation from her background and experience, but the reality is that there is and there will be a potential impact on the accommodation supplement if someone is in receipt of the accommodation supplement and the in-work tax credit. However, the assessment is its considered to be very rare because of the reality that one needs to be, in effect, off the benefit to be able to receive the in-work tax credits.

I’m not intending to be difficult in the context of this point, but the member is asking questions which are outside my ministerial accountability and responsibility. They are best directed to the Minister of social development in that context. I am acknowledging—as we are aware—there is an interaction. However, the assessment in the context of the advice that I’ve received is that that circumstance which has been questioned here is a circumstance that is rare.

Hon CARMEL SEPULONI (Deputy Leader—Labour) (21:35): Madam Chair, I am not sure why that Minister thinks that it would be rare for the families in the income bracket who receive the in-work tax credit to receive the accommodation supplement, given that, actually, it’s not just beneficiaries that receive the accommodation supplement and that there is a much higher threshold for being able to access it and that many low to middle income households are eligible for the accommodation supplement.

I wanted to know from the Minister actually how many are eligible for the accommodation supplement, but I understand, given he has not received any advice from the Minister for social development or the Ministry of Social Development, that he probably doesn’t have those figures. My understanding—and this is something that we’ll go away and check and that he might want to, as well—is that over 500,000 New Zealanders have access to the accommodation supplement. Now, that’s quite high, and many of them will fall within that bracket that receive the in-work tax credit. I don’t know where he got the understanding from that it would be a rare situation for these 143 families who get the in-work tax credit to be eligible for the accommodation supplement.

I was also going to just say, in regard to that, that there’s always the option of stating in legislation that certain other grants would be precluded from being counted and so, therefore, wouldn’t be reduced. I wanted to ask the Minister whether or not there was any consideration given to these areas where there may be an interaction like the accommodation supplement of explicitly stating in the legislation that the temporary increase to the in-work family tax credit would not impact or reduce that particular grant.

Dr LAWRENCE XU-NAN (Green) (21:37): Thank you, Madam Chair, and thank you, Minister, for the response. We also recognise that because this is something that is quite new and because it takes the Minister a little while just to get the full advice to get back to us, I do appreciate the Minister for doing that.

I want to check some of the questions I had for the Minister before, and I’m looking specifically at the calculation question. In lieu of anything else, what we can go on is, potentially, the ministerial statement that’s been made and the FAQs for this particular piece and the fact sheet. The Minister constantly mentions this is calculated on a family-based income and that there’s a minimum amount of family-based income, but I want to first check with the Minister if he wouldn’t mind explaining how that works with how the calculation eligibility criteria itself first works.

Now, the reason I mentioned that is new section MF 4L inserted by clause 79C that we are looking at in Amendment Paper 560 is an extension of section MD10 of the Income Tax Act. But MD10 is the calculation, whereas the eligibility criteria is earlier than that. I think, from memory, it is MD 4 to MD 9. In MD 4(2) of the Income Tax Act, it does mention that “If 2 persons are entitled to an in-work tax credit or a child tax credit for a child for an entitlement period, the entitlement of each is not affected by the entitlement of the other person.” Does that mean that they should be calculated individually rather than as a family? What is the definition of the interaction of MD 4(2) here with what is being proposed here or with the general in-work tax credit system?

The other thing the Minister mentioned as well—and this is also in the fact sheet—is that the in-work tax credit is going to be paid to around 143,000 people. I know there were questions by the previous speaker, the Hon Carmel Sepuloni, in terms of that particular number. Are we expecting 143,000 people to get the full entitlement increase, which is $50 a week for 52 weeks? Or is it that only 143,000 people will receive a version of that for X period of time—anything from one week up to 52 weeks within a year? Are we looking at the whole 143,000 people receiving the entire amount for entirety of the year? If not, what is the average number of weeks that those 143,000 people are on the in-work tax credit for?

Hon SIMON WATTS (Minister of Revenue) (21:41): I will just answer that point. The member’s question was in regard to whether individuals receive either a portion of it or the full entitlement on an annualised basis. It is the reality that when the 143,000 families number is calculated, it does take into account that some of those families will only receive the in-work tax credit for part of the year. They could receive the additional $50 but not the full $2,600 for the year. The reality is that that’s because there will be families and individuals within those families that move from the main benefit to full-time work partway through the year. Also the reality is that families with dependent children who turn 18 years or older become no longer relevant because of that. All of those interactions are happening within a family unit. The calculation of 143,000 is a forecast of that, in effect, complex dynamic of the different ways in which those aspects will change.

There was a question earlier in regard to child poverty. Child poverty was not modelled, but we do know, based on the most recent figures by Stats NZ, that approximately half of all children in material hardship, around 81,000, are in working households, and the targeting of this intervention through the in-work tax credit targets those that are working. Obviously, not all of these children will be in households that are eligible for the in-work tax credit, as some of the families in material hardship have incomes above the Working for Families threshold as well.

Lastly, there was a question asking if there is a change to the eligibility criteria. No, it’s just the rate change, which we’ve outlined.

CHAIRPERSON (Barbara Kuriger): I’m going to take a question from the Hon Dr Megan Woods. I think we are traversing the Amendment Paper quite well at the moment, so I think we’re nearly at the end of that. We are looking at anything post - page 25 and the clauses after that.

Hon Dr MEGAN WOODS (Labour—Wigram) (21:43): My question does pertain to the Amendment Paper because I think—

CHAIRPERSON (Barbara Kuriger): As long as it’s a new one.

Hon Dr MEGAN WOODS: It is a new one. I think that while we understand that, in exceptional times, Governments need to move quickly and make changes quickly, the fact that there is no regulatory impact statement with this amendment, which we’ve only seen today, does mean there’s a number of questions that—

CHAIRPERSON (Barbara Kuriger): Fine, as long as they’re new questions.

Hon Dr MEGAN WOODS: It is a new question, Madam Chair. One of the things that we are developing some concerns on, on this side of the Chamber, is the lack of questions that Cabinet and Ministers seem to have asked in terms of the intersection of the tax system with the Ministry for Social Development in terms of the abatement of the of the accommodation supplement and, perhaps, the lack of understanding the Minister in the chair is showing about the how the two things do intersect. Something else that we have concerns about is whether or not there has been information provided to Ministers and to Cabinet around the breakdown of those 143,000 people that will be receiving it.

We know that there are a number of people who are relatively low paid but, none the less, rely on their cars in order to do their jobs. I’m thinking of homecare and support workers who need to drive to each of their jobs. I’m asking if any breakdown has been done about how many of our homecare and support workers will fall inside and outside of this. Likewise, in community nursing, there will be groups of people that could well fall outside of this assistance, but they’re going to be required to use their vehicles in order to carry out their jobs. It’s not only paid people, and I know that it has been a concern in other countries, listening to commentary.

What’s going to happen to things like Meals on Wheels? Often we have a large amount of volunteer work done by people who are retired and will not be eligible for this. If they are superannuitants, they fall outside of the eligibility, and I know that we are seeing concern about how it is that the volunteers are going to cope in these circumstances in terms of getting those meals to some of our most vulnerable people. That work is done by volunteers, at their own cost, using their own vehicles and using petrol. Has there been any consideration of some of these things, which I know, for example, the Australians have been talking about and considering? Has New Zealand considered that at all?

I did have a follow-up question around the monitoring question that the Minister did answer, and I thank the Minister for that answer. I appreciate that the Commerce Commission and the Ministry of Business, Innovation and Employment will be doing their fuel monitoring, and I’m not suggesting that, at the moment, there is any cause for concern about whether they’re going to keep it at $3.01 a litre. Of course, many times there can be changes, and there are inadvertent and unforeseen consequences and perverse incentives that are put up to keep prices at a certain level. Has Cabinet given any thought to what additional monitoring might need to go in in that space. For example, will there be a red flag if petrol price stats are $3.01 a litre, to 2 cents, to 3 cents—just over that amount—for a sustained period of time? Would that raise a red flag that would require some more in-depth monitoring by those agencies?

The last question I have for the Minister is around the fact that he said he hasn’t received advice from MSD, but I would expect, as my colleague the Hon Carmel Sepuloni did, that at both the Cabinet committee and at Cabinet that there would have been a broad-ranging discussion when those Minister would have fed in from their agencies’ perspectives. I also would like to know whether Treasury gave some advice on the net costs around this, because certainly from our experience, Treasury usually is pretty quick with that advice around the net cost of policies in terms of what the savings are going to be in terms of expenditure like this and whether or not Ministers asked for that advice from Treasury.

Hon Dr DEBORAH RUSSELL (Labour) (21:48): In terms of this Amendment Paper I have a completely new question to ask. I’m hoping that we’ll get through the Amendment Paper tonight and we can return to the rest of Part 2 tomorrow morning. In terms of this extra $50 a week, I want to bring the Minister’s attention to a possible interaction within his own department that is going to matter here.

That is to do with the amount of inadvertent debt that individuals end up in because of the way that the in-work tax credit and other Working for Families tax credits operate. We know that a large part of the way these credit operate is that families have to estimate their income and depending on what that estimate is they are given an idea of how much their Working for Families tax credits will be. If they get that estimate wrong, then they end up in a position of owing debt to Inland Revenue. It inadvertently occurred but they still owe the debt. The same thing happens when people move in and out of work. They move in and out of work and it means that their income fluctuates. It can take time for the Working for Famies tax credits to capture. It happens in all sorts of ways, but that’s a particular scenario where those credits do change around. A similar thing happens when relationships come apart or form and dissolve, or when new families are formed. It does have a big impact on the Working for Families tax credit. Now, this is happening already anyway, so let’s be clear about this: this is an existing problem. But what’s going to happen is I think this problem is going to be exacerbated by the extra $50 a week—partially just because the amounts of money involved are going to increase. We are going to have more people getting into worse inadvertent debt situations because of the increase.

Now, I don’t think we should be stopping the increase—let’s be really clear about that—but I do want to know from the Minister of Revenue what extra resources he is considering within his own department in order to help people deal with this likelihood of inadvertent debt. Is he considering extra staffing in this area to ensure that people understand how much they can get? Is he considering extra staffing in the call centres? We know we already have found people who will ring up week by week to find out how their Working for Families tax credits will be affected if they take on an extra few hours’ work or not. It’s a very live consideration for low-income families.

A couple of questions there for the Minister: the extent to which he has considered that problem of inadvertent tax debt—which we still need a solution for—and the problem as to whether or not he’s considered extra staffing from within his department to actually deal with the queries that are going to start coming in about this and to deal with helping people to get through that inadvertent debt situation.

Hon SIMON WATTS (Minister of Revenue) (21:51): Thanks to the member for the question. Obviously tax debt is a significant focus for the Minister of Revenue. The number is in the region of $10 billion or so, and if you add in social debt then it’s up around $13 billion—so it’s not insignificant in its totality. The Government did increase investment in regards to compliance activities for IRD earlier in the term. The assessment by IRD in regards to this policy adjustment is that they will be able to manage the impact and the implications of this new policy within their baseline. That’s because they’ve identified mechanisms of savings through the very hard work that they undertake as an agency.

Dr LAWRENCE XU-NAN (Green) (21:52): Thank you, Madam Chair. I actually just have one question for the Minister of Revenue, and this is specifically to do with the formula itself. This is new section MF 4L(3)(b) added by Amendment Paper 560, and I want to specifically focus on the formula for “amount B is $780”—noting that in section MD 10 of the Income Tax Act 2007 the amount has stayed the same in terms of $780 while we’re seeing the initial amount has increased. Essentially, the amount that you get for every child after the third child has not increased as a result of this. Can I check with the Minister: why has “amount B” not also been adjusted to increase to the same proportion as what we’re seeing with “amount A”?

That is essentially my question because what it then means is, proportionally speaking, for every child after the third, you are actually getting proportionately less per child because every child after the third amount has not been adjusted. Just that one question.

Hon SIMON WATTS (Minister of Revenue) (21:53): Madam Chair, I just wanted to come back to the question around the accommodation supplement because it is an important point of clarification. I’ve just got a little bit more advice from the Ministry of Social Development coming through, which has taken a bit more. It is important to clarify that Working for Families is not classified as income in the assessment of the accommodation supplement. I retract the word “rare” and say that it won’t have any impact at all. I just wanted to clarify that point.

Hon WILLOW-JEAN PRIME (Labour) (21:53): Thank you, Madam Chair. I don’t believe the Minister of Revenue answered my questions that I asked about what is the number of families with children who are working part time and are also receiving part benefit—the Minister is giving me a signal but I need the answer for the Hansard. What advice did you receive around those people, and what other support did you consider? Because these families have jobs to go to; to travel to. In fact, the Minister of Finance said yesterday—and I quote—“I’d also note working families face the obligation to get to and from work each day. Beneficiaries do not face that obligation.” That is an inaccurate statement for this group of people. I want to know the number and what consideration was given for them.

Hon SIMON WATTS (Minister of Revenue) (21:54): As the member the Hon Willow-Jean Prime will be aware, people’s circumstances change on a daily and ongoing basis. It’s not reality that I’m going to be able to give you a definitive number, because the reality is that because those circumstances do change, and whether they’re in work tomorrow or they’re out of work is different.

CHAIRPERSON (Barbara Kuriger): Members, the time has come for me to leave the Chair. The committee is suspended and will resume at 9 a.m.

Sitting suspended from 9.55 p.m. to 9 a.m. (Thursday)

Extended Sitting

Thursday, 26 March 2026

Bills

Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill

Committee of the Whole House

Debate resumed.

Part 2 Amendments to Income Tax Act 2007, and Part A of Schedule 1 (continued)

CHAIRPERSON (Greg O'Connor): Good morning, members. I hope we’re all well rested. The committee is resumed on the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill. When we were considering the bill last night, we were debating Part 2. This is the debate on clauses 4 to 106—“Amendments to Income Tax Act 2007”—and Part A of Schedule 1. Once again, the question is that Part 2 stand part.

Hon Dr DEBORAH RUSSELL (Labour) (09:00): I just want to traverse briefly where we’ve gotten through to last night. We had worked our way through Part 2 to a roundabout clause—where am I up to?—on the sale of excess electricity, so that was clause 19.

In addition to that, we had spent a substantial amount of time on the Minister of Revenue’s Amendment Paper, Amendment Paper 560. Now, that was a really important Amendment Paper. It was the one that introduced the assistance for families in this fuel crisis, giving them an extra $50 a week. As I’ve previously stated, the Labour Party will be supporting that amendment, but that Amendment Paper has probably been done over now and it is time to move on.

CHAIRPERSON (Greg O'Connor): That’s my advice and observation.

Hon Dr DEBORAH RUSSELL: Yes, indeed. So I do want to outline what there is still to discuss in Part 2. So there is a series of changes to the Investment Boost rules, there is a series of changes around the foreign investment fund and revenue account method rules, there’s a series of changes around employee share schemes, and very importantly, there’s an entirely new Amendment Paper as well. It arrived earlier this week—Amendment Paper 559. There is a very substantial change in that Amendment Paper around infrastructure funding and the thin capitalisation rules for infrastructure funding. There are those major topics still to canvass in Part 2.

There’s a lot of work still to do in this, in particular, that work on the Amendment Paper because, of course, that has not been through the Finance and Expenditure Committee. The select committee did some work on those thin capitalisation rules, but we did not have the legislation in front of us; we were just talking general policy. So as I said, a lot of work to do in this section.

Going back to where we left off, I want to go to—

CHAIRPERSON (Greg O'Connor): Just at this stage, given what the member has indicated about how much work there is to do, the back and forth nature would probably assist, rather than 5-minute speeches on each part of it. Then we’ll indicate progress.

Hon Dr DEBORAH RUSSELL: That would be great, Mr Chair. Of course, that will depend on the Minister in the chair participating. I note that the Minister in the chair is not actually the Minister responsible for this bill, so that could be a little bit tricky at this stage, though I’m sure the Minister in the chair at the moment will in fact do his best. I’m sure he’s looking forward to every moment of tax conversation, and I’m sure he’ll be ably assisted by the officials who are there.

CHAIRPERSON (Greg O'Connor): The Minister will be aware that his voice does get picked up on the microphone, and it goes out—

Hon Dr DEBORAH RUSSELL: And, of course, if the Minister responsible for the bill is not here, it does make it rather difficult to have a whole lot of back and forth, but let’s give this a go.

So I just want to start on clauses 33 to 35. These are a series of changes to the Investment Boost rules or the immediate write-off rules, the accelerated depreciation rules, so the rules that were brought in on Budget night last year. We debated them at the time and of course the difficulty with legislation brought in on Budget night is that again, it hasn’t been through a select committee process, so it can be very hard. Try as they might for officials and drafters to get them perfect, it does take time to get tax rules sorted out.

The first question I want to ask the Minister, and given that we’ve asked for the back and forth, is what feedback the Minister and Inland Revenue were getting that made these amendments necessary. There would have been something that came up that triggered this, either from within Inland Revenue or from within the tax community that said, “Hey, you’ve got to get this right.”, so I’d just like to know what feedback the Minister and Inland Revenue were getting.

If we’re going to do a back and forth, we actually need the Minister to participate in this, and as I’ve said, there’s a long way to go on this bill, so I’m going to give the Minister a little bit of a chance right now. Is he able to answer the question as to what information or advice he was getting and that Inland Revenue was getting that made these changes necessary?

RYAN HAMILTON (National—Hamilton East) (09:05): I move, That debate on this question now close.

CHAIRPERSON (Greg O'Connor): Mr Hamilton, just bearing in mind what you’ve heard, bearing in mind what took place last night, you’ll be aware there’s quite a wee way to go here. I won’t say you’re trifling with the Chair, but just make sure the bill is in front of you and be following progress yourself and then you might get some idea of where we are and the likely success of a closure motion. I might have to say that it’s fairly early, given the progress we’re making through the bill at the moment, and given the message from the Chair last night.

Hon Dr DEBORAH RUSSELL (Labour) (09:05): Thank you, Mr Chair. I am waiting. I’m sure the officials who are there will be quickly drafting a response for the Minister. It is actually quite important to know where the information was coming from about the need to introduce these changes to these accelerated write-down rules.

I want to go to replacement section DI 4(a)(viii), inserted by clause 34B. Let me see if I can find exactly the right spot; it’s quite interesting. What I want to know there is it expands the meaning of “improvement”—oh, yes, I’ve found it here now. It expands the meaning of “improvement” and it extends it to all asset classes, including petroleum and mining development expenditure.

In the original legislation, we just had the word “improvement”, so there could be an accelerated write-down for improvements, but now we’ve actually changed that word “improvement” to “alteration, extension, or repair”. I’m just asking what was going on there, what advice the Minister was getting, and what advice officials were getting that said that the word “improvement” wasn’t sufficient and that we actually needed that rather clarified definition of what an improvement was to “alteration, extension, or repair”. If the Minister is able to answer that question—no?

Well, in that case—this is one of the frustrations. I know the Minister in the chair is a good guy doing great work in his portfolio around mental health, but it would be helpful if we had the Minister who was responsible for this bill. I appreciate things happen, but it is very hard to discuss a bill and to take committee stage seriously if we cannot get responses from the Minister.

So carrying on from here, so that need to look at improvement, alteration, extension, or repair—if we go to new section DI 4B, and it’s the treatment of certain items as assets. What it does is it says a person can get this accelerated write-down, this accelerated depreciation for farm development expenditure or an immediate write-off, and it extends that immediate write-off to farm development expenditure. It’s got the definition of farm development expenditure—all petroleum development expenditure, all mining development expenditure incurred by a person, and an alteration, extension, or repair of an asset of the type in any section.

Now, this is kind of interesting because of course those development expenditure rules are sitting there in order that taxpayers who are developing an asset can capitalise that and they get, if I recall correctly, more immediate write-offs, but now they’re going to get this accelerated depreciation as well.

So there are two questions here. The first question is why was this type of expenditure—the farm development expenditure, the petroleum development expenditure, the mining development expenditure—not included in the accelerated write-downs in the first place? Actually, there are three questions. The second is, again, what advice was the Minister or officials getting that it was necessary to actually include this explicitly in the accelerated write-down rules?

The third question there is—and this is where we need the officials’ advice, because although I am familiar with tax, obviously, I haven’t worked in it directly for eight years, so there’s some stuff, the very keen detail, that I’m not sure on. I’m looking for some reassurance on this. I’m assuming this doesn’t allow a double deduction, but if I could get some clarity on whether or not that actually allows a double deduction. I’m going to give the Minister an opportunity to answer some questions if he so wishes.

Hon MATT DOOCEY (Minister for Mental Health) (09:10): Thank you, Mr Chair. Just to acknowledge the questions from the Hon Deborah Russell. She seems to be taking the lion’s share of the work for the rest of her colleagues this morning. As pointed out, my portfolio’s around mental health and what is the connection—well, I suppose when the Opposition was in Government and called tax “love”, then, obviously, we’ve brought in some mental health support.

What feedback did IRD get that triggered this clarification? The Hon Deborah Russell talked about referring to section 33. The advice I’ve received involved full consultation with the tax community to understand the gaps in the legislation and an extension to second-hand good clarification required to provide certainty for investment decisions. Just to repeat that: full consultation with the tax community, clarificatory to give certainty, and I suppose when we think about the Government side of the House, it is around giving confidence and giving certainty, because I’m sure you agree we need to give certainty for investment decisions to be made.

Hon Dr DEBORAH RUSSELL (Labour) (09:11): Thank you, Mr Chair. I just want to carry on a little bit there, because it says “full consultation with the tax community”. Now, I appreciate that this was Budget night legislation. These rules around accelerated depreciation came in on Budget night last year, and the nature of Budget legislation is such that it is kept reasonably quiet because announcements need to be made. A further detail around this is that, of course, people who knew this legislation was coming could well have delayed asset purchases until they got the advantage of the accelerated write-down. But then the Minister talked about full consultation with the tax community. Now, that’s an interesting discussion. Does this mean that there is a commitment within Inland Revenue and by the Minister around Budget legislation, or indeed any legislation that is introduced with little notice—again, I appreciate the necessity to do that—to doing ex post reviews and ex post consultation in order to ensure that the legislation really does meet the needs of the community?

REUBEN DAVIDSON (Labour—Christchurch East) (09:13): Thank you, Mr Chair, and thank you to the Minister for the time in the hot seat this morning and to answer some of the questions, and there will be many coming from this side of the House as we work our way through what is a very long and complex bill.

Now, the question I have relates to clause 34D, “Section DI 5 amended (New investment asset deduction)”. Really, the issue I have with this question and with the section I want to get to is—as the Minister himself has expressed, he is not an expert in the area of tax. My sense is that there are a lot of New Zealanders who are not. For that very reason, understanding exactly what is in here and how that will impact New Zealanders who don’t necessarily take the time to read through the entire Act would suggest that, actually, our job here is to understand and interpret a lot of this content so that it’s much easier for New Zealanders to understand the ramifications and, indeed, for all of us to understand the ramifications around the decisions we make about whether or not we support this.

Coming to the specific subclause (1AC) in clause 35, in section DI 6, where it says it’s inserting as subsection (2)—and I just want to read the passage here: “For the purposes of subsection (1), if the amount of person A’s deduction is less than the amount (the available deduction amount)”—it goes on—“they would have been allowed if they had used the asset wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income,”. Thankfully, there’s a bracket at this point, which allows me to catch my breath. The passage goes on: “the applicable amount referred to in subsection (1) is reduced by the available deduction amount for the purposes of quantifying the amount of depreciation loss under subpart EE or the amount of a deduction under subpart DO, DP, DT, or DU, as applicable.”

The question is a very simple question about what is, essentially, a very complicated series of words in the bill, which really is: what does that mean in plain English, and can the Minister give us an assurance not just that he understands it but that we are all able to understand it and that, most importantly, the New Zealanders for whom this will apply are able to understand exactly what that means?

Hon Dr DEBORAH RUSSELL (Labour) (09:16): I do want to go to a couple of very specific questions now. They will be my last questions on this part, and I hope the Minister is—sorry, this section, before I move on to the next major topic of employee share schemes. But I want to understand in particular the policy decision around DI 4B(b) and (c). This is new section DI 4B, subsection (b) and subsection (c), inserted by clause 34C. Now, we’ve been allowed a deduction for development expenditure. I just want to remind the Minister that he hasn’t yet answered my questions on development expenditure in general, and so I would appreciate an answer on those. But DI 4B(b) and (c) give accelerated write-downs for all petroleum development expenditure and all mining development expenditure.

Now, there is, of course, a broader question around this, and that is to do with, certainly in the case of petroleum development expenditure, whether we should be encouraging petroleum development expenditure in our Income Tax Act, given the pressing needs of climate change. There’s a policy decision taken here in the tax Act to support fossil fuels. I get the reason for consistency within the tax Act, but could the Minister please explain why it is important to support fossil fuels in this way, given the crisis the world is facing in terms of climate change?

I also want to point out that no matter what, the type of fossil fuels that are available in New Zealand would not replace the type of crude that we get from Iran and from the Middle East. It’s not the right quality of crude. So why are we mining these fossil fuels in New Zealand, and why are we encouraging these in New Zealand?

There’s a second point here, and it says “all mining development expenditure”. Now, in the Labour Party, we are not opponents of mining at all. We recognise the wealth it can bring to a country. But we are opposed to new coal mining. This is all development expenditure for new coal mining. I’m really worried about this. Would this create an incentive, for example, for expanding the mine on the Denniston Plateau? There’s some stuff here that just really goes against our conservation aims and it goes against the rules we have for what we’re trying to do in terms of climate change.

Right at the start, when this bill was introduced on Budget night, it was clear that the accelerated write-down was available for fossil fuel mining. We opposed it then, but I also oppose it in this sense. Even though we thought the accelerated write-down was a good idea, extending it to fossil fuels was an absolutely bizarre thing to do.

David MacLeod: So you don’t support affordable energy.

Hon Dr DEBORAH RUSSELL: I wonder if the Minister could just give some reason—take a call—

David MacLeod: I don’t need to. Affordable energy.

Hon Dr DEBORAH RUSSELL: —behind the policy decision for allowing petroleum mining and allowing coal mining to be supported in this way. Take a call, David—take a call.

Hon MATT DOOCEY (Minister for Mental Health) (09:19): Thank you, Mr Chair. First, in response to my Canterbury colleague Reuben Davidson, who is the rising star of the Labour Party—and, I must say, full credit for innovativeness around filibustering. He is reading out a whole section and then asking the question of what it means in plain English. I look forward to more of those questions.

To the Hon Dr Deborah Russell, there were questions around what were the gaps that needed to be filled. The advice I’ve received is that there is no significant change from the original legislation. It covers other types of asset classes other than depreciable property where it was always intended to include improvements, but the definition wasn’t included in relation to the relevant sections. The proposed change introduces the definition to those sections.

To the question around double deductions, there will be no double deductions. To the extent that a taxpayer claims Investment Boost, they will get only the balance of the deduction. The deduction is limited to the expenditure.

To the question from the Hon Dr Deborah Russell around why it is so complicated for new section DI 6(2) in clause 35(1AC), the section is complicated because it contains integrity provisions. Most taxpayers will have simpler circumstances, and so the approach will be simpler.

REUBEN DAVIDSON (Labour—Christchurch East) (09:21): Thank you, Mr Chair, and thank you to the Minister for the answers—

Shanan Halbert: Reading out his responses.

REUBEN DAVIDSON: —to previous questions, and, yes, as my colleague points out, for reading out his responses to my questions that I’d asked previously. The—

Hon Matt Doocey: And what are you reading?

REUBEN DAVIDSON: I’m reading the bill, Minister. I’m reading the bill—

Hon Matt Doocey: Word for word.

REUBEN DAVIDSON: —which is what my questions relate to.

Hon Matt Doocey: Hasn’t even come to the House and prepared questions.

CHAIRPERSON (Greg O'Connor): Minister, I won’t warn you again. When you are engaging cross-party, you have a microphone, which means you have an advantage over everyone else in the Chamber. If flippancy goes through the Chamber, it does give you an advantage, and so please take the advice—

Hon Matt Doocey: He could have asked proper questions, though.

CHAIRPERSON (Greg O'Connor): Well, I’ll decide that; not you, as Minister.

REUBEN DAVIDSON: Thank you, Mr Chair. I’m now wanting to ask some questions specifically around the clauses in this bill—which is the document I have in front of me, for the Minister’s reference—around the employee share scheme rules. This is really important, especially for New Zealand’s economic development or economic growth, depending on how you want to interpret the title of that portfolio—but it’s really important for both economic development and economic growth because it’s around the rules that we put in place in law to empower and enable the start-up sector in New Zealand.

Now, we’re known around the world for being very, very good, if not the best in the world, at innovation and innovating, and our start-ups the length of the country—many of which I’ve had the privilege to visit and see what goes on—are leading the way with new ideas and with developing talent locally and attracting talent internationally. A big part of attracting and holding that talent in our innovation sector comes down to allowing those employees and individuals to be invested not just in the realisation of the idea but also in the potential growth and monetisation that transfers from IP to IPO that those companies are seeking to have.

What we’re looking at in this section of the bill are the rules and regulations put in place around the issuing or transferral for an employee to become a share scheme beneficiary. There’s a specific reference in the bill at new section EA 4B, “Deferred tax for unlisted employee share schemes”, in clause 40, where new section EA 4B(2) says, “The employer may, at the time the shares are issued or transferred, designate the shares issued or transferred to an employee share scheme beneficiary as employee deferred shares.” Then there’s an underlined section here that gets very interesting. It goes on to say, “If the employer makes that designation, the employer must notify both the Commissioner and the employee share scheme beneficiary of that designation”—and this is the number—“within 20 days after the date of issue or transfer, or by a later date allowed by the Commissioner.”

My question for the Minister here is: what’s the process for the designation of that later date, is there discretion, and are there specific instances where the Commissioner of Inland Revenue would be asked case by case, or are we looking here at a blanket ruling that could extend out that 20-day period? I mean, 20 days can sound like a long time, but 20 days is four weeks. In our innovation and start-up sector, we know that a lot can happen in that period of time, and also, if you’re dealing with time zones in different countries and investments from other territories in other countries and from foreign investors, as well, that could all be very difficult to progress in that 20-day period. Those are my questions for the Minister: what’s the process; where is the discretion, if there is any; would there be specific instances of variation of that 20-day limitation, or is there a facility for a blanket ruling that would shift that 20-day discretion for the commissioner?

Hon MATT DOOCEY (Minister for Mental Health) (09:25): Thank you, Mr Chair. In response to the Hon Deborah Russell, who asked her question, as to why include petroleum and mining expenditure, I’ve been advised that the decision to include petroleum and mining expenditure—these were included in Investment Boost so that all expenditure and capital investment is treated equally. It is a good policy that aims at driving productivity for all sectors.

Hon Dr DEBORAH RUSSELL (Labour) (09:26): I thank the Minister for his answer to that question. I think that we debated it substantially at the time on Budget night, and if you’re going to do that, I don’t agree with doing it, but if you’re going to do that, then a consistency reason applies.

We have now moved on to the employee share scheme rules. These are clauses 39 to 41, and my colleague Reuben Davidson has already talked about some of the issues there. I just want to draw the attention of—it really got me. It’s new section EA 4B in clause 40, and I want to draw the drafter’s attention to this because I think there’s been a typo or a mistake. There’s section EA 4B, then there’s section EA 4B(1), section EA 4B(2), section EA 4B(3)—and that’s quite straightforward—and then there’s section EA 4B(4B). I’m looking at it on page 28, halfway down the page, and I think that it should be subsection (4), not subsection (4B).

Hopefully, that will get picked up and tidied up somewhere, but then it goes to section EA 4B(2), and so we’ve got two subsection (2)s in there now. I’m pretty sure that there are just some typos going on somewhere, but if the drafters—and the officials, I know, will be listening in the room outside because there’s a suite of officials working on this bill. As I’ve said, I’m pretty sure it’s just a typo, but it would be nice to get that one tidied up. I guess that it would have been tidied up at some stage, but it certainly would help in debating it, and this just goes to the fact that I did actually read the bill, unlike my colleagues on the other side of the Chamber, it seems.

Aside from that issue with the typos, I was particularly interested—and the reason why I picked this up was because I was looking at new section EA 4B(4B), and I thought that that just can’t be right—in where it’s talking about the liquidity event date. What I was concerned about here was this. In terms of the liquidity event, I guess what I’m concerned about here is whether we meet the arm’s length criteria, particularly.

Obviously, at the point at which we’re trying to establish a liquidity event, we need to be sure that the value established is correct. The best way to do that is through having an arm’s length transaction. This applies particularly from, under new subsection (4B)(a)(i)—which should be new subsection (4)(a)(i)—the date on which it becomes a listed company. At that stage, for the shares which will be issued to an employee, there is a value established, and so that’s quite a good date.

Then, new subsection (4B)(a)(ii) says, “the date the employee share scheme beneficiary”—that’s the employee—“sells or transfers the shares to a person who is not associated with a beneficiary”. I wonder if the Minister could explain just the extent to which that term “not associated” is working: who counts as being associated with the beneficiary and who counts as not being associated with the beneficiary? In this case, we do want to be very, very sure that we are establishing a genuinely arm’s length transaction to establish a genuine value, and so it would be great to clarify exactly how it meets that test.

The other thing that I was sitting on there was the date on which shares are cancelled, including by the company ceasing to exist. So, you know, the employee will have been given a whole lot of shares, as is common in start-ups, but then, as is equally common in start-ups, start-ups don’t always succeed, and people have to try several things before they succeed, and then the shares achieve zero value, and that counts as a liquidity event, too. What then happens to the employees’ remuneration? How is that, sort of, figured into the—I guess it’s just a non-event, in a sense, but if the Minister could clarify that, that would be very helpful.

There was a just one other thing—oh, no, I think we can move on. Those are some of the questions I wanted to ask—oh, no, I want to ask one other thing. In this new section EA 4B, inserted by clause 40, I want to go to—EA 4B; should be new subsection (4).

Ryan Hamilton: What page?

Hon Dr DEBORAH RUSSELL: Page 28, new subsection (4B), it talks about the shares. The date is obviously the sale date, and then it talks about “unless the shares are subject to a restriction that prevents their disposal”. So it means the date on which the restriction ends. I’m just trying to think about that—if the Minister could clarify. I’m taking that it’s the instance where perhaps the shares are listed, but the employee is not permitted to dispose of them until, say, a year after the listing date or something like that. Now, that might be a fairly common thing to do to ensure that the employee’s expertise stays with the start-up and so on, or that they’re—so I just wonder if the Minister could clarify exactly what sorts of restrictions might be envisaged there.

Again, when it’s coming to “associated persons” or not associated persons—so trying to establish that arm’s-length thing: the nature of restrictions, does that create a relationship that fits within the associated person rules, and things like that? I would hope that the restriction has to have a very certain date to it, otherwise I could see trigger events or a very certain trigger event that then says, no, this restriction is at an end. Otherwise, I can see the possibility for manipulating the date at which there is a liquidity event and, therefore, manipulating the value of the liquidity event. I wonder if I could just get some clarity around that, please.

REUBEN DAVIDSON (Labour—Christchurch East) (09:32): Thank you, Mr Chair. Just to further probe into one of these clauses, clause 41 here, “Section EA 5 amended (Income from disposal of original shares under share-lending arrangements)”. In subclause (2B) here, it says, “In section EA 5(1)(c), replace”—and then it quotes—“ ‘in the following income year (the later income year)’ with ‘in a later income year’.” What you’ve potentially got there is a shift, in my reading of it, and I’m seeking some clarity from the Minister. If you’re saying, “in the following income year”, that’s very specific; that’s next year. If you’re saying in “a later income year”, that’s very broad. That’s potentially any year following the one you are in, which implies, or could imply, a period of deferral—well, an infinite period of deferral, because you’re saying, “a later income year”, not “the following income year”.

It’s really some clarification from the Minister about his understanding of what that means and how broadly that could be applied, and what risks that might pose—because, all of a sudden, something that had to be tied up in the following income year now may never be tied up or could be tied up in two years, 10 years, 50 years. So some clarification from the Minister about exactly what the change there in clause 41(2B) will mean.

Hon MATT DOOCEY (Minister for Mental Health) (09:34): Thank you, Mr Chair. In response to the question around clauses 39 to 41, employee shares schemes, “Is there discretion for the 20-day period?”, I’ve been advised that, yes, there is.

To respond to the Hon Dr Deborah Russell, or we will now call her the “Eagle-eyed Deborah Russell”: “Are there typos?”, as pointed out—I thought, very good question and did leave the reader with that thought, but I have been advised that, no, this is not a typo. The numbering will be updated in the assent version of the bill.

Hon Dr DEBORAH RUSSELL (Labour) (09:35): I think there are still a few more questions that the Minister in the chair hasn’t answered yet, but I think we’ve dealt with the questions around the employee share schemes. That still leaves a couple of major topics in this section 1: the foreign investment fund (FIF) and revenue account method (RAM) rules. The other is the matter introduced in the Minister’s Amendment Paper, which has not been discussed in detail by select committee—although we discussed some of the policy proposals there—and we did not have submissions on it, so I do want to cover some of those issues quite carefully.

I want to move to—aside from the questions that the Minister hasn’t been able to answer yet, and I’m sure he will do so in due course—I want to move to clauses, I think it’s 51 to 67B, and that’s the revenue account method rules for the alternative to the foreign investment fund rules. First of all, just before I do that, I just want to note a couple of other things to do with the accepted financial arrangements in section EW 5, where clause 44 replaces “50,000” with “100,000”, and in section EW 57 and a few others. I think it’s EW 57 replacing “1,000,000” with “2,000,000”. I think these are good changes. Those thresholds were put in place a long time ago, and I think there was a real need to update those thresholds for the financial arrangements rules. So no particular need to discuss those. We agree with those changes, and I’m sure that, had we been in Government, we would have been doing much the same.

Moving on to the foreign investment fund rules. Now, this is a very, very technical area of the Income Tax Act. Very roughly, how the rules work is that if a person has, I think it’s $50,000 of foreign shares, they have to value those shares at the start of every year and then treat 5 percent of the value as taxable income and pay tax on that—so not pay 5 percent as tax, but, say, 5 percent of that is income; 5 percent of that value is income; and then the income is included as deemed income in the person’s tax return. What, of course, that is is a tax on unrealised gains, or you can also get unrealised losses out of it. There are some particular difficulties associated with that, especially for shares that are not in a listed company, or shares that—because, in the end, there’s no mechanism for establishing a value. And, of course, there are also particular issues for American citizens who are tax residents in New Zealand. The United States taxes its citizens, not its residents, and there were some particular interactions with the capital gains tax rules in the United States and the rules here, the FIF rules here in New Zealand, which have been creating genuine difficulty for people.

So we’ve now introduced the revenue account method. That’s so any dividends received are taxable as a person’s marginal rate and a gain or loss in any value of shares is going to be included in income and tax, but the value would be discounted by 30 percent. I think that’s the way it works. So, look, the policy intent is to reduce compliance costs for taxpayers and, really, to remove not just compliance costs but also to give people a way around having to pay taxes on unrealised value when they may not actually have the cash in hand to do so. It really has been a point of friction in the tax system.

Nevertheless, I want to understand when a person may use the revenue account method. The person has to be a RAM taxpayer or a RAM interest—I have to say, that acronym brings to mind sheep, but, you know, OK; hope our farmers don’t take this as an incentive to start using this method, either. So I want the Minister to clarify exactly who may be a RAM taxpayer. There’s a little bit of confusion there; it’s hard to work your way through this. Perhaps a RAM taxpayer is a person who’s a—if the Minister could just set out in clear words what a RAM taxpayer is.

Hon MATT DOOCEY (Minister for Mental Health) (09:40): In response to the Hon Dr Deborah Russell—the question around who is associated with a beneficiary and who is not—I have been advised that the meaning of “associated person” is in Subpart YB of the Income Tax Act. There are no special rules for its proposal. To clarify, the ordinary rules apply.

What happens to employee remuneration on the date shares are cancelled? I have been advised that, when shares are cancelled, an employee will generally be compensated for the loss of the shares by the employer. This may be in the form of a cash payment or different shares of the same value. This is common in share restructure situations. This will trigger a tax liability.

DAVID MacLEOD (National—New Plymouth) (09:40): I move, That debate on this question now close.

CHAIRPERSON (Greg O'Connor): I’m aware we’re still moving, but let’s keep moving.

Hon Dr DEBORAH RUSSELL (Labour) (09:41): I’ve specified very clearly the two areas where I feel as though we need to do some more work yet.

Just carrying on looking at a revenue account method (RAM) taxpayer, I want to understand, then, what “RAM interest” is? There are two definitions here which I think we could do with plain English for. I know there are a number of fairly ordinary people who this affects who want to understand whether or not they can now be a RAM taxpayer or whether they have RAM interest. We’re looking for a plain English version of what a RAM taxpayer is and what RAM interest is.

I think it’s really important here what date this applies from. I recall when I first became a member of Parliament—it’s getting on for close to nine years now; it’s hard to believe this is my ninth year in this place—I immediately had people approaching me over this particular issue: people who had lived in New Zealand for some years but still had shares overseas, particularly in the States. I want to understand if those people can now use this RAM method or whether they are still required to continue using the standard foreign investment fund rules. Now, as I said, this is a point of friction for those people. Is this this going to solve that point of friction for people who have been here for a very long time indeed?

FRANCISCO HERNANDEZ (Green) (09:42): Thank you, Mr Chair. I appreciate that the member the Hon Dr Deborah Russell is going clause by clause, but I did have a question that I wanted to ask now which is slightly, I think, not quite where she was, because I do have to leave at 10 o’clock.

My question is around the Order in Council mechanism for the FamilyBoost package and whether there was consideration given to using that mechanism for the Amendment Papers and the fuel crisis relief package that the Government is offering. The change that this bill is making is that it allows the rates of the FamilyBoost to be set via Order in Council, which is, of course, a much simpler mechanism than setting them via legislation. Was there consideration given to making it so that the boost that the families are getting through the fuel crisis relief package is done via that mechanism as well?

We know that this crisis is going to be quite a fast-moving one. We can’t predict the future. We don’t know what’s going to happen. It just strikes me that the Order in Council mechanism is a much better way potentially to set the rates that are in the Minister’s Amendment Papers rather than going through the changing of legislation, because the flexibility that it offers is that you can adjust the rates up or down depending on the price of fuel, depending on what’s happening with the international markets.

That’s just my very quick question to the Minister, and I’m looking forward to an answer to that.

Hon Dr DEBORAH RUSSELL (Labour) (09:44): As well as a revenue account method (RAM) taxpayer and RAM interest, there is then an “extended” RAM taxpayer. Now, that’s kind of an interesting—

Suze Redmayne: Ha, ha!

Hon Dr DEBORAH RUSSELL: Yeah, talking about extended “rams”, I think Suze Redmayne has probably got a little bit of information to share here! What’s an extended RAM, Suze?

That’s an odd kind of thing to have: not just a RAM taxpayer but an “extended” RAM taxpayer. If the Minister could clarify why you might have something that is extended further?

The other thing I want to be really clear about—and I think people at home are going to need to be very sure about this too. It’s sitting here in the legislation. It says that a RAM taxpayer has to be a “natural” person—no companies, and so on. Now, again, if the Minister could just explain, and I appreciate it is a perfectly sensible rule, why a RAM taxpayer has to be a natural person—so, a company or a trust, or whatever, cannot be a RAM taxpayer?

Hon MATT DOOCEY (Minister for Mental Health) (09:45): Isn’t it great to be talking about a RAM taxpayer and not a ram raid!

What is revenue account method (RAM) interest? It is not a liquid foreign share, which means not easily able to be sold or converted, such as not on the stock exchange.

When may a person use RAM? I have been advised that the person must be a New Zealand tax resident on or after 1 April 2024, and the person must have been a non-resident for at least five years before becoming a New Zealand tax resident.

To the question from Reuben Davidson, around clause 41, section EA 5—the question was about why the change from “the later” income year to “a later” income year—the relevant disposal or return of shares can occur in more than one income year, later for a returning share transfer. This is why the change was made.

Hon Dr DEBORAH RUSSELL (Labour) (09:47): I’m grateful for the explanations that the Minister, the Hon Matt Doocey, has made around the revenue account method. It is a highly technical piece of legislation, so I think, rather than pursuing it further, I actually want to move on from this now.

I appreciate that we have been spending a large amount of time on this part; nevertheless, there is one more set of rules that I want to have a really good look at, and it’s actually going to be quite important to have an extensive look at this, because they are rules around thin capitalisation. Now, these are contained in the Minister’s Amendment Paper 559. This Amendment Paper was made available, I think, on Monday of this week. I’m pretty sure I picked up a copy of it then. It might have been earlier; it might have been a little bit later. This is, I think, the first time we’ve had an opportunity to have a look at the actual legislation. The particular ideas were discussed in select committee, but not the legislation, so there is quite a bit of work to do on this section.

Just to set the context for the committee—a brief explanation of the thin capitalisation rules—what multinational companies could do, if you’re not careful about it, is locate all of their debt in New Zealand and get a deduction for it even if they didn’t actually have a lot of their investment in New Zealand. It’s a pretty standard strategy for shifting funds around the world and getting the best tax deduction possible. What the thin capitalisation rules do is make sure that companies don’t load a high proportion and commercially unrealistic level of debt into New Zealand and claim high deductions. I think, under the thin capitalisation rules, firms can have up to 60 percent debt financing here or, if they look at the average debt financing of the company across the world, they can have 110 percent of the multinational’s average debt financing located here. What that does, then, is ensure that the deductions that are taken in New Zealand are fair and reasonable.

The trouble is that that can in some ways be a barrier to some investment, and we do want to ensure that we encourage inward investment as well. We know we need it around infrastructure. These thin capitalisation rules are now being modified to ensure that, where we’re getting inward investment for infrastructure, those companies can get a reasonable deduction.

Particularly, they have to have third-party debt and all sorts of things going on there, but provided some infrastructure investment they can get the full deduction. I hope the Minister in the chair is appreciating that explanation as well, given that the Minister who is responsible for this legislation is not able to be here at this time. That of course happens. We understand this. The Minister in the chair is doing an excellent job—doing an excellent job.

There are two new clauses here in the Minister’s Amendment Paper 559, new clauses 69B and 69C. I have to say that 69B is a little dull—sorry, drafters, legislation officials—but 69C is where all the work is done. What 69C does is it introduces a new section FE 7C. Now, FE contains all the thin cap rules, so this is the obvious place for these new rules to go in.

I want to go to new section—oh, I’ve managed to put an FEC there, clearly, I’ve just got Finance and Expenditure Committee on mind—FE 7C(1)(a). So what this does is it says that people who can use this exemption to the thin cap rules for infrastructure have to meet the requirements of section FE 2(1)(b), (c), or (cc). Now, FE 2(1)(b) is a non-resident company, (c) is a resident company that is more than 50 percent overseas owned, (cc) is a resident company controlled by overseas and overseas trustee. Roughly, that’s how it works.

This is the question for the Minister: FE 2(1), why would a non-resident who is not a company not be able to claim this deduction if they are engaging in infrastructure, if they’re providing funding for infrastructure? Now, I get that that’s a highly unusual situation, but why would they not be able to claim that deduction, a non-resident who is not a company; why not FE 2(1)(cb), a resident company that, effectively, has overseas control through counting of its holdings?

Now, people who’ve worked in tax will know that there are kind of these wiring diagrams showing capital flows and cash flows and revenue flows and deduction flows and all sorts of ownership flows. Those wiring diagrams are very, very complicated and you count up those holdings. So what I want to understand from the Minister, given that those who can use these exemptions—is: why is it that if FE 2(1)(a) and FE 2(1)(cb) are not included in new FE 7C(1)(a)?

Hon MATT DOOCEY (Minister for Mental Health) (09:53): Thank you, Mr Chair. In answer to Francisco Hernandez’s question, who said he had to leave at 10 o’clock, so I thought I’d expedite that question a bit quicker. Had to go and—

Hon Member: Busy guy.

Hon MATT DOOCEY: —well, that’s right—do what Green MPs do, like play hacky sack or something like that. Did we consider doing the in-work tax credit by Order in Council? No, in-work tax credit rate changes are generally made by primary legislation. The reference to Order in Council relates to setting a date when support will stop, not for setting the rate itself.

For the question by the Hon Deborah Russell, who I never thought I’d hear her say that she found part of tax legislation dull. I mean, those nine years are changing you slowly. I never thought I’d hear that. It’s surely all exciting. Who can use extended revenue account method (RAM)? I’ve been advised extended RAM taxpayer are RAM taxpayers who are also being taxed in another country. This distinction was necessary because they needed RAM to apply to more investments to resolve the double taxation issue.

SUZE REDMAYNE (Junior Whip—National) (09:54): I move, That debate on this question now close.

CHAIRPERSON (Greg O'Connor): Keep moving but with some pace.

Hon Dr DEBORAH RUSSELL (Labour) (09:54): I am keeping moving. I want to move on to some further questions on this Amendment Paper 559 that was just dropped this week and when we haven’t seen the legislation previously. I appreciate that in the absence of the Minister responsible for this legislation, that the Minister in the chair is doing an excellent job. Nevertheless, it’s very hard to discuss some of these technical issues and to get the policy intent behind them because of this.

I want to look at new section FE 7C(3), and this is one where I just want a confirmation of this. It says, “For the purposes of applying this subpart to any other person”. So this is new subpart FE 7C or maybe FE—if they could clarify whether that’s subpart FE or new section FE 7C that would be helpful, because I’m just not quite sure what, in FE 7C(3) this subpart refers to. “For the purposes of applying … to any other person”, so another person who might be able to claim the exemption for eligible infrastructure. I’m envisioning a situation where two entities are trying to claim the exemption for eligible infrastructure, so you can’t count the debt interest assets and non-debt liabilities of the eligible infrastructure entity and so on. If the officials could clarify that that’s to prevent a double dip on this. I think that’s what their work is doing. I might be getting it wrong, but, again, because I’ve only just seen this legislation, we haven’t had an opportunity to discuss in select committee. I’m unsure as to exactly what that work is doing.

Carrying on from there, on FE 7C(4), we have a non-QID—or a non “kid”, “quid”, something other—interest. I’m just disappointed that officials missed the opportunity for a full-scale quidditch reference. They could have done that. What it does is FE 7C(4), it sets up an amount of income that gets counted as income. I was puzzled by that, because it it’s got the subtitle “Income” there. Of course, that led me to the question: this is all supposed to be enabling a deduction, and I’m not quite sure how the mechanics of this are working. So where is the deduction itself enabled? Or is it the case that, first of all, we have the thin cap rules that prevent a deduction and then this new section FE 7C prevents the prevention of the deduction and we’re doing a double negative here? If the officials could just clarify how that mechanism actually works.

I want to make sure that there is a deduction enabled somewhere. But if it’s done via cancelling, as it were, the prevention of the deduction, it would be helpful to know just exactly how that mechanism is located within the Income Tax Act. So that’s a couple of questions for the Minister there.

Hon MATT DOOCEY (Minister for Mental Health) (09:58): High productivity this morning. The question was why would a non-resident that is not a company not be able to claim a deduction? I’ve been advised the provision is focused on companies because these are the most likely taxpayers using it. Other taxpayers can always incorporate a company to access this thin cap treatment.

The next question was asked by the Hon Deborah Russell. Why does foreign investment fund (FIF), revenue account method (RAM) only apply to natural persons and certain trusts—e.g., family trusts? The RAM proposal was intended to remove tax barriers to migration and settlement of people in New Zealand and returning New Zealanders, hence why that is worded in this way.

Hon Dr DEBORAH RUSSELL (Labour) (09:59): Thank you, Mr Chair. I’m very grateful for that answer and, of course, that makes good economic sense to encourage people to migrate into this country. So I commend the Minister and the officials for introducing that change

Carrying on, on new section FE 7C, I want to go to FE 7C(7)(a). We’ve got “eligible infrastructure entity” and we’re trying to define what that is. It means a person who is carrying on a business or project of “creating, operating, maintaining or upgrading qualifying infrastructure assets the person owns;”

Now, I’ve got some serious concerns around those qualifying infrastructure assets and I do want to discuss those in a moment, and “creating, operating, maintaining, or upgrading” seems reasonable for the actual asset that is being created—this legislation is supposed to be enabling or encouraging infrastructure development—but then for eligible infrastructure it says “any activity in New Zealand that is ancillary to or facilitates the activities described in subparagraph (i) if the person carries on any such activity;”. What’s going to be “ancillary” to “creating, operating, maintaining, or upgrading qualifying infrastructure”? I just recall that when we were discussing the accelerated write-down rules a short time ago, one of the things that we discussed there was how improvement had been expanded to maintain, develop, something other like that—the actual definition of “improvement” had been expanded into some particular words. I’m really worried that “any activity in New Zealand that is ancillary to or facilitates the activities”, is going to be something that subsequently gets expanded as well or needs further explanation.

If we could have some examples, maybe, from officials of what sorts of activities would fall into that “ancillary to or facilitating the activities”. I think 7(a)(i) is pretty clear, but 7(a)(ii) is somewhat unclear because of that word “ancillary” and also those words “facilitating the activities”. If the Minister of Revenue is able to answer that, that would be helpful.

Hon MATT DOOCEY (Minister for Mental Health) (10:01): Thank you very much, Madam Chair. Good morning. The question is who is the “any other person” referred to in new section FE 7C, added by clause 69C in Amendment Paper 559? I’ve been advised that thin capitalisation rules apply on New Zealand group level. When an exemption applies to an entity that is part of a group, the normal thin capitalisation calculation applies to the rest of the group, disregarding the entity applying the exemption.

CHAIRPERSON (Barbara Kuriger): I’m going to take a call from the Hon Dr Deborah Russell, but I do know, in consultation with the previous Chair, that we’re getting pretty close in this Part 2. I know that you’ve been honed into this the whole time, so a couple more specific questions would be really good.

Hon Dr DEBORAH RUSSELL (Labour) (10:02): Thank you, Madam Chair. I note that this particular set of legislation only dropped this week. It hasn’t been examined in select committee—it’s the last major topic I wish to examine in Part 2.

CHAIRPERSON (Barbara Kuriger): I’m just asking to—

Hon Dr DEBORAH RUSSELL: Yep, and I’ve been moving.

CHAIRPERSON (Barbara Kuriger): I’m looking specifically to you as the member who’s been honing in on this. Thank you.

Hon Dr DEBORAH RUSSELL: I’m going to keep on moving clause by clause through, very steadily.

CHAIRPERSON (Barbara Kuriger): Very quickly, questions and not comments. OK?

Hon Dr DEBORAH RUSSELL: New section FE 7C(7)(b)(ii) added by clause 69C in Amendment Paper 559—and this is really interesting. It’s talking about assets and which assets are recognised in the balance sheet, and it’s (7)(b)(ii) and (iv) that are giving me concern. In terms of valuing the assets, we have “tangible assets:” and “financial assets:”, “deferred tax assets:”, but there are two there—“intangible assets:” and “goodwill:”. Now, how are they valued? This is really worrying me because, of course, goodwill and intangible assets are subject to quite a bit of opinion—as it were—in terms of their value. There’s an opportunity there to inflate the value of assets sitting on a balance sheet as to whether or not they can be—as to meet that threshold. I’m concerned about how the value of those assets is going to be audited and policed by Inland Revenue. If I could have an answer around the ancillary activities and these intangible assets, they have two areas where I think there’s wriggle room in the legislation and I would be concerned about that.

Now, “(c)” is kind of interesting—new section FE 7C(7)(c)—the things that an entity doesn’t have, so a qualified infrastructure group must not have these things. Just going to say that the reality is that it’s a logical impossibility to prove a negative. That’s just a basic finding from logic—one cannot prove a negative. How is a company going to be able to prove something that they don’t have? I mean, I can assert that I don’t have a cat, but proving I don’t have a cat is a different thing. I would like some clarity as to how that is going to be policed as well. That’s three items there that I need some clarity from officials on.

Then new section FE 7C(8)—and this is the qualifying infrastructure. It has to be “a tangible asset in New Zealand that provides … transport infrastructure”— tick, I’m happy with that. “Provides energy infrastructure … electricity generation, transmission, and distribution assets”—provided it’s green electricity, that’d be a tick from us. “Water infrastructure”—this got me a bit worried, overseas companies owning water infrastructure and investing in water infrastructure. There’s a few issues around that in New Zealand at the moment and that kind of begs the question as to who ought to own our water infrastructure. I’d like to know what the policy discussions were behind enabling water infrastructure to be owned, built, maintained, operated by overseas investors. Overseas investors expect a return and I feel as though water infrastructure—this is a conversation we need to have in this country—is infrastructure that needs to be operated by and for the benefit of New Zealanders, not by and for the benefit of overseas investors. “Telecommunications infrastructure”—OK, no worries about that one. “Waste infrastructure”—it’s got me a wee bit worried, but not as worried as the water infrastructure.

Then the last one: “social infrastructure … hospitals, schools, libraries, prisons, large-scale student accommodation or similar public facilities”—the large-scale student accommodation, all right, that seems OK. But hospitals? Schools? Libraries? Prisons?

Hon Member: You just said that.

Hon Member: Repetition!

Hon Dr DEBORAH RUSSELL: This is actually a serious policy issue. This opens the door to private investment in our prisons. This opens the door to private investment in our schools. This opens the door to private investment in hospitals. This opens the door to private investment in libraries. This is a very serious policy question and I think we need to spend some time in this committee examining it, especially as this Amendment Paper was only dropped this week. There is a very serious policy issue here and that is the extent to which there should be private investment in these entities.

When we imprison someone, we take away—Madam Chair?

Hon Members: Madam Chair!

CHAIRPERSON (Barbara Kuriger): The Hon Dr Deborah Russell.

Hon Dr DEBORAH RUSSELL: This is a serious question. When we imprison someone, we take away their freedom. That is a large and important thing for a State to do, but this says that people can derive a profit from the State imprisoning someone. That is deeply worrying. Our public schools have always been that: public schools and they have been provided by the State. As much as possible they have provided a free education. But if we are going to have private investment in our public schools, then that private investment is going to demand a return. That private investment for operating and maintaining those school buildings takes money out of taxpayers’ money and sends it off to private investors overseas. Is this the right thing for us to be doing as a country?

I want members on the other side to justify this. Why should we be enabling foreign investment in our prisons? This is a deeply serious matter and I want a policy answer from the Minister in the chair, the Hon Matt Doocey.

Hon MATT DOOCEY (Minister for Mental Health) (10:09): Madam Chair, I was just going to compliment the Hon Deborah Russell for being so strong, but starting to falter a bit—although Reuben Davidson did start off strong but faded a wee bit.

CHAIRPERSON (Barbara Kuriger): Just answer the questions please, Minister.

Hon MATT DOOCEY: But I see the Hon Duncan Webb’s come in and passed him a few questions, so no doubt he’ll be back up on his feet now he’s been prepped a bit better.

The question around thin cap proposal—how will the value given to intangible assets be audited, policed by IRD? I’ve been advised the definition of “intangible assets” and “goodwill” follows standard accounting treatment, so IRD would check that this standard accounting treatment is being followed.

The question from the Hon Deborah Russell: “what is new section FE 7C(4), inserted by clause 69C on Amendment Paper 559”—if I’m correct in that—“classification doing?”, subsection (4), effectively, denies a deduction by deeming income for debt that is not third party—from related parties does not qualify and the interest expense on this related party debt is deemed to be income. I’ll just read that again: subsection (4), effectively, denies a deduction by deeming income for debt that is not third-party debt. Debt from related parties does not qualify and the interest expense on this related party debt is deemed to be income.

RYAN HAMILTON (National—Hamilton East) (10:10): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Motion agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that the Minister’s amendments to Part 2 set out on Amendment Papers 559 and 560 be agreed to.

Amendments agreed to.

Part 2 as amended agreed to.

Committee of the Whole House

Part 3 Amendments to Goods and Services Tax Act 1985, and Part A of Schedule 2

CHAIRPERSON (Barbara Kuriger): Members, we come now to Part 3, which is the debate on clauses 107 to 134—“Amendments to Goods and Services Tax Act 1985”—and Part A of Schedule 2. The question is that Part 3 stand part.

Hon Dr DEBORAH RUSSELL (Labour) (10:12): There are a number of minor changes in this part of the bill to the GST rules, but, actually, the thing that I really want us to focus on is the new joint venture rules. I don’t want to go through all the remedials—fascinating that each of them is on an individual basis, but I actually do want to focus on the joint venture rules.

So for the benefit of the committee, in terms of joint ventures what was going on was where companies were involved in a joint venture together, so one company would be paying—sorry, two taxpayers, GST-registered taxpayers were engaging in a joint venture together, one entity would pay the bills and claim the GST and flow it through to the other company, who could claim their share of it, and so on. This whole process had seemed to go on in a fairly, I wouldn’t say casual, but on a somewhat ad hoc basis. It was the accepted practice for how GST on joint ventures was accounted for.

There was a need to actually firm up the legislation on this. The practice followed commercial reality, but Inland Revenue established that actually, through a draft ruling, that this probably wasn’t the appropriate practice; it didn’t actually follow the legislation. So although people were doing something which at the end of the day accounted for all the GST correctly, all the correct amount of GST was being paid—that’s our understanding—it wasn’t actually being done legally. So there was a need to make sure that the GST rules caught up with the actual practice, given that the actual practice was reflecting commercial reality and did actually mean that all the correct GST was being paid.

My understanding is this whole set of rules ensures that unincorporated bodies can indeed claim the GST. So it proposes what is now called a flow-through treatment. We’re familiar with flow-through treatment in other areas of the taxing Acts, for example, with flow-through companies and so on. This is a flow-through treatment here with GST.

The difficulty is that we got a whole lot of feedback from submitters and from accounting bodies, from some of our senior tax consultants that, actually, the rules now create more of a mess than there was in the first place. I just wonder if the Minister has a sense of how he would respond to that and what he would say to that, or what officials would say to that.

I appreciate that this is a difficult bit of law, so I’ll just go to it clause by clause. I was inviting the Minister to perhaps comment on the general policy overall, but that’s fine. I want to know why—going to clause 108 which should be in section 2 amended, the interpretation section of the Goods and Services Tax Act—“partnerships” are not included? You know, partnerships are the ultimate flow through entity of anything. So it’ll be interesting to know why partnerships are not included in these definitions.

Then it goes on in clause 108(6) to talk about some interesting things like—it’s a really interesting thing here—a “non-integral deduction”, means for goods and services that don’t make a substantial improvement to the main goods or does not become an integral part of the main goods. So the “main goods” is an interesting definition in itself, but then a “non-integral deduction”, again, is there a definition of “integral deduction” sitting in the Act? In that case, wouldn’t that be a better thing to do? I want to know why it was defined this way on a negative basis as a “non-integral deduction” instead of being defined in a positive manner as an “integral deduction”. If the Minister could give me some clarity on that, please. Apparently not—not yet.

So carrying on through these rules, and they are quite technical. If the Minister could explain—sorry, I’ve just lost my place here because the Goods and Services Tax Act is a little bit complicated; it’s one of those ones that could do with a good tidy up. So we’ve got a definition here under clause 109, section 2A amended, the definition of “associated persons” and we’ve got (db) “an ordinary joint venture and a member of the ordinary joint venture” is coming in, and we’re inserting (dc) “2 members of an ordinary joint venture or of a flow-through joint venture when they transact in their capacity as members of the joint venture:”. So they now become associated persons. I just wonder how that affects the associated persons in these flow-through rules for the new joint venture rules.

Normally, when we’re looking at associated persons, we’re trying to prevent some mischief. But this seems to be enabling people to conduct something together. That just feels like a faintly different use of the associated person rules around GST.

REUBEN DAVIDSON (Labour—Christchurch East) (10:18): Thank you, Madam Chair. I just wanted to look at one of the clauses in here in—I’m here on page 71 and it’s really a threshold question around a determinant. So in clause 111(4), “After subsection 5(23B), insert: (23C)”, it steps through a number of scenarios here or criteria here for “a taxable supply of goods and services in a return provided by the supplier;” And then when it gets down here to (23E) it goes on to say that “Subsection (23F) applies if—” and in (a) it says “section 11(1)(md) is treated as applying to a taxable supply of goods and services in a return provided by the supplier: and (b) after the date on which the supply is made, the supplier or the Commissioner finds that section 11(1)(md) does not apply:” Then it says, “(c) the recipient of the goods and services did not provide the supplier with correct or sufficient information under section 78FB to enable the supplier to determine whether the supply should be zero-rated.”

There must be criteria or a threshold here, around what that level of sufficient information is or means. Then, if the onus is on the supplier to determine whether the supplier should be zero-rated or not, there’s someone here who has to interpret the criteria or information. So, to me, there’s two questions there: what metrics or framework would the recipient need to provide, but also what would the supplier need to provide? So, keen to get an understanding from the Minister around the level of detail that is provided to both parties in that relationship, to enable the correct determinant around the applicability or otherwise of the GST considerations within this part—this amendment—to this bill. Because if there is a grey area or if that’s not crystal clear for people, the risk is that mistakes and errors will be made. Obviously that’s exactly what this bill is trying to prevent.

Hon MATT DOOCEY (Minister for Mental Health) (10:21): Thank you very much, Madam Chair. I’ll just gather a few questions up around partnerships. We had one specifically on clause 108; why are partnerships not included? I’ve been advised this is to clarify for the avoidance of doubt that the rules can only apply to joint ventures, because in some countries joint ventures can include partnerships.

There was a further questioning around definition and also complexity, especially within the amendments. I’ve been advised the rules were subject to full public consultation; much of the volume and complexity of the amendments is in relation to zero-rating amendments which were supported by submitters

Hon Dr DEBORAH RUSSELL (Labour) (10:22): Madam Chair, I want to refer to clause 114 which amends the zero-rating of goods. The way the GST is set up is interesting, if exempt supplies, exempt goods are completely outside the GST net, therefore you can’t claim input costs, but zero-rated supplies are in the GST net and you can claim input costs against them. So when you’re zero-rate something it’s to do with, in some cases, just ensuring that we’re not adding unnecessary complexity to transactions and so on. Section 11 has a whole lot of goods that are zero-rated, a whole lot of things that are zero-rated. It’s adding into this section the zero-rating of the supply of goods and services through this joint venture.

That does make sense but I want to just clarify with the Minister that we shouldn’t be passing goods back and forth in a joint venture and charging GST on them and so on. So that the zero-rating here just enables that to happen efficiently, but nevertheless enables people to claim the input tax deductions. So if I could have a clarification from the Minister on that.

I do want to just clarify, in clause 119: often people make mistakes with recording the information for GST and it actually matters kind of a bit more than it does in some ways for the income tax because of the way that GST is a flow-through tax and flows and flows and cascades through the system. So we need to have correct record keeping all the way through. In the supply correction information—that’s section 19N of the Goods and Services Tax Act—that date there is seven years from the date the supply was made. I just want to clarify that that is consistent with the other time frames in the GST Act; so that’s seven years works both ways. Again, it’s just that consistency thing; we know that if people have the same date in their mind then it’s easier for them to comply with the tax law. So just clarification that the time frame is actually consistent within the GST Act,

I want to go to new clause 120; it’s the Calculation of tax payable. You know, we have a flow-through joint venture; it’s making both exempt tax supplies, so no GST involved whatsoever, and zero-rated GST supplies, so GST is involved and people can claim input tax deductions. But what we have here is two entities involved in a joint venture together, claiming input tax deductions. They have to agree on the same method for all members; they have to have that agreed in writing between all members, and it has to be fair and reasonable as to the method they’re going to use for apportionment. Minister, I just want to know what happens if they don’t agree? What is the consequence if they don’t agree to that?

Hon MATT DOOCEY (Minister for Mental Health) (10:25): Thank you very much, Madam Chair. Just in response to the Hon Dr Deborah Russell’s question around non-integral deductions, and is there a definition of integral deductions? The advice I’ve received is because the relevant rules allow a GST-registered person to claim non-integral deductions for the relevant goods—typically expenses for repairs or maintenance associated with a house that they partly use for home office or for their business—it is simpler, from a drafting perspective, to define what is not integral than to define what is integral.

RYAN HAMILTON (National—Hamilton East) (10:26): I move, That debate on this question now close.

Motion agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that the Minister’s amendments to Part 3, set out on Amendment Paper 559, be agreed to.

Amendments agreed to.

Part 3 as amended agreed to.

Committee of the Whole House

Part 4 Amendments to Tax Administration Act 1994, and Part B of Schedule 1 and Part B of Schedule 2

CHAIRPERSON (Barbara Kuriger): Members, we now come to Part 4, which is the debate on clauses 135 to 171—“Amendments to Tax Administration Act 1994”—Part B of Schedule 1, and Part B of Schedule 2. The question is that Part 4 stand part.

Hon Dr DEBORAH RUSSELL (Labour) (10:27): We’re gradually making our way through this bill. There are, I think, three major topics I wish to discuss; they’re kind of related. The three topics that are really worth discussing in here: first is the repeal of section 17GB of the Tax Administration Act. The second one, which is a very serious one, is the insertion of new section 18HB, Regular disclosure to Government agencies. I think we need to have a substantial discussion around those disclosure rules, and I can see that my colleague Vanushi Walters is itching to get to discuss that. The third—and I must just check exactly where it is—is the rules about what information a commissioner may collect from trusts has been repealed and changed. So I do want to have a look at that, as well. Also sitting in here is the Schedule 7 amended —I think sits in this part of the bill as well; that’s cause 169.

I want to go back, straight away, to clause 141 of this bill. Clause 141 is very straight but it repeals section 17GB, and there are a number of other sections that are amended because of that: 17C, 17E. Section 17GB is a really interesting provision and, I think, a really necessary provision. It is the provision that enables the Commissioner of Inland Revenue to collect information from taxpayers and to require taxpayers to provide information to the commissioner for the purposes of forming tax policy. Forming tax policies is a really important role; tax policy is complicated. We have a very specialist team at Inland Revenue who work in tax policy, and people who make lifetime careers there, as I can see from some of the officials on the bench at the moment who make lifetime careers in tax policy.

CHAIRPERSON (Barbara Kuriger): I don’t think we should bring the officials into the debate.

Hon Dr DEBORAH RUSSELL: Oh, I was wishing to compliment them but I will withdraw that comment, then, and I’ll make it in private later on. It is difficult to get tax policy right. Now, Inland Revenue, at the moment, has an excellent consultation process, which they work through to get tax policy right, but, even so, sometimes the information is simply not there.

Section 17GB gave the commissioner power to collect information from individual taxpayers or groups of taxpayers in order to see what was going on in the tax system, in order to see what patterns of behaviour there were, in order to see whether there was any mischief was going on, and in order to see what could be done better. The information could not be used for tax-collection purposes; it was completely barred from being used for tax-collection purposes. It could not be handed over to investigative teams, or anything horrid like that. It had to stay sitting in that tax policy purpose. There was no harm being done by this particular piece of legislation, but this Government has decided to repeal that piece of legislation.

In the select committee process, really important groups of people—such as, I think, Chartered Accountants Australia and New Zealand; I’m trying to remember the others, but certainly the tax justice group—urged that this clause be retained. Given that people wanted the clause retained, given that they saw value in it, given that they felt it made tax policy a lot better, why, then, is the Minister continuing with this repeal of 17GB, with repealing this really important plank in the way that we form policy? It’s, I think, a real shame that it is being repealed, and I’d like the Minister to justify it.

VANUSHI WALTERS (Labour) (10:31): Thank you, Madam Chair. I look forward to having a really robust discussion about clause 143, inserting new section 18HB, which is the insertion of the new disclosure requirements, and in my view, a significant step into privacy rights. I think it really does require a broad discussion.

There was an interesting point of view, which I agree with, put forward by the Privacy Foundation, where they make quite a compelling argument that there is no need for a new scheme of disclosure. There is already the ability for information-sharing agreements to be created under Part 7 of the Privacy Act. The objection to using the current framework is primarily that it takes too long, so that it takes up to 18 months to get one of these agreements in place and that it’s inefficient in terms of the purpose required for information sharing, particularly in regards to cases of fraud, etc. But the argument that the Privacy Foundation make is that, actually, the existing regime—so the Part 7 regime—is sufficient; the delays that occur are not inherent or a necessary part of the system, it’s, essentially, due to operational reasons, but they also argue that the existing framework is sufficient and there’s no need for any of these changes. So they’re arguing “Just remove new section 18HB in its entirety—there’s no need because you could make operational efficiencies to make the current system work and then you would also have the existing benefits of the system that we have.”

I do want to talk through the benefits that the current system has, because this is a clear choice that the Government have made not to try and address operational inefficiencies and use the benefits of the current system and bypass those protections which are important protections in privacy law. The first protection, they suggest, is that the current system is a legislative instrument, and while it does take some extra time, it does help guarantee high-quality drafting, high-quality information, so the information that’s required is confirmed by Order in Council. This would permit an agreement that sits outside of that framework where there’s an agreement between two agencies. The value of having that agreed by Order in Council is, of course, then the House has the ability to disallow the agreement if it believes that it’s in breach of the privacy principles. Again, that means that the approved information-sharing agreements—the AISAs—must be approved by Cabinet, as well. The time taken to do that is important because it does mean that there’s sufficient protection for individuals.

The second thing is that they say that consultation—and they’re right—needs to occur under the existing information-sharing agreements. Under Part 7, you have to consult with agencies or people who may be affected, before you put that in place. Again, it does take a particular amount of time, but the argument is that that’s certainly worth it, because then you ensure that you’re protecting information and that the interests of those who may question the validity of a stretch into that information space can be taken account of.

CHAIRPERSON (Barbara Kuriger): The member does a very good job of interpreting the legislation, but I’m waiting for a question.

VANUSHI WALTERS: The ultimate question here is: why is there a need for new section 18HB, inserted by clause 143, at all? It is, essentially, we still have these information-sharing agreement provisions under Part 7 of the privacy regime—so that’s there. The argument from the Privacy Foundation is that that’s sufficient. What I’m setting out is why that is a better system. If the Government just chose to improve that system, as opposed to imposing this new one, they would not only be able to get the information required but individuals would still retain privacy.

The other important point they make is that when information is matched or shared, the individual concerned would be alerted under the existing framework; that’s not the case under the new framework. Their point there is that there can be errors that are made.

So the first question to the Minister is: why not retain the current regime and just address the operational issues that the Privacy Foundation have pointed to?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:36): Thank you, Madam Chair. I’ll just answer the question from the Hon Dr Deborah Russell. This was a question around “Why repeal section 17GB?” We acknowledge submissions on this, and we acknowledge people’s feedback, but, ultimately, the Government had concerns that section 17GB gave insufficient weight to the privacy of taxpayers—and it actually links into the point from Vanushi Walters. Because of that, we thought a repeal was considered to be the best option for protecting the privacy interests of taxpayers. Just for some context, that section 17GB had only been used once before previously.

Hon Dr DEBORAH RUSSELL (Labour) (10:37): As I said, I think it’s a real shame that section 17GB hasn’t been retained. A number of submitters came to us and said, “Well, OK, we get that there were concerns around the use of 17GB, but then why not simply put more safeguards around it? Why not put more guardrails around it?” So why not put explicit provisions into the law as to how it could be used? I do kind of agree that more guardrails could have been introduced in the first place, but why remove such a valuable tool from our policy officials? It would have been straightforward to put more guardrails around it.

We’ve had pretty interesting discussions in the Finance and Expenditure Committee. This is available from the public hearing we had with the Commissioner of Inland Revenue earlier this year on the annual review. He talked about the way that taxpayers’ data is protected. He pointed out that there are really stringent provisions around that. They’ve dismissed people for breaching those provisions. I think, in the last five years, something like 75 people have been dismissed because they breached the provisions of information access, so they take really good care with their staff—take them through all sorts of training programme things around the privacy of taxpayers’ information. I’m concerned that one way to use 17GB simply would have been to shore up the protections around it.

In discussing this, again, in public session, the assertion was made around 17GB that the commissioner actually had the power to collect this sort of information under 17GB already; that he could already do so because he could use his powers around the stewardship of the tax system to collect the same information. Now, that seems like a long reach to me, and I would like to understand whether the commissioner can actually collect that information, and to what extent taxpayers would simply refuse to give it up, and what the commissioner would do in those circumstances.

So, you know, we have a situation where we had a valuable tax policy tool. It could have done with more guardrails: a way of retaining that valuable tax policy tool would have been to have put more guardrails into it, and yet the Minister chose not to do so. Why not, Minister?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:40): I think it is a finely balanced argument, and we understand all the arguments. But I think what has tipped it in favour of the repeal of section 17GB is a couple of things. One is that the nature of that provision, in our view, was overly invasive, to the point where it didn’t adequately protect the privacy rights of taxpayers. The second point would be that it generally wasn’t used often; in fact, it’s only been used once. So in terms of a tool, it has been used relatively rarely. With those two factors, we think it’s finely balanced, but we’re taking the decision to repeal it.

Just in terms of the idea around more guardrails, I tend to agree that guardrails for privacy are important, and in fact the member pointed out some of the guardrails that currently exist around repercussions for misuse of information data that exist in the system. We think it’s probably a good argument, but we think it’s in the right place.

CHAIRPERSON (Barbara Kuriger): I’ll take a call from Vanushi Walters, but I am going to comment that we are getting more speeches than questions at the moment—from a range of members, actually—so I want this to be concise and clear and I want it to be post - clause 143, which we’ve just discussed, because as we made a ruling last night, we’re moving forward, and the teams need to be organised and working in that structure. Vanushi Walters.

VANUSHI WALTERS (Labour) (10:42): Thank you, Madam Chair, and I will be brief. My first question was: why do we need it at all, when the existing framework is protective? The second option for the Government was to adopt some of those protective elements of the current scheme into the new one. So, specifically, I would ask the Minister why there is no inclusion of a requirement to give notice of an adverse action. So in the current framework, for example, in cases where there could be an offence committed and so you might want to information share, the result is maybe a deportation. The current framework allows for the individual to be notified; there’s notification requirements of a potential adverse action. The new framework doesn’t appear to have that, so if the Minister could advise whether there was consideration for inclusion of some of those protective elements.

The second one is on the reporting requirements. The situation as it is allows the Privacy Commissioner to raise concerns with the Minister of Police or the Minister of Revenue, but doesn’t allow the commissioner to require an agreement to be reviewed. Was there consideration, or would the Minister consider, that that is a useful clause to include?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:43): Thank you, Madam Chair. I’ll just go and address the question from Vanushi Walters about why new section 18HB, inserted by clause 143, is inserted. Essentially, the member pointed out that these kinds of provisions do already exist, in a sense, through the approved information-sharing agreements. The problem with those is that they can take some time to process through. They are helpful for a situation where it’s unclear whether there is public support for a particular information-sharing agreement to be put in place, and so that public consultation is required and helpful.

When there is a situation where it’s clear that there is public benefit or public support for information sharing, that’s where this new section 18HB can come into play for a proposal for ministerial information disclosure. It’s a faster tool; it’s used in an instance where there is clear public support for the information-sharing purpose, and also where time is of the essence—for example, it could be relating to a person’s ability to access a benefit or to combat serious offences.

Hon Dr DEBORAH RUSSELL (Labour) (10:44): A couple of comments and then on to a new section. The Minister said that the information-gathering power in section 17GB, repealed by clause 141, had only been used once, which proved it wasn’t really needed. For goodness’ sake, it’s only been in place since 2021, so it’s a very new power, so I’m surprised it hasn’t been used more often. That doesn’t say that it couldn’t still be used. The Minister also said that it was important to protect the privacy rights of taxpayers. Well, how does that stack up, then, with the huge impost that has been introduced in clause 143, where there is now going to be a whole lot of information disclosed to other agencies and without, necessarily, the strong protections we know Inland Revenue has got in place?

Those things really do push against each other, Minister, and I’m really disappointed to hear you advancing those arguments.

Ryan Hamilton: Questions, not statements.

Hon Dr DEBORAH RUSSELL: Take a call.

I’ll leave my colleague Vanushi Walters with clause 143 and those very important issues around privacy. I want to move to clause 153, and that’s the repeal of the legislative provisions for trust disclosure. Now, again, there was a whole set of provisions. We know that trusts are a very commonly used mechanism in this country. We don’t have a lot of information about trusts. Particularly if they don’t earn income, then they don’t have to do a tax return, so it’s very hard to know what’s going on with trusts. They are routinely used for tax planning purposes, with “planning” being an interesting word there.

The commissioner was enabled to collect a whole lot more information around trusts—you know, names of trustees, names of set laws, and so on, to try to trace some of the flows around that. This is clause 153, Madam Chair, which repeals section 59BAB.

CHAIRPERSON (Barbara Kuriger): Yes, I’m on it.

Hon Dr DEBORAH RUSSELL: Then it was asserted that the commissioner would still be able to collect that information under his existing powers. Could the Minister in the chair please explain those existing powers to reassure that that information can still be collected.

REUBEN DAVIDSON (Labour—Christchurch East) (10:47): Thank you, Madam Chair. I want to get to some very specific questions in clause 143, section 18HB, the newly drafted section inserted in here. The first is in subsection 3(a)(i): “the disclosure is reasonable and”—and here the word “practical” has been replaced with “practicable”; no major issue with that. So no major concern, because that doesn’t really, in effect, make much difference to the impact of that word.

The questions I have, where I think the wording has been redrafted and that does have a material impact on the intention of the clause, is subsection 3(a)(iv), where we’re seeing “adequate” struck out and replaced with the word “reasonable”. Now, there’s quite a difference between these two words, in my opinion, and I’m interested in getting the Minister in the chair’s opinion on this.

“Adequate”—for example, if I have a bucket and I’m trying to move water from one place to another, and the bucket has a hole in it, it’s not adequate for the job. But it will still do a reasonable job of transferring water from one place to another. But it’s not actually adequate. So replacing the word “adequate” with “reasonable” would, all of a sudden, imply, having not as strong a safeguard in place to protect the privacy of individuals and the commercial confidentiality of information, that this bill is now prepared to accept a bucket with a hole in it to do that job rather than a robust system that will be watertight. When it comes to the privacy of individuals and the commercial confidentiality of information, I would want a bucket that didn’t have a hole in it to be managing that information.

Further down in this passage, the word “retention” has been changed to the word “storage”. The word “storage”, to me, talks about a method of containing information. It doesn’t give any implication of timeliness; retention does. So the issue here, and particularly in the digital age—and we are well and truly there—is that storage also speaks to digital technology and the potential for digital technology to be used as the method for holding that information. But, again, storage doesn’t explicitly state or imply, as retention does, or did, or would have, a time signature or time frame on that. So I’m interested in the Minister’s answers to those question, not so much about “practical” to “practicable”, because I think that is a minor change, but “adequate” to “reasonable”—I see that as being significant.

If someone told me they were going to provide me with adequate protection, I’d be quite comfortable; if they said “reasonable”, I’d want to be asking some questions about what their idea of reasonable is versus what my idea of reasonable is. Similarly, “retention” to “storage” all of a sudden; a timeframe on that isn’t necessarily implied by the use of the word “storage” versus the use of the word “retention”. Some answers to those specific questions would be appreciated.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:50): Thank you, Madam Chair. I’ve got a couple of answers that are just overdue. One, I think, was just to round off a question from Vanushi Walters; I think there was a question around why there is no inclusion to give notice of an adverse action in the new information-sharing proposal framework. The adverse action will be included in the ministerial agreement rather than the framework itself. For example, one of those adverse actions could include reductions in some entitlements.

On the question from Dr Deborah Russell about trusts’ disclosure powers; the existing trust powers are in sections 33 and 35 of the Tax Administration Act, which enable the commissioner to prescribe and to require taxpayers to file returns as required by the commissioner. I’d just make a comment that I know that the member mentioned that the provisions have been in place since 2021, and that’s not a lot of time, but, of course, that’s five years. I measure time in terms of Tom Rutherfords, and that’s about 20 percent of Tom Rutherford’s life. For some people, that is quite an extensive period of time with which you can undertake some action.

Finally, I’ll give some consideration to the difference between storage and retention. From a pure statutory interpretation view of the difference between “adequate” and “reasonable”, there is a longstanding understanding of reasonableness tests in legislation. They provide for an objective test for what is reasonable in particular circumstances, and that actually takes out that subjectivity of what I think is reasonable versus what you think is reasonable. It’s an objective test, and there is an argument in there that when you require an adequacy test, you could go to the extent of requiring actions to be taken that are unreasonable in the circumstances.

In order for something to be bulletproof, or in order for all of the holes in the bucket to be completely filled and completely sealed, you could block those holes up with plasticine, I guess; you could get your welder out, and you could weld the bottoms of the metal pail together; or you could replace the bucket with an industrial-strength nuclear bunker. That might be adequate to protect something, but it might not be reasonable to do so. That’s, I think, the main difference there. It provides protection for the consumer and protection for the data because you still have to take reasonable safeguards, at which point the adequacy of those will be a consideration in what is reasonable. One person’s interpretation of adequate may be that nuclear bunker, and someone else’s interpretation might be just getting a new bucket that’s fit for purpose.

VANUSHI WALTERS (Labour) (10:53): Thank you, Madam Chair. And thank you to the Minister for his explanation in terms of adverse actions being included, but in the agreement itself. I would say that there are still rights issues present because you’ve reduced that from a statutory obligation through to secondary legislation. We can’t guarantee that it’s there.

My other point to the Minister was that there are other protections in the current framework. There is a question across the board in terms of reporting and advising the individual before the information is shared. There are a number of protections in the current system, and there’s been a choice made not to have them in primary legislation. It could be the fact that they’re in secondary legislation, but, none the less, the point is that they are potentially more rights-infringing because they’re in secondary legislation as opposed to primary. The reason this is important is because this could be biometric data as well. Clause 143 inserting new section 18HB says “the Commissioner may disclose sensitive revenue information”, but revenue information presumably would include a file on an individual that contained biometric data as well. We’re talking about the potential sharing of biometric data; again, the existing framework allows additional protections.

My question is this: if there’s a decision being made to lower those protections to secondary legislation, surely—at least for biometric data, a particularly category of private information—we may want to retain the higher protections that are in statute as opposed to secondary legislation, and would the Minister consider that as something that could potentially be lifted into primary legislation?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:55): I think it’s an interesting discussion because there are obviously trade-offs when you incorporate something into statute versus secondary legislation. One of those is that the benefit of having something in statute provides rigidity and a little bit of untouchability, to a certain extent. The downside is that if that particular provision or condition of storage of biometric data is in primary legislation, there is no challenge to the rights-limiting factor of that beyond a declaration, say.

You could argue that having those kinds of provisions in secondary legislation opens up those guidelines or barriers to challenge under privacy conditions, human rights conditions, reasonableness tests—all under judicial review. There is an argument that, actually, if you’re concerned about the effectiveness of them and whether they are rights-enhancing enough, you have the ability to actually strike down secondary legislation in a way that you don’t for primary legislation. In one sense, you could argue that there are some stronger protections by putting it in secondary legislation, as well as having that flexibility. It’s probably there or there abouts. We haven’t given consideration as to lifting biometric data into primary legislation at this point.

Just to round off the question from Mr Davidson; I am now advised also that the changes he refers to were actually those suggested by the Law Society at the Finance and Expenditure Committee. Their intention is to align with the wording in the equivalent sections in the Privacy Act and also in the Customs and Excise Act. Part of that will be just a consistency of terminology across statutes.

MILES ANDERSON (National—Waitaki) (10:57): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Motion agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that the Minister’s amendments to Part 4 set out on Amendment Paper 559 be agreed to.

Amendments agreed to.

A party vote was called for on the question, That Part 4 as amended be agreed to.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Part 4 as amended agreed to.

Committee of the Whole House

Part 5 Amendments to other enactments and revocations

CHAIRPERSON (Barbara Kuriger): Members, we come now to Part 5. This is the debate on clauses 172 to 192, “Amendments to other enactments and revocations”. The question is that Part 5 stand part.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (10:59): I know we don’t backtrack in these debates, but, just for completeness, right at the end of that last question, Vanushi Walters asked a question around biometric data being in secondary legislation. I can point to examples of that existing already. Biometric data can already be disclosed under approved information-sharing agreements, which are also secondary legislation, so there is precedent for that kind of data.

Part 5 is the “Amendments to other enactments and revocations” part. It is, essentially, the consequential amendments that give effect to the policy decisions agreed to by the committee at the previous parts. For example, it amends a number of statutes to make a series of administrative and technical changes to give effect to those previous agreed policies—for example, amendments to the KiwiSaver Act to insert a definition of “compulsory employer contribution”; amendments to the Unclaimed Money Act to, again, define what a “tax file number” is. I’ll think of some other interesting examples to take the committee to. We’ve got amendments to the Māori Fisheries Amendment Act to insert new parts around share transfers, and various other definitional inclusions as well. It’s a fairly straightforward part that makes the effective changes to other pieces of legislation that are required to give effect to the bill.

Hon Dr DEBORAH RUSSELL (Labour) (11:00): The Minister is correct that in the bill that has come back from the select committee, this is a fairly straightforward part. I want to draw the committee’s attention to one change, which I think is just kind of interesting in itself, but then I want to raise an issue that actually makes it not straightforward.

I just want to draw attention to clause 187B. It’s an amendment to the Māori Fisheries Amendment Act, and there are some matters in there to do with some shares being transferred from Te Ohu Kai Moana Trustee Limited. That was an out-of-scope amendment to the bill. We had to go to the Business Committee to get permission to include it in the bill, and it was actually there in order to protect the position of the shareholders there. It was a really important one. We were pleased to be able to include it in the bill at the select committee stage.

The bit that is not straightforward, and perhaps the Minister has missed this, because it is not in the bill itself; it is in the Amendment Paper. Now, this Amendment Paper was dropped on Monday sometime, maybe Tuesday sometime. We knew it was coming. I came into the House on Tuesday and looked for the paper on the Table and then looked at the regulatory impact statement and the like on the Table and found a brand new one on student loans. That sits in this part of the bill. These new rules around student loans were not signalled earlier on. They were not signalled in the select committee process. The first we knew of them was when they arrived on the Table this week.

I see the Minister is looking a little disconcerted. I’m going to direct the Minister to Amendment Paper 559. In the original bill, we are looking at the amendments to the Student Loan Scheme Act 2011. That’s on page 93 of the original bill. In terms of the Amendment Paper—and I’m going to urge my colleagues to look at this Amendment Paper too, because this does a whole lot of work. There’s an Amendment Paper and a regulatory impact statement. In terms of the Amendment Paper, we are looking at the new clauses which are now being inserted. It is new clauses 180AB to 180AI. If we look in terms of page numbers, we are going from page 17 of the Amendment Paper to page 20 of the Amendment Paper.

Sitting in here are a whole lot of new rules around student loans—not signalled in the bill that was presented to the House in the first reading, not signalled during the select committee process, not signalled at, I think, the second reading. The first we knew of them was when this Amendment Paper and the attached regulatory impact statement arrived on the Table earlier this week—a whole new set of policy, which we actually need to have a pretty thorough discussion of, because there are some quite serious issues sitting in here.

It’ll just take me a while to explain this, seeing as the Minister hasn’t. There’s a known problem with student loans. We have a number of student loan borrowers overseas who have very large loan balances, and because they are overseas borrowers, they also have very, very large amounts of interest on those loans. In fact, in many cases, the interest exceeds the amount of the loan itself, the original loan proper. That is now creating a number of problems. There’s a huge problem for the individual student loan borrower. We know of people who simply won’t come back to New Zealand, because they are overseas. We know of people who are deeply stressed by their student loan balances and can’t manage them.

It used to be that a student could head off overseas with their student loan balance and pretty much just remain uncontactable, but these days we have some pretty strong information-sharing going across tax jurisdictions, actually going to the tax jurisdictions that New Zealanders are most likely to go to, obviously, with Australia and with the UK. So we are now starting to be able to track down these student loans.

The difficulty is, a little bit like with child support, a person—[Bell rung] If I may carry on, Mr Chair; I do want to explain the problem. The difficulty is that, as with child support, the amount of interest and penalties become so great that in itself it becomes a huge barrier to the person doing the right thing and contacting Inland Revenue and sorting out a repayment schedule.

What these set of new rules do is that they enable a person to get in contact with Inland Revenue and to put in place, hopefully, a payment programme by instalment—an instalment package. In that situation, the commissioner, if these rules go through, will have the capacity to forgive some or all of the interest—to write it off. Obviously, we can see straight away a whole set of issues that we need to work through in terms of that capacity of the commissioner to forgive interest debt, provided the person keeps in line with a student loan.

First of all—I want to get to a question now, and then we’ll go through it clause by clause. This is a question on the general policy. I’d like to ask the Minister to explain why Inland Revenue, why the Minister, thought that this was a good time to make this change. What is the reasoning behind making this change?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:07): Thank you, Mr Chair. As someone who incurred a significant student loan and then stayed in New Zealand, worked my butt off, and paid it off, interest accruing on my loan hasn’t been an issue for me. But for many New Zealanders who choose to engage in our public education system and enjoy the fruits of that system and the support provided by the taxpayer through that system and then head abroad to pursue their dreams and ideas and careers—which is their right to do and something that we love to encourage, as a country that loves to encourage our young people to explore the world, build a career, and then, hopefully, return home—they do incur debt sometimes in terms of interest on their loans. That can be, as the member indicated, quite significant at times. For some of those individuals, that has resulted in debt so large that they disengage from the IR completely.

Currently, the position is that the commissioner of Inland Revenue can only provide relief from late-payment interest on student loans. That is interest which applies when a borrower doesn’t make a payment in time. Under the existing laws, the commissioner does not have discretion to provide relief from interest charged on student loans more generally. You could have an instance where a borrower overseas has accumulated interest, has never made a late payment, but still has significant interest debt. Currently, in that situation—and that applies to overseas borrowers, clearly—the commissioner has no discretion to provide relief at all.

The proposed amendments in new clauses 180AB to 180AI on Amendment Paper 559 would give the commissioner the discretion to provide some relief from that interest. Discretion would be broad in nature, and it could be exercised when the commissioner considered relief was equitable. To qualify, the loan would have to be repaid in full, either in a lump sum or through short-term instalment repayment arrangements, and after that point both the loan interest and the late-payment interest would be cancelled for the period of the instalment arrangement, provided that the borrower met all their obligations under the arrangement.

So we are trying to find a way in which we can encourage overseas borrowers to pay off their loans more quickly. One of those ways would be to provide incentive through relief from that interest debt, because we know that the accumulation of debt overseas is an issue, and, as the member pointed out, we have undertaken a number of tools and changes over many years to continue to pursue those who have incurred a debt from the taxpayer and who otherwise would be obliged to pay. But we cannot track them down or chase them up as readily as we can if they were onshore here in New Zealand. We do that more now with our relationships in the UK and Australia, but this is one way of incentivising those borrowers by saying, “Look, if you get on top of it, if you pay off your debt, we can provide you some relief from the interest that may have accrued on that debt.”

So that’s the intention behind it. We want to encourage people to reduce the debt they have overseas, and, ultimately, hopefully, in one sense, get them to a position where they do want to return home to New Zealand and build a life and build a family here because they won’t be faced with a very large tax bill when they get here.

Hon Dr DEBORAH RUSSELL (Labour) (11:11): I just have a further question on the broad policy level before we start getting into the detail of it, because there are really significant policy issues here. This is just one further question from me and my colleagues, and they have further broad policy questions.

There’s an obvious fairness issue here, and I’m sure the Minister is aware of it. At one stage I was overseas paying a student loan, and I did the right thing, paid the amount and so on. There are other students who stay here in New Zealand, and I’m delighted my three daughters are doing that, and they get no interest on their student loans. But there’s a heap of young people who head off overseas, do their OE, have two or three or four great years overseas, maybe stay permanently, but in those two or three great years they acquire real knowledge and skills and expertise and then come back to New Zealand. Many of them do the right things. They’re in contact with Inland Revenue. They work out how much they’ve got to keep on repaying on their student loan. They keep on repaying their student loan, and because they are overseas borrowers, they pay interest as well. And these are the people who do all the right things.

So they’ve paid their loan and they pay the interest, and now those people who’ve done the right thing—and I’m sure the Minister can see where this is going—are going to be faced with a group of people who have not done the right thing, who have not paid their loan, and so have been in contact with Inland Revenue. They’ve done all the wrong things. They’ve taken the money and run. And those people are now going to be let off not only their late-payment interest but now they’re going to be let off the interest as well. So they are going to end up paying less overall than the people who have done the right thing.

Now, I get the reasons for doing this. It’s something we were grappling with in Government and I know this Government is grappling with as well. It’s actually a hard problem. But I want the Minister to talk to those people who have done the right thing and have paid the interest, and could the Minister explain to those people why this is the right thing to do, why it is a good policy even though, certainly at first glance, it looks like quite an unfair policy? What’s the wider consideration that means it is best to pursue this despite the seeming unfairness to some individuals?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:13): I could think of an analogy here at home. If you were someone who had committed an offence and that offence had come with, let’s say, a fine, and you’ve got two people, same offence, same fine, and one person chooses to pay the fine on time and incurs no further penalty. The second person chooses whether they have the means or not to pay the fine. Therefore, they incur some penalties on that and may at some point incur a conviction, at which point the court may decide, “Well, in lieu of your inability to pay the fine, we may wipe that debt and we may ask you to do community service instead.” That recognises that there are some situations where having some flexibility may result in a greater outcome because the individual who would be saddled with that debt or that fine may then be able to contribute in another way, and you reduce the overall long-time impost on the taxpayer.

I think the general proposition for those people who have done the right thing is that we will always, as a Government, support those people, and we will do everything we can to take both a carrot and stick approach. We’re a very fair-minded and evenly balanced Government and while we have the stick with which we can chase people down through the IRD, and say hello to them when they arrive at the border and remind them that they’ve got a debt to pay, and maybe send them friendly reminders through the post, we also will provide a bit of carrot for them as well. I think that is a very even-handed balanced approach and it’s a good way of making sure that people are aware of their obligations and do pay up. But we’re also aware that there is a responsibility on the Government to try and recoup as much of those costs as possible. And if it means having more debt paid off in a more timely manner, we are willing to take steps to provide some incentives to do so.

For those who have borrowed money from the taxpayer and gone overseas, made a good life out of it, and benefited from the higher incomes and the higher quality of life and the opportunities that higher education and taxpayer-funded education gives them, I’m very proud if they choose to come back and contribute back to New Zealand. Because, certainly, there are people out there who don’t have the privilege or the opportunity to undertake further education and get the private benefits of that, and they are the ones that are out there working in our store houses and our freezing works and on our farms day in, day out, paying the tax so that some of our children can enjoy a higher education and travel the world.

So for those of you who do the right thing and pay your debt and come back, good for you. For those of you who have struggled a bit and have incurred some interest and are thinking of writing it off and never coming back, hopefully this gives you food for thought and an ability to maybe make that decision to pay off your loan and come back home at some point.

CHAIRPERSON (Greg O'Connor): We’ve had some very good contextual discussion on the policy issues; now, the nuts and bolts, please.

Dr LAWRENCE XU-NAN (Green) (11:17): Thank you, Mr Chair, and thank you for that, Minister. I want to echo the previous speaker’s surprise when I saw the regulatory impact statement on this particular section, because literally the student loan interest rate and the concerns around that has been something that the Green Party has been advocating for quite a while, particularly ramping that up since the middle of last year. So I’m really pleased to see something that the Government is doing, and I also particularly acknowledge the Hon Dr Shane Reti on this as well.

You want to get into specifics, Mr Chair, but I just note that this is my first call. I have some very specific questions, and I guess the first question I have for the Minister is: when we are looking at the overseas student loan interest rate, one of the fundamental differences that we are having when it comes to interest rates in general is that in other areas the interest rate is determined based on the size of your income, the proportion of your income if you’re paying for a student loan back here in Aotearoa New Zealand. That is not the case when you are overseas borrower. When you have a student loan and you are overseas, your repayment is not based on your income but on the size of your loan. The problem with that, I think, is the misconception, the assumption—and I think the Minister just mentioned this, as well—that when you are going overseas, you are likely going to be in a position where you are earning more or having a better standard of living. That simply is not the case.

One of the things we hear when we’re talking to overseas borrowers around this is that when you’re in another country, in general the cost of living is lower but also your salary is lower. If you’re in, let’s say, South-east Asia, you do not actually get a chance to even be able to earn enough to pay off your loan in the first place, which then means that you’re naturally going to accrue interest on that.

So my first question is: has the Minister, as part of this package, considered adjusting the interest rate to the income level of an overseas borrower rather than alongside an overseas borrower? That is what’s getting a lot of people in debt. Basically, back in 2021 we were looking at maybe about 52 percent of the people having overdue payments. Now we are looking at 75 percent by 2025. So it is obviously clear that this system, in terms of how we are making repayments, is not necessarily working. But, again, what we are introducing here is a good step.

My second question is, when we are looking at this, as part of this package, what sort of allowances is the Minister also being presented, in terms of IRD’s ability to communicate with overseas borrowers, not just in terms of this policy, but, in general, about overseas loan payments. The reason I also say that is because one of the other challenges we’re finding with overseas borrowers is, number one, the system is in place to fit the purpose of domestic borrowers without an interest loan, which means that when you are getting an email from IRD about your overseas payment, you are never actually told how much you’re paying.

What we’re hearing is—please, correct me if I’m wrong—you’re never actually told how much interest and how much principal you’re paying on top of that. Anyone with a mortgage will know that your fortnightly payment, or weekly payment, or monthly payment to the bank, breaks everything down so you know how long it’s going to take you to repay that—that’s not immediately clear. Also, when IRD communicates with overseas borrowers, often there isn’t clear communication. There is an inability to check, in terms of emails, and also, sometimes, it kind of tells you that it’s a six-monthly payment and they drop it on you at the drop of a hat.

So when we’re looking at this, the other question I have is: what is IRD going to be doing to ensure that overseas borrowers are understanding the size of the loan they have that they need to repay? Because even including the example that we’re seeing here in the regulatory impact statement, paragraph 15—the example that we’re using here with “Lana”—often people who left quite early on don’t necessarily know they had any more loan outstanding and that loan has been slowly accumulating. So while the policy here we’re seeing, which is allowing the commissioner changes to the student loan, to get interest but also loan interest—is there a way that we are able to communicate with borrowers earlier on, so they don’t get into that situation in the first place?

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:22): I think this might be a case of “It’s not the size of the income; it’s how you use it.”, in terms of paying it back. So for those who are overseas, they are smart enough to have gone to university, are smart enough to have booked their flights, and found accommodation, and found work; I think they are more than capable enough of keeping track of their own loans. However, in saying that, if there is more work that the IRD could do to communicate with them, I’m sure that they would be interested in that. It is, unfortunately, outside the scope of this bill. This bill is focused on changes in order to allow for the provision for the commissioner to write off interest, in terms of providing relief.

So in terms of the member’s two questions, there has been no consideration to changing the interest rates nor to changing Inland Revenue’s communication strategy as part of this package.

ARENA WILLIAMS (Labour—Manurewa) (11:22): Thank you, Mr Chair. I want to take the Minister to page 19—to his new powers introduced at clause 180AF. This is the provision which allows for the relief of loan interest. My first question to him is: if this power was being exercised by IR before this new provision was introduced, how, and was that power outside of their legislative power? Was that by some other regulatory-making power?

I refer him to a report on this recently—as recently as May 2025—where Auckland tax expert Dave Ananth profiled a number of cases of overseas borrowers that he had been assisting with, some of them with six-figure loans, that had racked up due to the interest costs, over and above their initial costs, that these New Zealanders owed. He was able to negotiate with IR one-off relief for those students and those were detailed by the reporters who covered those cases. So there are cases, recently, where IR have forgiven debt of overseas borrowers. If this new power is required, then under what power was IR operating when they granted that relief? That is my question to him.

I want to ask this in the context of at the time of that reporting in 2025, the Minister Simon Watts had ruled relief out. He was reported as saying that there would be no forgiveness of that debt for overseas borrowers and he framed this all as a discussion about the moral hazard of New Zealanders overseas and the fairness constraints around that; people should repay the debt that they owe. They knew the rules when they got into it. You can understand that position from the Government. That’s not something that we would be pushing—this sort of “tough on borrowers” rhetoric—but that was the position of the Minister. So I think this committee is owed a little bit of explanation about why we now have a Minister in the chair who has said, “There’s a stick there, but we need to use this carrot.” That is a change in the position.

Why is it that when we have a Minister talking up the new powers of enforcement for IR that this bill has actually introduced—more powers of enforcement, and we have traversed them in this stage, and, in the last year, new enforcement powers for IR. Labour members have pointed out that a punitive system and a further punitive system would discourage those skilled New Zealanders from being able to return. It’s essentially an argument about labour mobility overseas.

Is it the Government’s position now that labour mobility and a new sort of workforce where we have New Zealanders going overseas to work in Queensland on the building sites there and build their houses—is that now Government policy to encourage New Zealanders overseas, and is this part of that? Is it the Government’s policy that New Zealanders will always go on an OE—as, I think, has been answered in question time in response to the number of New Zealanders leaving overseas by the droves? Is it now the Government’s policy that that sort of labour mobility requires some form of flexibility in these rules, which were ruled out by the Minister in charge of this last year? When we look at those powers of relief that the commissioner can grant in new clause 145A, it also begs the question of when the Minister used the example of a repayer who has repaid every payment on time, has never missed a payment, but is still accruing interest debt—is that the only example here? That would also fit with the Government’s rhetoric around being tough on enforcement, but that’s not what I’ve heard from this Minister.

I’ve heard that this is about equitable considerations, as well as natural justice, for those people who are seeking genuine relief because recognising that people find themselves in different circumstances. So is it, in fact, the case that the example used here is much broader than it; that someone who has missed a few payments—the 70 percent of borrowers overseas who have missed some repayments, who have done things a little bit wrong—does it also apply to them?

And then, how much of the debt? There’s $4.3 billion outstanding that is held by overseas borrowers, yet they make up only less than 20 percent of the total borrowers. How many of them, who are not coming to this entirely blameless, but they are people who we all recognise, they’re probably members of our family, people we have employed before, people who we know and we’ll see, hopefully, around the Christmas table because they will be able to return to New Zealand, these people who have gotten themselves into a bit of a situation—does it also apply to them? We’re still not clear whether IR, in fact, had the power to forgive their debts before, has been doing this by some other mechanism, and will continue to, in future, with these new powers, which seem much more than the Minister intended when he commented in 2025.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:28): To the very last point: I understand that the case the member’s referring to was using the existing provisions, which I outlined before, which is that the commissioner can provide relief for interest accrued as a result of late payments. The challenge at the moment is that that is the only thing that the commissioner can provide relief for, not the wider interest burden.

I’ll also remind the member that the commissioner will be able to consider, and, in fact, will consider every case on its individual circumstances. So if you took into account some of the examples that the member said, where the borrower was not completely blameless when it comes to not making their repayments—perhaps one or two many trips to the South of France in their holiday period, when they could have been paying off the loan generously provided to them by hard-working New Zealand taxpayers—I’m sure the commissioner will consider every circumstance relevant to the borrower to determine if they are, indeed, eligible for relief. Relief is not guaranteed and the amount of relief given will be able to vary.

I’ll note that the IRD did receive Budget funding in 2024 for additional compliance action and one focus area was on overseas borrowers. I will note that those very large sticks do apply to borrowers, in terms of the enforcement action that IR can take, but, you know, we are a Government that supports our farming sector, we are the world’s farm, and we are always being pro-carrot, and so we will always have a mix of carrot and stick. If this is something that can encourage some higher levels of repayment so that the taxpayer isn’t continuing to incur this debt on behalf of those individuals, then we think that is something worth pursuing.

My message to all borrowers out there, whether you have stayed onshore or not, is that you are very fortunate to be in the position to be able to go on an OE. I didn’t go on an OE. My parents didn’t go on an OE. Their parents didn’t go on an OE. If you go far enough back, my great-great-great-great-grandparents did go on an OE, but they came on their OE either from Hawaiki or from Cornwall to come here and to make a life for themselves. So, for those of you who are privileged to go on an OE: enjoy yourself, make a living, but maintain your obligations and pay your debt back, like the rest of us have to.

CHAIRPERSON (Greg O'Connor): Dr Lawrence Xu-Nan. Again, we’re getting broad on the policy issue here—on both sides of this discussion, I might say.

Dr LAWRENCE XU-NAN (Green) (11:30): Thank you, Mr Chair. I do now want to move on to specific clauses, but, I think, just one small thing on that—and I thank you, Mr Chair, for indulging me to be able to ask my previous questions.

One point of clarification I do want to make is, what I’m asking for, maybe, as a part of this package is to treat the method in which overseas borrowers are paying off their student loan the same as domestic borrowers, where the repayment is based on their income, not based on the size of their loan. Is that something that has been considered? Because that would drastically reduce the number of overseas borrowers, particularly in countries where they may not earn the same income but have a lower cost of living. It will mean that they are less likely to get into debt in the first place and be more prompt in their repayment. So just checking with that with the Minister.

Moving on to new section 138A, inserted by Amendment Paper 559. I want to start with the new section 138A, which is “the borrower has entered into an instalment arrangement”, and this is with the commissioner. I wanted to check, because in the explanatory note, it does say, “either in a lump sum payment or through a short-term instalment arrangement”. If it’s in lump sum—so, basically, the whole essence of this is that we’re looking at waiving the interest, in terms of both the debt and, also, for the loan itself.

I guess, going back, the first question is: in new section 138A(2), it says, “from the date of the instalment arrangement”. If you’re paying off in lump sum and there’s no retrospective element in terms of the debt accrued by interest or via debt interest, wouldn’t that mean that they just need to pay off the whole total lump sum—as in, the entire amount—and there’s actually no relief? Unless I’m missing a trick somewhere, where the commissioner is able to retrospectively say, “OK, I see that you have accrued interest both in terms of your loan but, also, in terms of your debt from, let’s say, 2015 to 2025. If you’re paying off in lump sum, we are happy to waive the loan interest and the debt interest from 2020 to 2025.” That, I can see as being an incentive. But if you’re saying “from the date of the instalment”, and that date is when you’re paying off in lump sum, there’s no retrospectivity, which means there’s no relief whatsoever. Is that a correct assessment?

Going back, my second question is, if the borrower has entered into an instalment arrangement, let’s say a short-term arrangement—two questions: number one is, what is “short-term”? What has been the average of a “short-term” currently? Because, obviously, this is an expansion of the commissioner’s power, so there must be some scope currently—just to get an idea for overseas borrowers who might be paying attention, to go, like, “OK, so this is something we’re looking at that’s a six-month thing or short-term expense to a three-year thing, a five-year thing.” It’ll be good to get some sort of range or clarity or average from the Inland Revenue Department.

With that, does that mean that the relief that we’re seeing for both long interest and, also, debt interest is only, again, for the period of that short-term instalment; from the date of instalment to when they’re supposed to pay it off? Which, potentially, if it’s short term—like, six months—also isn’t a significant relief. It’s a good one, but may not be as significant if they’ve been having this debt for 20 years. Just those few questions for the Minister.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:34): I’ll touch on “short-term” soon—I can’t see where that term is being used. But just in terms of the first question around differential payment: that issue is out of scope, and so it wasn’t considered as part of this bill. The bill was just looking at interest relief mechanisms.

The second question was around new section 138A(2). My understanding, and hopefully confirmed by the officials, is that this is the period from—say you entered into an agreement to make repayment over six months; essentially, interest on your debt obligation pauses at that point through to the point you make payment, so that you’re not paying further interest on that. And so, let me try and explain that a bit better. You make an agreement with the commissioner to make installations over six months to pay off your loan. As part of that agreement, you will get interest relief. You enter into that agreement on 1 January, and you pay it off on—what, six months later? 1 June, something like that.

Dr Lawrence Xu-Nan: 1 July.

Hon JAMES MEAGER: 1 July—1 July. The period from 1 January to 1 July, if you’re making those payments ordinarily, would accrue interest, right? You would continue to accrue interest. This says that if you enter into the arrangement and you make the payment in full at that period, the interest that ordinarily would have accrued for that period is just wiped off or cancelled. You don’t have to pay that on top of whatever else is being paid.

Dr LAWRENCE XU-NAN (Green) (11:36): Thank you, Mr Chair. Just for the Minister’s reference, the part that I mentioned about short-term lump sum—to pay “in full, either in a lump sum payment or through a short-term instalment arrangement”—is on page 22 of the Amendment Paper 559. This is the explanatory note. And the student loan discretion to provide relief from interest—second paragraph.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:36): OK, I see—yes, it’s in the explanatory note. So, just for clarification, instalment arrangements can be for up to two years.

Dr LAWRENCE XU-NAN (Green) (11:36): Thank you, Mr Chair, and thank you, Minister. That’s actually a really good thing to know, in terms of the two years.

But I want to check, then, following on from the Minister’s response: in which case, if we’re looking at the example that was presented on page 9, so paragraph 15 of the regulatory impact statement, the example with Lana, who has a student loan between 1998 and 2005. In this case, she is someone who had $44,000 in student loan. By the time she was dealing with a student loan that was $120,000, she has then made $77,000. She’s still paying off her loan, but her loan balance is $90,000, over double what she has borrowed.

If she decided to make, I guess, an instalment agreement with the commissioner in that case, would that then—my understanding is there is no interest or debt relief for the fact that she has accrued $77,000 of interest rate over that period; it doesn’t take into consideration that she’s already paid more than double of what she’s borrowed, and will only get relief for the period if she decided to pay the instalments. And if you’re looking at this example, she would have $30,000 left. So, let’s say, between 2017 to now—we’re looking at a period of nine years, or maybe 8½ years: in 8½ years, she paid $77,000. But what you’re asking for now is not only, under this policy, she’s not going to get the relief for that amount; she also must then pay off the remainder of, potentially, $30,000 or more within two years, which is more than what she’s able to pay off up until now.

I’m just trying to get a sense of—she’s not going to get the relief for older ones; she’ll get a relief for the current ones for the two years that, maybe, she has an instalment—if she’s even allowed to have two years, because two years is the maximum—but, at the same time, she needs to find a way to pay off an even greater amount than what she was able to pay off up until now in order to try and get a relief for two years. Would that be a correct analysis of that example in the context of what we’re mentioning in terms of new section 138A?

I know that there are other parts of this particular part that others may want to contribute on. I know that we do spend a fair bit of time here on the amendments pursuant to the Student Loan Scheme Act, but I think this is probably one that is quite significant. I want to check, then: if an instalment has been made with the commissioner—and I know that there is a lot of—let’s says new section 141B, inserted by clause 180AD on Amendment Paper 559, “Late payment interest cancelled if instalment arrangement complied with”, and it does also follow with instances talking about the commissioner’s obligations, “must cancel any late payment”, and I’m also looking at in conjunction with clause 180AF, “New cross-heading and section 145A inserted”. In new section 145A(2), “The Commissioner [must have] regard to the circumstances of the case … if the Commissioner considers it equitable to do so, write off as much of the loan”. That is on the basis that there is an instalment arrangement being made. What happens if, for whatever circumstance, the loan borrower is unable to make a payment as required of that instalment arrangement? Does that mean the commissioner will cancel the whole arrangement if there’s one payment that’s been overdue, regardless of circumstance?

To give an example, if someone from overseas, who has a reasonable income, made arrangements saying “I can do this.”, made an agreement with the commissioner, then the person lost their job and they are unable to make the same payment—will the commissioner look at that with sympathy or with equitability, and say that “It’s OK. You know, we would want you to maybe pause, maybe, like, for this period, if you’re wanting to find a new job, we are going to continue with an interest rate or a debt rate, etc., but once you’re able to pay it, your instalment plan continues and there’s no more interest or debt.”; or, at that stage, the commissioner’s like, “Sorry, you missed a payment. That’s it. We’re reverting back. No interest loan or debt interest relief for you.”? So what happens when we get to that kind of situation?

I’m just seeing that the Minister in the chair, the Hon James Meager, is getting some advice. If the Minister is ready to, maybe, respond to that, I’ll leave those questions there for now.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:42): I’ll go to the example used. There might be some confusion. Essentially, any arrangement that would come to would be an arrangement between the borrower and the commissioner as to what they could actually afford to pay back in a scheduled rate. I think that we shouldn’t confuse a situation where this example is used just to show how significantly in debt or behind some borrowers can get when they are overseas borrowers. I can’t speak for whether an arrangement could be made in an example like that, or what the arrangement might be, but that is sort of at the extreme end of the example, right? You’re looking at a borrower whose debt is, essentially, six times the original loan balance. Whether or not this kind of scheme would work for them or not, I’m not too sure, but we don’t want to get confused by just using an example of how interest can accrue and cause people to gather more debt over time. That’s more to emphasise the fact that this is a big problem that we’re trying to address, and that’s why we’ve got the carrot and the stick in play there. I just think that, in terms of the details of specific examples, I can’t really go into them much more than just to look at what’s in the legislation that’s before us.

Dr LAWRENCE XU-NAN (Green) (11:43): Thank you for that, Minister. Just, I guess, another question—I appreciate what the Minister in the chair said in terms of it’s an arrangement between the borrower and the commissioner of what the borrower is able to pay off. Would that, then, be a correct assumption that because, again, this is something where the instalment arrangements need to be paid in full, in which case, if a borrower is unable to meet the full payment within the period of what is considered a short term or a lump sum, that means that a borrower is not eligible to have that kind of agreement with the commissioner and, therefore, would not benefit from this, really—OK, I’m seeing a head nod. Cool. Good to know.

My final question for this clause—and I’ll just signal to the Chair that we’re happy to move on to other parts of Part 5, which I know still has quite a few things—is to do with new section 145A(3) and also (4), inserted by clause 180AF on Amendment Paper 159. In terms of when we’re looking at if loan interest is written off and, also, the commissioner may reverse a write-off, which kind of answers one of the other things that are mentioned—but let’s say, in terms of (3), has there been any modelling done by IRD, in terms of what would be the likely average or what would be the range of the interest write-off it would be, both in terms of at an individual level but also in terms of the total amount level, noting that Australia, for example, just last year, has written off $16 billion in bad student debt? Is there any sort of modelling done, in that case, from IRD on how much in total will be written off and the average?

RYAN HAMILTON (National—Hamilton East) (11:45): I move, That debate on this question now close.

Dr Lawrence Xu-Nan: Mr Chair?

CHAIRPERSON (Greg O'Connor): Lawrence Xu-Nan, the Minister is just getting the answer to your last question.

Dr LAWRENCE XU-NAN (Green) (11:46): Thank you, Mr Chair. I just want to seek one clarification from you, noting that we do have a very good officials’ team and also a very diligent Minister in the chair—for example, if this part of the debate is closed, would the Chair allow the Minister to still respond to the question in a subsequent part, if the Minister is still receiving advice? Would that be OK with the Chair?

CHAIRPERSON (Greg O'Connor): We’re happy—the Chair will indulge that in the next part.

Dr LAWRENCE XU-NAN: Thank you so much, Mr Chair. That was all I had for that.

MILES ANDERSON (National—Waitaki) (11:46): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Motion agreed to.

CHAIRPERSON (Greg O'Connor): The question is that the Minister’s amendments to Part 5 set out on Amendment Paper 559 be agreed to.

Amendments agreed to.

A party vote was called for on the question, That Part 5 as amended be agreed to.

Ayes 102

New Zealand National 49; New Zealand Labour 34; ACT New Zealand 11; New Zealand First 8.

Noes 21

Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Part 5 as amended agreed to.

CHAIRPERSON (Greg O'Connor): The question is that Schedule 1 stand part.

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

Ayes 102

New Zealand National 49; New Zealand Labour 34; ACT New Zealand 11; New Zealand First 8.

Noes 21

Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Schedule 1 agreed to.

CHAIRPERSON (Greg O'Connor): The question is that Schedule 2 stand part.

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

Ayes 102

New Zealand National 49; New Zealand Labour 34; ACT New Zealand 11; New Zealand First 8.

Noes 21

Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Schedule 2 agreed to.

Committee of the Whole House

Clauses 1 and 2

CHAIRPERSON (Greg O'Connor): Members, we come now to clauses 1 and 2, the debate on the title and commencement.

Hon Dr DEBORAH RUSSELL (Labour) (11:50): Mr Chair, thank you. I just want to make a brief comment, really, on the title of this bill, the Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill. The “Annual Rates for 2025-26” is—as I discussed earlier, I think, in the second reading, or maybe in the Part 1 debate—a constitutional requirement. It now looks as though we will meet that constitutional requirement, and I assume that the Minister in the chair is sighing with relief that he’s going to get his bill through, because it’s quite tricky if we don’t.

I do want to just take issue with the next phrase, the “Compliance Simplification”. Frankly, I’m not quite sure what the simplification is, because if we look at the GST and unincorporated joint ventures rules, those are rather complicated. If we look at the new rules for revenue account method taxpayers, which are inserted into the foreign investment fund rules, those are actually rather complicated, too. I pity the people who are going to have to try to sort their way through them in terms of applying them. Then there were further complications introduced in the Minister’s Amendment Paper, so that’s hardly simple law either. In particular, looking at the changes to the thin capitalisation rules around infrastructure expenditure, those are not a simple measure at all.

If we look at all the issues in this bill in terms of whether compliance has been made easier, I don’t think that’s the case at all. In fact, the title of this bill is quite misleading in that regard. I suggest that this bill should be renamed the “Taxation (Annual Rates for 2025-26, Compliance is Never Going to be Simple, and Remedial Measures) Bill”.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:52): Thank you, Mr Chair. Just before we go on to debates about the title and how complicated tax legislation is—I’ll defer to the member on that, given her expertise and given that I can spell “tax” and that’s about as far as it goes in terms of figuring it out sometimes—

CHAIRPERSON (Greg O'Connor): One hopes you pay a little.

Hon JAMES MEAGER: Oh, I’m sure we all pay our fair share. We’re obliged to pay.

Look, I’ll go back just to round off the question from Dr Xu-Nan about analysis done on the likely range of interest write-off. It is complicated. The variation in the amounts and the lengths of time that overseas borrowers or any borrower has had a loan vary wildly. The analysis done shows that the proposal is expected to deliver a modest one-off gain of about $1.5 million to the Crown. While that brings some money in, the value of each loan differs. We think the changes will make it more likely that we can collect amounts that would otherwise not be collected.

For example, if you think of some of the very old loans on our books that are of quite low value, if this new power enables the settlement of those loans, we might end up recovering more financially than what the loan’s book value is. That’s essentially the extent of the analysis on that. It is a difficult exercise. As members have pointed out throughout the debate, it’s quite difficult to know exactly who is where and what they actually need to be contributing.

This is the debate on the title and commencement; we’ve already had one call on the title. Again, the title just does what it says: it amends the Income Tax Act in order to set the annual rates for 2025-26, provide compliance simplification, and some remedial measures. I take the member’s points that legislation can be incredibly complicated and sometimes make things more complicated. That’s why we have very intelligent experts in all manners of tax to both teach those of us in the real world who want to learn about these things but also come to the House and teach us here as well.

In terms of the commencement dates, there are a number of different commencement dates for different sections. There are various reasons for that. I’d invite members to check out the departmental disclosure statement, which gives clear reason for all of the differing commencements. If you take, for example, clause 2(3), which looks at commencing section 73 on the date of 1 January 2009, those of you who are very good at maths will notice that that is in the past. One of the reasons for that is that it looks to deal with crypto assets and essentially ties some of these transactional definitions to the date on which those assets came into being, essentially, in the world.

If members have questions about the commencement dates and want some particular detail, there is some detail for each of those in the departmental disclosure statement. Essentially, most of these dates are coming in at different times to take into account either the complexity in operationalising them—so giving agencies and individuals more time to respond, giving people enough foresight and enough warning to make sure they can prepare for their obligations, and also doing some tidy-ups for those matters that may have arisen in the past that we want to account for when we’re incurring future tax liabilities.

Dr LAWRENCE XU-NAN (Green) (11:55): Thank you, Mr Chair. Thank you for that, Minister. I do want to address the commencement date, but I actually want to address the commencement date for Amendment Paper 559 and Amendment Paper 560.

I’ll start with Amendment Paper 560. The changes to clause 2 are to do with the increase in the in-work tax credit. It says that it “comes into force on a single date set by Order in Council”—that’s in clause 2(25). In clause 2(26): if it “has not come into force by 1 April 2027, it comes into force then.” My two questions for that are: what would be the date that is set by Order in Council? Is there a rough estimate of when that date is going to be, because 1 April 2027 is the day after this scheme ceases to take effect at all? If the Order in Council doesn’t happen, and it naturally comes into effect on 1 April 2027—if we’re looking, on Amendment Paper 560, at section MF 4L(3)(a)(ii) “for the period starting on the change date and finishing on 31 March 2027”—by the time you get to 1 April 2027, there is no increase in base rate by $50 a week.

I think it would be good to reassure everyone that there is a date in mind by Order in Council and it is sometime soon rather than waiting till next year. That’s my first question regarding the commencement date for Amendment Paper 560.

The second one might just be me not being able to see it, and it might be a drafting thing. In Amendment Paper 559—I know we just had a big discussion around clauses 180A and new clauses 180AB to 180AI—I’m just noting that on page 1 to page 2, at no point, even under amended clause 2(23)(h), do those clauses get mentioned as part of the commencement date. Would you be able to highlight what is the commencement date for clauses 180A and 180AB to 180AI? Have I missed something under clause 2?

Usually, there is a catch-all phrase—something like, “everything else commences on X date”—but I’m not seeing that here. Clause 2(1) of the main bill says that “This Act comes into force on the day after the date on which it receives the Royal assent, except as provided in this section. Am I correct, then, to assume that if Amendment Paper 559 doesn’t mention the particular sections we’re looking at—sections 180A and 180AB to 180AI—those sections come into force the day after Royal assent? Would that be a correct assumption? I’m seeing nods, but if I can get a response to my first question, that would be great.

Hon JAMES MEAGER (Minister for Hunting and Fishing) (11:59): Yes, the date by which the Order in Council will be set is—it’s kind of a tautology, but it’s the date on which the Order in Council will be delivered. It will obviously be before 1 April 2027, because the whole point of this is to provide relief that is timely, targeted, and temporary. In our view, it will be as soon as possible after this bill passes through the House.

In response to the member’s question, just so we get it on the record, about commencement dates generally: yes, clause 2(1) is a catch-all for all sections that aren’t outlined in the rest of section 2.

DANA KIRKPATRICK (National—East Coast) (11:59): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Motion agreed to.

Clause 1 agreed to.

Celia Wade-Brown: No! Party vote.

CHAIRPERSON (Greg O'Connor): I’ve already declared—a little slow, I’m afraid. Members need to keep up.

The question is that the Minister’s amendments to clause 2 set out on Amendment Papers 559 and 560 be agreed to.

Amendments agreed to.

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

Ayes 102

New Zealand National 49; New Zealand Labour 34; ACT New Zealand 11; New Zealand First 8.

Noes 21

Green Party of Aotearoa New Zealand 15; Te Pāti Māori 5; Ferris.

Clause 2 as amended agreed to.

Bill to be reported with amendment.

Online Casino Gambling Bill

Committee of the Whole House

Debate resumed from 10 March.

Part 6 Gambling duty and other matters (continued)

CHAIRPERSON (Greg O'Connor): The Online Casino Gambling Bill. Members, when we were last considering this bill, we were debating Part 6. This is the debate on clauses 80A to 82—“Gambling duty and other matters”. The question is that Part 6 stand part.

LEMAUGA LYDIA SOSENE (Labour—Māngere) (12:02): Thank you, Mr Chair. We have traversed this bill and I’m quite pleased at where we’re up to. Mr Chair, I do have an Amendment Paper in terms of this section—Amendment Paper 538—which is on the Table and I’ll just get to it. It’s with regards to new clause 80G.

With regards to the proceeds from lottery gambling but also that the online gambling proceeds—we had some submitters that had an issue with when the funding is coming through, but also what I wanted to ask the Minister of Internal Affairs: what advice did she receive in terms of the modelling because the Lottery Grants Board will be receiving the proceeds? What I wanted to ask was: will there be a differentiation between the proceeds from the lottery bodies with the online gambling proceeds?

What I wanted to ask—because it was brought through a couple of the submitters—the issue is around receiving funding or community funding that is returned to the community. Will there be a specific differentiation between what comes through the lotteries side of it and what comes through the online gambling proceeds? The second part of my question—so I’ll just put it how the submitters put it. What they wanted to understand was if it comes through lotteries, that’s clean money; if it comes through online gambling proceeds, that’s termed “dirty” money. Money is money. However, some of the submitters have an issue applying for funding if it’s clean versus dirty.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:05): Thank you, Mr Chair. Speaking to the Amendment Paper that the member raised, Amendment Paper 538, as presiding member of the Lottery Grants Board, I am also aware that there will be people who don’t wish to touch money that’s been from the proceeds of online casino gambling and therefore do not wish to apply for a source of funding from this area. The board is also cognisant of this and will provide for applicants to identify the source of money they wish to seek funding from. I don’t consider that a legislative amendment is needed for this matter, as the board can resolve this matter as a board.

LEMAUGA LYDIA SOSENE (Labour—Māngere) (12:05): Thank you, Minister, for your reply. My Amendment Paper, Amendment Paper 538, does specifically have an addition to an application about how those applying will be able to make their own decision. I appreciate what the Minister of Internal Affairs has said because I, too, am a member on the Lottery Grants Board. It’s just helpful, in part of educating communities when they are going for funding, that they understand where it comes from. But what people wanted to be really clear on is whilst all the funding might go into one bucket, they really wanted to understand that: is there an ability, through the Minister, or did she get any official advice on that differentiation?

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:06): As the presiding member of the Lottery Grants Board, I expect to be receiving advice from officials in this area, But I don’t believe a legislative change is needed because the board is cognisant. I, as a Minister and the presiding member of the Lottery Grants Board, am also cognisant that there will be some people who will not wish to apply and receive funds from online casino gambling. We will ensure that it is clear where some of that money is and which funds it is attached to, so that those people who do not wish to have any of those proceeds from online casino gambling do not touch that money.

LEMAUGA LYDIA SOSENE (Labour—Māngere) (12:07): Thank you. Thanks, Minister, I appreciate—and probably traversing all this may be out of scope. Minister, in your role as chair of the Lottery Grants Board, do you think that officials will provide that advice? Even though my question is out of scope at that other mechanism, I just wanted clarity on that.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:07): Madam Chair now!

CHAIRPERSON (Barbara Kuriger): The honourable Minister.

Hon BROOKE VAN VELDEN: Yes, I would expect so. Because as the Minister of Internal Affairs and the presiding member of the Lottery Grants Board, I am responsible for the distribution committees and so therefore will be taking advice in that capacity.

HELEN WHITE (Labour—Mt Albert) (12:08): Thank you. Madam Chair. I just wanted to ask about service. Because we’re dealing with so many overseas entities, I appreciate that the world is changing rapidly and becoming more networked, but it’s also a situation where post is changing and people’s use of that. In the case of overseas entities, it is more and more easy for people to escape things like the issue of notice.

I wanted to know from the Minister of Internal Affairs what advice she had had on that changing area of service overseas, and whether this had informed the way that this is structured, and what kind of eye or review of the successive service there would be in the next little while, given that we are dealing with the pointy end of often quite sharp operators in those areas. Will there be any kind of attempt to look at whether those service provisions are fit for purpose, given this particular application of service? Thank you.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:09): I can only assume the member is talking about clause 81 in terms of service of notice. Is that correct?

Helen White: I am, I’m talking about—yes, 81. Thank you. Apologies for not saying so.

Hon BROOKE VAN VELDEN: That’s all right. I would just point the member to clause 81(1)(a)(iii) and it makes it very clear that a notice that can be served on an individual can be served by sending it via email. This is to ensure that cross-border issues can be addressed cross-border rather than requiring a physical person to be present in New Zealand, which gets around any border issues to do with online casinos.

Tim Costley: Madam Chair?

CHAIRPERSON (Barbara Kuriger): Camilla Belich.

Tim Costley: Madam Chair, can I just—aw.

CHAIRPERSON (Barbara Kuriger): I’m not sure it’s a genuine call, Mr Costley. If it is, let me know.

CAMILLA BELICH (Labour) (12:10): I look forward to Tim Costley’s substantive contribution on this part of the bill!

Thank you, Madam Chair. I do have a few questions around Part 6, and the questions I have are in relation to Schedule 2, which, I understand, is part of Part 6, as it refers to clause 82.

CHAIRPERSON (Barbara Kuriger): Yes, that’s correct.

CAMILLA BELICH: Even though Part 6 itself is not the longest part of this bill and many of the changes that are in Part 6 have been inserted by the Governance and Administration Committee, the consequential amendments to other Acts are quite a substantive part. I had a couple of questions, and other colleagues will undoubtedly have questions around how these changes will impact on other parts of the Government’s legislative framework. Specifically, I wanted to ask first about the anti - money-laundering practices that will need to occur within this bill. Obviously, we’re regulating a market which is currently unregulated, and I do see that there is, appropriately, as it should be, a link to the Anti-Money Laundering and Countering Financing of Terrorism Act.

What I wanted to know is whether we have any evidence to date that in the regime that is currently being operated in an unregulated fashion, this has had any link or there has been any evidence of money laundering, or indeed, financing of things like terrorism, which are prohibited under our law, and how those particular provisions will come in under those particular pieces of legislation. I’m just wanting some evidence of what the problem issue is that we’re looking at with the changes to this bill, and currently, if there is evidence that that has been occurring, would the current legislation that is listed there in Part 1 of Schedule 2 actually apply to the existing prohibitions on money laundering. I think that’s quite a big subject area. I think, because we are dealing with international operators, it will be more incumbent on the Government and on this House to ensure that those are sufficient. I look forward to the Minister’s comments on that.

I also wanted to ask specifically about the changes to gaming duties. With this Act, there are some substantive changes that bring the online casino gambling framework within the Gaming Duties Act 1971. Obviously, that’s quite an old Act, I suppose, or an Act that has been around for some period of time. I just wanted to know whether the provisions in here will, effectively, be allowing the taxation of those offshore providers in the same way as other current gambling operators are already providing taxation within New Zealand under that Act. Is the Gaming Duties Act 1971 able to sufficiently, I suppose, account for—I assume it has been amended substantively since 1971—the nature of the online gambling framework? Obviously, it’s a regime that has been around for a little while.

The third issue that I wanted to raise, within Part 1 of Schedule 2, was that there is a specific change to the Tax Administration Act—in Schedule 7, after clause 34A—and there is a slight change that the select committee has made in there, too, which talks about a specific allowance for the commissioner to allow communication to someone who is an employee of the Department of Internal Affairs. I just wanted to know the kinds of protections around these types of disclosures and what types of employees we’re envisioning may be covered by this type of provision. What is the mischief that this provision is trying to avoid, and what are the types of conversations that the drafters were thinking would occur that will then be prevented by the inclusion of clause 34B?

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:15): To answer the first part of Camilla Belich’s question, she asked about the Anti-Money Laundering and Countering Financing of Terrorism Act (AMLCFT) requirements within the law. The bill does bring online casino gambling operators under AMLCFT regulations because we are aligning it with existing explicitly covered and treated regulations for other forms of gambling here in New Zealand. The Government doesn’t have any specific evidence of any issues of this nature currently, because it has been an unregulated market, which means that the Government hasn’t been capturing information in this area. However, going forward, this will bring it into line with physical gambling here in New Zealand.

Camilla Belich also asking about the gaming duties and whether the provisions allow taxation of offshore operators. Yes, I can confirm that they do. They are already paying a duty tax under other legislation, such as GST, but at clause 34B we are removing this, and the answer is no, the Government Amendment Paper addresses this.

HELEN WHITE (Labour—Mt Albert) (12:16): Thank you. I haven’t been on the Governance and Administration Committee on this matter, but I’m interested in the changes to dates. It’s Part 2 of Schedule 2, new regulation 7A. I can see that there has been a decision to take out a simple rule of the 20th day for the returns, and there is more a complicated approach further down in that new regulation.

I’d just like to understand why. I’m particularly interested in whether that is something that is common to other practice. Really, it is just the why: why are we changing that in the way we are? Has there been a problem with that more simple approach? I’m very keen to hear from the Minister on that practice. I appreciate it might be for a very good reason. Thank you.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:17): Thank you, Madam Chair. The member Helen White refers to the dates at new regulation 7A(1)(a). This aligns with the Inland Revenue tax payment dates.

RYAN HAMILTON (National—Hamilton East) (12:17): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Motion agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that Lemauga Lydia Sosene’s tabled amendment to Amendment Paper 530 replacing new clause 80E be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendment to the amendments not agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that Mike Davidson’s amendment to Amendment Paper 530, amending clause 80D, set out on Amendment Paper 558 be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendment to the amendments not agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that the Minister’s amendments to Part 6 as set out on Amendment Paper 530 be agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Amendments agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that Lemauga Lydia Sosene’s amendment to insert new clause 80G as set out on Amendment Paper 538 be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

A party vote was called for on the question, That Part 6 as amended be agreed to.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Part 6 as amended agreed to.

CHAIRPERSON (Barbara Kuriger): Now, we come to the voting on Schedule 1, where there’s no further debate. The question is that Lemauga Lydia Sosene’s amendments to Schedule 1 as set out on Amendment Paper 561 be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendments not agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Schedule 1 agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that the Minister’s amendments to Schedule 2 as set out on Amendment Paper 530 be agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Amendments agreed to.

CHAIRPERSON (Barbara Kuriger): Tamatha Paul’s amendment to Schedule 2 as set out on Amendment Paper 507 is ruled out of order as being inconsistent with a previous decision of the committee.

Mike Davidson’s amendment to Schedule 2 as set out on Amendment Paper 543 is ruled out of order as being inconsistent with a previous decision of the committee.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Schedule 2 as amended agreed to.

Committee of the Whole House

Clauses 1 and 2

CHAIRPERSON (Barbara Kuriger): Members, we come now to our final debate. This is the debate on clauses 1 and 2, “Title” and “Commencement”. The question is that clauses 1 and 2 stand part.

HELEN WHITE (Labour—Mt Albert) (12:27): I’d like to take a call to discuss the title of this bill, and I appreciate that often people put up flippant things in terms of those titles.

CHAIRPERSON (Barbara Kuriger): A truer word was never said!

HELEN WHITE: Ha, Ha! I’m not intending to do that at all. I wasn’t on this committee and then I looked at the report and I saw that the Greens have made the point that in the Cabinet paper it was seen that this bill, one of its primary purposes was actually revenue gathering. Now, I think that the public need to understand that, and I don’t see that as being made apparent from this title. I would like to know from the Minister whether she accepts that that’s what the Cabinet paper said, because I’m looking at this here and I’m seeing it.

I’d like to know where she sees that in the schedule of purposes of this bill, because I am very concerned we are dealing with a group of very vulnerable people, and particularly we’re dealing in my area in Mt Albert with groups that are very concerned about the addictive nature of online gambling to young people in particular and that we might be gathering that very revenue from a vulnerable group. I have Asian Family Services in my network of people I constantly talk to and they are particularly concerned about the nature of this gambling in the Asian community and that it really is very destructive of families and is really undermining those communities.

What I would like to suggest as a title here is that we simply, straight as a die, put into the title that this is “revenue gathering from online casino gambling”. It’s not treating it any differently from anything else, but it’s straight as a die—this is the purpose of what we’re doing. If it isn’t what the Minister is prepared to accept this bill actually does—and that’s what our title should do, be very straight forward about this—I’d like to know why she rejects that title as more informative to the public about the nature of what is going on here. I look forward to her comments. Thank you, Minister.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:30): Thank you, Madam Chair. Look, I’m as big a fan as any that the law should be given a title that does what it says it does. I think for anybody who is trying to find what the rules are around online casino gambling, making sure that the title says “Online Casino Gambling Act” makes that exceedingly apparent, and there shouldn’t be any misunderstanding of where to go to find the rules.

To the member’s questions and the suggestion of changing it, I do reject that. The system itself enables revenue gathering, but its purpose is to regulate the unregulated market, which takes us back to: how would somebody find what the rules of the regulations are? They would google “online casino gambling”.

LEMAUGA LYDIA SOSENE (Labour—Māngere) (12:31): Thank you, Madam Chair. I appreciate the Minister’s answers for the title and also her contribution. I want to ask the Minister specifically around commencement, and I do have an Amendment Paper in. One of the concerns, as you’ve heard in some of the contributions, is the impact. Labour agrees with the regulating of this industry; however, we have some concerns in terms of the speed of the amendment bill. We also have concerns about the impact in our community. Members’ contributions from this side of the House have raised the impact on our young people.

Rather than make a speech about it, the Amendment Paper is very clear in terms of the commencement date and the reasons behind us requesting, from this side of the House, that it is important to understand that whilst the bill brings in revenue, it is the impact and the unknowns of online casino gambling. Many of our submitters talked about how young people will have access—and they do now, in an unregulated platform—24/7. The concern is that online casino gambling will be available 24 hours, seven days a week. The difference with the land-based casinos is that you have to physically go there. You have to get in your car and physically go there, and there are restrictions there.

The reason for our push in terms of consideration for commencement—we know that in New Zealand, we have something called social media influencers. Some of our young people are being lured by overseas offshore companies that if they do this, put out a service, have a product, they’ll get that—they’ll get a big payment. Internal Affairs have got some very clear guidelines and restrictions. What I’m asking is, in terms of the Minister’s decision, what advice was given to the Minister—we heard a number of submitters raise their concerns about vulnerable groups in our society that are going to be saturated in terms of advertising, in terms of what’s available. Can the Minister explain what advice, what modelling, the exposure to young people—all of these important issues in our community?

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:34): Thank you, Madam Chair. Just starting at the end of that member’s contribution, we’ve already traversed social media influencers and advertisement restrictions within other parts of this bill. I acknowledge that was on a different week, but we are this week now on a different part.

I also want to acknowledge that the member’s contribution talked about how when this law commences and comes into force, it will make online casino gambling available. There was a response from this side of the House: well, it already is. We are commencing this year with the law because the market has been unregulated for far too long. I acknowledge the Labour Party could have regulated it, but they didn’t. It’s been unregulated for far too long already, and it means that if we pushed any time frames out, consumers would be continuing to participate in online casino gambling online with no harm minimisation and consumer guarantee standards.

CHAIRPERSON (Barbara Kuriger): I’m going to take a call from Helen White, but I do want to say that the last speech strayed quite a long way from commencement, so they need to be very much on point.

HELEN WHITE (Labour—Mt Albert) (12:35): I think the issue of commencement is the one I’d like to speak about in this contribution. The member will be aware that it’s very recent that we have come out with an online harm collaboration in the select committee, which was the Education and Workforce Committee. It really is a very interesting piece of work, because there was an exploration where almost every party, I think, save for the ACT Party, has come up with a real addressing and a suggestion that there was a lot of harm being done—

CHAIRPERSON (Barbara Kuriger): So is this—

Todd Stephenson: Point of order.

CHAIRPERSON (Barbara Kuriger): I think I might be about to address the member’s point of order, so please make it again if I don’t. This is title and commencement—very tight.

HELEN WHITE: OK, maybe if I start with why it’s important to commencement—

CHAIRPERSON (Barbara Kuriger): I think just go to title and commencement, because we’re traversing things that have already been said and not necessarily relating to this piece of legislation—title and commencement only.

HELEN WHITE: Thank you, Madam Chair. My point is that in a world that’s changing so rapidly, the commencement of this bill at this time when this work is starting to be cross-party and there’s an understanding of the harm of addiction in this area, particularly young people—it is a moving feast. It would be very helpful to see whether the Minister has considered that work and the capacity, perhaps, to move the commencement of this out long enough for that work and that understanding to be actually looked at. It is so relevant to the harm that’s being done in the area. It really is a new area for us all as parliamentarians, so I’d like to know whether she’s considered moving the time out long enough to talk to some of those stakeholders. I’m thinking about people like Holly Brooker and the people who’ve been doing the work in that area of online harm for children. Thank you.

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:37): Look, I hope I can close this out pretty quickly. The member has been here long enough to know what a title and a commencement is. That contribution had nothing to do with this law, and I think it makes a trivial mockery of the parliamentary process that we’re here for today. I would suggest that this debate is actually closed.

CHAIRPERSON (Barbara Kuriger): I think the Minister should leave the job of deciding when we close to me. There was there was a vague link to commencement there, but I am getting frustrated with the broadening out of these speeches, so one more chance.

LEMAUGA LYDIA SOSENE (Labour—Māngere) (12:38): Thank you, Madam Chair. Thank you that you are allowing one more question on commencement—

CHAIRPERSON (Barbara Kuriger): On commencement.

LEMAUGA LYDIA SOSENE: You have said be specifically tight, Madam Chair. To the Minister: the commencement date is really important, specifically with the self-exclusion register. What we have before us—and I’ve got an Amendment Paper there, and why it’s important is the horse will have bolted before the cart comes along in terms of—

Tim Costley: I think we’re mixing our—it’s a real kettle of worms, this speech.

LEMAUGA LYDIA SOSENE: You’ve got an amendment bill here—you’ll have your time—and the provision is to allow it to begin, but the self-exclusion register will come at a later date. The question that I have is: what advice did the officials provide in terms of the self-exclusion register for the commencement date?

Hon BROOKE VAN VELDEN (Minister of Internal Affairs) (12:39): Look, I’ll make it really simple, because I know that the self-exclusion register came through the select committee. This Government has a mission to regulate the online market. We are progressing with the law, with the regulations that the Government had signed off on. As a Government, we have accepted that there was a change at the select committee for this additional area of regulation, which is why there is an extended date for those regulations to be made, because the other ones are already in train.

Dr CARLOS CHEUNG (National—Mt Roskill) (12:39): I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Motion agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Clause 1 agreed to.

CHAIRPERSON (Barbara Kuriger): Oriini Kaipara’s tabled amendment to clause 2 is out of order as referring to an indeterminate event and not providing sufficient certainty.

The question is that Lemauga Lydia Sosene’s tabled amendment to clause 2 replacing “1 May 2026” with “1 January 2028” be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Barbara Kuriger): The question is that Lemauga Lydia Sosene’s amendments to clause 2 as set out on Amendment Paper 561 be agreed to.

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

Ayes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Noes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

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

Ayes 68

New Zealand National 49; ACT New Zealand 11; New Zealand First 8.

Noes 54

New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; Te Pāti Māori 5; Ferris.

Clause 2 agreed to.

Bill to be reported with amendment.

Antisocial Road Use Legislation Amendment Bill

Committee of the Whole House

Part 1 Amendments to Land Transport Act 1998, and Schedules 1 and 2

CHAIRPERSON (Barbara Kuriger): Members, the House is in committee on the Antisocial Road Use Legislation Amendment Bill. We start with Part 1. Part 1 is the debate on clauses 3 to 23—“Amendments to Land Transport Act 1998”—and Schedules 1 and 2. The question is that Part 1 stand part.

Hon JAMES MEAGER (Associate Minister of Transport) (12:45): Thank you, Madam Chair. We are all aware of what this bill does. It deals with the growing issue, over the past couple of years, of antisocial road behaviour. Colloquially, I think, that’s known as the bad activities of boy racers, but, of course, it’s 2026; we’ve got girl racers—we’ve got all kinds of racers. Sometimes, those racers terrorise our neighbourhoods and terrorise our roads. Now, I know that in places like Christchurch, there are various by-laws and restrictions in place, including anti-cruising laws around the centre of Christchurch. That may come as a surprise to some members in the Chamber, but if you go around Christchurch, you’re not allowed to cruise around Hagley Park at certain times of the day. For those of you who wish to join us in the South Island, do so sensibly, but do not be cruising in and around Christchurch.

Of course, that’s no help to some areas of the public around our country who are terrorised by really poor behaviour on our roads. I’m talking of things like intimidating convoys. We’re talking about groups of motorists who are determined to do nothing more than spending the nights and early hours of the morning doing burnouts on roads and terrorising the neighbourhood and generally just creating dangerous or reckless situations for the general public.

This is the piece of legislation that is aiming to address some of those issues, and, in particular, this part we’re talking about, the part that amends the Land Transport Act, does a lot of the heavy lifting in terms of creating a new offence of dangerous or reckless activity. It also provides the police new powers to request information connected to some of those offences.

Now, of course, the police have powers to require or ask for information in some occasions now, including when someone has failed to stop. If anyone has done the Otago university first-year law exams, we had to memorise six out of 10 essays. One of those essays was interpreting the failure to stop section, so this gives me a bit of a throwback to my law career, and I’m glad that we are now providing the police some additional powers to require that information.

Of course, when these large convoys or when these large gatherings appear and are creating chaos and havoc, it can be difficult to determine who is responsible for those vehicles in order to take the enforcement action later on, such as impounding those vehicles, forfeiting those vehicles, and perhaps even, maybe, crushing those vehicles. This part makes amendments to the Land Transport Act to provide some powers and some enforcement mechanisms in those areas. I’m sure members will have some significantly interesting questions and contributions to make.

TIM COSTLEY (National—Ōtaki) (12:48): Thank you, Madam Chair. I do want to take just a moment to ask the Minister about this because, as I’m sure the Minister is aware, this has been an issue in my electorate in Levin and Ōtaki and some of the other areas. It’s something I’ve been advocating for to the Minister for a while. I even had draft member’s bill legislation, but, of course, thankfully the Government has chosen to act, seeing the wider issue, and bring this in. I do just want to seek his reassurance that this is going to suitably address that because I think of the two significant events that took place in Oxford Street in Levin. We had police officers assaulted during one.

Also there’s a need to be able to conduct that follow-up action to go and bring meaningful consequences that will deter further efforts. The police, in the second instance, did a tremendous job in shutting this down and seizing them, but they need the tools, and I want to make sure they’ll be in place. I’m thinking of the residents I met with in places like Miro Street in Ōtaki and Oxford Street in Levin and even the old Main North Road in Waikanae. I just want to get some assurance—not just for me but for the people that might be watching or engaging with us online—that this tools up the police and it gives them some more powers to go after them, it brings in meaningful consequence, and it’s going to enable us to reassure local citizens that we are giving the police the tools to actually go after these guys and bring some consequences back.

Hon JAMES MEAGER (Associate Minister of Transport) (12:49): That’s an excellent contribution. I think it shows the value of good, strong, local representation on issues that are important to parts of the country like Ōtaki, like Kāpiti, like Lower Hutt, and like central Christchurch.

The bill does a number of things to address Mr Costley’s concerns and the concerns of the community in Ōtaki. It creates some new offences for those who are engaging in reckless behaviour. It creates new offences for intimidating convoys, so not only are you having the case where you have to be stationary in one place causing issues, but if you are actually travelling on the road and using your behaviour to intimidate other people—maybe up and down the State highway there, Ōtaki to Levin and north of Levin—causing a whole lot of issues on the road, it creates offences for those, too.

It gives police greater powers to identify those who are involved in street racing. It gives police powers, actually, to close off those roads where those activities may be undertaken, to take some preventative action, and also to make sure that we can better deal with these issues. It introduces new $1,000 infringement fines and court-ordered fines. It increases the fines for excessive noise.

Another thing it does is it allows police the ability to impound those vehicles, so that those individuals who are facing the consequences of their actions do not go and sell them off to their mates on Trade Me Motors or on Auto Trader NZ, if they still do that, and avoid the consequences of their behaviour. So to the people of Ōtaki, the people of Lower Hutt, the people of Christchurch, you can be assured that help is on the way with this legislation.

Hon Dr DUNCAN WEBB (Labour—Christchurch Central) (12:51): Thank you, Madam Chair. That’s great to hear that from the Minister and see a little bit of electioneering for the member over there. But these no-cruising signs in Christchurch that the Minister alluded to are actually quite amusing, because there are signs everywhere that say, “No-cruising zone ends here.” I’m assuming that means that that is where the cruising zone starts. If the no-cruising zone ends, the cruising zone must start, and it’s not far from where I live.

Actually, my first question is about one of the centrepieces of the legislation, and it’s new section 39A, inserted by clause 10, which the creates the offence of “Dangerous or reckless activity offence conduct in frightening or intimidating convoy” in it. It just strikes me—and the Minister might want to comment—that this would be quite hard to commit because to do so, the first thing is to prove it you have to prove that they’re engaging in a dangerous or reckless activity offence, right?

Subsection (2) lists those, so, for example, reckless use of a motor vehicle is what it’s traditionally called would be one. That’s already a very serious offence. In fact, I believe it’s an imprisonable offence. So you’ve got to be engaging in road use that’s already illegal at almost the highest level, not just careless use of a motor vehicle but reckless or dangerous use of a motor vehicle.

Then it says, “and (b) operates the motor vehicle”, so that’s just being the driver or the user of the motor vehicle, and is “intending it to frighten or intimidate”, and—another “and”—operates that motor vehicle as part of a convoy. You’ve got to have four elements: committing a serious traffic offence, being the operator of the vehicle, being in convoy, and being frightening and intimidating.

Now, it strikes me that you could get a convoy that’s frightening. I think the general public thinks this is what they’re doing, that if there are three cars with stereos blasting and people yelling out the windows, now, that’s not dangerous or reckless, but it’s frightening or intimidating. But you actually have to be doing something which is already an offence, so, for example, driving not just over the speed limit but dangerously over the speed limit. That would catch it. Or drifting around a corner, which the Minister might not know, but that means when you lose traction and it backslides.

I mean, I guess my point is this: is it the Government’s intention that a convoy of two cars going a bit fast, being loud and threatening is caught or does it actually intend that that additional aggravating factor of there being a very serious traffic offence being committed at the same time is intended? It’s those four “ands” in there which are the challenge.

Then, of course, embedded in that section is the other tricky thing, which is intending it to frighten or intimidate another person. Now, if you know any boy racers or girl racers—car enthusiasts—in fact, they don’t think very much at all. They don’t intend to intimidate; they intend to be cool, so I guess that kind of intention thing seems to be a little perplexing. They don’t actually think ahead, so knowing that or being reckless that—they’re not knowing or reckless either; they just don’t even think about it, because recklessness is wilful blindness. They’re not wilfully blind; they’re just stupidly blind, which is an entirely different thing. I’m struggling to see how that particular section will operate in practice, and if the Minister wants to comment on that, that would be useful.

Hon JAMES MEAGER (Associate Minister of Transport) (12:54): There was a lot in that contribution from Dr Webb. I think one thing we can say with certainty from that contribution that he wasn’t electioneering, because of course he’s going to leave us at the end of this term of Parliament, and we will miss his insightful judicial mind and his forensic analysis of bills clause by clause, and also his contribution to the Justice Committee.

Now, of course, the Government’s intention in this bill is to prevent dangerous or reckless activity being undertaken whilst travelling in a convoy. That activity needs to be intended to be frightening or intimidating to another person, or being reckless as to whether or not it is likely to be frightening or intimidating to another people, and the activity that they undertake has to be dangerous or reckless conduct as defined under subsection (2). They also have to be operating the motor vehicle and have to be engaging in that conduct while operating that motor vehicle as part of a convoy.

Dr Webb has asked and answered the questions about what the Government’s intention is. It is intended to create this offence to stop those very dangerous, very reckless, very frightening, very intimidating convoys that are going up and down our highways, up and down our motorways, in and out of our leafy suburbs, all through central Christchurch, causing chaos and frightening people on the road. We think that’s a bad thing and we’re going to stop it.

CHAIRPERSON (Barbara Kuriger): With that, it becomes time for me to report progress. Thank you.

Progress to be reported.

House resumed.

Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill

Online Casino Gambling Bill

Antisocial Road Use Legislation Amendment Bill

Report of Committee of the Whole House

CHAIRPERSON (Barbara Kuriger) (12:55): Mr Speaker, the committee has considered the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill and reports it with amendment. The committee has also considered the Online Casino Gambling Bill and reports it with amendment. The committee has also considered the Antisocial Road Use Legislation Amendment Bill and reports it has made progress on the bill. I move, That the report be adopted.

Motion agreed to.

Report adopted.

ASSISTANT SPEAKER (Greg O'Connor): The House stands adjourned until 2 p.m. today.

The House adjourned at 12.55 p.m. (Thursday)