Volume 691 Week 45 - Tuesday 11 June 2013(continued on Wednesday 12 June 2013 )Text is incorporated into the Bound VolumeVolume 691 Week 45 - Tuesday 11 June 2013(continued on Wednesday 12 June 2013 )[Sitting date: 11 June 2013. Volume:691;Page:10985. Text is incorporated into the Bound Volume.]Tuesday 11 June 2013(continued on Wednesday 12 June 2013 )Taxation (Annual Rates Foreign Superannuation and Remedial Matters) BillFirst ReadingHon TODD McCLAY (Minister of Revenue):I moveThat the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider this bill. The Government is committed to fostering growth and building on the gains we have already made towards a more secure economic future for New Zealand. The tax system plays a part by ensuring that the Government can continue to perform its function by efficiently and fairly raising revenue. The Government aims to raise the revenue it requires not through raising tax rates but by ensuring that the existing tax bases are fairly applied. An important aspect of fairness in the tax system is that taxpayers must be able to understand and comply with rules and it is necessary for tax rules to be cohesive fair and applied consistently.This bill aims to continue with the work of further rationalising the tax system. For New Zealand residents with interests in foreign superannuation schemes the current tax treatment of withdrawals from such tax schemes can be complex. It is not always clear that the rules result in a fair outcome particularly for lump-sum amounts. For example a person with an interest in a foreign superannuation scheme might be taxed on accrual under the foreign investment fund rules. In other cases a person may be taxed when they withdraw or transfer funds from their foreign superannuation scheme. As a result some people pay more tax than others depending on how the foreign scheme is structured. This bill provides a much simpler and more even-handed approach to taxing foreign superannuation interests held by New Zealand residents.From 1 April 2014 a new cohesive set of rules will replace the current rules. Under the proposed changes the foreign investment fund rules will no longer apply for foreign superannuation schemes. Lump sums from foreign superannuation schemes will be taxed only when they are received or ultimately transferred to a New Zealand or an Australian superannuation scheme. The proposed rules for lump sums aim to tax only the investment gains that the person would have made during the time they were resident in New Zealand. Periodic pensions will continue to be taxed in full on receipt as most periodic pensions currently are. The rules will make it easier for people to transfer their superannuation. In general no tax will need to be paid if the person is simply transferring from one foreign superannuation scheme to another foreign superannuation scheme. The KiwiSaver rules will also be amended to make it easier for taxpayers who transfer their funds to New Zealand to pay their tax on the transfer. The bill contains a limited amnesty for migrants who have transferred their superannuation funds to New Zealand in past years but not complied with existing tax rules. They will be able to pay a tax on only 15 percent of the value of the transfer which equates to an effective tax rate of 5 percent. This strikes a balance between helping these taxpayers meet their tax obligations while being fair to those taxpayers who did comply with the rules.The bill also addresses another aspect of the tax system in need of rationalisation. The current tax treatment of the mining of specified minerals such as gold and silver and ironsands activities is concessionary. Although the Government acknowledges that mining is an important sector and part of our economy we must ensure that tax ratesapplied here do not advantage one sector over another. It has been a particular focus of the Government to remove distortions in the tax system. The current tax rules allow mineral miners a tax deduction for prospecting exploration and development expenditure including expenditure on capital items such as plant machinery and production facilities. The rules also allow for amounts set aside for mining exploration or mining development to be deducted in advance. Deductions for expenses of this nature are not in line with business expenses for other industries. The proposals in the bill therefore will make the tax treatment related to the mining of specified minerals broadly consistent with the rules that apply to other business activities while still recognising some of the more distinctive aspects of the mining industry. The proposed changes to mineral mining will apply from the beginning of the 2014-15 income year.This bill also proposes amendments to the financial reporting that dovetail with the proposals in the Financial Reporting Bill. The Financial Reporting Bill proposes that most small and medium sized companies will not need to prepare general purpose financial statements. However as New Zealand’s biggest user of financial statements the Inland Revenue Department does have some financial reporting requirements. This bill therefore proposes a framework for minimum reporting requirements for companies and potentially other taxpayers that meets the department’s requirements but minimises the compliance costs.Other measures in the bill include changes to the tax rules relating to bad debt deductions for holders of debt to make them fairer changes to the general and life insurance business tax rules to ensure that they work as intended and further improving the integrity of the Working for Families tax credit provisions.In addition donee status is proposed for three new charitable organisations—namely the Kailakuri Health Care Project’s NZ Link Group Marama Global Education and Marama Global Health. Donors to these charities will be eligible for tax benefits on their donations.I commend the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill to the House.Hon DAVID CUNLIFFE (Labour—New Lynn):I am pleased to take this opportunity to say that the Labour Opposition will be supporting this Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill the maiden bill of the new Minister of Revenue the bright and shiny Todd McClay who has got up early this morning to come to the House to read the speech that one of his officials has clearly written for him and we compliment the officials for their excellent work in that regard. What a fine start he has made! He has gone where Jonathan Coleman did not go and he has actually picked up the right speech notes and read the right speech. What a brilliant start! I have to say that the member opposite was a pretty decent chairman of the Finance and Expenditure Committee and we wish him well for the 2 or 3 weeks that it takes for us to bring his ministerial career to an end.Why is he here? Why is he here? The answer to that is very very simple. It is because the Hon Peter Dunne is not here. Why is the Hon Peter Dunne not here? It is because he is no longer a Minister. Why is he no longer a Minister? Well he assured the Finance and Expenditure Committee that he did not leak sensitive Government Communications Security Bureau documents to a journalist. He gave a point-blank assurance. Unfortunately when he gave the same point-blank assurance to the Prime Minister the Prime Minister said: “Well I’d love to believe you but you’re gone.” So he has gone and Todd McClay is here.That will be a very interesting ride for him because he has got his work cut out. While Peter Dunne was busy thinking about matters of the ether the revenue portfolio was going to rack and ruin before his very eyes. Todd McClay has got a huge job to tidyup the portfolio before it unravels. Nit-picking taxes like the car-park tax like the iPad tax—imagine applying fringe benefit tax to the personal use of computers or cellphones. The cost of working out which calls were private and which were public would have been far more than the tax was worth. What about applying fringe benefit tax to car-parks for shift workers or only for businesses in the central business district but not two streets further over? Those are the kinds of bizarre tax ideas that emanated from the Inland Revenue Department from the previous hapless Minister—hopefully not under this hapless Minister.They were withdrawn under pressure from the Labour Opposition from labour unions from business groups and it has caused a great deal of push-back because we all know that the word went out from the Minister of Finance’s office to the Minister of Revenue and to the Inland Revenue Department officials and it went something like this: “If it can get $5 million or more for God’s sake tax it because we are desperate to get to a Budget surplus and we will use any tool in the tool box to get there real or imagined.” In the Budget debate we uncovered the fact that so many of the fiscal and revenue tools being used by this Government were straining credibility were in the realm of the fictitious—like a $400 million tax spike in the year 2014-15 alone due to the magical appearance of some redeemed tax credits or a $1 billion spike in corporate tax revenue or a $1.2 billion spike in personal tax revenue. So the Minister is going to have to establish some credibility pretty quickly to tidy up those kinds of rubber numbers that have infected the fiscals.The Inland Revenue Department’s mainframe computer system is in tatters and the officials have recommended an open cheque book of $1 billion to $1.5 billion to rebuild their pet computer. Well it is important. The Labour Government that is coming in will have to fix it up too. But we will not be writing a blank cheque to the officials for a billion-dollar computer. I have no idea how you could pay a billion dollars for a computer. Let me just say that Cabinet and the outgoing honourable Minister were so unsure of themselves that they had to build in a teeny-weeny contingency margin. How much? It was $500 million of contingency margin. So on his first day in the House as Minister of Revenue I say to the Hon Todd McClay to get out your pencil get out the ruler and measure up that $500 million grey area and fix it up because we are going to be coming after it. If you do not fix it Minister we will be coming after you.While we are on it the time is now Minister that you should be worrying about the erosion of the tax base. Please do not do what the Hon Peter Dunne did and say: “Look we know multinational companies are laying waste to our tax base by shifting profits across internet sales. We know Google Apple and the other multinational giants are really hard to tax but don’t worry the OECD is working on it.” Well the OECD is doing good work and we commend that. We would agree that we should be participating in it. But here is the difference. Those clowns over there are happy to wait for Paris to do something in the springtime. We are not. We are saying that the Government is negligent if it does not pursue domestic initiatives in parallel. For example the Labour Opposition is actively looking at the issue of the threshold for GST on purchases online of foreign-sourced goods because that is creating an incentive to disembowel the New Zealand retail sector and that needs very serious consideration. But base erosion and multinational taxation cannot wait for some thinktank in Europe to get its act together in 3 or 4 years because hundreds of millions of dollars of New Zealand revenue is at stake in the meantime.While we are on that theme and following the Minister’s maiden recitation of what the officials have given him let me mention two mega issues that revenue must play a part in. The first is the growing inequality of income in New Zealand. There is a little thing called the Gini coefficient and it measures the difference between the 20thpercentile and the 80th percentile and the gap is getting wider. There are some revenue purists who say that people should never consider the role of the tax system in income distribution and I say “Bunkum!”. Tax is always a matter of revenue redistribution and the Government’s major tax steps in this term of Parliament were to take from the poor and give to the rich in an iniquitous tax switch that gave 40 percent of the winnings to the top 10 percent of income earners. It is still the case Minister that three-quarters of the wealthiest 100 New Zealanders are not on the top tax rate. They declare an income of $70000 or less per annum and that is a national scandal. So if you want to pay for food in schools and if you want to pay for roads of national significance do your job and make sure all New Zealanders pay their fair and legal share of tax. Do not turn a blind eye just because they are your big-business mates—not you Mr Deputy Speaker the incoming honourable Minister.This bill is a small part of the tax work programme. This bill is a useful step forward in clarifying the superannuation rules. We have no dispute with the objective of this bill. I will however mention several factors that are very important in its construction which we will be looking at in the Finance and Expenditure Committee. The first is that by the Minister’s own admission the mining sector has had a free and advantageous run in the tax system. This bill goes some way towards re-equalising that. Does it go far enough? Well that will be a very interesting question to test.This bill tries to simplify the taxation of foreign-held superannuation funds for New Zealand residents and in doing so it looks at imputation credits and Australian dividends. It uses the fact that there is a double tax treaty to convey a particular exemption for our Aussie mates. Well that is very good but when is this Government going to do something about the fact that the New Zealand corporate sector is being rorted by the Australians over the non-convergence of the taxation of corporate dividend imputation? Why is the Government sitting on its hands while there is a tax advantage to Australian business over New Zealand business that it has been unwilling or unable to negotiate a solution to despite the urgings of the Productivity Commission? We will ask whether that issue can be picked up in this bill. Whether the bill makes sufficient difference between contributory and non-contributory schemes whether it addresses the interpretation of KiwiSaver and other portfolio investment entities and how it interfaces with the broader foreign investment fund rules are all second-tier issues that will merit the select committee’s consideration. But today for now in this maiden speech of the bright and shiny new Minister who unfortunately inherits a very non-bright—Mr DEPUTY SPEAKER: Order! The member’s time has expired. [Interruption ] Order! The member’s time has expired.JOHN HAYES (National—Wairarapa):I join the last speaker David Cunliffe in congratulating the bright and shiny new Minister of Revenue on his new portfolio. I would just point out that the most important contribution the tax system can provide to our economy is to be an efficient system. To be efficient it needs to be much more simple than it is and that is why this Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill is a good bill because it is getting rid of complexity and it is making the system fairer and simpler—fairer and simpler.Why do we need it to be fairer and simpler? Because it is part of the Government’s process of making a more competitive and productive economy. This is one of our Government’s key priorities because it is only by lifting economic performance that we can create jobs we can boost incomes we can improve living standards across the Wairarapa and we can provide world-class services like those that come out of Masterton hospital.The Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill is the latest piece of tax legislation that is aimed as I said at making the system fairer andsimpler and it will help strengthen our economy. This Government aims to raise revenue not through hiking tax rates as those goons on that side of the House would do but by ensuring that the tax bases are applied fairly. I support this bill.Hon DAVID PARKER (Labour):To the Hon Todd McClay congratulations on your appointment and I hope it goes well for you. The Labour Party is supporting this Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill to go to the Finance and Expenditure Committee. There are some issues that we want to check on particularly around the retrospective nature of the changes to the taxation of foreign superannuation vehicles. The case against retrospectivity is normally very very high and we want to make sure that what is happening here is proper. Both the last speaker John Hayes and Todd McClay in his opening address said that the taxation system should be efficient and fair and then said that this bill achieved that.It is interesting to reflect upon what the OECD said in respect of New Zealand’s tax system in theOECD Economic Surveys: New Zealand 2013 in June just this month. It is the latest in the advice from a number of international agencies like the IMF and the OECD to critique New Zealand’s taxation system. I want to read out what it says because it says the opposite of what the Minister and the last speaker said. It says that tax changes should be considered “to make the tax system more conducive to both growth and equity:”. The changes that it proposes which are supported by the Labour Party are very very significant. It is interesting that the changes go to both improving equity in our country and increasing the wealth of our country through more growth. But before it sets out its prescription it notes that New Zealand now has one of the least redistributive tax systems in the OECD—one of the least. That is one of the reasons that it says that the rate of growth in inequality in New Zealand has been amongst the highest in the OECD in the last two decades. I say those two things slowly because I think it would shock most New Zealanders to realise that the rate of growth of inequality in New Zealand is worse than in most OECD developed countries and that we as a country as a consequence are becoming less equal.What it does not go down to is how this Government has made it worse because it is a prospective-looking document rather than criticising the Government’s recent policy platform. But of course inequality has gotten worse in New Zealand under this Government when 40 percent of its income tax cuts went to the top 10 percent. The Government says: “Oh but we increased GST.” Of course GST is effectively a tax on wages if you are a low or middle-income person and you spend all your income. You pay GST on everything except your interest and your rent. So you pay quite a high effective rate of GST in relation to your income. But if you are a wealthy person and you save a lot of your income you do not use up all of your income on GST-related services and your effective rate of GST is lower as a proportion of your income than it is for a low or middle-income person. So the effect of those tax cuts which gave 40 percent of the income tax cuts to the top 10 percent of income earners and then effectively replaced it with some GST which proportionately fell more on low and middle-income groups was to increase inequality markedly—and I say markedly.We see the effect of that in Auckland’s property prices. The Government as its centrepiece of this Budget says: “Oh we have now got to do something about unaffordable house prices.” But it is driving them both with the tax system—which is what I am going to come back to next—and with the increase in inequality as a consequence of more and more of New Zealand’s resources New Zealand’s wealth being captured by the top 5 percent or 10 percent of New Zealand. They of course are the people who are out there bidding for a third or fourth home while younger people are closed out of owning even one.So what does the OECD say in terms of reforms that could make this better—that could in its words: “make the tax system more conducive to both growth and equity:”? I will read it out. It says: “New Zealand belongs to a group of five OECD countries with particularly high pre-tax capital-income inequality … As much of this income especially at the top levels takes the form of capital gains the lack of a capital gains tax in New Zealand exacerbates inequality (by reducing the redistributive power of taxation). It also reinforces a bias toward speculative housing investments and undermines housing affordability as argued in the 2011Survey .” which is a wee flick at the Government saying: “Why do you ask us for these reviews and pay for them if you are going to ignore them like you did the 2011 one?”. So it is saying that we are one of only five OECD countries that have this capital income inequality because we tax a subset of economic income based on a statutory definition of income not an economic definition of income. We are one of five OECD countries that do that.Then it says that as much of this capital income takes the form of capital gains the lack of a capital gains tax in New Zealand exacerbates inequality. Well I thought the Minister of Revenue told us that that is what it is aiming for—a fair tax system rather than an unfair one. Then it says that it also reinforces a bias toward speculative housing which we know is probably one of the largest economic problems that we have in New Zealand. We over-invest in speculative land-based investments and we under-invest in the productive economy—the manufacturers and the like—that export products that pay for our imports and interests. Then the OECD says let us talk about this in respect of growth and the OECD says: “that recurrent taxes on immovable property are the tax category least harmful to long-term growth”. The OECD is saying that taxing capital—that is effectively what it is saying—has fewer negative effects on growth than other forms of taxation. So it is saying that the thing that New Zealand could do—and it stands out clearly; effectively its stand-out recommendation is how to improve both the economy and inequality—is to fix this glaring hole in our tax system where capital income is not taxed despite the fact that it is economic income.Really I should sit down now because that points to the most glaring hole in New Zealand’s economic settings. There is nothing more important that this Government could do economically than to get the investment signal right so that people invest on the basis of the productivity of their investment rather than on the basis of a tax bias because there is a tax bias there. No one disagrees now that there is a tax bias. The Prime Minister stands up and says that we have got a capital gains tax on people who are traders in property. No we have not. They are paying income tax on their trading activities. They are not paying taxes on their capital gains. They are paying income tax on the change in value of their trading stock because they are traders—just like someone who buys and sells shoes pays income tax on trading shoes or supermarkets on the goods they sell. If you are a trader in property it is your stock-in-trade and you pay taxes on your profits on your trading as income tax not as a capital gains tax.New Zealand’s tax system is fundamentally flawed. We face a higher cost of capital in New Zealand because of our prolonged current account deficit and our dissavings. And again what would the OECD and the IMF say is the right thing to get New Zealand people saving rather than over-investing in property and fooling themselves that they are wealthier because the price of the asset has gone up even though it is just the same asset and the country is no wealthier as a consequence? It is the same thing that existed at the start of the year; it is just that the number that is attached to it has changed. They would say that to fix that you need a capital gains tax. So you come back to this absolutely central thing that is important both from an economic growth perspective and from an equity system perspective and this bill does nothing about it.One more thing: this bill does nothing to remove the over-taxation that New Zealanders are facing through ACC. ACC is meant to be a levy that reflects costs. It is being used as a tax. It is being used by the Government to over-tax New Zealanders by $700 million over the next 2 years the effect of which allows it to squeak into surplus. It is good that we are getting back to surplus but the Government should not pretend that it is using ACC as anything other than taxation when it is meant to be a levy that reflects cost. It has already announced that in those out-years—around the time of the election somewhat coincidentally—it is going to drop those levies after it gets back to surplus. We are supporting this bill going to the select committee but it does not make the changes that the New Zealand economy needs.JULIE ANNE GENTER (Green):Tēnā koe Mr Speaker. Tēnā koutou e te Whare. Good morning. It gives me great pleasure to speak on behalf of the Green Party on the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. The Green Party will be supporting this bill going to the Finance and Expenditure Committee. It would like to congratulate the Government on taking a very small but not insignificant step to improving the fairness of our tax system by removing some of the favourable tax treatments that have existed for the mining industry which may well be worth $30 million. It is a nice change to see the Government actually moving towards fair tax treatment particularly for an industry like mining which we know is a favoured industry of this Government.However the Government does not completely level the playing field. It is still picking winners. My colleague the Hon David Parker mentioned the recent report from the OECD theOECD Economic Surveys: New Zealand 2013 . What the OECD found was that the use of environmental taxes in New Zealand is very very low by OECD standards. Their increased use would enhance the quality of future economic productivity growth. And the OECD recommended the creation of a sovereign wealth fund as Norway has to manage any mining royalties much more equitably. The OECD has found that mining royalties and access charges are still extremely low New Zealand as is the carbon price signal.The Greens have in our taxation policy a number of principles. Basically we think that taxes should come from a broad base to avoid excessive reliance on income tax and in particular that the tax base should include personal and business taxes that reward sustainable activities and enterprise. We would like consumption and expenditure taxes that discourage wasteful use of energy and finite resources targeted environmental taxes designed to reduce and eliminate behaviours that simply are not sustainable in a finite world and taxes that acknowledge the value of common property through resource rentals and that encourage long-term sustainable business practices. Of course those principles are very much in line with what is recommended internationally by organisations like the OECD.We think that investment income from different sources should be treated equally for tax purposes. I would like to congratulate the Labour Party on finally coming on board with support for the capital gains tax. I think the Hon David Parker gave an excellent explanation of why a capital gains tax is so important for rebalancing New Zealand’s economy and for ensuring that we do have high-quality economic productivity rather than just speculative investment that does not actually increase the wealth of New Zealand.Of course the lack of a capital gains tax is just one of the factors in the housing affordability problems that are being faced in Auckland. There are other factors such as an unknown quantity of foreign capital coming in because there is no restriction to New Zealand residents and citizens on the purchasing of property. We have foreign capital coming in and bidding up the price of houses the lack of a capital gains tax and quitean easy or a loose credit situation where it is quite easy to get credit that is leading to it being more favourable to purchase as opposed to rent. What we have seen in Auckland is that it is much less a supply problem that is causing the housing unaffordability and that is indicated by the gap that has opened up between house price inflation and rent inflation in Auckland.So the Green Party has as its priorities three basic areas. One is the economy. I think it is really important to look at rebalancing the economy and reducing our current account deficit and there are many easy ways that we could be implementing policy that would do that. Unfortunately the Government is doing the opposite of most of these. For example in its transport policy it is spending a lot of money on a few projects that tend to aggravate our reliance on private vehicles rather than giving New Zealanders real choices. That means that New Zealand households and businesses have to spend well over $12 billion a year on vehicles and fuel to run them while the Government spends $4 billion of our taxes on a few motorways that have extremely poor benefit-cost ratios. These will not actually reduce transport costs for New Zealand households and businesses but will mean that New Zealand households still have to rely on their cars for trips. That means they have to go fill up the tank and they are paying a lot of money for petrol. They would be paying even more if the New Zealand dollar came down to a level that would be more appropriate for it. Of course all of that contributes to our current account deficit.The other priority for the Green Party is protecting our natural environment and our natural capital. The fact is that the planet is finite. We have finite resources. If one accepts that we have finite resources it makes sense that we cannot count on extracting resources for ever and infinitely polluting the atmosphere in order to achieve a higher quality of life. It is simply not possible. On the one hand we are being told that if we want to have a high quality of life if we want wealth we have to dig up our precious minerals we have to dig up our forests like on the Denniston Plateau and we have to encroach upon these precious areas that are actually of very high value to New Zealanders in order to extract the minerals beneath them so that we can sell them.But that is not a sustainable strategy for long-term wealth creation because once that place is gone it is gone for ever. And once we have sold the minerals or the coal as the case may be what is our strategy after that? Once we have sold the coal then what do we do to earn a living in the world? The sooner we recognise that there are sustainable industries that we could be cultivating and that we should focus our attention on those the less it is going to cost us and the easier it is going to be to achieve a higher standard of living for all New Zealanders.It is also important to reduce inequality as David Parker mentioned earlier. New Zealand has one of the fastest-growing rates of inequality in the OECD. Not only is that not fair it is also not sustainable. It is not good for the economy. One of the factors in the global economic crisis was growing inequality. We are in this together. There has been a lot of research that shows that when the gap between those who have a lot and those who have very little increases then everybody is worse off. The entire country ends up paying more in terms of increased crime rates and having to put people in prison and we end up paying more because of worse health outcomes. If we have an economy that looks after our people and our environment that is going to be the best thing for all New Zealanders and that is the priority of the Green Party.So the Greens support a tax policy that can contribute to the overall quality of life of New Zealanders and one of the most obvious ways to do that is through ecological taxes. We want to see a real price on carbon. The OECD has criticised New Zealand for not having a meaningful price on greenhouse gas emissions. We know we are going to have to reduce our greenhouse gas emissions. We know we are going to have totransition to a low-carbon economy. The sooner we do that the less it will cost us. The sooner we face up and say that we are going to have to develop new ways of doing business that do not rely on activities that pollute the atmosphere the easier it is going to be for us to make that transition. The sooner we put a tax on capital gains the better it is going to be from an investment perspective. We are going to have people investing in productive industries in New Zealand hopefully and at the very least it should dampen the housing speculation that is driving up prices in Auckland.There are many other ways we can have a more direct fair and transparent tax system. We congratulate the Government on its tiny move in that direction by removing favourable tax treatment of the mining industry in this bill but we would very much like to see and we ask for a greater move towards ecological taxes.MAGGIE BARRY (National—North Shore):I rise to speak to the first reading of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. This is a very straightforward piece of legislation and it potentially at least enjoys the support of the political allies we have in this House and oftentimes foes. Even the Greens not known for being particularly positive have supported it because it is a very straightforward piece of legislation in its purpose. It is simply this: to protect the tax base changes to make the tax system fairer and the economy stronger.Our very eloquent new Minister of Revenue Todd McClay has already outlined the three main provisions of the bill so I will not waste the House’s time by going over them again. Just to recap though the changes in the taxation of foreign superannuation to make it simpler and fairer both for New Zealanders returning from overseas and for migrants with a limited amnesty for foreigners are a very good thing. The bill also sets up a framework for the specifications of minimum requirements for company financial reports.I am concerned too with the change that is happening with regard to mining because bringing the tax treatment of the mining of specified minerals—such as gold silver and ironsands—into line with general business tax principles really has to be done. Looking at that in more detail we know of course that mining is a very important sector but we have to ensure that tax rules do not advantage one sector over another. So this proposal to remove the concessionary tax treatment that currently applies to the mining of scheduled minerals like the ones I just mentioned by replacing it with rules that are more consistent with those that apply to the rest of us—other taxpayers more generally—while still creating space for some of the unique aspects of the industry is in fact a very fair thing to do. At the moment the tax on mining effectively allows a tax deduction for capital expenditure in the year that the expenditure is incurred and in certain circumstances after that expenditure is to be deducted in anticipation of its being incurred. That is something that needs to be tidied up and this piece of legislation does just that. Thank you.ANDREW WILLIAMS (NZ First):I take a call on behalf of New Zealand First and we also congratulate the new Minister of Revenue the Hon Todd McClay the former chairman of the Finance and Expenditure Committee who is now taking up where the Hon Peter Dunne left off. In this respect New Zealand First also supports the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. There is a lot of good sensible sound policy in this bill that will help tidy up aspects of our taxation system and simplify areas of filing requirements for individuals and record-keeping requirements for businesses. It will also provide that taxpayers who choose to file a tax return also need to file their returns from the previous 4 tax years so they cannot basically cherry-pick a particular year. If they are going to file a tax return it must also include the tax returns of the previous 4 years to ensure that it is fully covered.We are pleased that the Government has seen fit to move in the direction of KiwiSaver to increase employer contributions and employee contributions back up from 2 to 3 per cent which we believe is again a positive thing for long-term savings in this country. We were very disappointed when the Government reduced its own contribution in July 2011. It reduced the annual Government contribution halving it from $1042 or $20 a week down to $521 or $10 a week. We thought that was a negative way of addressing the problem of savings in this country. The Government reducing its contribution to KiwiSaver did send the wrong message.Just recently I was reading—I do not have the figures in front of me—that the impact on that KiwiSaver fund in the next 10 to 20 years as a result of the reductions of the Government contribution is into the tens of billions of dollars that New Zealanders will not have in the long term and that is a great shame. It is a great shame that the Government could see fit to give $2 billion in tax cuts to its wealthy rich mates and could provide $2 billion in tax cuts for those who do not need it—$5000 a week in tax cuts for the likes of Paul Reynolds the head of Telecom; $1000 a week for the likes of John Key; and goodness knows how many other thousands of dollars a week for very wealthy people in this country who simply did not need it. Those tax cuts gave them the opportunity to buy a new boat at Westhaven and that sort of thing or a new bach at Ōmaha but for the people who actually could have done with tax cuts and could have done with the ongoing significant contribution to their KiwiSaver schemes it was a pity that the Government had its priorities wrong and saw fit to take $2 billion out of the tax revenue coffers to give to the wealthy while reducing the KiwiSaver contributions.It is also interesting that in this bill it talks about taxing bonus shares issued by companies under profit distribution plans. Is that not interesting? I wonder whether that would include Mighty River Power bonus scheme shares because it almost seems like the Government is putting out the little carrot putting out the tempter for people to buy Mighty River Power shares and saying: “If you keep them for 2 years you will get”—Hon Clayton Cosgrove: Just after the election.ANDREW WILLIAMS: —yes that is just after the election—“a bonus just after the election next year in your shares of Mighty River Power.” But here in this bill it says that it will be taxing bonus shares issued by companies under profit distribution plans. So it is bad news for New Zealanders. You have not been given the full story it would seem by this Government because it is giving with one hand while at the same time it is ripping your other hand off with the other.It will be very interesting if the Government makes a little bit more of a feature of this when it tries to launch the Meridian Energy shares with a similar bonus scheme. Will it be telling the people of New Zealand when it tries to sell off Meridian Energy: “Oh by the way the bonus shares come with a little bit of a tag to them—that you will get taxed on those as well.”? It is clear here that the Government does not always necessarily tell the full truth but we have understood that in the last week on many other issues as well.One of the areas where New Zealand First is in support is where the bill talks about foreign superannuation and different tax regimes around the world and assisting people to bring their superannuation back to New Zealand. In this respect this lines up very nicely with New Zealand First’s superannuation policy which we put out in just the last month or so in relation to keeping the superannuation age at 65 years. Some parties in this House would see the superannuation age sliding up to 67 or an even greater age than that in the future while others would keep it at 65 as long as the current Prime Minister is at the helm. Once he is gone from the helm I am sure that Steven Joyce Judith Collins and Bill English will be just chomping at the bit to move the age out to 67 or higher in order to try to balance the books.In that respect the New Zealand First policy—and we have put it out this month—is that we would have a graduated superannuation scheme based on the length of time a person has been living and working in New Zealand. If a person has in the 45 years between the ages of 20 and 65 lived and worked in this country—and when I say “worked” that could include non-paid work in terms of a spouse a husband or wife taking care of the family; they are still contributing in a non-paid situation—for the full 45 years then under the policy of New Zealand First at age 65 you would get 100 percent of the universal superannuation. However if you have been out of the country for a period of that time you would get that percentage of time taken off your superannuation payment. Perhaps you had worked overseas for 10 years. You would then get 10 years taken off the 45 years and therefore you would get 10/45ths taken off your superannuation when turning 65.What this also means is that where we have a lot of repatriation of people coming back to New Zealand who have worked a huge amount of their time overseas and have contributed very little in the way of tax to New Zealand they will not come back and just get on the bandwagon and take the hard-earned taxes that all those people who have been in this country and who have worked most of their lives in this country have contributed to the scheme. Similarly those who come to join their family when in their senior years of life who arrive here and stay the minimum requirement of 10 years would not then suddenly get the full 100 percent of superannuation either. If they have come here and had 10 years in this country then they would get 10/45ths of the superannuation for themselves. They would not get the full 45/45ths of superannuation. Therefore they would get some form of payment but they would not be stepping over the New Zealanders who have contributed all their lives to the scheme.In that respect that fits in with this bill because we would also permit them to transfer and bring back to New Zealand their own superannuation from schemes that they may have been paying into overseas. They could therefore keep the payment from their scheme plus take a percentage from the New Zealand scheme on the basis of the years that they have been in this country. We believe that that is a very sound and solid policy which New Zealand First will be pushing and will certainly be pushing into the next election. It will mean that New Zealanders will be able to keep a superannuation scheme at age 65 going on for many many decades to come whereas under the current situation that is looking increasingly perilous while the New Zealand tax base does not have a bright future in many areas.In closing New Zealand First supports this bill. We believe that much of this bill is very much technical. Much of it is just tightening up loopholes. It does improve the tax system in a great many areas. New Zealand First has always said in this House that we will support good sound solid policy and we will oppose bad policy. In that respect there is good policy in this bill and New Zealand First will be supporting it.JONATHAN YOUNG (National—New Plymouth):I am very pleased to stand in support of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill here in its first reading. When it comes to taxation bills it is all about how we are going to carve up the golden egg. Sometimes I think members on the other side want to kill the goose and divide that up.Hon Amy Adams: Just sometimes?JONATHAN YOUNG: Just sometimes. It is very important to get the balance right so that we are actually able to raise taxation but also maintain and build a sustainable base for that taxation as well so that going forward New Zealanders can receive the benefit of that income source.We have heard today the old story the old criticism of those people who received tax cuts but many people forget and certainly do not bring it up that in order to havereceived a substantial tax cut you were a substantial taxpayer in the first instance. So perhaps there are some people in our nation who have received that cut but they were paying in the vicinity of about $350000 per annum in tax and now they might be paying $285000 per annum. Of course their contribution sustains probably about 20 superannuitant families in our country so it is a matter of actually understanding the whole story and getting some perspective around these sorts of things.Certainly in this instance—[Interruption ]Hon Amy Adams: Oh they’ve woken up.JONATHAN YOUNG: —yes I have woken them up—we believe that we have got our taxation system working far far better than it has done in the past under the stewardship of those members. What we are seeing is that we are addressing issues around education and skills training in order to enable people to be self-determining to have choice in their lives and to not be dependent upon only the State for an income and a life.So it is important to get these matters right and I believe that as a Government we are working in a multifaceted holistic way in order to improve New Zealanders’ way of life here in this country. So with that said and with those points made—bringing some reality back to those members’ argument—I am very pleased to speak in support of this bill. Thank you.Hon CLAYTON COSGROVE (Labour):You have just heard the age-old sort of explanation for providing massive tax cuts for the wealthy and providing very few cuts or little assistance for the middle and low-income earners. It is called trickle-down. It did not work for Thatcher and it did not work for Reagan and these geniuses over there are sort of clawing back into history because they have not got any innovative vision or policy to the old trickle-down theory which for the uninitiated goes like this—so I am told. You fund massive tax cuts to those on the top—first step. So what did those members do? The top 10 percent got 40 percent of the tax cuts so they put a tick next to “income tax”—they put a tick in the box there. The theory goes that if you give massive income tax cuts to those on the top then somehow in some quasi-religious beneficial way those at the top will shell out these wonderful hundred-dollar notes and they will trickle down to the masses the proletariat those poor souls at the bottom who have very little income who scrape for it every day and who cannot make ends meet. And from this great trickle-down theory nirvana will occur. Everybody will be rich. Everybody will be better off. Unemployment will disappear. Economic growth will be sparked. The veil will fall from the temple—as I am sure Mr Clark would know from his religious experience—and all will be well.Well there is a wee problem with that: it has not actually worked. It did not work for Margaret Thatcher. It did not work for Ronald Reagan. George Bush had a crack as well. It just does not work. It is a bankrupt invalid economic policy. But oh no these guys are dusting it off yet again—for the last 4 years—and having another crack. They are having another crack. John Hayes who with a haircut like that looks like he is sort of morphing into or sort of channelling Peter Dunne I have to say—Dr David Clark: He’s lost the bow tie.Hon CLAYTON COSGROVE: He has lost the bow tie though—that is true. This bill the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill comes on the back of a series of botched tax proposals—botched tax proposals—like as my colleague said the car-park tax. John Hayes I have got to say—he will not thank me for saying it but I have got to pay tribute to him—showed a tonne of guts did our Johnny. He opposed the car-park tax in the privacy of the select committee room where it was not public. He opposed it on principled grounds and I admire him for that. He always shows a ton of guts does John Hayes. He opposed the iPad tax. He had somereal problems with the student loan tax of course. I think he also opposed the paper boy tax—these groundbreaking reforms that National bring into this House.Well it just shows how bankrupt these people are because on the back of those botch-ups on the back of that we have this sort of trickle-down theory which is not working. Those members talk about how they gave a bit in GST so they dropped the tax rates down. The top 10 percent get 40 percent of the tax cuts. John Key gets a thousand bucks a week. The new Minister who—forgive me I should congratulate Mr McClay who was not a bad chair of the Finance and Expenditure Committee. I wish him well in a limited way but a hundred bucks a week Mr McClay did get. Now he has gone up a bit because his salary has doubled. Those on the middle and low incomes those who actually spend money and actually grow the economy because they have no choice but to spend their income they have not got any spare money to save. They cannot ferret it away. Often they have mortgages and debt. They actually have to spend their money on school shoes school fees food and basic things like that and electricity of course which apparently is very competitive and no one is paying too much for their electricity according to the National Government in its small myopic bubble of a little world which no one believes. But if you actually want to grow the economy what these guys could have done is—Dr David Clark: Geniuses!Hon CLAYTON COSGROVE: —geniuses yes—do what the Aussies did and that is target the tax cuts one at those who need it and two at those who are going to spend it and those who are going to create jobs by spending that money that they get back—their own money—not give it to the top as these guys did because the most wealthy do two things. They have got a ton of dough anyway. So what do they do? They either retire debt with their tax cut or they save it and put it in the bank.Andrew Williams: Or buy more champagne.Hon CLAYTON COSGROVE: Or buy more champagne. So they are not actually providing the juice and the lifeblood that the economy needs by getting those dollars moving. But of course over there National looks after its mates.It is interesting that in this bill there is talk of a limited amnesty. Well Peter Dunne was in charge of the bill and had Peter Dunne been the Minister today I would be asking a simple question: will that amnesty extend beyond the realm of tax to perhaps Mr Dunne’s own misdemeanours and difficulties? Will the Government extend or accept an amendment or will somebody propose one from that side that will give Mr Dunne an amnesty for the deeds that he has committed in the last few days or is this confined to just tax? Or is the fact that he has been removed from the revenue portfolio because the Government is going to extend an amnesty and there would be an inherent conflict of interest if he stayed as the Minister? I do not know. I know this is a simple question. I am sure somebody can perhaps answer that.We will support this bill to the Finance and Expenditure Committee. We have some reservations over a number of aspects but we do believe in simplicity. We do believe in transparency in respect of tax. The other thing that you have got to have in tax is confidence in the system. So GST as a tax is a pretty simple tax. It is a transparent tax and people generally have confidence in it apart from when they are told in an election that it is going to stay at the level it was and then they are lied to after an election and it is bumped up as this crew did for middle incomes and the lower incomes of course because they are the ones who pay the most of that. So it has got to be transparent it has got to be simplistic and people have to have confidence in it. But I argue that it also has to be fair.Mr Hayes got up and had a bit of a crack trying to talk about equity and fairness in taxation. Well this bill simplifies a whole series of processes but I do not see anythingin it that corrects the mass inequity where Mr Hayes’ Government gave the top 10 percent 40 percent of the tax cuts. Does anybody over there across the aisle—I am not an economist—think that it is equitable to provide the top 10 percent who are the wealthiest in our society with 40 percent of the tax cuts and give certain folk a thousand bucks a week while others languish down the other end and get a few cents the odd crumb off the National Party table? Do the colleagues across the aisle think that is equitable? Will anybody stand up over there—maybe I am going deaf. There is silence. Does anybody think that is an equitable proposition? Presumably they talk about equity and they talk about fairness. They have all these high and mighty visionary words but when it comes to actually finding some spine a bit of backbone and standing up for their own policy I just simply ask them again—Jonathan Young: Sorry we weren’t listening.Hon CLAYTON COSGROVE: I am happy to yield to them if they would like. Does Mr Young who has woken from his slumber think that giving 40 percent of the tax cuts to the top 10 percent—the top 10 percent getting 40 percent of the tax cuts—while those on the bottom languish is equitable? Oh I do not know whether the mikes are not working or maybe I have gone deaf or something has happened but there is silence. They cannot even stand up—even the Minister over there who is guarding the shop cannot stand up and we will love theHansard around this next year—and support the proposition that they have put forward that they believe their own tax policy is equitable and fair. I know that in the privacy of his own room Johnny Hayes will be grinding his teeth saying that this is not fair and this is not equitable but the whips will not let the reins off him so he can go public on it.So although these tax changes will provide some simplicity—some of them are positive but there is a gap in the detail in some of the superannuation propositions in them—the point about it is there is nothing in this legislation that corrects the mass inequity the mass unfairness that we now know even Government Ministers and members will not stand up for. Even Maggie Barry who is known for dishing it out around the place and being very vocal will not stand up in this House and say that giving 40 percent of the tax cut—revenue and income—to the top 10 percent is equitable or fair. Even she knows that over the bridge in her patch no one will believe her just like no one believes the Government proposition that says people are not paying too much for power. If those members really believe that and they really believe that their tax policy is fair and equitable I argue they should go out and make those claims publicly on the stump on every street corner and in every hall in the land especially about the electricity price issue and see what sort of a response they get.I invite Mr Hayes to continue to show a tonne of guts and oppose some of these tax proposals. I would like him to do it publicly but I give him credit for at least doing it privately. I invite some of his other colleagues perhaps who believe the same way he does to maybe use his example and step up to the plate.Dr JIAN YANG (National):It is a pleasure to take a call on the first reading of the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. After listening to the speeches from Labour members I have come to the conclusion that what Labour wants is a society where everyone is equal but everyone is poor. That is the society it wants to live in. That society has been abandoned in China and China is now developing very well basically based on what we call the market economy.This bill will make the tax system fairer and simpler and it will strengthen our economy. The National-led Government has been focusing on returning our Budget to surplus and growing our economy. It is building its record as a responsible economic manager that taxpayers can rely on. It will provide the steady hand our economy needs.Taxation is a key component of our economic package. This Government aims to raise the revenue it requires not through a hike in tax rates but by ensuring that the existing tax bases are applied fairly. An important aspect of fairness in the tax system is that taxpayers must be able to understand and comply with the rules. It is necessary for the tax rules to be cohesive fair and applied consistently and this bill does just that. For instance it makes changes to the taxation of foreign superannuation to make it easier and fairer for both New Zealanders returning from having worked overseas and migrants. This is a timely bill. I commend it to the House. Thank you.Dr DAVID CLARK (Labour—Dunedin North):Kiwi power bills are too high. John Key is on the side of the energy companies and Kiwis are hurting. Labour will reduce power bills. These are the big issues—these are the big issues. We know that power bills are too high we know that John Key is on the side of the energy companies and we know that Labour has a plan to reduce those power bills. And what are we debating here? We are debating a remedial tax matters bill again—again. We are debating the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill.This is not the first time we have debated minor tax law in the last 12 months. My colleague the Hon David Cunliffe will agree that we have spent a lot of time in this House debating minor amendments to the tax legislation when the fundamentals of this economy are wrong. But this Government is not prioritising correcting the big things that are wrong in the economy. We have to ask ourselves why. Why are we debating these matters when the economy is struggling when ordinary Kiwis workers are struggling and when the fundamental settings of our economy are wrong?The IMF says that New Zealand has the worst current account deficit in the developed world. It is worse than that of Greece. What is this Government doing about it? I asked the Minister of Finance when he came down to Dunedin on a rare visit by the National Party to Dunedin what he would do about addressing this fundamental imbalance in our economy. He did not give a straight answer to that question. This Government does not have a plan. It is so focused on bringing down Government debt which is not the real problem. This Government inherited zero net Government debt; that is not the real problem. Labour would bring us into surplus in the same time frame that this Government would. The Government is hoping to get there next year or the year after and we think it probably will. That is not the real issue.The real issue is that New Zealand is continuing to spend more than it is earning. That means long term that borrowing in New Zealand will become more expensive and that will hurt Kiwi businesses. This Government does not like business. This Government does not like small business because small business has to borrow. Everything is setting itself up against small business. I do not understand why this Government does not like small business but it does not. How can we get there? How can we correct those things that are wrong in our economy? Well I will come back to those things. First I want to say a few things about this bill.There are some good things in this bill. It is attempting to address some of the minor problems with the taxation system and we will not oppose it going to the select committee because we want to see these minor things fixed up too. But we are frustrated that the big issues are not being tackled and they are not being tackled of course because this Government does not want to tackle them. It benefits from having its supporters benefiting from an unjust regime.One of the big issues dealt with in the bill is that of foreign superannuation charges. As a former tax spokesperson for the Labour Party I have had plenty of phone calls from those who are experts in the field and they are asking why the Government is doing it in this way. The proposal is preposterous. The first issue that is dealt with hereis that all transfers—from British schemes in particular and this is where people are the most het up—will be locked in made to enter a locked-in scheme such as the KiwiSaver fund and they will attract an expectation of a tax payment. So in this case it is proposed to allow the taxpayer to withdraw an amount up to the value of the tax due from their KiwiSaver scheme. It sounds good but it ignores the fact that where the transfer is made from a UK pension fund withdrawing funds would possibly either invalidate the transfer or trigger a 55 percent tax charge in the UK. The two systems are different and this legislation does not deal with that.I am fairly certain that we will have some fairly substantive and energised submissions to the select committee on this particular issue because there are a lot of New Zealanders who are returning from overseas and have money in UK pension funds or immigrants who are coming here and are going to be treated in a really rough way by this Government. These people also have a lot invested and their life-savings are under threat because of a system that is set up to be unfair.According to the regulatory impact statement an “amnesty is not recommended as it would create an unfair advantage”—and I am quoting here—“for non-compliant people over people who have complied with the law and fulfilled any resulting tax obligations.” I would like members of this Parliament to contrast this with the leeway given by the Speaker to Peter Dunne leader of the deregistered United Future party. He has been given time to get his affairs in order while still claiming Parliamentary Service funding for his party with no penalty. By contrast taxpayers are expected to pay tax on transactions involving law that is in the Inland Revenue Department’s own words “complex and difficult to understand …” and about which the department has offered no guidance.Hon David Cunliffe: There’s 70 percent non-complianceDr DAVID CLARK: There is 70 percent non-compliance as my colleague here says—this is a lot of people who are affected. The Inland Revenue Department has given no guidance. If the Inland Revenue Department is concerned about equity it could either allow those taxpayers who previously paid tax in relation to a transfer to reassess their position using the proposed 15 percent option or refund the tax paid. The fact that it will not do so demonstrating its desire to raise revenue has triumphed against equity in this case.I am quite certain we will get some full submissions on this. I have talked to some people who are very exercised about this. Where you have a situation where an unfair rule is proposed one that will disadvantage the 70 percent who are non-compliant—and they are non-compliant not because they are intending to be that way; it is because they have had advice that they did not need to do things this way or that it was too complex or the Inland Revenue Department could not give them guidance—we will see those people come back and say that this is just simply not fair. I am sure that once this bill gets to the select committee this matter will need to be addressed.I hope members opposite will give the matter the attention that it deserves. There are a lot of people out there who face bankruptcy because of this legislation and that is not fair. The Inland Revenue Department is there to collect what is due to it—that is quite correct—but it is not there to send people to the wall through unfair systems and unfair treatments. So I think that is something we will hear more of in the select committee.In the bill there are a number of other measures that although worthy are minor. They do not address as I said at the beginning the fundamentals that are wrong with our economy. What we need to be seeing in bills like this is measures that bring about pro-growth tax reform. We need research and development tax credits. The OECD says we need a capital gains tax. The Labour Party says this. The OECD says this. The IMF says this. Almost every single OECD country has one. New Zealand does not have oneand that creates a distortion in our system. We know from recent statistics that of those people in New Zealand with net assets over $50 million—with assets over $50 million—75 percent of them are not on the top tax rate. That is not fair.I beg one member opposite to say that that is a fair system when 75 percent of those in New Zealand with assets over $50 million are not declaring income of more than $70000. There is silence on the other side of the House—silence. None of them are willing to defend that. They all know that the tax system is not just and that the gap between rich and poor is growing at a frightening rate in New Zealand. But they will not do anything about it because their mates are benefiting. They are not willing to tackle these issues. They do not care about the equity issues. They do not care about the future of society and investing in all citizens. They are prepared to let those who have got the money now build more money through an unfair system. The OECD says it is unfair and what is more it says that the economy will suffer because of it.This inequality is not just a social bad; it is hurting our economy. It is part of the reason why this Government has the worst economic record of any Government in the last 50 years. I will repeat that: this Government has the worst economic growth record of any Government in the last 50 years. Mr Henare knows it is true.Hon Tau Henare: Boring.Dr DAVID CLARK: He is saying it is boring. He does not care about growth. That party does not care about economic growth and that is part of the problem—that is part of the problem. It is concerned only about looking after those who have already got the money. That was clear from the 2010 tax cuts where 40 percent of the value of those tax cuts went to the top 10 percent of earners in New Zealand. Just 2 percent of the value of those 2010 tax cuts went to those in the bottom 20 percent and that is an outrage but it tells you where this Government is coming from. It wants to make sure that the privileged few are looked after. The middle classes who are being hollowed out who are suffering are not getting any relief. It is bad for society and it is bad for our economy. Our economy will not grow unless these issues are addressed.SCOTT SIMPSON (National—Coromandel):It is a pleasure to take a brief and short call in the final slot on this Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill. I want to join with previous speakers in congratulating the new Minister of Revenue the Hon Todd McClay on his maiden piece of legislation. I thought he gave a very eloquent and good introduction speech. He is going to make a very good and fine Minister of Revenue and I am looking forward to working with him.This bill is a bill that on the face of it makes great common sense. It is a bill with a number of measures in it. There are three points in it. It really instils a further view for the public who are watching this morning that this is a Government that is careful about taxation measures that does not want to hike taxes unnecessarily and that wants to keep a careful and controlled approach to fiscal management. This bill goes a long way to ensuring a continuation of that guidance under the very capable leadership of our finance Minister Bill English.This Government is all about making sure that our revenue tax take is taken from citizens carefully and judiciously and that we do so in a way that does not promote extra tax hikes of the sorts that the Labour Party and the Greens would want. I do not think the Greens in particular have yet figured out that every time they mention a capital gains tax it takes the Labour Party’s polling down by several points.This is a good bill. It is one that I think the Finance and Expenditure Committee is going to give very due and full consideration to. I commend it to the House.A party vote was called for on the questionThat the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill be now read a first time.Ayes119New Zealand National 59; New Zealand Labour 33; Green Party 14; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.Noes1Mana 1.Bill read a first time.Billreferred to the Finance and Expenditure Committee.Construction Contracts Amendment BillFirst ReadingHon CRAIG FOSS (Minister of Commerce)on behalf of theMinister for Building and Construction: I moveThat the Construction Contracts Amendment Bill be now read a first time. I nominate that the Commerce Committee consider the bill. The Construction Contracts Act 2002 provides for the timely and cost-effective resolution of disputes in the construction sector. The processes in the Act are a lower-cost alternative to going to court. The building and construction sector is vital to our economy. It employs around 8 percent of our workforce and contributes around 4 percent of our gross domestic product. This House has already considered amendments to the Building Act 2004 over the past 2 years. In speeches on the Building Act amendments the Minister for Building and Construction Maurice Williamson has referred to the wider context for the proposed amendments. That context is also relevant to the Construction Contracts Amendment Bill so it is worth repeating some of that information.The National-led Government reviewed the Building Act 2004 during 2009 and 2010. The review was carried out in an environment where productivity in the construction sector was low and some of the criticisms for low productivity were being directed at legislation and associated compliance costs. The review found that current regulatory systems were not broken but they were more costly than necessary and less efficient than they could be. This was having an impact on productivity. This Government is committed to regulatory reform but not at the expense of quality. It is vitally important that we get the balance right between reducing compliance costs and providing adequate assurances that building work is up to standard. The amendments to the Building Act 2004 that have been considered by this House seek to achieve that balance.To support the amendments to the Building Act a package of other changes and initiatives is necessary to achieve the Government’s goal of a sector that has the necessary skills and capability to build it right the first time and that takes pride in its work and a sector that delivers good-quality affordable homes and buildings and contributes to a prosperous economy. The goal is a well-informed sector that shares information and quickly identifies problems where everyone involved in the building work knows what they are responsible for and what they can rely on others to do and where consumers can make informed decisions and understand the risks and consequences of their decisions. Some of these changes are non-regulatory and the Ministry of Business Innovation and Employment has a significant programme of work under way addressing matters such as consumer education and advice maintaining the skills of licensed building practitioners and making the building code more accessible.The Construction Contracts Amendment Bill is one of the regulatory changes that supports the amendments to the Building Act 2004. This bill will support the Government’s goal of achieving a more efficient and productive construction sector that stands behind the quality of its work. A detailed review of the Construction Contracts Act was carried out in 2010 and was reported to Cabinet in early 2011. Like the findings of the Building Act review the review of the Construction Contracts Act found that the system was working well but could be improved by reducing some costs and clarifying some processes.I will now outline the key changes contained in the Construction Contracts Amendment Bill. The bill will remove the distinction between how the Act applies to residential and commercial construction contracts. Currently the Act is unclear about the jurisdiction to deal with disputes under residential construction contracts. This is a barrier to parties to residential construction contracts accessing and using the processes under the Act. The bill will consolidate the processes in the Act so that one process applies regardless of the type of work the construction contract is for.One distinction will be retained in relation to residential construction contracts. Obtaining a charging order in relation to a dispute under a residential construction contract will not be possible because a charging order may create inappropriate risks for a homeowner such as possible default on mortgage obligations. The bill will also remove the distinction between the two different types of decisions that can be adjudicated under the Construction Contracts Act 2002. Current decisions on payment disputes can be more readily and easily enforced than decisions on disputes about rights and obligations. The bill will streamline the enforcement process so that it is the same regardless of the subject matter of the dispute.The scope of the Act is currently limited to contracts relating to construction work. The definition of that term in the Act is limited to ordinary building work and does not capture related services such as design and quantity surveying work. The bill will expand the scope of the Act to include construction-related services. Parties to contracts for the performance of these services will then be able to access the payment and dispute resolution processes in the Act. This amendment will be of particular benefit to consumers helping them to hold architects engineers and quantity surveyors to account for their work and will also benefit designers and quantity surveyors in enabling them to use the payment provisions under the Act to ensure that they are paid for their services in a timely manner.Resolving disputes can be a lengthy and costly process. This is particularly the case in the construction sector where issues can be technically complex and involve multiple parties. In response to the Construction Contracts Act 2002 the private adjudication market has developed the skills and experience to effectively and efficiently resolve construction contract disputes. It is working well. The Government does not need to intervene significantly in this market. What the Government needs to do is to continue to ensure that the legislation is fit for its purpose and does not create barriers or impediments for a well-functioning market. The Construction Contracts Amendment Bill will fulfil the Government’s obligations in this regard.I should also inform the House that the bill contains some other less significant amendments to the Construction Contracts Act 2002 to streamline processes and reduce costs. These include reducing some of the time periods in the adjudication and enforcement processes; clarifying some procedural steps such as how to seek an extension of time; a new power for the Chief Executive of the Ministry of Business Innovation and Employment to obtain information for research and monitoring purposes; and consequential amendments to the definition of “residential occupier”. Also there are amendments requiring a pre-adjudication conference to be held to dealwith process issues if there are any and amendments clarifying how an adjudication order can be appealed contested or reheard.This bill will speed up dispute resolution in the construction sector support the Building Act reform programme by making improvements to accountability in the construction sector and maintain efficient functioning of the private dispute resolution market. Thank you.RAYMOND HUO (Labour):I rise to take a call to support the Construction Contracts Amendment Bill which is to be referred to the Commerce Committee. According to Statistics New Zealand from 2000 to 2008 the building and construction industry contributed around 5 percent to New Zealand’s GDP comprised over 50000 businesses and employed around 7 percent of New Zealand workers. All these indicators will trend upwards with the Christchurch rebuild. Labour supports the referral of this bill to the select committee because it is important to listen to any concerns that submitters may have about the bill at the select committee.This bill provides an opportunity for Labour to highlight that it is already taking steps to ensure that in the event of a construction company collapse subcontractors are protected and paid for the work they have done. From the departmental report on the Building Amendment Bill (No 4) we have learnt that the building sector’s failure rate is higher than the rate for all businesses before 2003 and after 2008. As we have seen with Mainzeal Property and Construction it is the subcontractors who are hit the hardest when a construction company fails. Subcontractors are nearly always last in the creditor queue and often miss out on money they are owed. That is not fair. We need to take action so that it does not happen again.Labour leader David Shearer and commerce spokesperson for Labour Clayton Cosgrove have been looking at sensible cost-effective options that offer a fair deal without loading costs on to the sector. Clayton Cosgrove has been undertaking a series of visits throughout the regions to discuss these proposals with those at the coalface and with industry associations. We have developed two options contractors’ liens and statutory construction trusts and are taking these options to the industry for assessment and comment. The first option contractors’ liens means that contractors would be required to retain a portion of money they owe. The second option is statutory construction trusts where money would flow through a trust to ensure that subcontractors get paid first should a construction company collapse.Our solutions will apply to significant commercial construction projects and will not interfere with contractors’ arrangements. We will also clarify and tighten the law to ensure that in the event of a construction company failure subcontractors can get access to their tools as fast as possible so that they can get back to work and earn a living. Labour MPs have written to trade industry workers to seek their feedback on the options and have asked them for ideas on any other options that could benefit and protect the industry.Back to this bill the Construction Contracts Act 2002 the primary Act creates default progress payment provisions for construction contracts provides an adjudication framework for disputes involving construction contracts and provides remedies for recovering payments under construction contracts. In 2009 the Government undertook a review of the Building Act 2004. The building review was initiated by the Labour Government and won cross-party support. Submissions on the review indicated broad support for the adjudication process under the Construction Contracts Act 2002 for resolving a range of building disputes. However submitters identified areas in which the Act could be improved to help parties to resolve disputes particularly in relation to residential construction contracts and disputes over the quality of work or rights and obligations under contracts.The building and construction sector is vital for New Zealand’s economic performance and prosperity. The Government is making changes to legislation across the sector to provide incentives for building professionals and tradespeople to take responsibility for the quality of their work—changes that are expected to deliver a productive efficient and accountable building sector. Improving the adjudication process under the Act is important in the context of these changes. The amendments in this bill aim to make the existing adjudication process a faster more cost-effective and efficient option for people with disputes under construction contracts.The amendment bill as outlined by the Minister will remove most of the distinctions between how the Act applies to residential and commercial construction contracts except in relation to the use of charging orders as a remedy for non-payment. The Government has also widened the definition of “construction work” to include design engineering and quantity surveying work and has removed the distinction between enforcement of payment determinations and rights and obligations determinations. Also the amendment bill will speed up enforcement processes by reducing the amount of time a defendant has to oppose an application to have a determination entered as a judgment.As I said we are talking to the industry about options and we are keen to hear its ideas as to how we can ensure that contractors’ incomes are protected without adding to Government red tape or an additional administrative burden to hard-working businesses. Under a trust fund model the process is relatively simple. Instead of payments going to the head contractor they go to the trust which then makes payments. No other contractual terms are affected. Head contractors should be passing through progress payments to fund subcontractors. Any profit over and above what is owed to subcontractors is paid out to the head contractor. The construction trust or a liens model will ensure that any risky behaviour does not occur. Under a trust fund model the flow of the payments being passed through occurs at the same speed as it currently does it just goes through different players to ensure that a portion of the funding owed to the subcontractors is protected.As to who would run the trust who would be the trustees and what it would cost to set up and run a trust there are a range of options that could be investigated. For example the Public Trust is a well-respected and safe institution. The trustees could be independently selected from a range of professional trustees. The trust would be self-funding from the interest received. For example if the trust invests its funds into safe bonds a percentage of the interest earned would be used for the day-to-day running of the trust. We will also investigate options to ensure that if the head contractor goes into receivership subcontractors are able to go on-site to retrieve from the site any tools and materials they own. If the law is ambiguous we will clarify the process through legislative change.The construction industry has a high level of vulnerable subcontractors compared with other industries and the problem of a payment to subcontractors in the case of a head contractor going into receivership has been most apparent in the construction industry. I commend the bill to the House. Thank you.JONATHAN YOUNG (National—New Plymouth):Although the previous speaker Raymond Huo proposed some very interesting ideas I do suggest that this is a very complex area and one of the difficulties that a contractor has if they do not receive payment is that the value of what they have contributed is often built into a building and you cannot retrieve it. If somebody sells a motor vehicle and does not get payment certainly they can go and repossess that vehicle. So there is a lot of complexity around this and there is a lot of complexity around retentions.We know as the previous speaker raised regarding the major construction company collapse at the beginning of this year that this issue has caused a lot of pain. But it is a very complex issue and a very complex area and if it could have been easily fixed in the past it would have been. So although these ideas have a sense a resonance of logic to them I think the working-out of them is quite difficult otherwise they would have already been worked out I am sure. However it is good to think on these things. I think that what is needed particularly in the construction contracts area is as much certainty as possible. You can never take away business risk but certainly having a contract in place creates certainty for not only the contractor but also the consumer so that everybody is getting a fair deal.This is what this bill the Construction Contracts Amendment Bill is about. It is about removing uncertainty and it is about creating some clear understandings around jurisdictions in order to deal with disputes under residential construction contracts. What this bill does is remove the distinction between the two different types of decisions that can be adjudicated under the Construction Contracts Act. Currently decisions on payment disputes can be more easily enforced than decisions on disputes about rights and obligations. The bill will streamline the enforcement process so that it is the same regardless of what the dispute is over.So I think that this is a bill that is timely and I do congratulate the Minister for Building and Construction the Hon Maurice Williamson on bringing it to the House and I do trust that we can have good progress through the House and Committee stage so that we get the sort of certainty that will bring confidence into the construction industry around disputes. Thank you.ANDREW LITTLE (Labour):I take this call on the Construction Contracts Amendment Bill and I make the point in light of what the last speaker Jonathan Young has just said that he said there is actually a case for doing nothing in an area that is crying out for attention. It is very easy to say that this is all too hard and it is all too complex that there is business risk wherever you look but actually what is happening in this industry today is that good people and good businesses are being ripped off by the shysters the snake oil salesmen the shiny arses—if I can use that term which is well known in the industry—who are not interested in a good-quality industry but are interested only in ripping people off.The only challenge for this Government when considering this bill is whether it has got the cojones to stand up to that type of conduct and do something meaningful that is going to be good for the trades the tradespeople the trades businesses and the small subcontractors who at the moment are the victims of the ever-rapacious corporate shysters who are operating in this industry day in day out.There is only one rule that counts and it is not about business and about business risk. It is called the “golden rule” and it is very simple: who has the gold makes the rules. That party if any knows it because it lives it and breathes it every day: who has the gold makes the rules. Tau Henare has woken up now because he understands that rule. If you have got the money if you have got the dosh you decide what happens. That is what it comes down to.That is why small-business people tradespeople who work their guts out work to get their trade and go off to set up their little business. They want a slice of the action and they want to help out. They want to do good things. They love their craft they love their trade they love making stuff especially when it is a building. They like to know that what they are doing is helping business or helping families. But hey go into business and they then cannot get paid the contractor price. That is what is happening.When we have a look at Mainzeal Property and Construction we see a symptom of a bigger problem. It is a giant corporate business run by shysters. The directors we knoware National Party acolytes from way back and they care not what happens to the small man. They do not care what happens to the little man but I in name and in deed stand for the little bloke. That is me and that is what the Labour Party is.Hon Member: That’s why they call you Mr Little.ANDREW LITTLE: That is right. They call me “Mr Little for the little man”—not just across New Zealand but in Taranaki especially.In fact it was only yesterday that I received a letter from a Wanganui businessman who at the age of 23 went out and set up his own business. He got his trade and at the age of 23 went out and set up his own construction-related business. He has done very well but the big complaint he says is that when it is time to send the invoice and get paid what do the big construction companies do? They say “Oh no.” and they will nit-pick and fiddle around. They will fiddle-faddle and they fudge and they will mudge and say: “Oh no we’re not going to pay the full price because you were 1 hour overdue or because you did not use this particular material.”Never mind that the job is perfectly good a good-quality job and never mind that he and his employees have put their hearts and souls into it and got the job done; the big companies will fiddle-faddle around nickel-and-dime it and try to squeeze down the price. The small-business man knows he has to pay his staff and pay his bills and he wants to get the cash as quickly as possible so he is forced compelled stood over to discount the job just so he can get the cash going. That is how the industry operates.We are left wondering whether there is anything in this bill that is actually going to fix that problem. More adjudication in the existing system is not going to help that problem. What needs to happen is that control needs to be taken over the cash for the job so that it is held independently and so that if there is dispute the owner of the job or the developer or the head contractor does not have an interest in holding on to the cash for as long as possible—because they will not have it. Likewise if there is a genuine dispute over the quality of the work let the holder of the cash—an escrow account holder or a trustee holder—determine it. They have no interest in holding on to the cash unnecessarily so let them become the referee.That is what the Labour Party is proposing. Labour members will vote for the bill to get it in front of a select committee so we can have this debate and hear from all the businessmen from Wanganui and all the small-business people—the little people whom I represent. We will call them all in to let them have their say and be part of that debate. Let us hear from them. Let us hear what they want to see happen so they can get access to the cash that is properly owed to them and so that when they tender for a job with an acceptable margin on it and employ people as a result with confidence they are going to get paid for the job they are not then held over a barrel and made to negotiate after the job is done from a position of weakness because you have got shysters and shonky head contractors who operate in this business as they do at the moment.That is the answer to the problem: follow the money. Follow the golden rule—who has the gold rules—and hand over the contract of the cash for the job to an independent party. If the developers are bold enough to enter contracts and get into the job it means they have got the credit lines open. It means they have got their money sorted out or they can draw down on their credit lines and place the money into an escrow account. Let the job get done and then if there is an argument have an argument with a genuinely independent third party who has got control of the cash and can make sensible decisions in the interests not only of the developer the owner or the head contractor but also of the subbie as well.The thing about the Labour Party is that it wants to see good business. The members on the other side always talk of Labour not being the party of business. Labour is a party of business. The difference is that Labour is the party of ethical business of goodbusiness. Labour is not opposed to the market but it reserves its right to criticise bad practices in the market.The construction industry at the moment is full of bad and shonky practices and Labour wants legislation that is going to address that and is going to give the little guy a chance to get into their business get started and enter contracts with confidence reliably understanding knowing and being sure that they are going to get paid at the end of it—paid a fair price for the work they do. That will help to give confidence in the industry. It will help to lift quality in the industry and nothing less than that is needed.We have had the experience—up to 1987 when the then Labour Government changed the law at the time—of the contractors’ lien and the lien over work and over labour. It was honoured in its breach. Head contractors were meant to reserve a part of the construction price and keep it aside. In reality it simply became a cheap way of head contractors funding their own cash flow and it did not work. Many subcontractors were critical of it at the time—funny how many of them are not so critical today. But actually it was a provision in the old legislation—from 1947 I think it was—that simply was not utilised extensively and was if anything honoured in its breach and so it was repealed at the time.It was thought that that was a good idea. We in our party have revisited that and we know that problems still exist and that something needs to be done about them. Having a piece of legislation that adds to or creates some special avenues in relation to adjudicated disputes as this does does not go far enough in our view. But we have a Minister for Building and Construction who at least appears to be open to new ideas—less so on plumbers and gasfitters as we see. But perhaps when it comes to the broader construction industry he may be open to more radical ideas. And let us face it: the Minister for Building and Construction is a man of radical ideas. He does not get them through his own caucus very often but here is an occasion where he has got the bill up this far and he may well be open to ideas that are actually going to help the small players in the industry help the small subcontractors make a difference keep the cash flowing and keep people in work.This is at a time where our construction industry needs every bit of help it can get in terms of a good-quality regulatory framework. We have massive construction now under way in Christchurch and construction now picking up out of Auckland and across the country but the businesses the enterprises and the workers in the industry need to know that this House takes seriously having in place a regulatory framework that will keep the cash flowing give integrity to the system and give people confidence so that we can all proceed to know that we have a construction industry that is good for the economy at large.JULIE ANNE GENTER (Green):Tēnā koe Mr Speaker. Tēnā koutou e te Whare. I rise to speak on the Construction Contracts Amendment Bill in its first reading. The Green Party will be supporting this bill at least to the Commerce Committee. I would like to note that most of the changes in the bill are actually relatively minor. Many of them are neutral. Some positive changes in the bill include the requirement for adjudicators to hold a pre-adjudication conference to answer questions about the process and a requirement for all adjudication notices to contain a statement of the respondent’s rights and obligations and a brief explanation of the adjudication process. These measures will make the process more transparent and understandable to participants. We think that is a desirable and good outcome.One negative change we are concerned about that we will be exploring in the select committee is the move to shorten from 15 working days to 5 working days the amount of time defendants have to apply to the District Court to oppose a plaintiff’s application for a determination to be in force by entry as judgment. Although the clause wouldrequire adjudicators to give a respondent additional time to serve a written response on the claimant if additional time is necessary owing to the size and complexity of the claim the shortening of time could have negative impacts on the fairness of adjudication and that is what we are concerned about particularly where a claimant is unable to hire a legal representative for financial or other reasons.One of the things I would like to bring up is what is not in this bill. Back in 2010 the Government undertook a review of the Construction Contracts Act 2002 and there were two significant recommendations out of that review that have not been taken up by the Government for legislative change. Those two exceptions were strengthening remedies for non-payment and ensuring a mandatory scheme for security of payment. Both of those actually became very relevant earlier this year when Mainzeal Property and Construction went into receivership. Of course one of the reasons that Mainzeal Property and Construction went into receivership was poor corporate governance by people like Dame Jenny Shipley and other friends of the National Party. It turns out that it looks like annual reports had not been sent to shareholders for several years and there are certainly none publicly available so it is impossible to know what sorts of directors’ fees the board of directors were receiving right up until the time that they exited the board. That was right at the end of last year or early this year.Another reason for Mainzeal Property and Construction’s problems was the leaky buildings. Of course that is as it should be. It was involved in a number of buildings that turned out to have significant problems. But I think that is worth pointing out because this Government seems to be opposed to all types of regulation and seems to be on the side of “Oh well less regulation is always going to get a better outcome.” The leaky building problem which has been enormously costly to taxpayers and to homeowners is a perfect example of where light-handed regulation actually ends up costing society and the economy quite a lot more in the long run. So it is much better to have that regulation in place to ensure that the problem does not start rather than to say: “Oh well look we want to reduce compliance costs and we want to free up red tape.” It is like the Housing Accords and Special Housing Areas Bill which is currently before the House. The Government wants to get rid of any oversight by the Resource Management Act and wants to remove any requirement to comply with district plan regulations in order to get houses built cheaply and quickly with no consideration of what the long-term impacts will be and there will be long-term impacts.The Green Party is not supportive of regulation for the sake of regulation but let us be honest: it does serve a purpose and it serves an important economic purpose. It is not just a cost imposed on business; it actually can be there to ensure that there are better long-term outcomes. In the economy as it currently exists there is a huge incentive for players to maximise their short-term profit with no consideration of the long-term impacts on people the environment or indeed the economy. It is really the role of Government to have that oversight. When Government gets too close to vested interests—as we have here in New Zealand at the moment; we have a Government that is very clearly looking out for its mates and a number of vested interests—then the lawmaking suddenly is not providing long-term oversights in the interests of “New Zealand Inc.” but rather is under pressure from vested interests to remove regulations that in many cases might be useful and important economically important in order that those vested interests might make another big profit this year and never mind what is going to happen in the future.So to go back to Mainzeal Property and Construction the problem with Mainzeal is that we have subcontractors hard-working tradespeople who are likely not going to be paid because of that company going under. This was flagged as a problem during the review of the Construction Contracts Act 2002. The Building Research Association ofNew Zealand commissioned market research in September 2010 to scope the nature and extent of contractors not getting paid. The key findings of the research included that 61 percent of respondents had instances of non-payment in the previous 5 years. That is pretty significant—61 percent of respondents had had instances of non-payment in the previous 5 years. Most respondents indicated that the total amount of non-payments was under $50000 but there were cases of non-payments of over $500000. Here in this Construction Contracts Amendment Bill we have the opportunity to ensure that there are mechanisms available to address this problem.One of these could be a mandatory security of payment scheme. The Government came back and said: “Oh well security of payment measures are already available in the market and people can freely engage in them or not.” But that really misses the point that the purpose of a mandatory scheme would be to ensure that nobody is disadvantaged by other people being willing to not accept security of payment. If one were a subcontractor and going for a job for a big construction company like Fletcher’s which is pretty much a dominant player in the market that company could say to the subcontractor: “Well there’s someone else who will do your job without security of payment.” We do not want to have to go in for that because it is going to cost us more money. So the competitive incentive means that people are less likely to choose to have the security of payment measure and that is the purpose of making that mandatory. We need some insurance because it is simply not fair that when large property management construction companies go under subcontractors do not get paid. They are the guys who actually have to feed their families. They are not the guys who are jet-setting around like the corporate boards of directors hanging out in the Koru Club.The Green Party would like to see what comes out of the select committee submissions process in terms of what the public has to say what the stakeholders have to say and whether indeed the stakeholders do feel that there is scope within this bill to address this issue of non-payment. We would then like to see some amendments to the bill to deal with that problem because it has been a problem this year in 2013 and it will doubtless continue to be a problem in the future. We need to look after the workers and people of New Zealand. Thank you.Hon TAU HENARE (National):I want to talk about the punters the real punters—that is the mums and dads who get a house built—Sue Moroney: What if they haven’t got children? You’re not worried about them; only mums and dads.Hon TAU HENARE: Oh here we go. Goodness gracious me would the woman just be quiet for just once—for once in this House could she just be quiet and show the House a bit of respect. That is what we did for Mr Little and Mr Little gave a good speech about workers about workers’ rights. If I had closed my eyes I would have thought I was back in the 1970s. But that is OK—but that is OK. He talked about the big corporations and Julie Anne Genter she talked about Mainzeal Property and Construction. Both of them sort of let out the obligatory dog-whistle politics of the left: “Blame it on Jenny Shipley. Blame it on National’s mates.” That is what they did. That is fine that is their politics. People can buy into that if they want to.But who talks on behalf of the person the mum and dad who actually has a building project either a house or an extension to that house and is in a bit of a dispute with the contractor? That is what this Construction Contracts Amendment Bill does. To the punter what they want in the building industry is trust from their builder whomever that builder may be. So this is what this bill does: it protects the punter and it also protects the builder. That is why I cannot wait for this bill to get to the Commerce Committee. I commend this bill to the House.ANDREW WILLIAMS (NZ First):I take a call on behalf of New Zealand First on the Construction Contracts Amendment Bill. We will be supporting this through to the Commerce Committee. We do see merit in some aspects of the bill. However we do have some reservations in others.Certainly where the bill says that amendments will remove most of the distinctions between how the legislation applies to residential and to commercial construction contracts it is we believe sensible. There are some grey areas between the residential and commercial construction sectors and often there are loopholes there that could be closed up. The bill also widens the definition of “construction work” to include the design or engineering work and the quantity surveying work. Again often there are those other contract elements of any construction project that perhaps are not necessarily deemed to be part of the project. However they provide a vital component in a good outcome of the particular construction in question and therefore we do believe that that has merit too to include the design and quantity surveying.It also mentions here that it would be “reducing the amount of time a defendant has to oppose an application to have a determination entered as a judgment:”. I guess in some respects we have some reservations about that—whether reducing from 15 days to 5 days is a good thing—because it does perhaps limit the opportunity to have a proper defence and proper legal advice on the matter and to have the correct professionals able to have input into it. That will be something that I guess will be fleshed out at the select committee level and we will have an opportunity to see whether reducing that to 5 days is a practical workable solution.The requirement for adjudicators to convene a pre-adjudication conference is a good thing in many of these areas. If it can be worked through in pre-adjudication meetings and conferences before it gets into the thick of legal wranglings then that is very positive. Certainly in many areas and indeed with other Acts such as the Resource Management Act and other areas of the Local Government Act and various things if there can be pre-adjudication conferences often some of the problems can go away before it actually gets into the final negotiation.In this respect we also would like to see something considered in all this and perhaps we will be putting forward a Supplementary Order Paper in this regard at a later date. We believe that it is time that New Zealand had a proper construction bond system. Perhaps that would be one way of working through this. It does occur in many other jurisdictions around the world where there is a requirement for a performance bond.In terms of that a performance bond is a surety bond issued by either an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. Perhaps that would be a good way through so that you do not have the situation as has occurred in the recent past where people register a company as say Joe Bloggs 2010 Ltd and as soon as the project is finished Joe Bloggs 2010 Ltd is wound up and they move on to Joe Bloggs 2011 Ltd and then nobody can actually find the original company in order to go after it. If there was a system that included performance bonds that are tied directly back to the directors and to those who have signed the bonds there might be more certainty in the market and we would not have some of the cowboy activity that has been seen in years gone by. That particularly relates to many instances with leaky buildings and leaky homes where now the last man standing often tends to be the local authority and council simply because the original builders can no longer be found or are no longer in business under the particular name they had when they built the building.I also note that in this Construction Contracts Amendment Bill clause 13 will insert a new section 31 which will also prohibit charging orders where a construction site is owned by a family trust and occupied by a beneficiary of the trust. That is an interestingone. I think in recent times it has been noted that the large mansion being built by the Hotchins on Paritai Drive in Auckland I understand is under some form of trust arrangement. Again there have been great difficulties in terms of many of the contractors and others completing the work there and completing payment because it has been done through other mechanisms and through other trust mechanisms and now the trustees themselves are trying to get money out of the trust to the tune of very significant amounts and are hiding behind that particular guise. Therefore if this bill does include making it more difficult for people to have some of these smoke-and-mirrors trusts to hide behind in terms of construction projects then that would also be a good thing.New Zealand First sees a great deal of merit in this bill. This tidies up aspects of the original 2002 Construction Contracts Act. It received quite a bit of input over the last year or so while the Government drew up this amendment bill. It has had significant input from all sorts of sources. There is some very good merit to many aspects of it. New Zealand First will support it through to the select committee stage and we hope that as a result we will get some good legislation coming out of this.COLIN KING (National—Kaikōura):It is highly appropriate that we are considering this bill the Construction Contracts Amendment Bill in light of how important the construction industry is to New Zealand. It is also very important when you consider the number of people who can be affected parties. We have had that canvassed this morning during the first reading speeches of other members but again generally underpinning this whole process is the level of uncertainty that can exist around what is a suitable solution or a suitable setting for a resolution around an issue.One is often touched as a member of Parliament by people who are affected in a negative way when somebody fails in a business sense and we have heard Tau Henare talking before about the punter—“Joe Public”. Sure you have subcontractors and probably the most highly profiled side of things when it has been in the media is when a company fails and is unable to pay its subcontractors. But again we have all had related to us situations where a building firm has failed and then there has to be the process of having a new contractor come in to complete a job and there is that level of uncertainty that surrounds the whole matter. So it is highly appropriate that this bill is here and that it is going to further clarify the distinction between the residential and the commercial construction contracts. These things have been barriers to speedy resolution and completion of situations. So it is a very very broad subject a very critical subject and it is one that is close to the hearts of us all.Likewise the distinction between the two different kinds of disputes around payments the rights and obligations means that decisions on some disputes will take longer than decisions on others. However the purpose of this particular bill is to improve what is there already. It is an amendment bill. We have a disputes resolution process but it needs further clarification. The building industry is such a large part of this country’s economy and it is just so crucial at this time that we have a very clear understanding of what everybody’s responsibilities are and that the process is resourced well enough and given a successful framework so that people understand the situation clearly. This will only go towards improving the situation.It gives me great pleasure to support this bill during the first reading and it is good to see that across the House—Dr David Clark: What does it clarify?COLIN KING: —there is wide support for it even from the member from Dunedin. You can hear him there just salivating over the qualities of this bill. Thank you very much. It is a pleasure to support this bill.Dr DAVID CLARK (Labour—Dunedin North):Well “salivating” may be an exaggeration I fear from Colin King the member opposite but it is a pleasure to rise to speak to this bill the Construction Contracts Amendment Bill which is an attempt to accelerate the adjudication process. It falls woefully short of what is possible and members opposite know that. They know that this is not a strong bill. We heard from the member Colin King that they need to get a grip on how to do this better that it is an important issue and so on. He did not say how they were going to do it because that is lacking in this bill. It is not really there. He has got nothing much to talk about. I feel a bit sorry for him being asked to stand up and speak on this bill when it is a bill that does not really get to where we need to go.New Zealanders are paying far too much for power at the moment—New Zealanders are paying far too much for power.Hon Tau Henare: So what’s that got to do with this bill?Dr DAVID CLARK: This member may ask what that has got to do with this bill and that is the right question to ask Mr Henare. That is the right question to ask because that is where I am going and that is what I want to talk about. This bill does nothing to correct that. In fact it is going to make the problem worse—it is going to make the problem worse. John Key is on the side of the big energy companies New Zealanders are paying too much for power and what is this bill going to do?I want to take you through a thought experiment. Imagine a construction project—let us say a major dam—for building more energy capacity for our country. What happens when we build a major dam? Of course there is a principal contractor—Hon Tau Henare: Oh I don’t know. Do you add water?Dr DAVID CLARK: Mr Henare says we add water. Well you know that is an enlightened contribution. We might leave it at that for the moment but we add water. We add water—we certainly do. But we have got a main contractor when we build a dam. We also have many many many subcontractors who hire employees and who set out to put their backs into a major construction project believing that they are making a difference for New Zealand because we know that energy is essential to run so many businesses and that we cannot afford to have blackouts in this country. They are doing something because they think they are making a contribution.The sad thing is that those energy companies are still going to charge too much because the model is broken because this Government has done nothing to correct for the rising power prices. When the rest of the world’s power prices have remained flat since the recession they have been rising in New Zealand rising faster than inflation for a very long time and this Government is on the side of the energy companies. John Key says that we are paying what is appropriate for power. Well no New Zealander thinks that is true. No New Zealander believes that. Power prices are rising too fast.This bill attempts to speed up adjudication processes. So let us say that there is a dispute while the Government is building another power plant to charge New Zealanders too much for power because that is what it likes to do. By the way I should mention that the Labour Party has an excellent solution to this rising power price problem called NZ Power. I would encourage members opposite and also any members of the public at home watching to look up the Labour Party website search for NZ Power and see just how their power bills will come down—by between $230 and $330 per family per year—under a Labour Party policy. We care that New Zealanders are paying too much for power. We care that New Zealanders are paying too much for power unlike them opposite.So let us go through this thought experiment. Come back to the building of this construction project which is a dam as it happens—Mr Assistant Speaker you are reminding me to come back to that point and I will. What happens when there is adispute? Well currently—there is silence opposite. Many of the members opposite do not understand what would happen.Hon Member: They’re wondering what would happen.Dr DAVID CLARK: They are wondering what would happen. They know that the power prices will go up; they are embarrassed about it. But what actually happens is that there is an adjudication if there is a dispute and currently the small players—the subcontractors—end up settling because they cannot afford to be without cash. This is a very real problem in our economy. The little guy always gets squeezed. We have seen it with Mainzeal Property and Construction and several speakers referred to Mainzeal before. This bill is an attempt to address a serious problem and that is why the Labour Party will be supporting its referral to a select committee.The adjudication of disputes is the material covered in clause 11 onwards in Part 2 of the bill. It lays out the compliance with the Act. It lays out the appointment of an adjudicator how a pre-adjudication conference would work how the response to the adjudication claim would work and how the special provisions for adjudication—if approved—for charging for an order sought by a claimant would all work. You know there are serious matters dealt with in this bill under these clauses but it will not work. That is the point. That is what is wrong with this legislation. It needs some serious work. That is why we are sending it to a select committee so that it can have the serious work it needs to actually make a difference.We have proposed a solution to these issues. Labour is consulting on two options. Clayton Cosgrove has done some very good work on this—my colleague the Hon Clayton Cosgrove. One is contractors’ liens and the other is the statutory construction trusts proposal. We are taking these options out to the industry for assessment and comment. We as Labour Party people can see that the solutions—so-called—proposed by this Government are not going to work so we are developing a response from the Opposition.We are trying to help those guys opposite out. They cannot seem to find a way through. Maybe they do not want to. Maybe they are actually incredibly happy with the rising power prices and with the inefficient system for solving disputes because they are not on the side of the little guy. They do not care if the little guy gets beaten up in the disputes. Maybe that is what really sits under it all. Those members are quite happy with the situation where the little guy gets squashed and the big company powers through—excuse the terrible pun—because they want to see the big guys get ahead. We have seen that with the way they have done their tax policy where all of the value of the 2010 tax cuts went to the top earners and very little went to those at the bottom—40 percent went to the top 10 percent of earners in those 2010 tax cuts and just 2 percent of the value of them went to the bottom 20 percent of earners in New Zealand.But this bill provides an opportunity for Labour to highlight that we are already taking steps to ensure that subcontractors are protected and paid for the work they have done in the event of a construction company collapse. We have seen it with Mainzeal. It is the subcontractors who are hit the hardest when a construction company fails. Subcontractors are nearly always the last in the queue. They are the last in the creditor queue and they often miss out on the money they are owed. So this process where they are trying to reach an agreement so that they get some of the cash as quickly as they can and they settle because they cannot do the court costs—all of those things—really does not solve the problem. This is a halfway measure. It is a halfway kind of typical National Party solution. Those members want to be seen to be doing something. They want to be seen to be doing something in this area because the public recognises it is a problem. It is typical timid National Party policy.We can look at the Labour solutions. The NZ Power one I have already talked about—the way in which the rising power prices will be tackled by Labour. Again you see the same thing in the housing affordability area. You hear Nick Smith talking about a big gain but only Labour has a plan to build 10000 houses a year to address this housing problem.Hon Tau Henare: I thought it was 100000.Dr DAVID CLARK: Yes it is. Mr Henare says that he thought it was 100000. It is 100000 over 10 years Mr Henare. It is an excellent policy and I hope he will consider crossing the floor to support it because I know that deep down he is concerned about housing in New Zealand. He is concerned about it. There are members opposite earnest backbenchers hard-working backbenchers who are embarrassed to support these halfway measures because they realise that this is about an issue of fairness. It is about fairness for the little guy making sure those subcontractors are not the last ones in the queue and are not the ones who are missing out.The thing I would say to them—those ones who share that concern—is that it is a real concern to share. But there are ways of doing something about it. There are ways of doing something about it as the Labour Party has demonstrated—the contractors’ liens and the statutory construction trusts. We are going around the country talking with the industries actually engaging with them and asking: “What would work for you? How do we make sure that the little guy is looked after? How do we make sure that you get the money that’s owed to you and you’re not done over by the major contractor who secures the big end of the deal?”—the ones who are making all the money the ones who are charging the high power prices that Mr Key thinks are just fine for New Zealanders.We are on the side of those small businesses that are trying to grow because they are the heart and soul of our economy those small businesses. They are ordinary New Zealanders working hard every day because they think it is the right thing to do and because they want to improve our economy. But this Government will not even address the fundamentals. It will not put pro-growth tax reforms through. It will not look at having a universal KiwiSaver. It will not address monetary policy. Everything is stacked against small business—those exporters who want to help address the balance of trade deficit that New Zealand suffers under. It is the worst current account deficit in the developed world. It is worse than that of Greece now and it is projected to be worse than Greece for a long time to come.These things all hurt small businesses because the cost of borrowing goes up. Then we have this halfway measure of legislation put forward by this Government which will not speed up adjudication processes in any kind of meaningful way. What we see is people wanting to be seen to be doing something but not actually doing anything. They do not want to do anything and that is the problem with this Government. It is not prepared to tackle the big issues. It is not prepared to tackle power prices which are crippling businesses. It is not prepared to tackle housing affordability. And here it is not prepared to attack the issue of proper adjudication processes.Dr Cam Calder: What a pleasure it is to rise—The ASSISTANT SPEAKER (H V Ross Robertson): Hang on. I have not called the member yet. The member must wait to be called but the member can stand and seek the call.Dr Cam Calder: Mr Assistant Speaker.The ASSISTANT SPEAKER (H V Ross Robertson): I call the honourable member Cam Calder.Dr CAM CALDER (National):What an absolute pleasure to rise and take a brief call after Dr David Clark’s at times electrifying address—not often. It was more lowvoltage and low energy. He tried to cast a light on of all things electricity energy. In fact his speech reminded me of a moth circling around an electric light bulb as it weaves its way around trying to find a purpose. But the purpose of this debate in fact is the Construction Contracts Amendment Bill.The previous speaker said: “What does it do?”. Well it amends the Construction Contracts Act of 2002 to clarify the jurisdiction of the Act and streamline the disputes process. This is it in a nutshell. It is a matter of amending the Act to remove the distinction between how the Act applies to residential and commercial construction contracts. The Act is currently unclear about the jurisdiction to deal with disputes under residential construction contracts. So we are trying to clarify that and this bill will do that. It will remove the distinction between the two different types of decisions that can be adjudicated under the Act. Currently decisions on payment disputes can be more easily enforced than decisions on disputes about rights and obligations.We are going to expand the scope of the Act to include construction-related services and these include design engineering and quantity surveying. There are three main areas of clarity that will be provided by this bill. I commend it to the House.DARIEN FENTON (Labour):I rise to take a call—The ASSISTANT SPEAKER (H V Ross Robertson): It is a split call. I am sorry to interrupt the member. It is actually a split call.DARIEN FENTON: No it is not a split call.The ASSISTANT SPEAKER (H V Ross Robertson): It is not a split call. Thank you.DARIEN FENTON: I am pleased to take a call on the Construction Contracts Amendment Bill. As my colleagues have said we will be supporting this bill and voting for this bill to go to the Commerce Committee. However I also agree with my colleagues when they say that this is a weak bill. It does very little. But we think that during the select committee process there will be an opportunity to canvass a range of issues in the construction industry because frankly the construction industry is in a bit of a mess. It is in a bit of a mess and we see that no more clearly than we do in Christchurch at the moment where the failure of this Government over several years to train skilled workers to provide for trade training is coming to a head in Christchurch where we are going to need something like up to 18000 workers in the next few years. We are going to be relying on bringing in skilled migrants from overseas and that has already begun.I think that what we will hear in the select committee process are the many disputes that are coming out of the Christchurch construction process. We are already hearing some of the stories where large companies are employing contractors subcontractors and sub-subcontractors and about abuses of migrant workers where they are being put into accommodation where 12 of them are supposed to live in four rooms and there is no attention to their rights as far as I can see. As far as I can tell the Ministry of Business Innovation and Employment has not put any extra resources into the enforcement of workers’ rights around the construction projects in Canterbury. It is not just workers who are employed in employment relations; it is workers who are employed as contractors. We all know that there is a huge problem there that needs a lot more work. Labour is committed to doing a lot more work around the small guy—whom Tau Henare says he is standing up for—to make sure that they actually have some protection because quite frankly at the moment they have very little.When a company like Mainzeal Property and Construction fails it is as David Clark said the little guy at the bottom of the chain who ends up getting nothing. Let us remember what it is like to be a sub-subcontractor. You are not an employee. You do not have rights to holidays or sick leave. If a family member is sick well you just have to take a day off and go without pay. You do not have the rights that other employeesdo. At the bottom of the construction chain we are talking about some very vulnerable workers. I think those issues need to come to the fore as well in this select committee process.The other disgrace going on in the construction industry is health and safety. Look I give credit to the Government for its Independent Taskforce on Workplace Health and Safety but we do know that one of the high-risk industries is the construction industry. Why is that? It is because of the deregulation that has gone on over the last 20 years. In fact the taskforce pinpointed the deregulation of the labour market that happened in the 1990s as the beginning of the problem that we have with health and safety. Construction workers get killed. They get injured. They get killed and injured in numbers that happen only in other high-risk industries like forestry. The Government is saying that it has a code around that and that it is going to work. Well the truth is that we are going to have to do an awful lot more in construction. It goes to the heart of the little guy and the relationships they have the pressure on them to earn a living and the pressure on them to work when perhaps they should not and to take risks. That is the heart of the problem in the construction industry as well as in other industries like forestry.The other thing about contracting of course is that it is full of rorts. It is full of rorts. It is good that this bill is going forward and that there will be some mild—very mild—amendments to provide for dispute resolution but as we have seen with Mainzeal Property and Construction there needs to be a lot more done as well. It is not only just what happens to the sub-subcontractors and their rights and what happens in health and safety; it is also how they are protected. It is the subcontractors and the ones at the lowest level who are hit the hardest when a construction company fails. They are always last in the creditor queue. They often miss out on money they are owed. If you take that in conjunction with the fact that they do not get holiday pay they do not get sick leave and they have no savings mostly because they are working from job to job often on jobs that go for a couple of weeks or that might go for a month and then their company goes bust and they end up with nothing—Hon Christopher Finlayson: You’re off on a tangent again. Concentrate.DARIEN FENTON: Chris Finlayson will not know anything about that because he has never been near a construction site. He would not have—Hon Christopher Finlayson: I was the Acting Minister of Labour and did a great job.DARIEN FENTON: I beg your pardon?Hon Christopher Finlayson: I was the Acting Minister of Labour and started the report.DARIEN FENTON: Oh you were Minister of Labour for about 2 weeks and what did that Minister do? He defended health and safety in the forestry industry and a code of practice that is hopeless—that is hopeless absolutely hopeless. But as I was saying the subcontractors are almost always last in the creditor queue. They miss out on money. When you put that together with the fact that they have so few rights they are trying to run their business they do not even get a holiday and they do not even get holiday pay or sick pay or any of the other things that employees get it is not fair. It is not fair and that is why Labour has been doing something about it by talking to the industry to look at some sensible cost-effective options that offer a fair deal without loading cost on to the sector.As we heard a lot of people were dismissive of the fact that the Hon Clayton Cosgrove has been going around the country but may I tell the House that he has had an excellent reception as have all of us in Labour who have reached out to contractors who have actually met with them and spoken with them had meetings had breakfast meetings and talked about the issues. There has been a very good reception. It has been interesting because they have said to us: “Well at least someone is listening.” At leastsomeone is listening because that Government is not listening to the issues that are going on in the construction industry and the issues that are going on for contractors. So we have done a whole lot of visits around that and we have looked at some proposals: one is contractors’ liens and the other one is statutory construction trusts. We are taking those options to the industry for assessment and comment.We are being constructive about this. We are being constructive in that we are supporting this bill to go to the select committee but there are many issues that need to be canvassed apart from the very narrow purpose of this bill. There are very many issues that need to be canvassed. One of the other ones that I think may come through—and I have talked about the immigration issues in Christchurch—will be other immigration issues that come through as well. Once again I was pleased last week that Simon Bridges took the credit for the fact that we are seeing more abuses of migrant workers being dealt with but I have had construction workers come to see me. They have talked to me about the fact that they have been lured to New Zealand and they are stuck. They are stuck on a work permit that is tied to a job. They are being exploited. They are not even getting their entitlements—they are not even getting their entitlements. So I think those issues will come through too. Yes let us hear about the issues in the bill but let us also talk about what is really going on in the construction industry. Let us talk about what it is really like for contractors and get some more protections for them. Let us talk about health and safety. Let us do something real for a change.LOUISE UPSTON (National—Taupō):I am pleased to take the final call from this side of the House on the Construction Contracts Amendment Bill. One of the things that is really rewarding as a member of Parliament is being able to deal with constituents who have problems which you are able to then see eventually in a piece of legislation. So if that is not listening to what the public are concerned about I am not sure what is. The important thing if we look ahead with our two largest cities Auckland and Christchurch is that construction will be the significant boom there for many years to come. What we want to make sure is that those who are in the construction sector can focus on building and focus on getting the job done and not have days and weeks and months tied up in disputes.This nice tidy piece of legislation just basically clarifies how that dispute resolution process works and speeds up the enforcement. We know that for small businesses cash is really important to them so if there is a dispute they want to make sure that any enforcements and any payments associated with that are received quickly and promptly. All of those things enable those working in the construction sector to get back on to the job. So this is just another example of a significant piece of work that this side of the House is doing to improve the building industry and the construction industry and to make sure that businesses are efficient are effective and are getting on with the job. Thank you.A party vote was called for on the questionThat the Construction Contracts Amendment Bill be now read a first time.Ayes119New Zealand National 59; New Zealand Labour 33; Green Party 14; New Zealand First 7; Māori Party 3; ACT New Zealand 1; Mana 1; United Future 1.Noes1Independent: Horan.Bill read a first time.Billreferred to the Commerce Committee.Local Electoral Amendment Bill (No 2)In CommitteeDebate resumed from 26 March.Part 1 Amendments to principal Act(continued )ANDREW LITTLE (Labour):I rise to speak as other Labour Party members have in support of the Local Electoral Amendment Bill (No 2) and remind the Committee just how important this piece of legislation is. I am somewhat surprised that here in nearly the middle of June in a year in which we are having local body elections we are dealing with more changes that arose out of the last set of local body elections more than 2½ years ago. We are now frankly down to the wire making changes that will have a bearing upon this year’s elections at least in relation to candidates’ returns in terms of their election expenses and residential declarations.We know why this is important. It is because there were aspects of the 2010 local body elections that were frankly a disgrace. There are consequences to that election that have been played out not only in the great city of Auckland—the super-city of Auckland as some have described it—but also in this House because of the conduct of some individuals arising out that election. What has become patently clear is that we now have a Government that even on important legislation like this is propped up by shabby and tawdry members who have muddled around and mucked around at the local body level caused disgrace to themselves and their so-called parties—or what is left of them—and shone a very poor light on the Government of the day. Frankly the people of New Zealand expect better.The people of New Zealand expect that in the Government of the day not only the members of the party that leads the Government but also those who support it through agreements formal and informal are people of good character and that they are people who act with integrity and indeed with honesty and act in a way that is befitting of members of a Government. But we have a Government that is increasingly supported by people who can be described only as shonky as lacking in integrity and as lacking in credibility and yet this Government is utterly and totally dependent and reliant upon them.What sort of shabby Government do we have now? The answer to that question is pretty obvious. The Minister in the chair the Minister of Conservation who only this morning defended his role in local government and in relation to housing by enunciating an entirely new philosophy of trickle-down housing philosophy—trickle-down housing philosophy—wants to impose that philosophy on every local government in this country. Well it just shows you what a pretty pass we have come to—what a pretty pass we have come to.This bill will make differences to the declaration of campaign expenditure. They are long overdue. We simply should never have been put in the position where a candidate—any candidate in any local body election—can be the recipient of brown paper envelopes stuffed with cash from large corporate donors that can then apparently credibly—Hon Chester Borrows: Union members sneaking around in the dead of night.ANDREW LITTLE: Here we go. Here comes Mr Borrows and the anti-union rhetoric. They are union-haters—the union-haters and union-wreckers opposite. They hate the idea of people acting collectively. They hate the idea of people exercising their freedom of choice to act collectively. That is the nature of this Government. It is not enough to be propped up by the tawdry shabby people and their informal confidence and supply agreements. It acts as it has always done. The anti-union wreckers and hatersof old have come back. Well if it was not enough for Tau Henare to express the values of the 1950s here earlier this morning now we have them back again—the “fifty-oners” of the National Government. They hate unions and hate working people who exercise their freedom of choice. That is why they bridle at and resist any attempt to regulate local government.Mr Borrows of all people knows that because of the Cold Creek water supply agreement which we had rammed through this House and rammed through the South Taranaki District Council at his and Shane Ardern’s behest. They know all about local government. They have never shown any respect for it at all and that is why they uncomfortably and grudgingly pass this legislation which will tidy up just an element of it and ensure that those who stand for local government and for office in local government at least meet some test of good character integrity and probity.When passed this bill will ensure that the declarations made by candidates for local government shine a proper light on their expenditure and those who have supported them and that campaign managers cannot be prevailed upon to make declarations that clearly are not credible and that clearly are not honest. When passed this bill will provide thresholds that by and large are meaningful and credible—except of course for those campaigning in the super-city of Auckland. My good colleague Phil Twyford will have a Supplementary Order Paper that will deal with the issue of campaign spending limits which under this bill are set extraordinarily high—at an extraordinarily high level—when that is not necessary and indeed when the most recent candidates in Auckland attested that the levels at which they are set are clearly not necessary if they are to run a credible campaign. So those are all good things in this bill.We welcome the opportunity to tidy up this piece of legislation. Many members who come to this House come through the local government channel. They come through having cut their teeth on local government and understand what Government processes are. They learn about regulation at a local level. They learn that local government has an important role to play in ensuring good peace and good order in the community that one ratepayer’s freedom invariably cannot be exercised if it is at the expense of another and therefore that we have local government to play an appropriately moderating and mediating role when it comes to regulation at a local government level.But we need to make sure that those who stand for public office even at that local government level do so under a system a framework that is appropriate and that ensures integrity credibility and honesty; that we do not have people who are sponsored by corporates or the rich and the wealthy; and that we do not allow Tammany Hall politics to infect local government in this country. We do not want the situation where local government can be controlled by a small elite a plutocracy or an oligarchy. We need to allow proper freedom and democracy to operate at the level of local government so that people who stand for public office open themselves up and open up their spending to a proper process of scrutiny. This bill will allow that in its provisions. It is for that reason that we support it.GRANT ROBERTSON (Deputy Leader—Labour):It is a pleasure to rise and speak in the Committee stage of Part 1 of the Local Electoral Amendment Bill (No 2). Just picking up where my colleague Andrew Little left off the Labour Party is pleased to be able to support a piece of legislation which within Part 1 has the goal of limiting the amount or value of anonymous donations; refining the definition of “anonymous” and “donation”; enhancing the obligations of candidates for the disclosure reporting and recording of electoral donations; and introducing penalties for non-compliance for those matters. This is the kind of transparency that has been missing from local electoral law. Sitting alongside that is the importance of making this consistent with the Electoral Act 1993. I think that is welcomed by all members of the House because there havebeen serious issues in this area that need to be addressed. In fact the driving force behind some of the changes here is the issues that have arisen in this House and elsewhere around donations to local body election campaigns. I think it is important to illustrate why the changes in Part 1 are important by aligning them with specific and real situations.In that regard I want to talk about the definition of “anonymous” and the definition of “donation” because we have certainly seen in the past the grey area of this being exploited. I think the obvious situation that we have to refer to here is Mr John Banks and his situation in the Auckland mayoral election campaign of 2010. I want to specifically refer here to the question of the definition of “anonymous” and “donation”.I wonder whether members of the Committee would consider the following type of donation to be one that could be regarded as anonymous. This is where an entity—in this case Skycity—agreed to make a donation to a mayoral campaign for John Banks. I have in front of me here the formal written statements of a staff member of Skycity and of the chief executive of Skycity Nigel Morrison. Mr Morrison recalls attending a meeting with John Banks in his office and this is what he said in his statement: “This meeting lasted only about 10 minutes during which time I handed to John Banks the cheque in a SKYCITY envelope”. That is what it says. That is what it says in the witness statement from Nigel Morrison the chief executive of Skycity. He handed Mr Banks a cheque in a Skycity envelope. John Banks declared that donation as anonymous. He said he did not know who gave him a $15000 cheque. A $15000 cheque was handed to him in a Skycity envelope. It will have been one of those white envelopes—those DLE envelopes—with the Skycity logo on the left-hand bottom corner. I am sure that will be the envelope that Mr Banks received the cheque in. Nigel Morrison said that in a sworn affidavit to the police.Another staff member from Skycity also indicated that his organisation had received a receipt from Team Banksie—a receipt from Team Banksie—for the said $15000 cheque. So let us just be absolutely clear here. The situation we have got is that a $15000 cheque is handed to Mr Banks in a Skycity envelope his treasurer from Team Banksie receipts that and Mr Banks declares it as anonymous—Mr Banks declares that donation as anonymous. That is the kind of cover-up the kind of evasion of the law that we on this side of the House have come to expect from Mr Banks and that is why this law is needed.However the problem we have got is that John Banks has not been fully held to account for that. John Banks has not been fully held to account because although the police were able to find him guilty of having breached the law in one particular part of his donation regimes—that is the fact that he signed a false return—the time period in which he was able to be convicted for that had expired. So although they said that he absolutely broke the law in that regard the time period for that conviction has expired. John Key of course had said that he would sack John Banks if it was discovered that he had broken the law but he backed off from that very very quickly once he realised that and refused to read the police report.The other part of Mr Banks’ donation that is relevant to Part 1 here is whether or not Mr Banks knowingly signed off on a false return. The police in the end said that they were unable to come to a decision as to whether Mr Banks had knowingly done that. If Mr Banks had knowingly done that then he would be subject to a conviction with a prison term of up to 2 years and I think the people in the Chamber know what that means—that would mean that Mr Banks could no longer serve as an MP. So it is certainly in the interests of the Government not to see that go to its full fruition. One of the reasons I suspect that the police were unable to decide whether Mr Banks had knowingly signed a false return for that donation is because of what Mr Banks mighthave said to them when he was interviewed. I am in receipt of the police file on Mr Banks’ case under the Local Electoral Act and all of the witness statements for that case have been provided to me bar one. The one witness statement that is missing is John Banks’. I am holding the police report about their interview with John Banks. Here it is.Andrew Little: Oh one of those again.GRANT ROBERTSON: Yes one of those.Andrew Little: Seen those before somewhere.GRANT ROBERTSON: Yes it is very familiar. It is blacked out here and on the back page as well. So Mr Banks who said he had nothing to fear and nothing to hide has hidden this because he is very afraid of what it says. He is very afraid that what it will show is that of course those donations were not anonymous. He knew about the donations he was getting.I have been able in this call so far to refer only to the Skycity donation. There are Kim Dotcom donations—two of them at $25000 each. Mr Dotcom has given extensive evidence in this inquiry to indicate that he was very well aware he was giving those donations to Mr Banks. Mr Banks came in a helicopter to his mansion and indicated that he would be gratefully receiving of this $50000. He specifically asked for the donation to be split into two $25000 amounts and he did that because he had a number of other $25000 donations. So what he was doing was using the provisions of the Local Electoral Act as they were at that time. He said: “If you give me this in a $25000 lot I can put it alongside all the other donations of $25000 and magically claim that I don’t know who they came from.”That is why these changes are required—because people like John Banks are prepared to exploit any loophole in the law that they can find. They are prepared to do anything that is possible not to be upfront with New Zealanders. It is very important to know that it is John Banks—a person who is thoroughly disgraced and discredited a person who is now in court on these matters—who is propping up this National Government. He is the person propping up this Government. He is the person who has exploited the Local Electoral Act beyond what any reasonable person would believe that these sections should allow. The idea that he could declare these donations as anonymous is not just ridiculous I would allege that it is also corrupt. He has done this knowingly. We cannot see what Mr Banks said to the police but Mr Banks has done this knowingly. He knew he did this. He used the Local Electoral Act in the form it was in to ensure that New Zealanders could not see who had donated to him. That is bad enough but then he covered it up and he has covered it up day after day.Today I stand here waiting for Mr Banks to allow the release of his witness statement because if he said he had nothing to fear and nothing to hide then he should release that witness statement. I know why he does not want it released. It is because it will show that he has lied to the Prime Minister and the Prime Minister said that if he found that out John Banks was gone. But the Prime Minister knows he cannot do that because his Government is propped up by disgraced MPs—MPs like John Banks who has knowingly breached the Local Electoral Act.We on the Labour Party side of the House do support this bill. We believe that it is high time that local electoral matters were made clearer that they were made consistent with the Electoral Act. But although we support this bill we cannot support the fact that the Government continues to be propped up by somebody who used the loopholes in the Local Electoral Act and who deliberately misled New Zealanders and the New Zealand public about the donations he received. That is unacceptable and the changes to this Act are high time coming so that people like John Banks cannot get away with it.EUGENIE SAGE (Green):Tēnā koe Mr Chair. I am pleased to take a short call in the Committee stage of the Local Electoral Amendment Bill (No 2) which the Green Party is supporting and that is because the Local Electoral Act is about ensuring a transparent local body electoral process and ensuring that the public can be confident in that process. So we certainly support the thrust of the bill to align the practice at local authority elections with that of general elections and to make those local electoral processes more robust. Certainly capping anonymous donations at $1500 is one example of making them compatible and requiring a third party who receives a donation on behalf of a candidate to disclose the identity of the donor if he or she knows it is another.But I would like to speak to Supplementary Order Paper 215 in my name which would provide for greater consultation when decisions are made to adjourn elections. Clause 21 of the bill inserts new section 73A in the principal Act and it would enable electoral processes to be adjourned in the case of a local or national emergency so that electors are not denied the opportunity to cast a valid vote to nominate a candidate or to accept nomination. The current Act allows elections to be postponed for 14 days and this bill proposes to extend this to 6 weeks and allow that to be rolled over. It is a very serious decision to deprive citizens of the right to vote or to postpone it and we have seen that in Environment Canterbury with the lack of an ability to vote for councillors and with the fact that elections have been postponed indefinitely it seems. The bill as drafted provides for the decision to postpone a local authority election to be made by the Minister of Local Government by Order in Council after consulting the affected local authorities and the affected electoral officer. The Supplementary Order Paper retains this provision but it requires that each affected local authority and its electoral officers must have agreed to the decision to postpone the election and must have advised the Minister of their agreement before an Order in Council can be issued postponing the election.We need this Supplementary Order Paper because Ministers under this National Government have been far too ready to take and keep power to themselves and to wade in and direct councils so that decisions important to local communities are being made increasingly by Ministers rather than by the local councillors whom that community elected. We have certainly seen that in the very sweeping powers that the Minister for Canterbury Earthquake Recovery continues to hold in Canterbury and he not the councils ends up signing off on final decisions on a raft of plans programmes and strategies that are critical for the rebuild of Christchurch. We have also seen it in the broken ministerial promise—and I am pleased that the Minister in the chair the Minister for Conservation is the same Minister who was involved in removing democracy in Canterbury—to reinstate elections for Environment Canterbury this year and the decision to introduce legislation that further postpones those elections.So this Supplementary Order Paper provides a check on this ministerial power and it underlines the importance of not depriving our citizens of their right to vote without a very very good reason. This Supplementary Order Paper with the requirement that councils agree to elections being postponed represents a partnership approach to local government which the Green Party believes is absolutely crucial to a healthy and functioning relationship between central and local government unlike this Government which has got a bullying relationship with local government and seems intent on directing local councils to do what Ministers please. So this Supplementary Order Paper which makes sure that councils actually agree to postpone elections brings much more of a partnership approach.Talking briefly about some other clauses in the bill we certainly support the proposed insertion of a requirement that voting papers must include a warning that it isan offence to interfere in any way with anyone who is about to vote. We often take it for granted that there will not be interference with voting but it is appropriate that it is in this bill. But it is very ironic that the Government is sponsoring this bill a bill that highlights that it is an offence to interfere with a person who is about to vote when it has been National and ACT who have so grossly interfered with the right of Cantabrians to vote for their regional council by cancelling that opportunity and extending the term of appointed commissioners. One of the disappointing aspects of the bill is that the Government Supplementary Order Paper 198 does not take the advice of the Justice and Electoral Committee to strengthen new section 103A in clause 27 and ensure that it catches cases where an individual or a company provides discounted advertising to one candidate and then charges everybody else the regular rate and ensures that such donations are disclosed.One of the big gaps in the bill where the Green Party has a concern is the bill’s failure to regulate and modernise the rules governing third-party spending on local body elections. In its report the select committee noted that the bill as introduced did not cover these third-party donations and expenditures and that left a potential gap for third parties to receive donations and use the funds to promote a candidate and potentially to denigrate other candidates without appropriate regulation and without the candidate’s permission. At the moment third parties can spend an unlimited amount to campaign for or against certain candidates and the bill does nothing about that. The select committee concluded that there was not time to implement the changes before the local body elections in October but the Green Party remains disappointed by this major gap in the legislation and commends a member’s bill in the name of my colleague Denise Roche the Local Electoral (Finance) Amendment Bill which would impose a $5000 cap on donations by any person or group. It would regulate third-party donations and it would ban overseas donations.But the Green Party is supporting the Local Electoral Amendment Bill because it does make some improvements to the principal Act and we commend Supplementary Order Paper 215 to implement much more of a partnership arrangement with local government in relation to any postponing of elections. Thank you.DENIS O’ROURKE (NZ First):Although the Local Electoral Amendment Bill (No 2) does some very good things and will be supported by New Zealand First it is far from perfect and it is incomplete. However it is just enough and just in time for this year’s local government elections.Clause 15 inserts a good new section section 61(2)(ca) requiring a candidate profile statement to include whether or not the candidate’s principal place of residence is in the local government area in question. That is a desirable provision because voters ought to have that information but it does not preclude a candidate from living outside the area and does not preclude him or her stating what connections he or she has with the area. Of course some people who do live within the area may in fact have very little genuine connection with it so voters need to be aware of that too.Most important however are the provisions which are long needed concerning anonymous donations. The need for those of course was well demonstrated by the John Banks issues in relation to hislast unsuccessful Auckland mayoralty campaign. This is an important issue for transparency and democracy in local government. The bill addresses the matter that the John Banks electoral return from the 2010 local body elections highlighted. It revealed a gap in the existing legislation that allowed candidates to call donations “anonymous” that they knew or ought to have known were not in fact anonymous donations.New section 103(F) inserted by clause 27 says: “If any person involved in the administration of the affairs of a candidate in relation to his or her election campaignknows the identity of the donor of an anonymous donation exceeding $1500 the person must disclose the identity of the donor to the candidate.” Many New Zealanders will welcome that new provision. I worry a little that it will be necessary to prove actual knowledge which may be difficult and perhaps we ought to have added the words “or ought to have known” in the section as well. Nevertheless it is a satisfactory section as it is and it will help solve the Banks problem at least as far as legislation can go.The bill provides in new section 103(H) inserted by clause 27 that anonymous donations may not exceed $1500 and that “If an anonymous donation exceeding $1500 is received by a candidate in relation to an election campaign the candidate must within 20 working days of receiving the donation pay to the electoral officer responsible for the conduct of the election to which that campaign relates the amount of the donation or its value less $1500.” I think that will also be a welcome provision to most New Zealanders.New section 103(I) inserted by clause 27 provides for offences relating to contravention of section 103(H): “A person who enters into an agreement arrangement or understanding with any other person that has the effect of circumventing section 103H(1) or (2) commits an offence ...” and so on. That is a very important provision as well.I also want to mention new section 103CA proposed to be inserted in clause 27 by Supplementary Order Paper 198 which is also supported by New Zealand First: “This section applies to a donation (other than an anonymous donation) that is made up of includes or is wholly or partly funded from 1 or more contributions. … the donor must at the time of making the donation disclose—(a) the fact that the donation is funded from contributions;” and disclose the details around it. This of course applies only to contributions over $1500. New Zealand First will support that but we would have preferred to see it apply to all donations or at least be limited in the way that Holly Walker recommends in her Supplementary Order Paper 200 which New Zealand First will also support.The bill also provides for postponement of a local election—and Eugenie Sage has just spoken about that—so that in the case of a natural disaster or an emergency there can be an Order in Council for postponement of up to 6 weeks at the discretion of the Minister. But I note that new section 73A(6) inserted by clause 21 says: “Before recommending the making of the Order in Council the Minister—(a) must be satisfied on reasonable grounds that the order is necessary … and (b) must have consulted every local authority and electoral officer that will be affected.” I think subsection (6) does sufficiently limit the Minister’s discretion about postponement and that this would preclude the Environment Canterbury situation which many of us are so concerned about. So New Zealand First could not support Supplementary Order Paper 201 or 215 in the name of Eugenie Sage. Supplementary Order Paper 201 gives postponement power to an electoral officer and we think that would be an excessive power to be administered by an official. Supplementary Order Paper 215 requires the agreement of local authorities in addition to consultation and New Zealand First feels that that would be excessive and unnecessary and would unnecessarily limit the overall thrust of the section.However there is one very serious defect in the bill by omission. As I have said the bill does need to do more than it does. The bill that we see now does not cover third-party donations and expenditure and we in New Zealand First think it should. There is a potential gap for third-party campaigners to receive donations and use funds to promote a candidate without the candidate’s permission and appropriate regulations should be necessary for that. We accept that it is a complex policy area and one that perhaps wedo not have time to deal with in this legislation. It is one that New Zealand First wants to see in future legislation on these matters.Overall the bill is a good one and does deserve support but we think it is still a work in progress in the way that I have described. For that reason New Zealand First will be happy to support the bill and we hope that other parties in the House will all do the same.Dr CAM CALDER (National):I moveThat the question be now put .PHIL TWYFORD (Labour—Te Atatū):I want to talk to my Supplementary Order Paper 252 which is on the Table. It proposes an amendment to the Local Electoral Amendment Bill (No 2) that would change the formula for determining the campaign spending limits. It would have a very specific effect only for Auckland for the Auckland mayoralty. It would have the effect of reducing the campaign spending limit for the Auckland mayoral campaign which is currently at about $580000 down to on the current figures $376000. So I want to speak to that Supplementary Order Paper and really invite members in the Chamber today to look seriously at this amendment and consider giving it their support.When the Auckland Council and the Auckland super-city were established in that legislation the campaign spending limits were set at a level that I believe is way too high. For a contender in a mayoral contest to be able to spend more than half a million dollars—in fact close to $600000—in the last 3 months of the election campaign I think sets the bar far too high. It sends a signal that our democracy in Auckland is for sale. The Auckland mayoralty has I think been recognised as one of the most powerful positions of elected office in the country and to deter possible candidates who do not have pockets deep enough to spend that kind of money in the last 3 months is I think bad for democracy. It is a blemish on the legislation and the rules that surround the Auckland Council and electoral arrangements. Labour members argued then that that figure was far too high and we said at the time that it would be much better if a lower limit had been set. What we suggested was a limit of around $380000. That would have been approximately the total of all the campaign spending limits from the legacy councils that were dissolved to make way for the new Auckland Council.This bill has some really important provisions in it. Although it is not perfect by any means Labour is supporting this bill. There are important principles of disclosure transparency and limits on political donations. Those are all fundamental principles important to a healthy democracy but it is also important that we have limits on campaign spending. We do have them for parliamentary elections—both at the national level and at the electorate level—and not only is it appropriate it is essential that for an office like the Auckland mayoralty there are some limits so that the office of the Auckland mayor is not just up for sale to the highest bidder. That would be I think a travesty of our democracy.The amount currently that a candidate could spend in the last 3 months of an Auckland mayoral campaign is $580000. That is just too much. It is not reasonable to expect that the full range of candidates that we would want to see contesting the Auckland mayoralty would have to raise nearly $600000 to run their campaign. That is bad for democracy. My Supplementary Order Paper proposes a new formula. It uses the current structure that you see in the current legislation but it reduces the amount. The formula is based on both population and the number of electors and my Supplementary Order Paper would reduce the amount in the formula to $70000 plus 30c for each elector. If you apply that to the number of electors that we have in Auckland at the moment it would basically allow candidates to spend about $376000. Coincidentally that is approximate to the total of the spending limits for the seven legacy councils that made way for the Auckland Council.I want to note also in this debate that in the last Auckland mayoralty race both candidates—the successful candidate Len Brown and John Banks who features so large in this debate—advocated for campaign spending limits substantially less than the limit that is in the current legislation. Len Brown argued that the limit instead of being nearly $600000 should actually be in the region of $150000 to $200000. John Banks told Michael Field of Fairfax that he would have preferred a threshold of $100000. So John Banks who has many years of experience in local government who was a mayor of the former Auckland City and who was the unsuccessful candidate in the last Auckland mayoral election proposed a threshold of $100000. He said: “The problem is that if you put the threshold of expenditure too high you put the elections out of the reach of candidates.” and that “The problem is that I want to encourage as many people as possible to stand for the Auckland mayoralty. It is in the best interests of the democratic process.”So I call on Mr Banks to vote for this amendment to be consistent with what he said in 2009. John Banks is a politician who knows a thing or two about redemption. He has been transmogrified—he has been transmogrified reincarnated. He is the master of political reinvention. I put it to Mr Banks that supporting this amendment would be a way of snatching redemption from the jaws of disgrace.There is a question if we believe in limits of whether it should go lower. I believe that my amendment strikes an appropriate balance. It is important that in an electorate the size of Auckland a city of 1.4 million people candidates are able to spend the resources that they need to put up billboards to print direct mail letters and so on. But the limit must not be so high that a rich candidate with deep pockets can simply buy their way into the mayoralty by spending millions of dollars on television advertising and the like. It is important that we strike a balance between putting limits on big money in politics but it is also important that we ensure that we do not disadvantage future challengers in the mayoral race. It is true that there are certain benefits of incumbency particularly for popular mayors. They have staff they have the name awareness of having spent time in office and they have a media profile. It is important that challengers can spend enough money on their campaigns to make an impact and register their candidacy with the public.I do not propose that the limit be set any lower and I would submit to this Committee to members that it be about $376000 across Auckland. We are talking of an area a jurisdiction that is about the same as 20 parliamentary electorates and members will know that local parliamentary campaigns are able to spend up to $25000 including GST on their election campaigns at electorate level. So the limit that I am proposing in this amendment would be of an order of the parliamentary limits. Also as I have already said it is about the same as the total of the spending limits from all the old legacy councils whereas the spending limit that Rodney Hide inserted into the current legislation is almost twice that amount. It is unreasonable and it does not pay enough attention to the important principle of limiting the influence of big money in politics.If you look at the spending limits from the old legacy councils Auckland City had a limit of $70000 Manukau had a limit of $70000 Waitakere had $60000 Papakura had $30000 Rodney had $50000 North Shore had $60000 and Franklin had $40000. There are no other cities in New Zealand that have a limit on campaign spending of more than $70000—COLIN KING (National—Kaikōura):I moveThat the question be now put .Hon NANAIA MAHUTA (Labour—Hauraki-Waikato):I am pleased to be able to support the Labour people who spoke before me who have said that we are supporting this bill the Local Electoral Amendment Bill (No 2) because participatory democracy benefits a lot when there are ongoing improvements to the transparency andaccountability of legislation affecting candidates who seek office at local body elections.I also want to carry on from the point that Phil Twyford made with regard to his proposed Supplementary Order Paper 252 because if we want to continue down the road of participatory democracy then campaign spending limits actually have a great bearing on that. If people cannot afford to seek office or if the ways in which their campaigns are funded are not fully transparent that will have a bearing I think on the quality of the candidates who will put themselves forward in local body elections. So for that reason I think the Supplementary Order Paper is a sensible suggestion. It is a suggestion that ensures that the process of candidates putting themselves forward to seek office is achievable and transparent and does not discriminate against anybody.I listened carefully to the debate and read the Justice and Electoral Committee’s report. I do want to highlight things that have not already been mentioned and they are some of the issues that have been identified as outstanding matters to be considered that could not be changed for this particular bill in time for the 2013 local body elections—in particular the efficiency gains to the unpublished roll.I think there is some merit in continuing to consider having the opportunity of processing for ease of voting those who find themselves on the unpublished roll but who could place an ordinary vote at a local body election. It makes sense. It will save money. It can be better streamlined to ensure that on the day people are not kind of left thinking: “Can I or can’t I?”.There is also the residency disclosure which is a great amendment there because when people know that their local candidates are living in or out of an electorate it will undoubtedly have a bearing on how they cast their vote. For some people it does not matter but in New Zealand we are a small enough country that in our communities we take a lot of pride in knowing our local councillor our local board member—knowing who they are tapping them on the shoulder being able to rock up and express a view. It is of some concern that in larger cities the people who seek office do not reside in the ward for which they are standing so I think the residency disclosure will be informative to the discerning voter and that can be only a good thing.I think all the issues around anonymous donations and greater clarity in that area for all the reasons that Grant Robertson raised and many more are the types of improvements that will ensure again that if we want a participatory democracy where candidates can be assured that there is no kind of secret bankrolling of interests in local body elections it will only be improved by this type of provision.We are heading into the local body election phase so it is really important that the amendments are practical that they are going to achieve what they set out to do and that they are going to be able to ensure that people can get on with voting. But I want to make this general statement: it concerns me that there has been an ongoing decline in participation in local body elections over a period of time now. No one person is to blame but it is certainly a worry when we can see in both the general elections and the local body elections the declining rates of participation. It is nothing to be proud of. So the more we can do to ensure that civics education instils in our children and our young people the necessity to cast their vote have a say in what is happening in their local community and be assured that there are some robust and transparent processes that assure every citizen that their rights and interests in participating in the voting process are clear then I think we will see some confidence being reflected back by more people participating.TIM MACINDOE (Junior Whip—National):I moveThat the question be now put .Motion agreed to.The question was put that the amendments set out on Supplementary Order Paper 198 in the name of the Hon Chris Tremain to Part 1 be agreed to.Amendments agreed to.The question was put that the following amendment in the name of the Hon Chris Tremain to clause 27 be agreed to:in new section 103D(2) replace “subsection (1)(b)” with “subsection (1)”.Amendment agreed to.The question was put that the amendment set out on Supplementary Order Paper 215 in the name of Eugenie Sage to clause 21 be agreed to.A party vote was called for on the questionThat the amendment be agreed to.Ayes49New Zealand Labour 33; Green Party 14; Mana 1; Independent: Horan.Noes71New Zealand National 59; New Zealand First 7; Māori Party 3; ACT New Zealand 1; United Future 1.Amendments not agreed to.The question was put that the amendments set out on Supplementary Order Paper 200 in the name of Holly Walker to Part 1 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes23Green Party 14; New Zealand First 7; Mana 1; Independent: Horan.Noes97New Zealand National 59; New Zealand Labour 33; Māori Party 3; ACT New Zealand 1; United Future 1.Amendments not agreed to.The question was put that the amendment set out on Supplementary Order Paper 252 in the name of Phil Twyford to insert new clause 30AA be agreed to.A party vote was called for on the questionThat the amendment be agreed to.Ayes59New Zealand Labour 33; Green Party 14; New Zealand First 7; Māori Party 3; Mana 1; Independent: Horan.Noes61New Zealand National 59; ACT New Zealand 1; United Future 1.Amendment not agreed to.Part 1 as amended agreed to.Part 2 Amendments to regulationsGRANT ROBERTSON (Deputy Leader—Labour):I just want to take a brief call on Part 2 and in particular the new “Return of electoral donations and expenses” in schedule 2. I just want to reflect on a couple of elements of this new return form. As with the rest of the bill the Labour Party certainly supports the changes that are beingmade here. In particular obviously this reinforces the fact that any donation that exceeds $1500 now has to be declared and that is obviously a useful and important change. The donation form then goes on to talk about what has to be said about the donor who is making that donation of a greater value than $1500. The things that need to be written down are the name of the donor; the address of the donor; the amount of the donation or in the case of aggregated donations the total amount; and the date the donation was received or in the case of the aggregated donations the date that each donation was received.As I discussed in my contribution on Part 1 of this bill the Local Electoral Amendment Bill (No 2) it is useful to put these new clauses alongside the practice that has come up in the past and see why such change is needed. Let us take the example of the donation from Skycity in 2010 to John Banks’ mayoral campaign. How would Mr Banks go about filling out this form? The name of the donor—well John Banks knew the name of the donor Skycity because he went to a meeting at Skycity where he met the chief executive of Skycity and that person handed him an envelope with Skycity’s logo on the outside with a cheque for $15000 from a Skycity bank account. So I think we can tick off the first of the requirements under the new Part A in schedule 2 of the Act set out in schedule 1 which is the name of the donor. It was Skycity.The address of the donor is the second requirement. We can make an assumption that Mr Banks would have known where he was. That is a big assumption because he does have some issues—Denis O’Rourke: In a helicopter.GRANT ROBERTSON: —that is right—remembering exactly where he was. He did not go there in a helicopter Mr O’Rourke—Hon Tau Henare: I raise a point of order Mr Chairperson. I am just wondering whether I could get a steer from you. Currently the Hon John Banks and so on and so forth is before the courts over this matter so I am just wondering whether we are not covered by the sub judice blah blah blah.GRANT ROBERTSON: That is a perfect legal term.Hon Tau Henare: The last bit was “blah blah blah”.GRANT ROBERTSON: Speaking to the point of order—The CHAIRPERSON (Eric Roy): I will hear Grant Robertson.GRANT ROBERTSON: This matter arose yesterday as well during the Committee stage I think it was and it was clarified. I was just looking for the Speaker’s ruling. It was a ruling from Speaker Terris and it made clear that reference can still be made to the matters that are concerned but not any judgment on it.The CHAIRPERSON (Eric Roy): The point of order is a valid one in that we need to be very careful about what we do. It is my understanding that certainly a private prosecution is taking place and the subject matter pertaining to that is off limits. There is a police complaint I think that the member was referring to as well which at this stage has not moved to a court proceeding. But the member’s point is well made and we need to be very conscious that we do not transgress into areas that are sub judice so I will continue to monitor the member.GRANT ROBERTSON: As I said we were looking at a practical example here of new Part A in schedule 2. So we have the name of the donor established. That is Skycity. Could Mr Banks have reasonably known where he was? Well as we have said he does have some issues with that but it is a very large tower in the middle of Auckland and I reckon he would have got there so he could have fulfilled the second criteria the address of the donor.The amount of the donation—there is no doubt here whatsoever. Skycity in its statement in the police report is very clear it gave $15000 to both mayoral campaignsto that of Len Brown and that of John Banks. So there was no confusion there about the amount of money that was on the cheque. They communicated that. The treasurer of Team Banksie was able to write back a receipt to Skycity for the amount of $15000. So Mr Banks would be able to fulfil the third criteria the amount of the donation.The date the donation was received—this is an interesting one because the donation was clearly received on a particular day. Could Mr Banks reasonably be expected to remember what date that was? I am going to cut him some slack here because we have seen some fading in his memory over time and he may not have known what day it was. However the people at Skycity certainly did and when they requested that receipt they no doubt would have communicated to Mr Banks the fact that he had received a donation.So there we are: in those four criteria for donations that exceed $1500 we can now see that John Banks should have been able to fill out a form that said “Yes I got $15000.” and he failed to do that. What is not at issue in any current proceedings is the question of whether or not the police found that Mr Banks had signed a false return. They actually said in their report that Mr Banks did do that. The difficulty they have was that the time had elapsed within which they were allowed to mount a prosecution. There is actually no doubt about that. This form change is a good thing but it just highlights the fact that if someone like Mr Banks wanted to come along and rort the Local Electoral Act which is exactly what he did that was open to him. These law changes will thankfully mean that people like Mr Banks cannot get away with that any more.Part 2 agreed to.Schedule 1The question was put that the amendment set out on Supplementary Order Paper 198 in the name of the Hon Chris Tremain to schedule 1 be agreed to.Amendment agreed to.Schedule 1 as amended agreed to.Schedule 2agreed to.Clause 1agreed to.Clause 2agreed to.Bill reported with amendment.Report adopted.The House adjourned at 12.36 p.m. (Wednesday)