Volume 671 Week 70 - Tuesday 5 April 2011 
Volume 671 Week 70 - Tuesday 5 April 2011 
[Volume:671;Page:17659] 
Tuesday 5 April 2011 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Visitors 
Israel—Speaker Knesset 
Mr SPEAKER 
: I have much pleasure in informing the House that Mr Reuven Rivlin Speaker of the Knesset of Israel is within the precincts of this Chamber. I am sure that members would wish that he be welcomed and accorded a seat on the left of the Chair. 
Mr Reuven Rivlin accompanied by the Deputy Speaker entered the Chamber and took a seat on the left of the Chair. 
Mr SPEAKER 
: I would also welcome his delegation which is in the Speaker’s gallery. I am sure members would wish that they too be welcomed. 
Ministerial Statements 
Earthquake Christchurch—Extension of State of National Emergency 
Hon JOHN CARTER (Minister of Civil Defence) 
: 
 I wish to make a statement under Standing Order 347 in relation to the state of national emergency in Christchurch City. On Thursday 31 March I further extended the duration of the state of national emergency in Christchurch City under section 71 of the Civil Defence Emergency Management Act. That was the sixth extension of the state of national emergency that has applied specifically to Christchurch City since it was first declared on 23 February. I will make a further extension tomorrow Wednesday 6 April. The extensions are necessary to enable the national controller to continue exercising his powers and functions under the Civil Defence Emergency Management Act. 
CHARLES CHAUVEL (Labour) 
: 
 I acknowledge the statement from the Minister of Civil Defence. I also though record some disappointment given that on the last occasion when the Minister advised the House of the renewal of the state of emergency it was pointed out to the Government that the very wide powers under a national state of emergency needed to be questioned as far as their appropriateness for dealing with a regional emergency is concerned. The Minister was asked to address the House on the next occasion when he spoke to the House on this matter after consideration about whether a regional state of emergency would do. I note in this regard that the Cabinet papers that have been released concerning the Canterbury Earthquake Recovery Authority contemplate effectively putting in place such a state to be administered by the new entity to be created by that legislation. Although the Opposition continues to support the need for extraordinary powers to exist in Canterbury I do register my disappointment that the Minister has not addressed the point of whether a national state of emergency remains necessary in the circumstances. 
KEITH LOCKE (Green) 
: 
 The Greens have supported the national state of emergency as a means of mobilising national resources and getting essential recovery work done quickly and efficiently. We praise the many people who have gone the extra mile to get things moving: the people at Orion who got the power back on very quickly; the heavy-truck operators who have been working so hard to get all the silt and rubble cleared away; and the many people who have travelled from cities and towns outside of Christchurch to work there and help the people of Christchurch in their hour of need. 
However alongside the praise we have to note the criticism by Christchurch locals of certain aspects of the civil defence operation and help rectify this situation wherever the criticism is justified. It is distressing that as recently as this morning we still read in the Christchurch  
Press 
 newspaper that people are complaining that premises are being knocked down without the owners or residents even being informed. In this morning’s  
Press 
 Hayato Sakaguchi who operated the Billiken Japanese restaurant in Colombo Street and lived in the apartment upstairs complained that his building had been demolished without notification or any opportunity to recover valuables despite the fact that he had registered his details on the official www.recovercanterbury.co.nz earthquake website. 
The slow overly cautious zero-risk approach to giving business owners access to premises is still causing frustration and slowing business recovery. The closer the earthquake recovery operation is to the people the less we will see such problems. In this respect the quicker the national state of emergency can be ended and more powers can be devolved to the local people including the Christchurch City Council the better it will be. Bodies like the newly announced Canterbury Earthquake Recovery Authority need to be truly accountable to Cantabrians. 
In the Minister of Civil Defence’s statement today he did not really give any idea—and I support what Charles Chauvel said—of when the national state of emergency will be ended or even what criteria will be used to end it. The Greens have been asking written questions on that matter and we have not had any real reply. 
The plan for the regeneration of Christchurch particularly the central business district needs to be locally driven. Kennedy Graham and the Greens in Christchurch are helping by planning a series of forums to gather ideas for rebuilding the city on a sustainable basis. 
We always need to be mindful of the huge challenges being faced by the people of Christchurch and of our responsibilities as a nation to help them. Christchurch businesses and workers will need substantial financial support for a long while yet which is why the Greens are pressing for a national earthquake levy on higher-income earners. We cannot see how the money for that support will be generated to a sufficient amount in any other way. We cannot just say to Christchurch businesses and workers that they will get 3 months worth of income support and then they are on their own or on the dole. 
We do support the extension of the state of emergency but we would like more information in future. Thank you. 
Hon JOHN CARTER (Minister of Civil Defence) 
: 
 I just want to say that it is wonderful when people have 40/40 vision 5 weeks later. The point is that the state of emergency will be continued until we have a replacement. The second thing is that we did endeavour to contact the person the member complained about but we could not find them and had to make the decisions that we did. Of course we are always concerned first and foremost about the safety of people. Finally I just make the point again that the national state of emergency applies specifically to Christchurch City. 
Questions to Ministers 
Earthquake Christchurch—Temporary Levy on Income 
1. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Minister of Finance 
: Does he agree with 57 percent of New Zealanders who according to a recent UMR poll support the introduction of a temporary earthquake levy to pay for the rebuilding of Christchurch? 
Hon STEVEN JOYCE (Associate Minister of Finance)  
on behalf of the  
Minister of Finance 
: Paying for the rebuilding of Christchurch is not a simple choice of either introducing a levy or funding it through debt which was one of the choices that was put to respondents in the poll. The Government is in effect already borrowing to pay for demands such as the welfare needs of Christchurch residents and to ensure rebuilding can begin quickly. So the Government has to borrow initially; then the question will be how the money is paid back. What we do agree on is that New Zealanders want to see the burden of rebuilding Christchurch shared not fall only on Christchurch residents. I note that when the question was put in a different way to respondents in the same poll 40 percent of respondents favoured the Greens’ levy plan whereas a total of 51 percent of respondents preferred that the Government borrow to fund rebuilding or make cuts in expenditure. 
Dr Russel Norman 
: In light of yesterday’s financial statement to the Government showing that the Crown is in a worse-than-expected fiscal position will he take the opportunity to reconsider a levy rather than going further into debt to pay for the rebuild? 
Hon STEVEN JOYCE 
: The reality is that we have to go into debt because the money needs to be spent now; then the question will be about paying it back later. I also point out though that the Government has decided it will have a strong focus on its own expenditure and making sure that it is all spent well taking into account whatever reprioritisation is possible rather than imposing a levy. 
Dr Russel Norman 
: Is he concerned that a big increase in Government debt could lead to a credit downgrade; and does he agree that a credit downgrade will add significantly to households’ mortgage payments? 
Hon STEVEN JOYCE 
: Of course the Government would be concerned if there was a blowout in Government debt and that is why it is very important to get the Budget right—to make sure that we prioritise all our expenditure properly and minimise the impact on our overall debt. 
Dr Russel Norman 
: Does he agree that every dollar raised by a temporary earthquake levy is $1 less in borrowing and every dollar less in borrowing reduces the risk of a credit downgrade and hence higher mortgage payments for New Zealand householders? 
Hon STEVEN JOYCE 
: I have some trouble with the member’s premise. He seems to think we should just ignore what we are spending already and just get people to write us cheques for more money. The Government is taking the view that it should make sure it gets the absolute best from the expenditure it is already doing. I understand that the reality is that if we do the exercise on the Greens’ proposed levy it shows that the levy would raise at best around $600 million a year which would mean that people in Christchurch would be waiting a long long time before we would be able to afford the rebuild. 
Dr Russel Norman 
: Does the Minister share the concerns of many economists that severe Government spending cuts at a time when the economy is already fragile could result in a renewed recession? 
Hon STEVEN JOYCE 
: I reject the characterisation of “severe” spending cuts. The Government will be prioritising its expenditure. We are doing it carefully and members will have to wait to see the Budget. 
Amy Adams 
: How long would the suggested tax levy actually take to fund the costs of the earthquake? 
Hon STEVEN JOYCE 
: I understand that the proposal from the Greens is to raise the income taxes of those earning above $48000 a year. Even ignoring the damage that that would do to economic growth and the erosion of the tax base it would raise a total of around $600 million per year. At that rate it would take about a decade to fund the direct costs of the quake. That is notwithstanding the fact that the amount of interest on top of the debt would also have to be borrowed in the meantime. So such a levy could hardly be called temporary. 
Dr Russel Norman 
: I seek leave to table a copy of the Greens’ proposal which shows that the levy would raise $1 billion per year. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Dr Russel Norman 
: Why is the Government ignoring the compassionate offer of New Zealanders to chip in to pay for a levy at $1 billion a year which is a much more fiscally responsible approach and one that avoids the risk of a credit downgrade due to increased borrowing and that also avoids the risk of inducing a new recession if there are big spending cuts in the Budget? 
Hon STEVEN JOYCE 
: I note that it is a compassionate offer by the Green members on behalf of a whole bunch of New Zealanders they do not speak for. I think that is largely what is going on here. That is cool and everything but the reality is that the Government believes strongly that we can reprioritise expenditure. As I have said the Budget will be out in the middle or at the end of May or something like that and the Greens will have a chance to see how the Government will do that. 
State-owned Enterprises—Shareholder Returns and Average Bond Rate 
2. 
Hon PHIL GOFF (Leader of the Opposition) 
 to the  
Prime Minister 
: What according to the 2010 Investment Statement of the Government of New Zealand was the average total shareholder return over the last 5 years from State-owned enterprises and the average bond rate and is that consistent with his statement that “it is the Government’s intention to use the proceeds of those initial public offerings to actually invest in other assets that the Government would have to fund through the Government bond rate”? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 The average total shareholder return for the Crown’s commercial portfolio over the last 5 years was 17.5 percent. However most of the total return was from unrealised changes in value and Treasury advises that those calculations are not particularly robust and are in fact potentially misleading. The average net dividend over the 5 years was only 4.6 percent. The average bond rate was 6 percent. To the last part of the member’s question yes. 
Hon Phil Goff 
: If the average return from the State-owned enterprises to shareholders is 17 percent and the cost of raising money through bonds is 6 percent how is the taxpayer the winner from selling off the State-owned enterprises instead of raising money through bonds? 
Rt Hon JOHN KEY 
: The total average return—not the average return—is 17.5 percent which is probably why the Leader of the Opposition wants the Government to resign. He wants to have a snap election because he is confused between our polling numbers and Labour’s polling numbers. 
Hon Phil Goff 
: I raise a point of order Mr Speaker. I think you have made the point in the past that superfluous comments at the end of the Prime Minister’s statements—[ 
Interruption 
] 
Mr SPEAKER 
: I apologise to the member. Senior members know they should not interject during a point of order. The honourable Leader of the Opposition had not finished his point of order. 
Hon Phil Goff 
: The point of order was quite clear. You have ruled in the past Mr Speaker that those sorts of comments at the end of an answer to a straight question are not in order. 
Mr SPEAKER 
: I think the member makes a reasonable point that his question was not unfair and did not deserve quite that answer. I think the right honourable Prime Minister should come back to the question and actually answer it. If there is debate about it I invite the honourable Leader of the Opposition to repeat his question. 
Hon Phil Goff 
: How does the Government—and therefore the New Zealand taxpayer—benefit when the return from State-owned enterprises is about 17 percent and the bond rate is 6 percent? 
Rt Hon JOHN KEY 
: I raise a point of order Mr Speaker. Sorry but that was not the question that the member asked the first time—[ 
Interruption 
] 
Mr SPEAKER 
: I say to the Labour front bench that a point of order is being heard and they will not interject. If the question was not the same it seemed to me to closely approximate it. The Leader of the Opposition asked how the taxpayer benefited when the total—or whatever it is—return from State-owned enterprises was 17.5 percent and the bond rate was 6 percent. I can think of plenty of answers to that question that are available to the Prime Minister but the Prime Minister did not use any of those answers which could have been reasonable. The questioner did not attack the Government politically; he asked a reasonable question. I think that question deserves a reasonable answer. 
Rt Hon JOHN KEY 
: I raise a point of order Mr Speaker. I will paraphrase for the member: he claimed that the average return was 17.5 percent. He did not say “total”; he said the average return was 17.5 percent. That is totally different and completely incorrect. If he cannot work that out then he obviously deserves a stupid answer. 
Hon David Parker 
: Speaking to the point of order— 
Mr SPEAKER 
: The member will resume his seat. The Prime Minister should know that it will not help the good order of the House to make that kind of comment during a point of order. I hear the point the member is making and that is why I invited the Leader of the Opposition to repeat his question so that what he intended to ask could be asked. I accept the point the right honourable Prime Minister makes that the member may not have asked exactly what he intended to first time round. That is why I invited him to repeat his question. 
Hon David Parker 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Well I have invited his leader to repeat—[ 
Interruption 
] Order! 
Hon David Parker 
: Yes I know Mr Speaker. I am making this point with the approval of my leader. The mistake made was that the Prime Minister misinterpreted Mr Goff’s question.  
Hansard 
 will show— 
Mr SPEAKER 
: The member will resume his seat immediately. There is no need to go back over that old ground. There was a dispute over the exact wording of the question asked and that was why I invited the honourable Leader of the Opposition to repeat it so that we can get an answer to the question that the honourable Leader of the Opposition intended to ask. 
Hon Phil Goff 
: Will not the Government—and therefore New Zealand taxpayers—be net losers if the returns to the Crown from State-owned enterprises sold are worth more than the money he would save from not having to raise that money from bonds? 
Mr SPEAKER 
: That was a somewhat different question but still. 
Rt Hon JOHN KEY 
: Possibly but not necessarily. If that was always going to be the case then arguably that might be the situation. However a mixed-ownership model may in fact allow the new entity to generate even more returns so that is not necessarily the case. I can present to the member an example of where buying a State-owned enterprise did not yield a terribly good return for the New Zealand Government. That State-owned enterprise is called KiwiRail. 
Hon Phil Goff 
: Was the percentage dividend return from State-owned enterprises earmarked for sale higher or lower than the 10-year bond rate last year? 
Rt Hon JOHN KEY 
: I do not have that information to hand. But the point is not really what it was; the point is—if one wants to follow this argument—what the likely returns are vis-à-vis the Government bond rate over the next 10 years. I am not aware of those returns at this point. 
Hon Phil Goff 
: Is he aware that the total return to the Crown of State-owned enterprises that are earmarked for sell-down has been double or treble the dividend return over the last 5 years? 
Rt Hon JOHN KEY 
: As I said that is not the average net dividend which is what the Crown receives; it is actually from a benchmark Treasury analysis of its assets. As I said in answer to the primary question Treasury advises that those calculations are not particularly robust; in fact they are potentially misleading. 
Hon Phil Goff 
: Does he propose to restrict the sale of shares in those State-owned enterprises to his so-called mum and dad investors or will a substantial number of those shares ultimately find their way into the hands of foreign investors with dividends being sent out of the country? 
Rt Hon JOHN KEY 
: The Government is taking advice on how to prioritise New Zealand mum and dad investors. It is worth remembering of course that at all times the Government will hold a majority ownership because we will not go below 51 percent. It is also worth looking at Contact Energy as a good example of where New Zealand mum and dad investors bought shares. Although the shares may have individually changed hands as Pattrick Smellie pointed out it is actually misleading to say that they do not continue to hold them. In fact as he wrote in a piece he did about a year ago there is a loyal bunch of Contact Energy’s Kiwi shareholders—the register shows a very wide range of ownership by Kiwi mums and dads. 
Hon Phil Goff 
: In respect of Contact Energy which the Prime Minister has just mentioned and which was privatised by a former National Government is it not correct that now more than $100 million a year goes out of this country and into the pockets of foreign investors out of assets that were once owned and benefited from by all New Zealanders? 
Rt Hon JOHN KEY 
: That might be the case but I also point out given that New Zealand has one of the highest levels of external liabilities as a percentage of GDP that our borrowing and therefore bond returns would go overseas as well. 
Hon Phil Goff 
: Is he aware of and does he accept the findings of energy expert Molly Melhuish that the sale of energy companies overseas to private shareholders and pressures from them to increase profits have resulted in the prices—[ 
Interruption 
] I raise a point of order Mr Speaker. I am sure the Prime Minister wants to hear the question. If his colleagues stop barracking they might do that. [ 
Interruption 
] 
Mr SPEAKER 
: Both members will stand and—no I will not ask that of the shadow Leader of the House because it is somewhat difficult for him to stand up at the moment. But I say to both the Leader of the House and the shadow Leader of the House that I am on my feet—[ 
Interruption 
] The Hon Simon Power will also respect that. The Leader of the House will not interject during a point of order neither will the shadow Leader of the House—unless I got that wrong. 
Hon Trevor Mallard 
: You got it wrong. 
Mr SPEAKER 
: Someone on my left interjected. I apologise to the shadow Leader of the House. I understand it was the honourable Leader of the Opposition. I apologise to the honourable member; I obviously got that wrong. But both members will cease interjecting. OK we have had a bit of fun now but we will come back to order. While the Prime Minister has been answering questions there have been quite loud interjections from the Opposition and I have not stopped them. Maybe I should have but if I were to come down on the Government because of interjecting during that question it would have been unfair of me. I ask members to be a little reasonable about the level of interjection. The Leader of the Opposition had better start his question again. 
Hon Phil Goff 
: Thank you very much Mr Speaker. Does the Prime Minister accept the findings of energy expert Molly Melhuish that the sale of energy companies to private shareholders and pressure from those shareholders to increase profits have resulted in the prices of electricity to Kiwi consumers for the shareholder-owned companies in New Zealand going up much faster than prices for the State-owned enterprises? 
Rt Hon JOHN KEY 
: No. I point out that the dividend return over the 9 years that Labour was in office for the three State-owned enterprises in the energy sector—Genesis Mighty River Power and Meridian Energy—was 72 percent. If gouging was happening it was actually happening under a Government-owned company. 
Infrastructure Programme—Progress 
3. 
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister for Infrastructure 
: What progress has the Government made on its infrastructure programme? 
Hon STEVEN JOYCE (Associate Minister for Infrastructure) 
 on behalf of the  
Minister for Infrastructure 
: The Government is directly spending billions of dollars each year on improving infrastructure and with it supporting thousands of jobs across the country. The latest example is the awarding last week of the $150 million contract for construction of the Ngaruawahia section of the Waikato Expressway. Engineering works are expected to begin on site in September—about 3 years earlier than expected when a previous Government was involved. Construction of the Ngaruawahia section will create up to 300 local jobs and when completed the Te Rapa and Ngaruawahia sections together will provide a 20-kilometre long new northern entrance for the city of Hamilton. 
David Bennett 
: How is the Waikato Expressway helping the regional economy? 
Hon STEVEN JOYCE 
: Construction is already underway on the 7.5 kilometre Te Rapa link where 200 people currently are directly employed. In addition there have already been over 1100 contractors working on the project with tasks ranging from design and planning to construction and engineering. Once completed the long-term economic benefits of the Waikato Expressway will be hugely important. It will bring the major cities of Auckland and Hamilton much closer together. The Government is committed to lifting productivity creating jobs and helping to get our goods to market more quickly. 
Nikki Kaye 
: How does this fit into the Government’s wider improvements for infrastructure? 
Hon STEVEN JOYCE 
: Work to unclog the arteries of our State highway network is just one aspect of the Government’s infrastructure investment. We are investing $7.5 billion in public amenities such as schools State houses hospitals prisons and ultra-fast broadband over 5 years. In addition we are supporting KiwiRail through the $4.6 billion KiwiRail Turnaround Plan and we have allocated $1.6 billion to metro rail improvements in Auckland and around $700 million to metro rail improvements in Wellington. Another important transport infrastructure investment was launched as late as yesterday with the HOP card an integrated ticket launched with the Associate Minister for Infrastructure’s help by Auckland Transport and the New Zealand Transport Agency. Integrated ticketing is great for consumers and will enable users to have faster and more convenient access to all public transport services. 
Vulnerable Citizens—Prime Minister’s Statements 
4. 
Hon ANNETTE KING (Deputy Leader—Labour) 
 to the  
Prime Minister 
: Does he stand by his statement “this Government is not prepared to turn its back on our most vulnerable citizens when they most need our help”? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 Yes which is why in difficult economic times we have maintained and increased benefits superannuation and income support for families and why we have continued to increase funding for important public services like health and education. 
Hon Annette King 
: What is he prepared to do to assist New Zealanders who are most in need in light of reports over the weekend that a boy was found eating cockroaches because he was starving and that the budgeting services are receiving reports of pensioners eating cat food as the cost of living keeps going up at a rapid rate? 
Rt Hon JOHN KEY 
: I have seen another report in relation to the boy involved and I understand that the case could be an issue of neglect not one of family income support. The Government obviously supports not only a benefit-based system for those who find themselves in need but also significant hardship grants. As we have seen in the case of Christchurch we have put a quarter of a billion dollars into funding support for Christchurch people in the first 14 weeks since the earthquake. 
Hon Annette King 
: Is he aware that many low-income families cannot afford even a basic nutritious diet for their children especially if there are teenagers in the household who need far more food according to the latest vulnerability report from the Council of Christian Social Services; if so what will he do to help those families who are struggling 5 months after the Government’s tax cuts took effect which were supposed to make most people better off? 
Rt Hon JOHN KEY 
: The price of food moves around quite a lot. It is highly volatile. So some things go up in price and some things go down in price. The Government has been putting more money into budgeting services to try to give people help and support. We also fund a significant number of emergency grants as the member will be aware on top of the basic benefit system. 
Hon Annette King 
: If that answer from the Prime Minister is correct can he then explain why the Salvation Army in Whangarei has seen an increase of 90 percent in food parcels since the New Year and is now having to ration them to one per family? 
Rt Hon JOHN KEY 
: I have not seen the report and I have not seen the details from Whangarei. But I will say that my experience in being involved in organisations that give food parcels shows that a lot of them do have a system where they do not allow people to have too many in a certain time—they do not want to build dependency. 
Hon Annette King 
: What will he do to help the increasing number of people in need of help as shown by the 37 percent increase in food bank clients at the Catholic Family Support Services of Hamilton the Glen Eden food bank giving out 73 food parcels in 3 hours and the demand for Salvation Army food parcels rising by 16 percent last year indicating that there are a large number of vulnerable New Zealanders who are not reducing in terms of their need for help under this Government? 
Rt Hon JOHN KEY 
: The Government can stand on a very proud record of keeping benefit entitlements and making sure that payments are made to all vulnerable New Zealanders despite running a very very large deficit as a result of very poor economic conditions. I think that if ever a Government could be excused for cutting costs it would be this Government because there is not a lot of money around. 
Hon Annette King 
: From the poorest? 
Rt Hon JOHN KEY 
: Well right across the board. But this Government has actually maintained all that support. 
Hon Annette King 
: Is he prepared to accompany me on one of my visits to a food bank so he can listen to those people who work on the front line and determine whether people are making poor lifestyle choices as he has claimed? 
Rt Hon JOHN KEY 
: I regularly go out and see social services. Despite what is a highly attractive offer from the deputy leader of the Labour Party no I do not want to hang around with her at any time to be perfectly honest. 
Mineral Resources—Government Plans for Development 
5. 
Hon JOHN BOSCAWEN (Deputy Leader—ACT) 
 to the  
Acting Minister of Energy and Resources 
: Is it Government policy for New Zealand to become a “highly attractive global destination” for oil exploration with expansion of the oil and coal sectors leading to a “step change” in the country’s economic growth as set out in the document  
Developing Our Energy Potential 
; if not why not? 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. Before the Acting Minister answers the question it is my understanding that there cannot be an Acting Minister if the actual Minister with the warranted responsibility is in the House at the time. 
Mr SPEAKER 
: It may be that my information is not correct on this issue but my understanding is that while Hekia Parata is the Acting Minister of Energy and Resources 
the portfolio responsibilities have been handed over to her by the Government. Those responsibilities have been transferred so she is the Minister for the time being while she is Acting Minister. That is why I call the Hon Hekia Parata to answer the question. 
Hon HEKIA PARATA (Acting Minister of Energy and Resources) 
: 
 Tena koe Mr Speaker. Yes. 
Hon John Boscawen 
: Is it Government policy to provide a step change in economic growth for the West Coast by supporting open-cast mining of Pike River if feasible or does the Government not have a policy on the conditions under which the Pike River mine would be allowed to reopen? 
Hon HEKIA PARATA 
: Our Government in the past 2 years has been pursuing a number of opportunities to create wealth in order to build a stronger economic foundation for our country. We are continuing to explore opportunities in oil gas and coal throughout New Zealand where extraction is feasible and within our legal framework. 
Hon John Boscawen 
: I raise a point of order Mr Speaker. I specifically referred to Pike River. My question was very specific. 
Mr SPEAKER 
: I will let the member repeat his question. 
Hon John Boscawen 
: Is it Government policy to provide a step change in economic growth for the West Coast by supporting open-cast mining of Pike River if feasible or does the Government not have a policy on the conditions under which the Pike River mine would be allowed to reopen? 
Hon HEKIA PARATA 
: Pike River Coal is in the hands of receivers. They are making decisions about its future at present. 
Hon John Boscawen 
: Would the Government look favourably on a proposal to extract over $10 billion worth of coal through a combination of open-cast mining and the tunnelling of the Pike River mine if such a proposal were put forward? 
Hon HEKIA PARATA 
: Pike River Coal is in the hands of receivers. We have no such proposals before us. 
Charles Chauvel 
: Can the Acting Minister confirm that the decision to grant an exploration permit to Petrobras for the Raukumara basin included no environmental considerations just like the seven other major offshore exploration permits handed out by her Government since last year’s Gulf of Mexico oil spill? 
Hon HEKIA PARATA 
: No. 
Earthquake Christchurch—Extension of Business Assistance Package 
6. 
Hon CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister for Social Development and Employment 
: Is the Government considering extending the business assistance package for employers and employees beyond the 14-week period currently signalled; if not why not? 
Hon PAULA BENNETT (Minister for Social Development and Employment) 
: 
 The situation is changing all the time but on balance we think we have got it about right at more than 3 months’ extra financial assistance. We have taken the advice of organisations such as the Canterbury Employers’ Chamber of Commerce and the Canterbury Development Corporation. We do not intend to extend the business assistance package at this time but we are constantly looking at it. 
Hon Clayton Cosgrove 
: Will the current business assistance package be terminated after the extra 6-week period ends given the Prime Minister’s statement that “I think everyone acknowledges we can’t go on forever”? 
Hon PAULA BENNETT 
: The intention at the moment is for it to run for another 8 weeks. We have 2 more weeks going to 18 April and then the employment support package will be based on quite different criteria. It will not include sole traders and there will be more business mentors who are going in at the moment and talking to those businesses to assess their eligibility. There is no intention to extend it at the moment but as I say the situation is constantly changing. 
Hon Clayton Cosgrove 
: Does she believe that 14 weeks after the initial quake employers and employees will be in a strong enough position to proceed without assistance given that 6 weeks have passed since 22 February and very little has changed except for the fact that thousands more people are now out of work and hundreds of businesses are still struggling desperately? 
Hon PAULA BENNETT 
: We have taken a lot of advice from businesses on the ground: the Canterbury Employers’ Chamber of Commerce and others. They have said to us that some businesses have obviously already relocated and others intend to do so. After 14 weeks one has to acknowledge that some of those businesses will not survive. We have seen that in recent weeks and we will see more of it coming up. It is a matter of how long we support them to relocate and allowing some others to close because that is unfortunately inevitable. 
Katrina Shanks 
: Has the Minister received any reports about the number of businesses and people still needing the earthquake support package? 
Hon PAULA BENNETT 
: We are seeing quite some changes. I can report that of the 7381 individuals who were on the job loss cover nearly half of them—3500—have told us that they do not need it any more. They went on it in those early weeks and they have now come off it presumably because they have all found work and no longer need that job loss cover. We have also seen that one-third of sole traders have opted in but two-thirds have not. We are also seeing that for the employment support subsidy. As I say it is changing every day. It is a matter of making the system flexible enough to acknowledge that change and to offer the support in the right place. 
Hon Clayton Cosgrove 
: Given her last answer has any Government agency provided her with advice as to how many Cantabrians will end up on the unemployment benefit once the current support package ends; if so what is that advice and what are the numbers? 
Hon PAULA BENNETT 
: I have heard various numbers in the last few days but to be frank they have all come from the Opposition. It feels like that member is plucking numbers out of thin hair quite frankly—sorry I meant to say plucking numbers out of thin air. Members need to be pretty careful where they are getting those figures from. I think they are actually not true. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. With respect the question was specific. It asked the Minister whether any Government agency had provided her with any advice etc. She went on to reference other reports she had received from me and others. I am not a Government agency and I asked her specifically whether she had received any advice— 
Mr SPEAKER 
: I am not sure that is what the member asked. I may have to apologise if I am wrong but I do not recollect the member asking particularly about Government agencies. I thought he asked about advice. The dilemma I have is that I cannot be sure that the question asked will be exactly the same. [ 
Interruption 
] I am on my feet. The issue is being disputed so to me it is reasonable to allow the member to repeat his question but I will be checking the  
Hansard 
 to make sure that the member is correct on that matter—that he did ask about Government agency advice. I invite him to repeat his question. 
Hon Clayton Cosgrove 
: I will repeat the question absolutely. Has any Government agency provided her with advice as to how many Cantabrians will end up on the unemployment benefit once the current support package ends; if so what is that advice and what are the numbers? 
Hon PAULA BENNETT 
: No I have not had advice on how many will end up on the unemployment benefit. We have certainly had advice on how many employers may not be able to relocate and we are certainly seeking advice on where we are moving skills training. But it is not a matter of concentrating on how many are going on the unemployment benefit; it is about supporting those businesses and those employees—those people who most need it. 
Hon Clayton Cosgrove 
: Can she tell the House why she has not proactively sought advice from her Government agency or any other as to how many people will end up on the unemployment benefit once the business support package ends given that she is the Minister for Social Development and Employment and given that the impact of the termination will create a major problem for earthquake victims and business owners desperately trying to survive? Why has she not even asked her agency to do some projections—or do her job? 
Hon PAULA BENNETT 
: Our concentration has very much been on supporting the businesses and employees that need us most. The member may not understand the social security system. That support is there for however many need it whether that figure is 1000 or a few thousand. The reality is—[ 
Interruption 
] 
Hon Clayton Cosgrove 
: Why don’t you ask your department? 
Hon PAULA BENNETT 
: If that member stopped picking numbers out of thin air and actually looked at what needed to be done which is supporting the employees who need us most he would see that the system is there for those who need it however many do. 
Crime Statistics—Trends 
7. 
JACQUI DEAN (National—Waitaki) 
 to the  
Minister of Police 
: What reports has she received on the latest trends in the level of crime in New Zealand? 
Hon JUDITH COLLINS (Minister of Police) 
: 
 I am very pleased to report that total recorded crime per head of population dropped by 6.7 percent in 2010. This result is a tribute to the dedication and tenacity of our law enforcement officers. The police have put more officers on patrol on the front line and are working closely with communities and other agencies to prevent crime happening in the first place. The Department of Corrections is also playing an important role by keeping the most dangerous people in our society securely locked away. At the same time it is focusing its efforts on rehabilitation in order to help offenders to stay out of trouble when they are released. I commend our law enforcement officers for these results and for the important work that they are doing to keep our communities safe. 
Jacqui Dean 
: What other factors have influenced the drop in recorded crime? 
Hon JUDITH COLLINS 
: One of the key factors is that this Government is determined to reduce the number of people who become the victims of crime. We have put extra police officers on the front line passed new legislation to strengthen their ability to fight crime and given them new tools such as Tasers and digital radios. We have also increased our focus on reducing the number of people who reoffend. There are now more prisoners than ever before undertaking drug treatment work training and education. However these results do not signal that we will be relaxing our efforts to fight crime. Although the drop is consistent with a long-term trend we will continue to back our law enforcement agencies to keep up their great work. 
South Canterbury Finance—Treasury Advice 
8. 
Hon TREVOR MALLARD (Labour—Hutt South) 
 to the  
Prime Minister 
: Did he tell a meeting in Timaru last week “The entire time I’ve been Prime Minister I’ve had Treasury in my office week after week month after month telling me South Canterbury Finance was going bankrupt”? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 I do not have the transcript with me and I cannot recall exactly what I said but I certainly received regular updates from Treasury on South Canterbury Finance. The Government was aware of the company’s financial difficulties but our advice was that there was a chance however slim it might have been that South Canterbury Finance could trade its way out of its difficulties. In fact that did not happen. South Canterbury Finance was placed in receivership in August 2010 and payments were made to deposit holders under the terms of the 2008 Crown Retail Deposit Guarantee Scheme devised and implemented by the then Labour Government. 
Hon Trevor Mallard 
: If Treasury advice was that there was a chance that the firm was going bankrupt why did he tell people in Timaru that Treasury told him it was going bankrupt? 
Rt Hon JOHN KEY 
: The point was that unless the firm could find a buyer and therefore a capital injection it was highly likely that it would go bankrupt. In fact it could not find a buyer and it did go bankrupt. 
Hon Trevor Mallard 
: How much would the Crown have saved if the Government had taken the initial Treasury advice and not allowed South Canterbury Finance into the guarantee scheme because as Treasury advised him it was never compliant with the scheme? 
Rt Hon JOHN KEY 
: My understanding is that that was arranged by the previous Labour Government and as per the ministerial statement to Parliament South Canterbury Finance was admitted to the scheme on 19 November 2008 which happened to be the day that this Government was sworn in. 
Hon Trevor Mallard 
: Was the signature that brought South Canterbury Finance into the scheme that of John Whitehead on behalf of Bill English? 
Rt Hon JOHN KEY 
: It was most probably on advice given to the then Labour Government on the scheme it devised at the time. But I think it is worth remembering why Michael Cullen wanted South Canterbury Finance to go into the scheme. 
Hon Trevor Mallard 
: No. 
Rt Hon JOHN KEY 
: Yes Michael Cullen did. The reason was quite simple: if South Canterbury Finance along with other finance companies had not gone into the scheme as the member would know as a former associate finance spokesperson those companies would have gone bankrupt. The level playing field was changed at the point that the then Labour Government—by the way at the Labour Party conference at the start of Labour’s election campaign—announced the scheme. 
Jo Goodhew 
: With hindsight is there anything that this Government could have done differently in order to lower the cost to taxpayers? 
Rt Hon JOHN KEY 
: No. Once the Crown guarantee was made available to finance companies by the previous Government and South Canterbury Finance was admitted to the scheme in 2008 the die was effectively cast. It became evident over time that the company had made bad loans and under the terms of the scheme taxpayers were legally obliged to make good any losses to deposit holders. No amount of wishful thinking and none of the arrangements suggested by the previous prospective buyers can alter that fact. It is sad that the Labour Government did not work that out when it announced the scheme at the Labour Party conference. 
Hon Trevor Mallard 
: Subsequent to the initial bringing into the scheme of South Canterbury Finance under the signature of Mr English were there two further opportunities to take it out that the National Government decided not to take up which therefore cost the Crown over an extra billion dollars? 
Rt Hon JOHN KEY 
: No. Firstly as the Minister of Finance said in his ministerial statement to Parliament on South Canterbury Finance despite the deteriorating position South Canterbury Finance remained in compliance with the deed of guarantee and as such there was no ability or cause for the Crown to withdraw its guarantee. Secondly South Canterbury Finance failed under your scheme not the— 
Mr SPEAKER 
: The Speaker does not have any scheme. 
Hon Rodney Hide 
: Has the Prime Minister seen Phil Goff’s call in the wake of the South Canterbury Finance collapse for the entire Government to resign and what is his response to Phil Goff’s secret election strategy? 
Rt Hon JOHN KEY 
: Tempting is what I think of his offer. Clearly there is a game of one-upmanship going on over there as those members sort out who will be the real leader. 
Resource Management Act Reforms—National Consenting Policy 
9. 
CHRIS AUCHINVOLE (National—West Coast - Tasman) 
 to the  
Minister for the Environment 
: What advice has he received on major resource consents being considered under the Government’s new national consenting policy? 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 I am advised that $5 billion worth of major infrastructure projects are being progressed under the new national consenting policy introduced by the Government in the 2009 reforms of the Resource Management Act. These projects include new renewable power stations airport expansions motorways prisons and transmission projects. A key advantage of this new process is a single robust submission hearing process taking 9 months rather than a drawn-out process of multiple submission stages and appeals taking many years. The first project lodged under the new policy was the $1 billion Contact Energy Tauhara stage two geothermal station. This was processed under the 9-month timetable enabling all parties to get a fair hearing and this has resulted in robust consent conditions that protect the environment. 
Chris Auchinvole 
: What benefits are there for ordinary New Zealanders from these more-efficient resource consenting processes for major infrastructure? 
Hon Dr NICK SMITH 
: Power prices relate directly to supply and demand. The problem historically is that taking many many years to get resource consents has constrained power supply and contributed to the very steep rise in electricity prices over the past decade. The more-efficient consent processing also helps security of supply in that delays in getting new power stations built and new transmission lines in place only increases the risks of blackouts and brownouts as we experienced over the last decade. It is also in the interests of New Zealanders that we are able to— 
Hon David Parker 
: There hasn’t been a brownout in New Zealand since the 1950s. 
Hon Dr NICK SMITH 
: The member who was previously the Minister of Energy obviously did not recognise the problem in Auckland where there were major power failures and the two periods when he had to plead with the public of New Zealand to save power because not enough power stations were built and when record amounts of coal were burnt to keep the lights on. The member opposite is embarrassed that this Government’s reforms are working so effectively in getting new power stations consented. 
Charles Chauvel 
: What monitoring is the Minister undertaking of the costs to parties involved in his new national consenting policy in light of reports of legal and consulting bills in the millions of dollars being incurred by those parties thanks in part to the tight 9-month timetable imposed and also to unclear policies and processes at his new Environmental Protection Authority? 
Hon Dr NICK SMITH 
: The feedback I have had from major investors like Contact Energy is that they would much prefer the certainty of the constrained timetable and the one-step process rather than the ridiculous examples we have such as the West Wind wind farm project here in Wellington which took over 3 years for consent. The uniform opinion both from objectors as well as applicants is that they prefer the national consenting process which is robust but is set to a timetable and is producing consents like the billion-dollar Tauhara project at reasonable cost. 
Charles Chauvel 
: I raise a point of order Mr Speaker. My question was directed toward asking the Minister what monitoring he was undertaking of the costs to parties involved in the new consent process not about what he thought or what he has heard anecdotally of the preferences of— 
Mr SPEAKER 
: If the member had asked only that he could have expected a more precise answer but I recollect that the question went on to become a much longer question that included more than just that in it. I believe that the Minister was responding to some of the rest of that question. If I have that wrong I am prepared to accept I have it wrong but I believe that the member did include more than just that in his question. 
Energy Strategy—Warm Up New Zealand: Heat Smart 
10. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Acting Minister of Energy and Resources 
: Does she agree that the joint scheme initiated by the Green Party and the Government Warm Up New Zealand: Heat Smart is the best initiative in the  
Draft New Zealand Energy Strategy 
 because it is providing hundreds of thousands of New Zealand households with warm dry energy-efficient homes and creating thousands of clean green jobs? 
Hon HEKIA PARATA (Acting Minister of Energy and Resources) 
: 
 Tena koe Mr Speaker. The Government agrees that Warm Up New Zealand: Heat Smart programme has been effective in improving insulation and heating in thousands of New Zealand homes. To date over 91500 homes have been retrofitted. 
Dr Russel Norman 
: Will the final version of the  
New Zealand Energy Strategy 
 change from the version mistakenly released last week and have a greater focus on smart green energy solutions like the Warm Up New Zealand scheme instead of prioritising the development of fossil fuels? 
Hon HEKIA PARATA 
: The Government is yet to finalise its energy strategy. 
Dr Russel Norman 
: Is she aware that if New Zealand goes ahead and digs up its lignite coal as proposed in the draft strategy it will result in the release of greenhouse emissions equivalent to 150 times our current annual emissions; and how is that compatible with the “50 by 50” target for reducing emissions? 
Hon HEKIA PARATA 
: The Government has not yet finalised its energy strategy. 
Dr Russel Norman 
: Does she agree that when the Government does finalise its energy strategy it would be best if the Government were to embrace a clean green energy strategy rather than that proposed in the draft strategy which is to embrace fossil fuels? 
Hon HEKIA PARATA 
: The Government has not yet finalised its energy strategy and those issues are being taken into account. 
Fishing Industry—New Zealand Companies’ Use of Foreign Boats 
11. 
Hon SHANE JONES (Labour) 
 to the  
Minister of Fisheries and Aquaculture 
: Does he still have no major concerns about the way foreign boats were used by New Zealand companies as the  
Nelson Mail 
 reports he said last year? 
Hon PHIL HEATLEY (Minister of Fisheries and Aquaculture) 
: 
 As Minister of Fisheries and Aquaculture I have concerns if any vessel foreign or otherwise misreports its catch is not registered breaches environmental standards refuses to comply with requirements for observer coverage or breaches any other obligations under the Fisheries Act. 
Hon Shane Jones 
: Does he believe that foreign crews receiving wages reportedly as low as $238 per month is a major concern; if not why not? 
Hon PHIL HEATLEY 
: That is a matter for the Minister of Labour but I am happy to comment. In the dying days of the previous Government Labour reset the rules on foreign fishing crews’ wages and working conditions and it seemed to be happy back then. I would be interested if the member could forward information to this Government if things have changed. 
Hon Shane Jones 
: What specific improvements will he be advocating to ensure that foreign crews are adequately recompensed or does he not care that this activity is besmirching the reputation of a major New Zealand industry? 
Hon PHIL HEATLEY 
: As I said that is a matter for the Minister of Labour but it would be fair to say that the previous Government in its last dying days looked at fisheries regulations vessel safety crew welfare and work visas. Labour came up with some changes at that time; I do not know why it did not use that chance only 3 years ago if it was so serious about this issue. 
Hon Damien O’Connor 
: How do allegations of slavery in New Zealand’s so-called sustainable fishing industry improve New Zealand’s image in our main export markets? 
Hon PHIL HEATLEY 
: I raise a point of order Mr Speaker. We have some vaguely intelligent people on the other side of the House who have already— 
Mr SPEAKER 
: The member cannot use a point of order to make a negative comment about any other member of this House. I will allow him to make his point of order in appropriate terms. 
Hon PHIL HEATLEY 
: I have already answered two questions that were out of order because I am not the Minister of Labour. I pointed that out but I gave the member the benefit of the doubt and answered the questions. I really think a third case where I am asked to address a question that should be asked of another Minister is entirely out of order. 
Hon Damien O’Connor 
: My question was quite specific. I asked what the accusations of slavery in the so-called sustainable fishing industry did to our image offshore. That is a simple question for the Minister of Fisheries and Aquaculture. 
Mr SPEAKER 
: I think I have heard sufficient on the matter. We will not take further time on it. I think the Minister is correct in saying that I could in fact have ruled out the questions as being more appropriately directed to the Minister of Labour but I did not want to deprive the Minister of a bit of licence to have greater freedom in answering a question. I did not want to be a spoilsport. When members ask questions that are more appropriately another Minister’s responsibility they risk receiving answers that they will not like. Today I have been pretty supportive of members when they have complained about answers given but when members ask questions that are perhaps more appropriately directed elsewhere they risk receiving answers they will not like. I think the Hon Damien O’Connor should have the right to ask his question. It relates to the fishing industry but how tightly directed it is to the Minister of Fisheries and Aquaculture will determine how precisely the Minister has to answer it. 
Hon Damien O’Connor 
: How do allegations of slavery in the so-called sustainable New Zealand fisheries affect our image in our international export markets for fish? 
Hon PHIL HEATLEY 
: I can say that if it relates to a misreporting of catch the question should be addressed to me. If vessels are not registered it should be directed to me. If environmental standards are breached it should be directed to me. In terms of observer coverage please put the question to me. If it is a matter of slavery in New Zealand or in New Zealand waters the member should please put the question to the Minister of Labour. 
Hon Damien O’Connor 
: I raise a point of order Mr Speaker. I was on the select committee that amended the Fisheries Act to include legal obligations to pay New Zealand rates of pay. 
Mr SPEAKER 
: The member will resume his seat. The member asked his question and the Minister answered it. There was a definite answer to the question and the member cannot litigate the answer by way of a point of order. He can litigate it by way of further supplementary questions. He is perfectly entitled to do that. If he does not like the answer and feels strongly enough about it he can put a question on tomorrow’s Order Paper but he cannot litigate the question by way of a point of order. 
Darien Fenton 
: Will his Government support an inquiry into the New Zealand fishing industry’s relationship with foreign fishing companies foreign crewing of joint ventures and chartered New Zealand fishing vessels and its effect on sustainable fishing employment and the relevant communities within New Zealand as set out in the petition of Neville Donaldson which was presented to the House on 14 February and which is before the Primary Production Committee? 
Hon PHIL HEATLEY 
: The petition went before the Parliament. Now that it is before the Primary Production Committee it is a matter for the select committee and Parliament. 
Hon Shane Jones 
: Given the Minister’s answer about having no major concerns can he confirm to the House whether he has received word of major concerns from the fishing industry via Peter Talley and did he answer those in such a glib fashion on that occasion? 
Hon PHIL HEATLEY 
: I have had correspondence on this matter from a range of people over an extended period not least of all when the previous Government was in power and made some changes. 
Rahui Katene 
: Has this Government conducted an inquiry into the fishing industry’s relationship with foreign fishing companies foreign crewing of joint ventures and chartered and New Zealand fishing vessels and its effect on sustainable fishing practices employment and the relevant communities within Aotearoa; if not why not? 
Hon PHIL HEATLEY 
: No. Under the previous Government in its last days Ministers did some work with various departments including the Department of Labour Maritime New Zealand the Ministry of Fisheries and the Department of Immigration. They looked at those matters they made some changes and they felt the changes they made were entirely adequate. They may have changed their minds now. The matter is now before the Primary Production Committee and I am interested in seeing the results of that inquiry. 
Housing Innovation Fund—New Projects 
12. 
TIM MACINDOE (National—Hamilton West) 
 to the  
Minister of Housing 
: What recent announcements has he made regarding the Government’s Housing Innovation Fund? 
Hon PHIL HEATLEY (Minister of Housing) 
: 
 Recently I announced five projects that will see $3.4 million be used from the fund for the 2010-11 year. Those projects will help to provide 21 new properties in South Auckland Tauranga Nelson and Tamaki for New Zealanders on low to moderate incomes or with special housing needs. Another project will benefit Maori directly with 5 new affordable rental properties being built on the Chatham Islands through Maori Demonstration Partnerships. 
Tim Macindoe 
: What is the aim of the Housing Innovation Fund? 
Hon PHIL HEATLEY 
: The fund encourages partnerships with community housing organisations. It is about making the taxpayer dollar go further and building roofs for families that are struggling. It is part of the Government’s commitment to increase the quantum of social housing. I am currently looking at ways that we can change the Housing Innovation Fund to make it even more attractive to third sector participants. 
Moana Mackey 
: Is the reason he has done nothing substantial in 2½ years to address the ever-worsening housing shortage in New Zealand—apart from taking credit for good Labour Government initiatives such as the Housing Innovation Fund—that like the Prime Minister he does not believe that New Zealand is actually facing a housing shortage? 
Hon PHIL HEATLEY 
: It is fair to say the general public know we have streamlined the Resource Management Act to make resource consenting easier and streamlined the Building Act to make building consenting easier. We have made it very very clear that the most important thing to New Zealanders when it comes to housing affordability is actually mortgage interest rates which have remained flat to low under this Government. They have not soared to 9 10 or 11 percent which is what they were under the Labour Government. 
Business of the House 
Hon RICK BARKER (Labour) 
: 
 I raise a point of order Mr Speaker. I seek leave for H V Ross Robertson to be appointed as an Assistant Speaker for today Tuesday 5 April Wednesday 6 April and Thursday 7 April given my appointment as the senior Labour whip and Eric Roy’s unavoidable absence from the House. 
Mr SPEAKER 
: Leave is sought for that course of action. Is there any objection? There is no objection. I congratulate Mr Robertson. 
Urgent Debates Declined 
Earthquake Christchurch—Creation of Canterbury Earthquake Recovery Authority 
Mr SPEAKER 
: I have received a letter from the Hon Clayton Cosgrove seeking to debate under Standing Order 380 the creation of the Canterbury Earthquake Recovery Authority. This may well be a particular case of recent occurrence involving ministerial responsibility but the member has provided no authenticating material. That in itself is sufficient ground to decline an application. I refer the member to Speakers’ ruling 170/5. The member though refers in his letter to anticipated legislation. I understand legislation is to be introduced in coming weeks. The consideration of this legislation will provide the opportunity to debate the establishment of the authority. I indicate it is not the lack of authentication that has caused me to fail to support the member’s letter today. I believe there is to be a debate on this matter and in these circumstances I am not persuaded that the business of the House should be set aside today. The application is therefore declined. 
Legal Services Bill 
In Committee 
Debate resumed from 8 March. 
Part 3 Administration of legal services system ( 
continued 
)  
CHARLES CHAUVEL (Labour) 
: 
 I will start with Subpart 1 of Part 3 of the Legal Services Bill which transfers the administration of publicly funded legal services from the Legal Services Agency to the Ministry of Justice and goes on to provide that the Secretary for Justice will be responsible for establishing and delivering legal services. I note that clause 68 sets out the functions of the secretary including assessing and determining the need for legal services by people of insufficient means. Clearly it is of concern to members on this side of the Chamber that there are reports so many people are having difficulty accessing legal aid or legal services that they have to consider representing themselves. I am concerned there is an idea that more legal aid payments are being made which seems directly related to the increase in both summary and indictable charges rather than the misconstrued idea that lawyers have somehow been gaming the system. I welcome the presence of the Minister in the chair Simon Power; the last time I was able to participate in the Committee stage of the bill we had another member of the executive sitting in his place and I think some of those issues need to be the subject of reassurances. 
The Secretary for Justice will have the flexibility to establish different legal services and different methods for delivering those services. The secretary will be able to determine which method of delivery is most suitable in a given situation whether by salaried lawyers as part of a public defender service private lawyers funded by legal aid or services provided by community law centres. Obviously that flexibility if it operates well is to be welcomed but there are some concerns about clause 68. I would like the Minister to consider taking a call to let us know his views on whether we are giving too much power to the executive and in particular to the secretary. The Minister will know that that concern was raised by the Law Society in this process. I think also it would be useful to hear from the Minister how the actual need for legal services and representation will be determined by the secretary and whether the issue of how community law centres are to be resourced on an ongoing basis is going to be front and centre in the mind of the secretary when he or she takes on this function. 
I am also very interested to hear the Minister’s view on why there does not appear to be any obligation to consult with anyone or any group when determining the allocation of legal services. Surely a statutory obligation of consultation which appears to exist under the current scheme would encourage better outcomes. I note that the departmental report which was considered by the Justice and Electoral Committee states that good administrative practice indicates that that consultation will occur. If that is the case it would be useful to hear from the Minister why we do not just codify the requirement so that we are assured it will occur rather than just fall by the wayside. 
The other matter worth drawing to the Committee’s attention is the insertion by the select committee of new paragraph 68(fa) which states that the secretary must “undertake or fund law-related research and education;” which was asked for by submitters to the select committee. If that is going to occur then how does it gel with the funding gap which the Minister has pointed to real concerns about? I think the figure we heard was $400 million in years to come. The Minister is nodding his head so obviously this matter has been thought about. We want to hear from the Minister about how we are going to reconcile what he says is a major funding gap coming up in the out-years in particular with the obligation that the secretary is to undertake or fund law-related research and education. On those points it would be helpful to hear the Minister’s views. 
I come to the rest of Part 3. Clause 69 empowers the secretary to contract with lawyers and law firms to undertake legal aid work. Presumably that provision exists to allow for providers in remote areas where there is not a good service in a particular area of speciality to assist with those who cannot afford to pay for their own lawyer. Clause 70 establishes the office of the Legal Services Commissioner. On clause 69 and the interplay with the clauses that follow I am interested in knowing whether the Minister has considered restricting the percentage of legal aid work that a lawyer or a law firm can do instead of leaving open the position so that all of the work a contracted law firm might end up doing is legal aid and whether he thinks that would be a desirable situation in any particular case. Obviously from the Minister’s facial expressions he has seriously considered that matter too so it would be helpful for the Committee to hear from him on that issue. 
On the issue of the Legal Services Commissioner we have as was said in previous contributions in the debate a move from an independent entity into the core executive. The Legal Services Commissioner within the Ministry of Justice will be responsible for the granting of legal aid the determination of legal aid payments and assigning and managing legal aid lawyers. Those were all formerly functions of a Crown agency the Legal Services Agency which will be disestablished by clause 117. Part of the work of the commissioner will be independent but also much of it will be carried out by the staff of the ministry under this legislation and that will not be done independently. So I think we need to hear from the Minister what guarantees are in place for the independence of the role of the commissioner and in particular the staff employed by the secretary but who are under the effective management or direction of the commissioner. 
I also have some concerns about Subpart 2 of Part 3 but I propose to leave those matters to later in the debate if I have the opportunity to take another call because I think it would be good to hear from the Minister on the other matters I have raised. 
Hon DAVID PARKER (Labour) 
: 
 Following on from my colleague Charles Chauvel’s comments I want to address the issue of community law centres just a little further. Clause 94 which sits in Part 3 says the secretary may enter into contracts with community law centres. I presume that it is through those contracts that the Crown sets out the sort of work that it is willing to fund community law centres for. The Minister in the chair the Minister of Justice nods. That change is a good thing. I think I have said previously in another part of this debate that we do need to take care that the primary thing that we are funding through community law centres is actually legal advice—legal advice for people who need legal advice in respect of problems that they often could not get a lawyer to be interested in and might not be able to afford to get any legal advice on. 
Community law centres provide a very very valuable and low-cost service to our country when it comes to advice on those generally more minor issues that can be none the less important to the individuals involved. If issues of more significance come through a law centre’s door and they do periodically then the normal practice is for the law centre to say to those people that they need some really decent legal advice from a full-time lawyer rather than a community law centre. So the matter gets referred on to a lawyer. 
Where there can be a problem is when one crosses the line between what is appropriate advocacy by community law centres on matters of principle to advocacy in favour of political causes. I have on occasions seen that from law centres where I think they have been perhaps applying the money that they get from the Crown to political causes which they no doubt believe very strongly in but there is an opportunity cost in them applying their resources to those tasks. The opportunity cost is that they are actually not spending it on legal advice for the people who come into legal centres in respect of legal problems. That balance needs to be carefully preserved and one of my reasons for that is I believe strongly in the importance of law centres and I am concerned that if we do not protect their core functions then if we get a law centre that goes too far with political advocacy it could annoy a future Government. I am not saying there is currently such an intention by either law centres or the Government but one can see that a series of events could be set up that would lead to funding for law centres being reduced in a way that would be to the detriment of the people who need advice from law centres. That advice is far cheaper than any other means that we have of delivering legal advice to people in New Zealand. It is cheaper than any other form of legal service either privately funded or through legal aid. 
The other issue I would like to touch upon briefly relates to civil legal aid because although some of the rules that are being changed in respect of the Legal Services Bill will change the way in which legal aid is granted they do not change the efficiency of court processes. The problem that we have in New Zealand is that court processes in the civil arena have over the years become too complex. They have become so complex that a lot of people cannot afford to access justice any more. Whether or not they are eligible for legal aid often legal aid is a loan to them. It has to be repaid. It is a cost to the Crown. It is effectively a loan to the individual who gets legal aid and it has to be repaid in the future. 
Although legal aid is very important and I do not decry the importance of legal aid the more important thing in my opinion is that we reform our civil court processes. I was a civil litigator for many years and I saw the change in process during the couple of decades off and on that I was practising. I saw our civil court processes become more and more complex. I have no doubt that if we run the full gamut of a court process through all of the interlocutory that can be forced upon parties these days whether it is applications for further and better particulars of the statement of claim whether it is questions asked before trial which are called interrogatories or whether it is the proliferation of expert evidence that seems to be admitted to courts all of these things are driving the length and cost of proceedings. 
When we get an outcome from a court decision the outcome of it these days is near perfect. Not many of them are turned over on appeal but there is always a trade-off between perfection and cost. When the pursuit of perfection goes so far that the cost of those legal proceedings because the processes have become so tortured and long becomes so high that people do not go to court to settle their disputes then there is something wrong with the court system. That is where we have got to in New Zealand. 
Someone told me and I have not had the opportunity to check this yet that in the High Court last year some 350 civil judgments only were delivered. In the whole of New Zealand there were only 350 judgments in such cases. I think that is an indictment on our legal system. A hell of a lot more than 350 disputes should have had the benefit of being litigated in court. Despite the fact that the number of judgments is down the length of law reports is the same. When we read a judgment now that comes out of the High Court most of them look like they are auditioning to write a new academic treatise on one subject or another. They have become in my opinion too often too academic and are becoming a little bit rarefied. I yearn for the day when we have judges who are a bit more robust— 
Hon Simon Power 
: Denning. 
Hon DAVID PARKER 
: Yes Lord Justice Denning or judges like Justice Holland or retired Justice Hansen who keep control of their courts have a good sense of fairness give the parties a hearing then deliver a judgment. We now virtually have no judgments delivered orally in New Zealand. It is very rare for an oral judgment to be delivered. Everyone goes away and they prepare a written judgment. Often that involves time from the judge and also clerks of judges who assist but in both cases it causes delay. Again I am not sure whether judges are fearful that they are going to be overturned on appeal if they do not turn over every stone that has been pointed at by one of the parties in the litigation but for these reasons our civil processes have become so expensive that they are not being used. That means that our court system is not serving the function that it is meant to which is to provide people with a non-violent way of resolving their disputes. 
The quality of justice cannot be divorced from its accessibility. Accessibility is largely a function of cost and cost is not cured just through legal aid. We must minimise these costs. We should have legal aid in appropriate cases but we must simplify these processes. So I would be interested to hear from the Minister of Justice his views on that. I know that the court rules are actually the Attorney-General’s rules. The Attorney-General sets the rules and I think that it is time for the Attorney-General to take some control of those rules and to improve court processes so that the amount that people have to get be it from a loan by way of legal aid or through their own means is not disproportionate to the amounts of money that are at issue. 
Hon SIMON POWER (Minister of Justice) 
: 
 In response to the Hon David Parker’s comments on the Legal Services Bill perhaps I could make three or four quick remarks. The first is that the need to expedite these matters before the courts and to ensure that that process does not divorce itself from quality representation and quality arguments is critical to a range of things the Government is undertaking across the justice area at present. I can tell him that if he holds his breath for long enough help is on the way in the jurisdiction. We are dealing with the criminal area; the family area is next on my radar. We have been doing some things on the simplification of the court processes themselves. Of course it was his Government that had the foresight to legislate for the removal of depositions and this Government that instigated it. We are making progress. 
To the matters contained in Part 3 of the Legal Services Bill and in particular on community law centres I share the member’s view that it is the role of community law centres to provide legal services to clients who cannot afford to seek that advice by way of payment directly from a law firm. Of course it might not be the case in the member’s part of the world but many of these community law centres actually employ full-time lawyers. So the ability to simply hive people off to another firm is not always the case with some of these bigger community law centres around the country. 
One of the things we are working hard towards is consistency of advice across those community law centres sound governance arrangements across those community law centres and relevance to a particular community to make sure that the skill set is correct. Those three categories of compliance have had diverse contributors to them—if I can put it that way—over the course of the last while. But I can assure members of the Committee that this Government and I are committed to the continuation of community law centres and the quality service they provide. 
I have a couple of quick responses to some of the comments raised by Charles Chauvel. Firstly on the statutory obligation to consult I briefly advise the member that the consultation provisions in the Legal Services Act 2000 frankly were used to stall and slow down legal aid reform during previous times. It made the development of the public defenders’ service much slower and far more expensive than it should have been. My experience has been that having a codification of statutory consultation actually invites that type of process to occur where differing benefits accrue. So on that basis I have no doubt that consultation will occur where appropriate. In respect of legal research and education as I am sure the member knows the secretary may undertake or fund law-related research and education rather than must. Law-related research and education is a traditional yet very small part of this particular vote and of the legal aid scheme. 
A party vote was called for on the question  
That Part 3 be agreed to. 
Ayes 110 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Maori Party 4; Progressive 1; United Future 1. 
Noes 9 
Green Party 9. 
Part 3 agreed to. 
Part 4 Transitional and savings provisions amendments to other enactments and repeals 
CARMEL SEPULONI (Labour) 
: 
 I want to speak on the Legal Services Bill but I also have to acknowledge that I am a newbie on the Justice and Electoral Committee. I have some questions but I will not pretend I am an expert like my colleagues Charles Chauvel or David Parker on this particular issue. Before I get on to Part 4 I need to say that Labour believes that reforms are necessary with an emphasis on the public defender system community law centres and a focus on quality assurance. However we have concerns about this bill and the Government’s overall direction in regard to its justice policy which seem to inhibit access to justice. 
I will get on to Part 4 “Transitional and savings provisions amendments to other enactments and repeals” and Subpart 1 “Transitional arrangements for transfer of Legal Services Agency to Ministry of Justice”. The Legal Services Agency will no longer exist the public advisory committee will be disestablished assets and liabilities of the agency will be transferred to the Ministry of Justice and employees of the agency will be transferred to the ministry unless they do not consent and the terms and conditions of their employment cannot be any less favourable than those before the transfer. In the transition legal aid granted by the old 2000 Legal Services Act is not affected by the enactment of the new legislation. Some of the non-legislative changes we see here as well as the changes outlined previously include the Government’s decision to expand the Public Defence Service to Hamilton Wellington and Christchurch and to work with community law centres to develop a uniform set of standards. 
The Public Defence Service was launched in 2004 by the then Minister of Justice Phil Goff in the Auckland and Manukau courts as a 5-year pilot and in August last year the Legal Services Agency made the service permanent. The Public Defence Service has its origins in Labour’s 1999 manifesto which I think is important to point out. There have been two independent evaluations of the service and both found it offered savings and lawyer costs. When compared to the estimated cost of equivalent private providers there was a saving of $985000 over the period of the pilot. Those savings were achieved with no difference in outcome for the client as measured by overall conviction rates. Simon Power announced in April that the Public Defence Service would be expanded to Hamilton Wellington and Christchurch. 
I will turn to the Bazley report. In April 2009 the Minister of Justice Simon Power appointed a panel chaired by Dame Margaret Bazley to review the legal aid system. Dame Margaret produced a discussion document in September last year which outlined some concerns and then a final report in November of last year called  
Transforming the Legal Aid System 
. The report was damning and prompted the Government to announce an overhaul of the legal aid system. What were the findings of that review? It found variable-quality legal aid services including a number of lawyers who were poor performers and some who were alleged to be acting in a corrupt way. Dame Margaret found that around 200 lawyers were apparently rorting the system. The review found that some practitioners paid backhanders to duty solicitors who recommended legal aid applicants to them. Some practitioners demanded top-up payments from clients over and above the remuneration they received from the Legal Services Agency. There had been complaints of dishonest behaviour to the Law Society that were not acted on. Lawyers and defendants colluded to make sure cases took as long as possible a mutually beneficial arrangement under which the lawyer racked up fees and the defendant delayed conviction and sentencing—I am just going through the findings of the review here. The quality of legal aid lawyers was variable and many of them showed up at court unprepared or late. Some lawyers gamed the system apparently by delaying a plea or changing pleas part-way through the process in order to maximise legal aid payments. Specifically Dame Margaret was told that up to 80 percent of lawyers practising at Manukau District Court could have been gaming the system. That is what she was told. 
I would really like to hear the Minister’s thoughts on that issue particularly in relation to what is being proposed in Part 4 of the legislation. A lot of the questions I had on the bill were around Part 3 but Part 3 went by and we have moved on to debate Part 4 now. 
The CHAIRPERSON (Lindsay Tisch) 
: I remind members that we are on Part 4 which is a pretty narrow debate. It is not a peroration of the review. 
CAROL BEAUMONT (Labour) 
: 
 I rise to speak on Part 4 of the Legal Services Bill. I note in relation to the bill in total that we have supported it to date but Labour is keeping its support for the bill under review. As Mr Chair said Part 4 “Transitional and savings provisions amendments to other enactments and repeals” is a very narrow provision. 
Part 4 has five subparts. Subpart 1 is “Transitional arrangements for transfer of Legal Services Agency to Ministry of Justice”—we have raised concerns about potential issues of independence there—Subpart 2 is “Transition of matters commenced approvals granted and funding provided under former Act” Subpart 3 is “Transition of matters commenced under Legal Services Act 1991” Subpart 4 is “Amendments to other enactments” and Subpart 5 is “Repeal and revocation”. 
One of the transitional arrangements under Part 4 is that employees of the Legal Services Agency will be transferred to the Ministry of Justice unless they do not consent. That provision is very important. In these times of high unemployment it is very important that people have employment security so I certainly support that provision. We have 158000 New Zealanders out of work at the moment so at least the people in the Legal Services Agency have the option of transferring to the Ministry of Justice and the transfer will see that their terms and conditions of employment are no less favourable than what they currently have. I put on record that in these tough economic times of high unemployment that transitional provision is important. 
I want to ask the Minister of Justice a couple of questions that are more to do with non-legislative changes. In terms of the transition from one system to the other a number of announcements have been made in conjunction with the bill that I think reflect the transition. First of all there is the decision around expanding the Public Defence Service to Hamilton Wellington and Christchurch which my colleague Carmel Sepuloni referred to and also working with community law centres to develop uniform sets of standards. I am just wondering what the transitional provisions will look like and whether there will be continuation of them given the Minister’s departure from his role. The Minister has made a number of undertakings and a number of announcements in relation to the bill so I seek from him his commitment that those transitional provisions will continue after his departure. 
The other thing I want to ask the Minister about is the funding gap that my colleague Charles Chauvel mentioned when he was speaking on Part 3. I understand that there is a funding gap of $400 million. Again I ask what the transitional arrangements will look like in relation to some of these non-legislative changes—like the expansion of the Public Defence Service to Hamilton Wellington and Christchurch—given the $400 million funding gap. Of course we know that the Budget the Government will be announcing this May is likely to see cuts in public services across the board and many important core services that assist New Zealanders like Working for Families will be under threat. 
Going back to the transitional arrangement that is alluded to in Part 4 I want to check with the Minister about the certainty that these other announcements that have been made by the Minister in relation to changes like expansion of the Public Defence Service will be able to be honoured by the Government in light of the funding gap of $400 million and the reality of the cuts to public services that we are all expecting. I think they are fairly important transitional arrangements too. I acknowledge that they are non-legislative matters but it is important to note that the announcements have been made in conjunction with the Legal Services Bill. I ask the Minister for his comment on those matters. 
CHARLES CHAUVEL (Labour) 
: 
 I will add my voice to the request made by my colleague Carol Beaumont. It would be very helpful to have the Minister of Justice take a short call about the transitional savings provisions and other repeals and amendments. As Carol Beaumont said the transitional and savings provisions in Part 4 of the Legal Services Bill in themselves are not comprehensively different from what we might expect in other similar legislation. Obviously the Legal Services Agency goes out of existence and is replaced as far as its functions are concerned by a core employee of the executive. But in respect of that transition there is one important disestablishment which is the public advisory committee to the old Legal Services Agency. 
When we had some questions earlier about the benefits of inserting a consultation provision in the statute the Minister’s reply was that consultation actually held up reform earlier and was not terribly useful but he was sure that officials will consult anyway. I am not sure that that reply is as reassuring as members on this side of the Chamber would have hoped. It would be helpful to hear from the Minister about the public advisory committee’s disestablishment and about what means will be in place for the Secretary for Justice and the commissioner to hear from the public about the sorts of access to justice issues there are out there and how they are truly to be met in what is obviously intended and envisaged by the Minister to be a more flexible situation. Instead of having just contracted legal aid providers there will be a mix of those types of providers and the public defence system as well as this notion of firms contracting to provide services to fill the gaps. 
On the statutory issues I think it would be helpful to hear about the extent to which there will be any obligation or expectation on consultation with the public over those access to justice needs and how they will be filled. On the matters of transition that are not legislative but none the less very relevant because they arise from the same sorts of questions I congratulate the Minister. I congratulate him on his announcements about the extension of the public defender scheme. I remember when the public defender scheme was set up under the previous Government the resistance encountered from the profession to not only setting it up but also having it properly evaluated and then having it expanded. I commend the desire to see the scheme extended to Hamilton Wellington and Christchurch. As Carol Beaumont said it would be helpful if the Minister were to update the Committee about his intentions. Public information about the extension is somewhat dated so it would be useful if the Committee could be told whether the intent is to extend the scheme especially to Hamilton and Christchurch. 
Obviously the benefit of extending the scheme is that it provides some contestability for those who are simply contracted providers. The evidence appears to be that where the public defender scheme has operated it has operated very efficiently and effectively it has used public money effectively and it has set up tension with the contracted providers so that there is something to benchmark performance with—one against the other. If the Minister can confirm that the public defender scheme is going to be extended as an effective part of the transition to the new regime in order to keep everything honest in the new system as well as to provide an alternative service it would be useful. 
I note that there have been two independent evaluations of the service. Both evaluations found that it offered savings in lawyers’ costs when compared with the estimated cost of equivalent private providers. In respect of the Auckland pilot the saving was nearly a million dollars. These savings were achieved with no reported difference as far as the clients’ experience of quality service was concerned and also as measured by overall conviction rates. Last April the Minister announced the extension to the other centres. Obviously we are nearly a year on from that announcement. Economic circumstances are not easy—we all recognise that—but we want to see excellent services. It would be very helpful to hear from the Minister in the chair on these matters. Thank you. 
Hon SIMON POWER (Minister of Justice) 
: 
 I am happy to update the Committee. Two further Public Defence Services have opened in Auckland on the North Shore and in Papakura. Since that time 3 weeks ago I opened the Wellington Public Defence Service. In fact I am a bit upset that the member did not see my press release and speech from that particular opening given that Kris Faafoi attended the opening of the Wellington Public Defence Service on behalf of the Labour Party. I can assure members opposite that progress is rolling out in a way and at a pace that I am sure they only wish they could have done when they were in Government and when they first promoted the Public Defence Service were it not for the strange arrangements that were in place regarding consultation and slow down at the time. 
The CHAIRPERSON (Lindsay Tisch) 
: I just remind members that if a party wants a party vote it needs to ask for one. Just because one votes against it does not mean to say that there will be a party vote. 
A party vote was called for on the question  
That Part 4 be agreed to. 
Ayes 110 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Maori Party 4; Progressive 1; United Future 1. 
Noes 11 
Green Party 9; Independents: Carter C Harawira. 
Part 4 agreed to. 
Schedule 1 
The question was put that the amendment set out on Supplementary Order Paper 208 in the name of Rahui Katene to schedule 1 be agreed to. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 49 
New Zealand Labour 41; Green Party 1; Maori Party 4; Progressive 1; Independents: Carter C Harawira. 
Noes 64 
New Zealand National 58; ACT New Zealand 5; United Future 1. 
Amendment not agreed to. 
The result corrected after originally being announced as Ayes 48 Noes 64. 
Schedule 1 agreed to. 
Schedule 2 
A party vote was called for on the question  
That schedule 2 be agreed to. 
Ayes 106 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Progressive 1; United Future 1. 
Noes 15 
Green Party 9; Maori Party 4; Independents: Carter C Harawira. 
Schedule 2 agreed to. 
Schedule 3 
A party vote was called for on the question  
That schedule 3 be agreed to. 
Ayes 106 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Progressive 1; United Future 1. 
Noes 15 
Green Party 9; Maori Party 4; Independents: Carter C Harawira. 
Schedule 3 agreed to. 
Schedule 4 
A party vote was called for on the question  
That schedule 4 be agreed to. 
Ayes 106 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Progressive 1; United Future 1. 
Noes 15 
Green Party 9; Maori Party 4; Independents: Carter C Harawira. 
Schedule 4 agreed to. 
Clause 1 Title 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 106 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Progressive 1; United Future 1. 
Noes 15 
Green Party 9; Maori Party 4; Independents: Carter C Harawira. 
Clause 1 agreed to. 
Clause 2 Commencement 
A party vote was called for on the question  
That clause 2 be agreed to. 
Ayes 106 
New Zealand National 58; New Zealand Labour 41; ACT New Zealand 5; Progressive 1; United Future 1. 
Noes 15 
Green Party 9; Maori Party 4; Independents: Carter C Harawira. 
Clause 2 agreed to. 
Bill to be reported without amendment presently. 
Financial Markets (Regulators and KiwiSaver) Bill 
In Committee 
Part 1 Preliminary provisions 
The CHAIRPERSON (Lindsay Tisch) 
: The debate on this part includes schedule 1. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I am very pleased to rise and comment on the Financial Markets (Regulators and KiwiSaver) Bill. Part 1 of course deals with the preliminary provisions. In some ways it is a bit unfortunate that we start the debate in the Committee stage on such an important piece of legislation by looking at the preliminary provisions in respect of the interpretation sections rather than looking at some of the more meaty elements of the legislation which is where we will debate the substance. Of course the debate on Part 2 will probably be focused on the role of the Financial Markets Authority and I will speak to that in some more detail. 
I know that the Committee stage is an opportunity to look at the more technical elements of the legislation and to explain a little bit about why the Commerce Committee undertook the particular approaches that it undertook. I will comment particularly on the way that we have restructured the language regarding financial markets participants. I think we have done quite a good job and I acknowledge the officials for all their good work. I know that we were working under the pressure of time and I think we nailed what we were trying to achieve in this particular provision of this part. I congratulate those who submitted to us on these issues and also the officials who put in such a fine effort. I do not want to say much more on Part 1 because it really is not the substance of the debate and I would rather leave the substance to the more substantive parts of the bill. 
Hon SIMON POWER (Minister of Commerce) 
: 
 I am not going to let an opportunity go by because although Lianne Dalziel is dead right—this is not the crux of the matter—the truth is that Part 1 of the Financial Markets (Regulators and KiwiSaver) Bill establishes the purpose of Parts 1 to 4 which includes establishing the Financial Markets Authority as an independent Crown entity. It is easy to say—just like that—but this is a significant shift. The purpose contained in Part 1 which talks about some of these issues more broadly: the main objectives and functions— 
Hon Lianne Dalziel 
: Part 2 that is. 
Hon SIMON POWER 
: No no I know what I am doing. I would like to suggest that although we are talking about the purpose at this stage we are actually seeing a fundamental shift in the regulatory landscape for the oversight of the financial markets in New Zealand. The announcement about this was originally made at the Institute of Finance Professionals New Zealand dinner in April last year and thanks to members of the Commerce Committee and others we have seen some speedy progress on this legislation. 
Before we head into the detail of the bill I acknowledge the work that has been done by the chair of the Commerce Committee Lianne Dalziel and some of the changes that have been made as part of this process to get to where we are today. I will leave it there; I did not want to take any opportunity other than to say we are entering into quite a significant step here. I know that Lianne Dalziel will be anxious to make contributions to other parts but I look forward to the speedy progress of this legislation and its sister—or brother—piece of legislation the securities trustees legislation through the Committee stage over the next hour or so. 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 1 be agreed to. 
Amendments agreed to. 
Part 1 as amended agreed to. 
Part 2 Financial Markets Authority 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 This is what I would call a meaty part of the Financial Markets (Regulators and KiwiSaver) Bill and this is the one I want to focus on. I cannot imagine that debate on this part will be over in an hour so I do not know why the Minister in the chair the Minister of Commerce thinks it will pass so quickly. I will table an amendment to this part which I would like the Committee to consider. The Minister will not be surprised at this because Labour members of the Commerce Committee referred to it in the report back from the committee. We think it is fundamentally important that there are principles to bind all financial markets participants. We were disappointed to see the securities review repeat one of the errors of the past which is not to have a number of principles. I think one overarching principle was mentioned at the end of the discussion document which I feel will be ineffective in terms of what we are trying to achieve here. 
What I have done is—[ 
Interruption 
] I have not tabled it yet. I have plenty of time but somebody might like to assist me with that—to take from the Financial Services Authority in the UK the principles it established under its conduct provisions. It has authority under legislation there to issue statements of principle in respect of the conduct expected of approved persons. When the authority issues a statement of principle it is also required to issue a code of practice for the purpose of helping to determine whether a person’s conduct complies with the statement of principle and the code then specifies descriptions of the conduct etc. that would be a breach of this code. Any failure to comply with a statement of principle means that issues need to be addressed. I have mentioned this in the House before and I will mention it again because I think it was a bit of a driver for me but unfortunately it was too late for me to influence the securities legislation review. The reason is that when I went back to the UK and met with the Financial Services Authority for second time in my period as Minister of Commerce it was unfortunately in 2008. It was at that time that I met the outgoing chair Sir Callum McCarthy—I have told this story before—and at the meeting we had he pulled from his pocket the laminated card with this set of principles. That is where I got the principles from. He told me that they guided him in all he did and that they guided the Financial Services Authority in all it did. Then he gave me his own personal laminated card. He probably had dozens of them but doing that was very effective. For me that is the indelible memory I now have of that occasion when I realised for the first time that the enforceable principles that underpin rules make the difference because unlike rules they are not made to be broken. Having come from the legal profession—and I know that others in this Chamber have come from the accounting profession—I know that our professions our entire livelihoods are dependent on advice for people to get around rules but principles cannot be got around because they guide everything we do with integrity. 
Let us look at the principles that the Financial Services Authority developed under its code. The first one is integrity: “1 Integrity—A firm must conduct its business with integrity. 2 Skill care and diligence—A firm must conduct its business with due skill care and diligence. 3 Management and control—A firm must take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems. 4 Financial prudence—A firm must maintain adequate financial resources.” How useful that would have been as a principle to underpin certain activities of certain finance companies. “5 Market conduct—A firm must observe proper standards of market conduct. 6 Customers’ interests—A firm must pay due regard to the interests of its customers and treat them fairly. 7 Communications with clients—A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear fair and not misleading.” 
I will comment on one thing because I know that the Minister in the chair the Minister of Commerce has made some statements recently about the need to hold people personally accountable for statements they have made in the public arena—celebrity endorsements. I do not agree with that; I think we should prohibit them from doing it. Under current broadcasting standards we are not allowed to have a doctor say that a particular non-prescription drug is OK. That is prohibited because a doctor saying that sends a very clear message. I do not know about other members but I do not think it is appropriate to have a celebrity endorsement for a finance company where that person cannot possibly know whether that company is up to delivering. I do not think we should punish the messenger; I think we just prevent that message from being sent because it is the wrong message to be sending. I think this is what the statement of principles that sits behind the Financial Services Authority in the UK is all about. As principle 7 states we have to make sure that information is communicated in a way that is clear fair and not misleading. “8 Conflicts of interest—A firm must manage conflicts of interest fairly both between itself and its customers and between a customer and another client.” 
We have talked about conflicts of interest in relation to this bill. The chair of the establishment board of the Financial Markets Authority Simon Botherway was in a situation that is now currently before the Ombudsman as I understand. But I want to reflect on one element. I personally think that I have taken a very strong line on conflicts of interest. When I was Minister of Immigration I made sure that my husband who is a lawyer did no immigration work at all—none not one jot of immigration work—even though of course very few immigration cases end up in the Minister’s hands. But it was the message it sent that was wrong. But in this particular case I think I made a mistake in the House when I referred to Mr Botherway in the question of South Canterbury Finance and putting his brother’s company into receivership. As I understand it it was Lion Breweries that put that company into receivership and South Canterbury Finance then appointed its own receiver. It is a step removed. I understand that the individual concerned took advice. I want to put it on record that I accept his word for that and that he acted honourably. I still believe he acted mistakenly and that is a view I will continue to hold because I feel that conflicts of interest are not just about real interests; they are about perceptions. Unfortunately in this place as we see all too often perception is reality. However I did want to put that on the record. I agree with my position but I do not agree with how I presented it. I wish Simon Botherway well in his new career. 
I return to the principles. “9 Customers: relationships of trust—A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.” This is so fundamental. We can think about all of those people who went to a financial adviser expecting to get good decent quality advice about where they should put their money and they were let down by a number of those advisers. Did they cross the legal line? Maybe not in particular cases but they certainly would have crossed the line as far as this principle is concerned. “10 Clients’ assets—A firm must arrange adequate protection for clients’ assets when it is responsible for them.” and of course that should go without saying but unfortunately it does not go without saying because adequate protection was not made in many instances in terms of the advice that people should have received. Then finally “11 Relations with regulators—A firm must deal with its regulators in an open and cooperative way and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.” 
The reason I really like that principle is that it puts it back to the person who is the financial market participant to say: “I’m going to deal with those who regulate my right to do this or undertake this activity in a reasonable way. I’m going to provide them with the information they need in order to ensure that the market itself has integrity.” That is what I think we are faced with at the moment. We are not talking about what really matters around these things. We have talked in this legislation about the Financial Markets Authority’s functions to promote the confident and informed participation of businesses investors and consumers in the financial markets. That is quite an important objective. We want to promote and facilitate the development of fair efficient and transparent financial markets. But there are two types of people out there and we have written one law to cover both of them. The two types of people are those who know that they take a risk when they invest their money and the other people out there are those who do not get that and who do not relate risk to return or anything like that. 
I know that the answer to that in many respects is the question of financial literacy. But it is more than that. We should be able to trust people to treat people honestly and with integrity. Unfortunately the history of the finance company failures in this country says that there were people day in day out who were prepared to rip off unsuspecting New Zealanders and take all of the benefit from it and none of the consequences for it. I think that is unfair. We have to make sure we do better. We have let down the people of New Zealand in this place and not just from a party political point of view because I think we can all look at each other we can all look in the mirror and say that we all took a little too long to realise that people would take advantage of the lack of regulatory framework around the finance companies and they did. There are other people within that framework though who did not take advantage of other people. They genuinely screwed up their business model; they made mistakes. But they made those mistakes with other people’s money. The question is: who pays? Who carries the cost when things go horribly wrong? 
If these sets of principles were drummed into the hearts and minds of everyone who is out there fund-raising off a sophisticated investor or an unsophisticated ma and pa investor or whatever we want to call them if they were drummed into our everyday living and being then how much better would it have been? How much money might we have seen saved and not seen lost in the debacle of the finance company failures? Our select committee is still considering its review of finance company failures. This legislation bridges the gap in terms of some of the gaps we have already identified but it does not go far enough. We know of the next item of legislation to come soon but again I am expressing some disappointment at what I have seen so far. I also think that some of the gaps we have identified need to be brought back to this House and debated when we report back on our review of the finance company failures and I hope we will be in a position to do so soon. 
I apologise to the Committee that I was not in a position before now to present the amendment I have now tabled in the House but I have been somewhat focused on other matters over the last month. I want to put on record my thanks to my colleagues for allowing me the time to spend with my constituents in Christchurch East over what has been a very difficult time. I know of the challenges that we face in Christchurch East in terms of the recovery from the disaster that the two earthquakes have meted out to my electorate in particular but other parts of Christchurch as well. In many respects what I am learning about recovery is that it is something we need to do in this area as well. The recovery process for those who lost thousands and thousands of hard-earned dollars their life-savings in many instances has not been resolved. It has not been resolved by this Government and it is not resolved by the establishment of the Financial Markets Authority except for one small element. I will come back to that element when we get to that particular part of the legislation. 
Hon SIMON POWER (Minister of Commerce) 
: 
 I think it is fair to say that Lianne Dalziel has just had three calls in a row and it is only appropriate that she was not interrupted given that she is a former Minister of Commerce and that she has chaired the Commerce Committee. I think she chaired the committee on this particular piece of work in a way that indicates she understands what is going on—she was the Minister of Commerce when a lot of the things she described occurred—and she has been determined in her discussions with me about amendments to this legislation and I appreciate that. I also think frankly that the comments she made in respect of the chair of the establishment board will be welcomed by him. 
I will talk briefly about the next step the member referred to and that is in relation the securities legislation which is still to be drafted. But an exposure bill will be released in August for all those who are interested in the detail of this particular piece of work to go through it in some detail. I persuaded myself that although it was an extra step I would rather that the bulk of the work because it is such technical work was done at the exposure bill stage rather than at the time it goes to the select committee. I suspect that that will inform the working of the select committee by the time we get the bill to it which will be hopefully prior to the House lifting in October for the end of this parliamentary session. In fact I am determined that that will be the case. I do think although it does slow it slightly that it is an essential step. My view is that the principles outlined in the member’s amendment fit more squarely with the securities law discussion rather than the Financial Markets Authority. 
Hon Lianne Dalziel 
: So you’ll put them in? 
Hon SIMON POWER 
: I am not saying they will go in; I am saying that there is an opportunity. The Government will oppose this amendment in this bill but there is an opportunity for further discussion and I would be happy to have that discussion with the member at the time of the exposure bill coming forward in August which from memory is the time. 
The issue of celebrity endorsement was slightly overlooked in the reporting of this issue—that is the Cabinet paper says from memory that the issue of celebrity endorsement is subject to a further report to the Government and we will get that report in May. The media ran the story as though it was a done arrangement. That is not the case. Cabinet has asked for further advice about the practicalities of regulating in this particular area. We will know more about that in May. 
The chair of the Commerce Committee looked at me slightly quizzically when I was talking about Part 1 establishing the Financial Markets Authority; of course it is the purposes of Parts 1 to 4 that are contained in Part 1. I want to talk briefly about the establishment of the Financial Markets Authority. The Financial Markets Authority or the FMA as it has become known will replace the Securities Commission and take on certain functions of the Ministry of Economic Development including those of the Government Actuary. It will be an independent Crown entity that in the same way as the Commerce Commission carries out its functions independently. Now that level of independence—and this is an important point—accords with international norms for securities regulators. 
The functions of the Financial Markets Authority will include promoting the confident and informed participation of business investors and consumers and that will be done by the issuing of warnings reports and guidelines and so on. One of the functions is to promote investor awareness that all investment involves risks and it is not the role of the Financial Markets Authority to remove those risks. It is the role of the Financial Markets Authority to monitor compliance with and investigation and enforcement of financial markets legislation. 
The authority will also perform these functions in respect of governance. It will regulate financial advisers securities trustees statutory supervisors and auditors. This is a really important point because one of the things we saw at the time of many of those finance company collapses was various regulators and oversight bodies staring at each other as those particular agencies decided that because their legislation was restrictive and prescriptive they did not have responsibility for the oversight and enforcement of the investment product that was being designed in some cases to be precisely outside of the securities legislation to avoid any independent scrutiny enforcement or oversight by a regulator. 
This particular mechanism of bringing these entities together takes away those gaps. I have referred previously to the fact that as the money hits the floor—and let us not undersell it; we are talking about billions of New Zealand taxpayer dollar investments hitting the floor—the regulators sat and stared at each other and said things euphemistically like: “Well we’re not sure that we’ve got statutory responsibility to oversee this particular part of the transaction.” or “Our legislation doesn’t allow us to intervene on this particular point because it is very prescriptive about what type of product is a security for the purposes of the securities legislation.” This body will remove the notion of that fracturing of regulatory oversight and if nothing else the most significant component part of this work is to give investors and for that matter designers and innovators of product that is going to the market a one-stop shop to have discussion with the regulator and the enforcer and overseer of the market. 
I use that distinction deliberately because often when producers of product are thinking about going to market they will not want to talk to the regulator for fear of the enforcement side becoming part of their discussions rather than the regulatory side of the operation. That is an important distinction. The Financial Markets Authority will be much closer to the market and the design of those products than its predecessors and that is a really important consideration. The market intelligence unit which will be contained within the Financial Markets Authority is designed to be close to the producer the public issuer the person or company that is taking product to market. 
Also when we get into the detail of the bill it is worth pointing out this particular power. For too long because of the prescriptive nature of some of this legislation product has been designed specifically to fall outside legislative and securities markets legislation oversight. That will change with the Financial Markets Authority being given the power to deem a product to be a security for the purposes of oversight supervision and jurisdiction in a way that will force in some respects those who are taking product to market to talk to the regulator at the appropriate time to ensure that everybody understands exactly what is going to market. 
We cannot take away risk. The legislative arm of this Government cannot take away risk from these products and from investors nor should we try to. But the point here is that enforcement and supervision have to come with power and a comprehensive oversight. My view is that this authority will do that. There is still work to be done on the securities legislation and that work is well under way. 
CHARLES CHAUVEL (Labour) 
: 
 Thank you Mr Chairman Robertson and I congratulate you on your acting chairmanship in today’s debate. I want to say a couple of things in response to what the Minister just told the Committee. I think it would be very useful if what he has just said was right and we were going to see comprehensive regulation and enforcement from one body and one body only. But the problem with the system that is to be constituted by the Financial Markets (Regulators and KiwiSaver) Bill in Part 2 in particular which creates the Financial Markets Authority is that of course it does not quite go as far as that. 
When the markets are faced with situations of criminal behaviour and in particular with serious fraud then the serious fraud task force—or perhaps on occasion the police—will sometimes step in either on receiving a complaint or because it is investigating other conduct. Of course if the serious fraud task force or the police are investigating matters on a criminal basis we will simply find that the Financial Markets Authority is locked out of the process. It will have no option in most situations but to simply stand aside and wait until the criminal investigation usually conducted by the serious fraud task force has been completed. As we all know criminal investigations because of the safeguards that are necessarily in them given the penalties that can be suffered can take some time. That can have a significant chilling effect on any regulator’s inquiry into a particular course of conduct. So I am afraid the Minister oversold these reforms on at least one important aspect when he gave his contribution earlier. 
I think it is important to point out that unless and until we have some sort of regulatory and investigative principle in this country relating to the primacy of an investigator whereby investigators or regulatory or enforcement bodies—all of which have some sort of overlapping jurisdiction in respect of some particular matter—can by an overriding statutory authority simply agree that the matter will be within the jurisdiction of one of them and one of them only to go forward with the investigation then we will still have this kind of overlap. It will be a problem. We can see that problem arising in all sorts of areas. Transport accident investigations are one area that springs to mind but there are many many other areas where the existence of overlapping regulatory or enforcement bodies can prevent the speedy and expeditious conclusion of a particular inquiry. That will still happen in respect of the financial and securities markets when fraud and in particular serious fraud is alleged even after this bill is passed by the House if that is what the House decides to do. 
I will make a couple of other points. The Minister talked about the comprehensive nature of this reform and I think I have indicated one area where that is an overblown claim. The other area is one that I touched on in an earlier contribution and that is the failure of this Parliament to address the fringe lending sector of the market. This bill still does not go far enough in that respect. We need to have comprehensive regulation across the market. The sort of reform that my colleague Lianne Dalziel advocates for in her amendment to insert new clause 9A which she has now tabled would be very useful. If there was a set of principles that bound all participants in all financial markets and if it was up to the Financial Markets Authority to then fill in the meaning of those principles in any particular context we would have progress. But despite the advocacy of the Labour members on the Commerce Committee that is not the way that the Government has decided to proceed. 
In particular I think it would be useful to consider how the principles that are contained in Lianne Dalziel’s amendment would apply in respect of the fringe lending sector. The scheme of the amendment that she has put forward is based as she said on the English Financial Services and Markets Act 2007. I have a copy of the relevant section. Section 64 of that Act allows the Financial Services Authority as it is called in England to issue statements of principle and codes of practice. I think I said 2007; I should have said 2010. 
Hon Lianne Dalziel 
: 2000. 
CHARLES CHAUVEL 
: I beg your pardon; I cannot read Lianne Dalziel’s writing. The legislation in section 64 allows statements of principle and codes of practice to be issued. After that happens the authority fills in as I said before what those definitions mean in any particular case. 
In her amendment Lianne Dalziel refers to obligations to do with a particular provider’s communications with customers. The proposal that she has tabled is that “A firm must pay due regard to the information needs of its customers and communicate information to them in a way which is clear fair and not misleading.” My colleague said she felt that would deal with the issue of celebrity endorsements. That problem has to be faced. It is a shame that Cabinet has kicked it into touch and is waiting for yet another report which we hear from the Minister will not be ready until May. Meanwhile times are tough out there and those celebrity endorsements are influencing people. 
I think particularly of the fringe lending sector where we have Stacey Jones and others saying a certain finance company is a fantastic one. [ 
Interruption 
] The honourable member Peseta Sam Lotu-Iiga ought to listen to this contribution because he knows the demographic to which that endorsement appeals. This Parliament has failed to prevent those sorts of practices despite having had the opportunity time and time again to do so. What happens? People continue to get ripped off because they think: “Gee that sportsperson is a real icon—a real hero of mine. If he or she is endorsing a product it must be a really good one. It must be one that we can trust.” Therefore they invest their money without much further thought. That is a real shame. Unfortunately under the provisions of this bill such practices will be able to continue and we should not think that is desirable. 
It would be much better to go along with the sort of proposal that the Minister indicated the Government will be voting against but which Lianne Dalziel has put up. Her amendment states that there are principles to bind all participants in the financial markets. If people complied with those principles their conduct over time would elevate and the rip-offs would stop. 
The last point I will make in respect of Part 2 relates to the financial literacy point that arises out of the issues I have just been speaking to. In the end until we deal fairly and squarely in this country with the issue of financial literacy it does not matter what regulations or laws we pass because we will still have major problems in this area. That is particularly the case in respect of the fringe lending sector which I mentioned earlier. Again we see something of a disappointing result when this bill is looked at in the round on the financial literacy point. The Commerce Committee in reporting it back has acknowledged that some work is already being done by the Retirement Commissioner in that area. There is a subsidiary function for the Financial Markets Authority that is enhanced somewhat in this bill but still no one in New Zealand is fairly and squarely responsible on behalf of the Government for trying to improve people’s basic level of understanding about the financial products on offer in the market. Until somebody is tasked with that responsibility fairly and squarely and until there is a Minister responsible for that agency and accountable to this Parliament we will still have major problems in that area with people not being able to understand the basic types of products on offer. 
So I say the claims that the Minister has made about comprehensive reform are brave. Certainly no one could deny that this bill is a step forward—in particular in the provisions of Part 2. But in respect of the significant omissions that I have identified on financial literacy and the failure to really come up with a comprehensive code of conduct that ought to apply across the markets so that we can as the Commerce Committee stated in relation to the Financial Markets Authority facilitate “the confident and informed participation of businesses investors and consumers in financial markets” this Parliament will not have done its job. 
Hon DAVID PARKER (Labour) 
: 
 I rise to take a call on Part 2 of the Financial Markets (Regulators and KiwiSaver) Bill. I will move to a topic that I do not think has been addressed yet in the debate on Part 2. It relates to the ability of the Minister under clause 20 to request the Financial Markets Authority to inquire into an issue that is of concern to him or her. Under clause 20 “The Minister may by notice to the FMA request that the FMA inquire into and report on any matter relating to the financial markets financial markets participants or other persons engaged in conduct relating to those markets.” I want to explore that issue a little and to inquire of the Minister in the chair the Minister of Defence whether those are the sorts of issues that are being talked about. 
I think it was evident to quite a few people in New Zealand and quite a few people in Parliament that problems were afoot as a consequence of the property bubble that developed around the world. There was a property bubble that was inflated during the heady days when credit was easy in various parts of the world; we were not immune to it. We were one of the worst in the world but we were not the worst. The Government of the day which was a Labour Government pushed against the bubble in a number of ways. We tried to take the heat out of it a little by increasing interest rates through the Reserve Bank which does that independently. We also took the heat out of it by running Government surpluses so that the Government was saving money and effectively taking out of the economy money that would have otherwise further inflated that property bubble. 
I suppose at this juncture I should put on record the fact that of course for every one of those Budgets that we ran as a surplus the National Opposition complained that— 
Hon Maurice Williamson 
: How did the Government increase interest rates? 
Hon DAVID PARKER 
: No I said it was done through the independent Reserve Bank. The Government did not increase interest rates. 
Hon Maurice Williamson 
: I thought you said the Government did it. 
Hon DAVID PARKER 
: No. We ran surpluses which were opposed by Mr Williamson and everyone else on the National Opposition. It said we were being greedy and that those surpluses should have gone back to people in tax cuts. If we had done that we would have had not only bigger problems in the finance companies but also a terrible Government balance sheet. We would now be like the so-called PIGS—Portugal Ireland Greece and Spain—which have such high levels of Government debt that they are really in the mire. The third way we pushed against it was by introducing KiwiSaver which introduced private savings. 
None the less it is true that despite all of those measures there was a property bubble in New Zealand. One of the symptoms of that property bubble was excessive lending into some risky propositions by finance companies. That symptom was evident for some time before the crash. Warnings came from the Governor of the Reserve Bank and warnings came from various other commentators. Of course some self-interested people in the property sector including a number of real estate agents said there was nothing to worry about. The finance companies themselves presented a very rosy picture of the future in a way that understated the risk that was out there. 
It would have been good if the Minister had had the power at that time to look a bit deeper into some of these things. I think it was evident to a number of people that related party transactions that were of concern were proliferating in the finance sector. By that I mean transactions in which the people who were ostensibly acting as independent managers of finance companies were lending money for the benefit of the finance company in a way that returned interest to the people who were investing in the finance company through debenture stock. They were presenting themselves in a way that was in my view dishonest. They were effectively saying they were not self-interested in those things when we now know that a lot of them had loans from the finance company using the money that people had deposited into the finance companies. They were using those moneys to lend into ventures that were highly speculative and in which they members of their family or related family trusts had an interest. Those related party transactions were not properly disclosed. 
I would have liked to see that sort of issue inquired into at the time or indeed even now. There is a systemic issue of why that matter was not picked up by the people who already had statutory obligations to supervise those organisations. Finance companies always have a debenture trust deed. In respect of that debenture trust deed there is always a statutory supervisor. The statutory supervisor is generally a trustee company and it is one of the roles of that statutory supervisor to supervise the conduct of the finance company under the deed of trust that governs the terms of their debenture stock. I think that is an area where that provision could be used and I am interested in the Minister’s view. 
I will give members another example: our accounting standards. I do not know what other people in this Committee think but I think some of our accounting standards have become so hideously complex that even people who have a degree in accountancy as I do struggle to read them. They have become so complex that they no longer make common sense to people. Therefore people do not bother to read them properly. In fact most people cannot read them properly and even those who could read them do not bother to go to the trouble because they would have to spend a day or half a day to read it and get to the bottom of it. 
Not only that but as my colleague Charles Chauvel just said the standards have become instruments in tick-box compliance rather than in fair provision of information to people who are making investment decisions. Although they have become more complex they have actually become less useful. They have also driven up compliance costs. They are no cheaper. In fact accounting costs and audit costs—the audit of those practices—have become in some cases hideously expensive. The added complexity firstly has not protected people; secondly has become more expensive; and thirdly does not serve the purpose for which it was originally intended. 
I get a bit tired of some accountants in society when they are asked for a comment from the newspaper forever calling for a reduction in compliance costs. In fact they are perhaps one of the centres of greatest compliance cost in our economy. I attest to that from my own private experience in respect of both the cost of putting together prospectuses and the costs of audits and accounting fees as the increasingly complex accounting standards take longer and longer to comply with. 
There is a need for an inquiry and a report into how we can appropriately provide realistic information. We went the wrong way with investment statements. Investment statements dumbed things down and anyone with a bit of knowledge went to the prospectus anyway. But in the prospectus itself we have gone too far the other way. We ended up with the worst of all worlds which is some very complex things that no one reads or few people read and few people understand and investment statements that were too superficial. 
The third thing that I suggest we look into is how these rules have been applied in practice. I might come back to this issue in a later call if I have the opportunity and do not have the time to finish it in this call. The issue relates to how organisations that wanted to make due provision for risk which was inherent somewhere in an investment portfolio were effectively being stopped by the trustees and the auditors from doing so. If someone wanted to make a provision for what effectively we would call a doubtful debt they could not do it because the trustee would say that they did not yet have a provable loss—they cannot point to a particular loss. Therefore if that person was making a provision for a doubtful debt they were effectively keeping capital back from the people it should be distributed to and the trustee would force them to revalue their unit up. If someone has made an allowance for an inherent but unspecified liability in the investment portfolio of a finance company an investment trust or a mortgage trust the auditors would come along and say to them that they had to put up the price to $1.10 instead of $1. That would completely defeat the purpose of the provision for doubtful debt. 
That issue remains a very very real problem because it was an absolute disincentive to people acting prudently. It was caused again by the people who were meant to be protecting the interests of the depositors. It was unworldly I would say but it happened on more than one occasion and that sort of thing should be inquired into. That is the sort of thing that the Financial Markets Authority can help with and I am interested to hear from the Minister whether he supports that inquiry. 
CAROL BEAUMONT (Labour) 
: 
 I rise to speak to Part 2 of the Financial Markets (Regulators and KiwiSaver) Bill. Part 2 is particularly about the Financial Markets Authority and its objectives and functions and the like. I note that Labour supports this provision and this bill. We all in this Chamber probably agree wholeheartedly on the purpose of the bill which is to restore investor confidence in New Zealand’s financial markets because clearly those markets have been very sorely tested indeed. It is important to note that we all have a really important interest in getting this legislation right. 
We support the bill because we believe that this new authority the Financial Markets Authority by consolidating a range of different regulatory functions in one single agency makes some sense. We also recognise that the officers of the Financial Markets Authority will be playing a significant and important role and therefore their processes must be fully transparent. They must be beyond reproach. This issue is an example of the importance of having a very robust range of public servants in our country. 
Of course the reform of financial markets was a process established by Labour and we are pleased to see the Government continuing our good work. In particular in looking at Part 2 first of all we see the objective and functions of the Financial Markets Authority. There is an objective of promoting “fair efficient and transparent financial markets.” The issue of fairness is a really important one and it is a core Labour value. It is one we think of as an underlying principle. I have to say that at the moment we live in a very unfair society and one that is getting less fair every single day. I ask why people actually need to use finance companies. Why do people have to engage with finance companies? I will particularly focus on the bottom end of this market if you like. I will focus probably not surprisingly to members opposite on what one might call the fringe end of the market—the loan sharks the finance companies on our streets the national companies that advertise on television right through to sole traders in a little one-office company on a street in Onehunga Panmure Otara or Mangere that lend people money. There certainly is a need for more robust regulation to ensure that they operate in a fair efficient and transparent manner. 
Why do people have to go to those sorts of places? Obviously it is about accessing credit. Usually people who go to that end of the market have very little choice. They are under enormous financial pressure they cannot necessarily access credit from mainstream agencies like banks so they end up using those agencies which charge very high rates of interest and lend irresponsibly. One of the very important things for the role of the Financial Markets Authority is to be very clear about looking at that part of the market. I note under clause 9 of Part 2 that the Financial Markets Authority’s functions include the collecting and disseminating of information or research about any matter relating to those markets—that is the financial markets. One of the things I say is that we need to make sure we look across the range of providers in financial markets and continue to put some light on this end of the market the fringe end of the market. 
So the first question I ask the Minister Wayne Mapp to answer is whether the Government is committed in this area. I have to say that it was very disappointing when the member’s bill I put up and worked hard on with Charles Chauvel was defeated by National and ACT voting against it despite it being a genuine attempt to deal with a part of our financial market. I suggest we look at and give the Financial Markets Authority some responsibility to look at how we might control excessive interest rates. I think that the Financial Markets Authority should have some responsibility to look at questions like how we can control excessive interest rates and what regulations there should be. Members opposite voted down provisions on setting interest rate caps for whatever reasons they had. What are their alternatives? What are they doing to deal with the facts? I think the Financial Markets Authority if we are talking about promoting fair efficient and transparent financial markets needs to look at that question. 
The second area is the issue of responsible lending. What will the Financial Markets Authority’s work be in that regard? I suggest that in looking at the point in clause 9 about “issuing warnings reports or guidelines or making comments about any matter relating to those markets or financial markets participants or other persons engaged in conduct” relating to those markets one of the very real things that need to be done is to look at what responsible lending looks like. What should the requirements be in lending money that people cannot afford to borrow? What are the rights of people who are struggling to make ends meet who are forced into a situation of having to borrow money—for example to pay for food or to purchase school uniforms for their children—at excessive interest rates in a situation where they cannot afford to pay back that money? I think we really need to look at that end of financial markets as a matter of some urgency. 
I support the work that my colleague Lianne Dalziel did in relation to putting up an amendment in relation to this part. She is really looking at how we can have a code of conduct that would apply and make sure that the operation was done in a useful and acceptable way. I think that is a very sensible idea. Members on this side of the Chamber urge members across the Chamber to seriously consider the amendment of Lianne Dalziel. 
I will touch on the issue of financial literacy. I absolutely think that financial literacy should be a core function of the Financial Markets Authority. It should have a core responsibility to educate. When I did a lot of work on the issue of loan sharks and fringe lending a lot of people said to me that we need to improve financial literacy. In fact members opposite waxed lyrical about how it is a matter of financial literacy and that one of the ways we can deal with those people at that end of the market is to make sure that consumers know what they are getting into their rights what is unacceptable and things like how interest rates and compounding interest rates work and all the rest of it. Well here is the time people to really look at sitting up there and doing something to improve the work in relation to an educational function for the Financial Markets Authority. 
It is certainly true that the Retirement Commissioner does a lot of very good work in a very principled manner on the issue of financial literacy and that work targets right across the board. The Retirement Commissioner looks at financial literacy from schools to entrance into the workplace through to senior citizens and everybody in between because obviously the needs are different at different stages of one’s life. But a lot of that work and a lot of the resources developed by the Retirement Commissioner have not rolled out as significantly as they should do due to a lack of funding. So there is a really important role for the Financial Markets Authority in ensuring that good-quality independent financial literacy work that targets people at different life stages is rolled out monitored and developed. That will make a difference to consumers’ experiences of dealing with financial markets. That is an area that we need to beef up. We need to make sure that the responsibility is much more strengthened than it currently is in Part 2 of the bill. 
In summary although we support the bill and the development of the Financial Markets Authority I think it is important that we get some commitments about ensuring that that authority looks at what is going on at the fringe end or the loan shark end or however one wants to describe it of financial markets. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I congratulate you Mr Chair on your recent appointment. 
I will address Part 2 of the Financial Markets (Regulators and KiwiSaver) Bill and the amendments proposed by my colleague the Hon Lianne Dalziel. First of all though I say that I was very pleased to hear Minister Simon Power talk earlier about taking responsibility; the importance of the new Financial Markets Authority which replaces the powers of all those agencies that have been mentioned; and the importance of having wider enforcement and surveillance powers. He referred to previous agencies and compared the behaviours that went on with a number of those agencies to a staring competition. Consequently they were not taking responsibility for the obvious gaps and issues that occurred which means we have ended up in a situation where we need to create the new Financial Markets Authority. 
All I could think of while he was saying that was: “Good. Yes I agree with that.” but also I wish that his Government would take its own advice and practise what it preaches. We heard today in the House the Prime Minister attempt to dodge responsibility for the mishandling of the South Canterbury Finance collapse. I put that on the record because it is a clear area where responsibility needs to be taken. I am sure that my colleagues will have more to say about it. 
I also reiterate what my colleagues have said about all the other issues that were raised by my colleague Lianne Dalziel in her amendments. I endorse what my colleague Charles Chauvel said about celebrity endorsements. Something is definitely wrong when a person who is considered an icon in society or a trusted person can front a company’s product and lend them their brand and then have it turn out to be a lie. I consider that to be deception at the highest level. We do not seem to have anything in place that can really truly address that issue. Countless submitters came before the Commerce Committee either on this bill or on the financial collapse inquiry and raised that issue. It is morally wrong and it should be wrong in law. If we want to talk about taking responsibility that is another clear area where we could make some headway. 
I also endorse the comments made by a number of my colleagues around financial literacy. It is a critical issue. It is an endemic issue right throughout our society in terms of the complexity of financial communications and people’s lack of understanding whether they are considering being investors or considering documentation of any kind. 
Financial literacy has been raised again and again. It is a known issue across society at all levels and at all ages. In this digital age the issue certainly needs to be addressed and addressed quickly. It has been raised in the Commerce Committee which I sit on by a number of significant bodies such as the Retirement Commission and the Securities Commission as an area of critical importance. If this Government is to do anything meaningful to underpin the new legislation I certainly think financial literacy is an area that urgently needs to be addressed. As my colleague Lianne Dalziel says with her amendments communication with customers is absolutely critical and a firm must pay due regard to the information needs of its customers and communicate information to them in a way that is clear fair and not misleading. 
Responsible lending as my colleague Carol Beaumont pointed out is another area of critical importance. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I would like to turn the attention of the Committee to clause 20 in Part 2 and in particular the opportunity for the Minister to request that the Financial Markets Authority inquire into and report on a matter. In that regard I wish to raise before the Committee an issue much in the media today and that is the debacle around South Canterbury Finance and the crystallisation of a loss to the taxpayer of $1.2 billion and climbing. That number stands in stark contrast to the approximately $500 million that would have been a capped liability had the Minister of Finance and his colleague the Minister of Commerce accepted one of a number of recapitalisation deals in August and September of last year. 
This is a screw-up of epic proportions for the Government. I know of no company no corporation where a chief financial officer could make a $700 million mistake and keep his job. It is for that reason that the Labour Opposition has called either for the resignation of the Minister of Finance or for the production of documents such as offer documents which would prove his contention that he made a rational decision. If there is a reason that would justify a $700 million extra loss I do not know what that would be. 
I would like to turn the Committee’s attention to the chain of events that led to this debacle and first to identify the period of May to July 2009 nigh on 2 years ago when the Government was first advised that the books of South Canterbury Finance were to use the technical term “rumpy”. Advisers were sent in Treasury was advised and provision was made in the Crown accounts for the Crown’s liability under the Retail Deposit Guarantee Scheme because the Crown knew 2 years ago that the company was verging on insolvency. The Government faced the first of probably three sets of tragic decisions and that was that rather than putting the company into statutory management the Government opted to install a new management team through proxies and allow the company to continue to refinance its debt. 
The second crucial decision was made in April 2010 when the Government decided to extend South Canterbury Finance in the Retail Deposit Guarantee Scheme. Now there is no partisan argument about its original inclusion or the value of the scheme. Both parties agreed to set up the scheme and although South Canterbury Finance was brought in under National the preparatory work was done under Labour and there is no debate about that. But there is big debate about whether it should have been extended. By that time the Government knew full well that there was a massive hole on its balance sheet. 
The CHAIRPERSON (Lindsay Tisch) 
: The member must come back to the relevant theme in Part 2. 
Hon DAVID CUNLIFFE 
: I am being absolutely relevant to clause 20. 
The CHAIRPERSON (Lindsay Tisch) 
: I want you to bring it back. I have sat here for a minute now and I have not heard anything to do with Part 2. Although the member’s comments may well be relevant they must be tied back to the relevancy of Part 2. I ask the member to come back to that. 
Hon DAVID CUNLIFFE 
: Clause 20 in Part 2 which features on page 27 of the bill allows the Minister to request that the Financial Markets Authority inquire and report. I am challenging the Minister to request such an inquiry around South Canterbury Finance if he thinks there are other matters that need to be brought forward for scrutiny—other than his own incompetence. At the moment in the absence of documentation that would prove that the Government had good cause not to accept a $500 million cap in liability in August and September 2010 we are now faced with a $1.2 billion bill and climbing. The difference is equivalent to all the new money in the Budget round. If anything justified an inquiry I would submit that that did. 
The third critical set of decisions occurred up to and including 31 August 2010 where officials negotiated with South Canterbury Finance through the night around a recapitalisation deal or several options one including Permanent Investments. At that time the deal would have limited the Crown’s liability I understand to about $400 million providing about $1.2 billion of Crown equity. There were some risks around that deal which were advised on by KordaMentha and others and the Crown allowed the company perhaps encouraged the company to go into receivership. Equity-holders were wiped out; debt-holders were made good some to an enormous profit margin; and then shortly after the Crown faced a third round of offers. A very interesting offer came from the same company Permanent Investments this time associated with the New Zealand Superannuation Fund and Ngai Tahu which I understand would have capped the liability to around $500 million transferred the good bank to a consortium owned by those three parties allowed the bad bank to be restructured and hopefully a happier outcome to occur than has occurred. There is now an unexplained wedge between the approximately $500 million cap that that deal would have afforded and the $1.2 billion which has already come to charge under the Crown accounts which were released this week. 
Clause 20 provides that the Financial Markets Authority may institute an inquiry. I submit that this is the largest financial collapse in New Zealand history and if anything ever merited a Financial Markets Authority inquiry it is this. My colleague Lianne Dalziel has raised the issue of whether the authority would be keen to do that given the involvement of some of its own should we say in earlier stages. We have heard various accounts of the management of potential or perceived conflict of interest issues around one Simon Botherway. I am not going to repeat those issues right now but let me say this: there is much more to come on this issue. We cannot have a $700 million loss to the taxpayer over and above that which would have been required by the recapitalisation of the company and not have hot political debate. If I was ever in doubt of that it was on Sunday morning when I was at the Avondale market—a very august place in my electorate—and an elderly Pacific Island gentleman came up to me and said “Mate we’re doing it tough. We need you to fight for us.” That $700 million would be a lot of money to him because he cannot feed his family and there are 180000 people unemployed. I know that I have to come back to the clause Mr Chairman but forgive me if I am feeling for my constituents. Clause 20 provides an inquiry power which if it were ever to be used should be used in a case like today’s. 
The third leg of the treble is the Minister’s justification for his action which ironically has been to challenge the Opposition to produce the offer documents which he himself has in his possession. I say to the Minister of Finance— 
The CHAIRPERSON (Lindsay Tisch) 
: Come right back to this part. 
Hon DAVID CUNLIFFE 
: —under clause 20 that if he does not want an inquiry if he wants to keep his job and prove that he is right then he should do so by releasing each and every document all the offers all the advice into the public domain because we do not have a third round. If I am wrong and there is a $700 million reason why he was smart to pay $1.2 billion and climbing then I am happy to admit it but I have not seen it yet. I can only make the judgment that a huge mistaken punt was taken on behalf of the taxpayer. I fear that it may have been worse than that and that there will be more to tell about this issue as it goes forward but for now suffice it to say that clause 20 provides a very important power and it sits right here in Part 2 of the bill. It provides for an inquiry power. We face a financial scandal that is of such magnitude that it has eaten Budget 2011. There is no new money for Budget 2011. There was $800 million 2 weeks ago—$700 million has been wasted on this issue alone above what could have been capped with a recapitalisation deal. That is a tragedy of epic proportions and New Zealanders want to know the reasons. I tell this Government to use this power if it is so confident it is right—release the documents and let the light shine otherwise the Minister must go. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I want to focus in on the question of the members of the Financial Markets Authority and indeed the associate membership. The Government has announced today who the members of the Financial Markets Authority are and I would have thought that the Minister of Commerce would take the opportunity to talk about why this particular membership was chosen. 
Clause 10 of the Financial Markets (Regulators and KiwiSaver) Bill states: “The board of the FMA consists of not fewer than 5 and not more than 9 members.” I ask myself whether we got those numbers right given that one member of the establishment board is on the board of the Financial Market Authority now and one member of the establishment board has become an associate member. I cannot remember the discussions that we had on associate members but I am not sure what they will do. That is to be determined by the particular notice of appointment that they are given. So I really would like to see the notice of appointment or get some comment from the Minister as to what the associate members that have been announced will do. 
I want to reflect for a minute on why I think it is important that the Government did look more carefully at the role of the establishment board and took some of those people—a lot more of those people—through into the new Financial Markets Authority. The reason I say that is that the membership of the establishment board was welcomed across the board. There was considerable support for the members of that group not all of whom obviously were going to make themselves available for the Financial Markets Authority. But there were also people in there who were never going to be appointed. 
Obviously Neville Harris is an extraordinary public servant and as the Registrar of Companies he obviously would not be taking up that role but he is a critical element in the establishment board. But apart from him and perhaps Paula Rebstock who perhaps has not seen herself in a role in the Financial Markets Authority but more as an economic consultant coming in for the establishment of it there are people on the list of the establishment board like Frank McLaughlin who is an incredibly well respected corporate lawyer and I would have thought I would see his name on the list. 
Maybe there are things that I do not know. Some people may not have put their names forward and it will be very interesting when all of this is explored further. There is also Andrew Harmos Mariette van Ryn and Scott St John. Shelley Cave is the one person who has come across and is also a member of the Securities Commission which probably is neither here nor there but it does seem a shame that the one person who has made it on to the board from the establishment board is one from the Securities Commission given that this is a whole new ball game as it were. 
There is also Bruce Sheppard. Now Bruce and I have had our moments in the past particularly when I was the Minister of Commerce and he was the head of the New Zealand Shareholders Association. But what I have always enjoyed about Bruce is that one does not die wondering what he thought about an issue. He is somebody who challenges things with incredible integrity and he annoys a lot of people. I know that I probably do too but I really was quite disappointed to see him listed as an associate member rather than as a full member of the board. That is probably the kiss of death for him; I can assure the Committee that he probably would not say very nice things about me from my time as the Minister. But I do respect the fact that he was not afraid to front on issues that were important to his members. 
The Financial Markets Authority board is supposed to be a brave new start and I just feel that the board announcement today—soft announcement that it was—without any comment from the Minister in the chair the Minister of Commerce while we are debating the very bill that brings it into existence was really a missed opportunity. I did want to place that on the record of the House. I am not making any comment about the people who have been selected. I know the media want to speak to me about some conflicts of interest that they have already identified but I will obviously not comment about conflicts of interest until I have done a little bit more homework—better than I did last time. 
CAROL BEAUMONT (Labour) 
: 
 I will continue with a couple of points in relation to the Financial Markets Authority as outlined in Part 2 of the Financial Markets (Regulators and KiwiSaver) Bill. Firstly I will talk particularly about its ability to monitor and conduct inquiries and investigations into any matter relating to financial markets or the activity of financial market participants. Secondly I will talk about the provision to keep under review the law and practices relating to financial markets financial market participants and other persons engaged in conduct relating to those markets. 
Those are two very useful responsibilities or functions of the Financial Markets Authority. One issue that is worthy of some consideration is the types of inquiries and investigations that we might need in relation to our financial markets. “Financial markets” covers quite a range of different operations from the second tier or fringe end right through to very big investment companies and the like. I think understanding how those companies operate—how people choose to use different types of lenders for example—is very useful. 
In the course of looking at the issue of fringe lenders or loan sharks it became very apparent to me that people were using so-called finance companies that were lending irresponsibly and at an excessive interest rate even though they could have got access to credit elsewhere. That seemed to be a very strange situation and understanding that type of behaviour seemed to be very important. It may well go to the matter I raised earlier of financial literacy or it may well go to other matters like the way particular communities are targeted by some sorts of finance companies and so on. The types of inquiries the Financial Markets Authority could conduct under clause 9 is something for us to think about. 
Likewise keeping under review the law and practices as outlined in clause 9 provides an opportunity for us to look at our financial markets in terms of how we can ensure that they are functioning as per the objective which is to have fair efficient and transparent financial markets as outlined in clause 8 in Part 2. One of the ways of keeping the law and practices under review is for the Financial Markets Authority to ensure that it is looking at best practice internationally. Where similar problems are being addressed in other jurisdictions let us make sure that we look at and review the laws in those jurisdictions. A number of countries have been dealing with for example the question of excessive interest rates and how they might be managed and trying to work out whether capping interest rates is the best way to go or whether other provisions are better. Using that information and keeping law in other jurisdictions under review is particularly relevant to us and useful for us as a country. 
I come to the amendment being promoted by the Hon Lianne Dalziel which is to insert a new clause 9A in Part 2. She is attempting to look at principles to bind all financial market participants. That is a really good idea. It makes a great deal of sense for us as a Committee to agree on the kinds of principles we think should underlie every financial market transaction and that all the participants should sign up to. One of the provisions she has outlined in the amendment is that “A firm must conduct its business with integrity.” A lot of the places that have caused a great deal of harm in New Zealand—and I do not mean just at the fringe market end; I mean some of the investment companies that have caused many small investors to lose their life savings—were not acting with integrity. The amendment would ensure that we have that requirement as a bottom line. Another provision is “Skill care and diligence:”. 
The two provisions I thought it was worth picking up on as Labour’s spokesperson on consumer affairs were the two provisions in the amendment about principles relating to customers’ interests and communication with customers. I think the suggestions she is making in the provisions are very sensible. 
The question was put that the following amendment in the name of the Hon Lianne Dalziel to Part 2 be agreed to: 
to insert the following new clause: 
9APrinciples to bind all financial markets participants 
The FMA will have an overriding power to enforce the following principles which will be binding on financial market participants— 
(a)integrity: a firm must conduct its business with integrity: 
(b)skill care and diligence: a firm must conduct its business with due skill care and diligence: 
(c)management and control: a firm must take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems: 
(d)financial prudence: a firm must maintain adequate financial resources: 
(e)market conduct: a firm must observe proper standards of market conduct: 
(f)customers’ interests: a firm must pay due regard to the interests of its customers and treat them fairly: 
(g)communications with customers: a firm must pay due regard to the information needs of its customers and communicate information to them in a way which is clear fair and not misleading: 
(h)conflicts of interest: a firm must manage conflicts of interest fairly both between itself and its customers and between one customer and another: 
(i)customers relationships of trust: a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment: 
(j)customers’ assets: a firm must arrange adequate protection for customers’ assets when it is responsible for them: 
(k)relations with regulators: a firm must deal with its regulators in an open and cooperative way and must tell the FMA promptly anything relating to the firm of which the FMA would reasonably expect prompt notice. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 54 
New Zealand Labour 42; Green Party 9; Progressive 1; Independents: Carter C Harawira. 
Noes 68 
New Zealand National 58; ACT New Zealand 5; Maori Party 4; United Future 1. 
Amendment not agreed to. 
Part 2 agreed to. 
Part 3 General information-gathering and enforcement powers 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 Part 3 of the Financial Markets (Regulators and KiwiSaver) Bill relates to the general information-gathering and enforcement powers. The reason I want to speak on it relates to the point my colleague Charles Chauvel made in relation to Part 2—it flows into Part 3 as well—which is that one of the reasons for having the Financial Markets Authority is to gather together the different enforcement functions of our various regulators in this area in order to give the authority some teeth. I support that approach 100 percent. That is why generally speaking Labour supports the bill.  
But what has not really been resolved is that a number of the hold-ups in the investigations around the financial company failures have related to the involvement of the serious fraud task force. Nothing in the bill changes that involvement at all. I do not know how the problem will be resolved without revisiting the fraud aspects of the serious fraud task force. I think we could have done that if we had proceeded with the reintegration of the serious fraud task force into the police as Labour had been planning to do prior to the 2008 general election. Then extensive criminal investigation work could have been shifted from the serious fraud task force to the Financial Markets Authority. I am sure that that approach would give the authority the teeth we are really looking for. 
The problem that I had at the time when we were considering the reality of the financial company failures was that every time somebody raised a question about why a particular issue was not being investigated the answer was always that it was because the matter had been referred to the serious fraud task force. I cannot see how this legislation will fix that fundamental flaw in our system. I hope the Government takes an opportunity when it reviews this legislation later on down the track through the Securities Trustees and Statutory Supervisors Bill to decide whether that flaw could be remedied by way of that particular legislation. I know that this legislation needs to be reviewed but maybe the serious fraud task force legislation needs to be reviewed as well. It seems to me that everything goes on hold while the serious fraud task force does its work. 
The work of the sharing of information that is contained within the bill should free things up a bit but it is not clear to me—maybe the Minister of Commerce would like to put on record the Government’s position on how the legislation will apply in practice—whether the fact that the serious fraud task force is investigating a particular allegation of fraud means that the Financial Markets Authority will have to hold back its investigation while the fraud investigation is being conducted. That is the question. If the Minister can give us an absolute assurance that the Financial Markets Authority will be able to continue its investigation unimpeded by the investigation of the serious fraud task force then I would have some comfort. But I do not know whether that comfort can be given because there is an essential conflict between the two roles even though they both have very similar functions in terms of bringing wrongdoers to account as it were—one from a regulatory perspective and the other from that of the criminal law. Now that we have brought in criminal liability I wonder whether we have that absolutely right. 
I really would be interested to hear some of the Government members participate in the debate and explore this issue. We did discuss it at the Commerce Committee a little but we did not really get to a conclusion that gives me the assurance that this legislation will be able to take on that particular issue. To me that is the main thing in relation to that issue. 
There is another very important subpart in Part 3 which is the provision relating to the Financial Markets Authority and which for me in some ways is actually the most important part of the bill. It is that the Financial Markets Authority may exercise a person’s right of action. This power was absent from the previous regime and I think it will give people confidence that the new regime can step into play in a way that the previous regime could not. That power is a tremendous advance in terms of the interests of the mum and dad investors whom we talk about from time to time because it enables the Financial Markets Authority to take action and step into the shoes of those who otherwise may be prevented from—they may be ill-equipped or impecunious—exercising their capacity to take proceedings to seek damages or other relief for fraud negligence default breach of duty or other misconduct. 
I think that is the strength of this bill. I am delighted that we were able to reach an agreement across party lines that this was an essential feature of the future. If we did not have this provision the reality would still be that people would miss out on having their cause of action proceeded with on their behalf when they were not in a position to do so. 
This provision also enables people to take some comfort from the fact that when avoidance techniques are used to ensure that companies’ assets are not traced back to those who have taken them inappropriately for themselves the searching can carry on regardless of the interests that would otherwise be protected by our company laws. That says to me that we are essentially in this legislation putting the right of people to be treated with fairness and dignity in these circumstances ahead of some of the legal niceties of the corporate veil as people call it. That is an extremely positive move and one that I am very supportive of. 
We had a lot of debate around this provision in the select committee. There were a lot of submissions on it and very strong views were expressed about its appropriateness for the legislation. I was actually quite disappointed in a number of people in terms of their representations to the select committee about removing this provision but I think we have done the right thing. I think that the advice that we have received on this at the end of the day is the correct advice and I believe that this provision will stand our country and our financial markets in good stead for a very very long time to come. 
Those were the main points that I wanted to make in relation to this particular part. I know there are a number of other provisions in it but I think those are the two provisions that are essential to the successful operation of the Financial Markets Authority. I am very very pleased that we have been able to play a role in making sure that we have created a very workable resolution of the issues that were put in front of us on that matter. 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 3 be agreed to. 
Amendments agreed to. 
Part 3 as amended agreed to. 
Part 4 Miscellaneous provisions 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 4 be agreed to. 
Amendments agreed to. 
Part 4 as amended agreed to. 
Part 5 Amendments to Securities Act 1978 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 5 be agreed to. 
Amendments agreed to. 
Part 5 as amended agreed to. 
Part 6 Amendments to Securities Markets Act 1988 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 6 be agreed to. 
Amendments agreed to. 
Part 6 as amended agreed to. 
Part 7 Amendments to KiwiSaver Act 2006 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I will take just a brief call on Part 7 to state for the record our support for the provisions for extending the arrangements for supervision in respect of KiwiSaver schemes. We think it is extremely important that we are doing this to ensure for those who are making their investments in KiwiSaver as so many New Zealanders are today that the legislation is expanded to make the same requirements for managers of KiwiSaver schemes as it has done for the rest of the financial sector that will be covered by the Financial Markets Authority. I think that that again will provide the reassurance that people who are investing in KiwiSaver are looking for in this field. I just wanted to place that on the record. I do not want to hold up the passage of the legislation. I think we have had the debate on most of the important parts of it. 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 7 be agreed to. 
Amendments agreed to. 
Part 7 as amended agreed to. 
Part 8 Amendments to Financial Advisers Act 2008 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to Part 8 be agreed to. 
Amendments agreed to. 
Part 8 as amended agreed to. 
Schedule 1 agreed to.  
Schedule 2 agreed to.  
Schedule 3 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to schedule 3 be agreed to. 
Amendments agreed to. 
Schedule 3 as amended agreed to. 
Schedule 4 agreed to.  
Schedule 6 
The question was put that the amendment set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to schedule 6 be agreed to. 
Amendment agreed to. 
Schedule 6 as amended agreed to. 
Schedule 7 agreed to.  
Clause 1 agreed to.  
Clause 2 Commencement 
The question was put that the amendments set out on Supplementary Order Paper 222 in the name of the Hon Simon Power to clause 2 be agreed to. 
Amendments agreed to. 
Clause 2 as amended agreed to. 
The Committee divided the bill into the Financial Markets Authority Bill the Securities Amendment Bill (No 3) the Securities Markets Amendment Bill (No 2) the KiwiSaver Amendment Bill and the Financial Advisers Amendment Bill (No 3) pursuant to Supplementary Order Paper221. 
Bill to be reported with amendment presently. 
Securities Trustees and Statutory Supervisors Bill 
In Committee 
Part 1 Preliminary provisions 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I rise to speak on Part 1 of the Securities Trustees and Statutory Supervisors Bill. One of the concerns I have regarding this legislation is the same concern that I expressed when we debated its first reading in the House—that is whether we are following the right sequence or the right order of play. To my way of thinking the  
Review of Securities Law  
should have come first followed by the establishment of the Financial Markets Authority followed by consideration of this bill. This bill should have been wrapped up in the review of the legislative framework. 
When the Commerce Committee sat for the first time after the 2008 general election it was not very long before we had a briefing from the Ministry of Economic Development. I will never forget the briefing we had from the Registrar of Companies because it really opened our eyes to a lot of the things that none of us had really seen before. It was a stark picture of who was supervising the finance companies that failed. There were two issues of concern: one was the trustees and the other was the auditors. We will still be dealing with those issues in our select committee over the next few weeks. 
The issue for me was that we always talk about there being no regulation for finance companies but that is not true. There was regulation for finance companies; it just was not strong enough. The regulatory supervisors under the former regime were the securities trustees. They were the ones who were responsible for overseeing decisions that were being made by finance companies and for what was not being advised to the public by way of very convoluted arrangements inter-party lending and all sorts of things that should never have been allowed to escape the scrutiny of the supervisors. That is what made me wonder whether this was the right thing to do. 
I am kind of agnostic about it. The Labour Opposition will not vote against the legislation—we will let it go through—but I think it is important to remember why it is important to do a proper regulatory impact analysis whenever one is dealing with the regulatory frameworks that have to stand the test of time. What preceded the finance company failures obviously did not stand the test of time and that is my strongest concern about the approach that we have adopted with this legislation. Labour will not oppose it but I just think we have to be very cautious. 
I would almost say to the Government that it should hold this bill back on the Order Paper. There is nothing wrong with getting the Committee stage out of the way so that it has just a third reading to go but the Government should just wait until after the exposure draft comes out on the securities legislation which will perhaps be introduced in October we now hear. The exposure draft is coming out in August so my strong advice to the Minister of Commerce is that he hold this bill at the end of the Committee stage and then have a serious rethink as to whether this is the structure to take us forward. 
I have some serious doubts as to whether the securities trustees regime is the right one for New Zealand particularly in light of the legislation that we were debating only a few minutes ago. The Financial Markets Authority will have a new role and I am just wondering whether we have created an unnecessary tier of supervision when it could be undertaking that role directly. 
Labour will not be opposing the passage of this bill but I make a plea to the Government to think very carefully about whether this is the direction we want to go in. I have no objection to the philosophy of supervising the supervisors but also I like to make sure that compliance costs are reduced. An unnecessary tier of bureaucracy may in fact be just as bad. 
Hon DAVID PARKER (Labour) 
: 
 I will just develop that theme a little. I agree with the previous speaker the Hon Lianne Dalziel that it might be wise to put the Securities Trustees and Statutory Supervisors Bill on the back-burner for a little bit. Labour is not opposed to the idea of there being oversight of those who are responsible for the supervision of securities—securities trustees and statutory supervisors—but I take the Hon Lianne Dalziel’s suggestion that this oversight might fall within the ambit of the Financial Markets Authority rather than a separate entity. 
Hon Lianne Dalziel 
: Or the Securities—yes the Financial Markets Authority. 
Hon DAVID PARKER 
: The Financial Markets Authority rather than a separate body. 
The issues of cost are very relevant. One of the problems we have in New Zealand’s capital markets is that through compliance costs the cost of raising capital can be too high. There have been some terrible problems and practices in respect of finance companies and we had a good discussion about those in debate on the Financial Markets (Regulators and KiwiSaver) Bill which was discussed previously. There was far too much related-party activity. People were effectively lending moneys to things that they had an interest in and they were effectively reaping the financial benefit of very risky transactions if they went well on the back of relatively low interest rate investments by naive investors. The New Zealand regulatory environment did not protect those investors by making sure they were properly aware of the risks they were taking and the regulatory settings did not enable the regulators to burrow into what was happening in a way that would have exposed it earlier and would therefore have minimised the loss. I am not one of those people who think that we can avoid risk and I am sure that no one on our side of the Chamber—nor indeed anyone in the National Government—thinks that. But we ought to appropriately highlight risk and in those cases we were not doing so. 
Having said that in respect of finance companies—the lack of information that was provided to investors the lack of regulatory oversight of the poor practice within those finance companies and the failure to pick up related-party investing—I find it galling that some of the people who have ripped off people this time had prior form for having done so previously. Despite the failures in the legislation I will not let our regulators off the hook completely. With regard to our regulators—and I include the auditors and statutory supervisors of some of these finance institutions—and the regulatory bodies that oversee finance companies I find it hard to accept that no one looked at the people who had prior form and who had done something similar to rip off investors in earlier incarnations. I would have thought that those people particularly should have had the heavy hand or the intense scrutiny of the regulator in a way that might have prevented some of the losses. 
Having said all of that we have a problem with the expense of raising capital for new ventures that are not finance company - related ventures. We need to take care that we do not overly regulate that space because we want to encourage innovative enterprises in New Zealand to thrive. One of the things they need in order to thrive is access to capital which should be available to them through accessing retail contributions from people who want to invest in their companies. We ought not to make it too expensive for people to produce prospectuses that are easily understood and that properly describe risk. The impediments that we put in the way by increasing their compliance costs hold back New Zealand business in a way that we on this side of the Chamber do not want. 
We say in respect of this matter that we just need a bit of a breather now. We are dealing to the big problem in respect of finance companies and it feels like it is relatively under control—is it not I ask the Hon Lianne Dalziel—in respect of the legislative fixes that are on the way. The finance company things that have gone wrong in previous years are on their way towards being fixed to the extent that they can be through regulation. I am looking to the Hon Lianne Dalziel because her expertise in these matters is greater than mine. We have to make sure that in terms of the fixes we have in that part of the market we are not over-regulating the raising of new capital for inherently risky equity investments in respect of new technology businesses. 
These businesses need to raise capital to expand. That is a hard ask for these businesses. They have to expand into export markets while they are quite small because the New Zealand market in respect of some of these niche products is so small. New Zealanders have these nascent businesses that are being developed to commercialise exciting ideas that can produce export earnings for our country and at an early stage in the development of those businesses they want to sell those products and services offshore. 
That in turn requires quite a bit of capital. They need to raise that capital. Banks will not lend it to them. Unless it is secured over real property banks are not likely to lend capital to businesses and therefore they have to raise it from new shareholders who are willing to invest. If our rules are so restrictive that we limit the pool of likely investors we are doing a disservice to our economy. I do not accept that the only people who should be able to invest in high-risk companies are the ones who are already very wealthy because they are able to lose their money and able to better assess risk. I do not like a securities system that effectively forces everyone to be professional investors rather than enabling ordinary people in New Zealand to have a stake in the outcome of our commercial enterprise. I want to facilitate that. 
I do not want to avoid risk for people. I want simply and relatively cost-effectively to describe risk to those people so they can take that decision. If they take that decision and it turns out to be Microsoft they will be wealthy. If it turns out to be Fortex Feltex or a company like that they will lose their money. People who invest sometimes lose their money. I do not want to prevent people from having the opportunity to raise money to expand these businesses which we need to improve the breadth of New Zealand’s exports by having inappropriate securities laws. 
New Zealand has a problem in terms of the breadth of our exports. It is true that the rural sector is going gangbusters at the moment with the highest-ever commodity prices and a relatively low dollar currently compared with where it was 6 months ago. But that is not enough for New Zealand to bridge the wage gap with Australia. To afford the sorts of social services that we like in our health and education systems in New Zealand we need to build the breadth of our exports. 
In order to build the breadth of our exports we have to enable those companies to raise money. We must make sure that in properly regulating some of the poor conduct we have had in finance companies and other financial intermediaries we do not stop the small companies being able to access capital from people who are not their family and from people who are not the wealthiest individuals in New Zealand. They collectively could all invest $5000 each if they had it to raise $250000. It would take 50 investors at $5000 each to raise $250000 to get these nascent companies operating and expanding to their next level of expansion. The compliance costs at the moment for raising capital are already too high partly because of our ridiculous financial reporting rules and the audit rules around them which need to be simplified. I hope that we take a wee break before we entrench some overly high costs through this particular bill. 
Having said that I say that we agree with the intention of the bill. We are just suggesting that maybe it could sit on the Order Paper once it goes through the Committee stage awaiting an exposure draft of another piece of work that has been done by the Minister which might be able to tidy up these things at the same time. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I will talk to Part 1 of the Securities Trustees and Statutory Supervisors Bill. I reiterate what my colleagues have said about our supporting the legislation but also the importance of taking a bit of a breath around it and perhaps taking a sensible and logical approach to how it is progressed into law. 
I will expand on some of the comments made by the previous speaker my colleague the Hon David Parker around the inappropriate securities regulation and the risk of it affecting capital coming into the country and the ability of new businesses to attract capital. It is extremely important that we have consistency on practice across our legislation and across our intent in terms of the signals we are sending to business. On the one hand we have this bill. We are saying we should take a deep breath leave it sitting on the Table and wait for the rest of the legislation to come through so that it has some logic around it. But on the other hand we have another piece of legislation before the House the Telecommunications (TSO Broadband and Other Matters) Amendment Bill which is putting in place a 10-year regulatory holiday. This regulatory holiday is essentially open slather and allows one part of the industry to get a benefit in order to progress a Government policy. 
The industry that my colleague David Parker referred to is critical to our country’s future. The new innovation high-tech industry is currently worth nearly $20 billion to the New Zealand economy and of that $20 billion $5 billion is export earnings. It is absolutely critical that we put in place legislation—this is where the Securities Trustees and Statutory Supervisors Bill is relevant—that has coherence in terms of the policy direction and the signals that this Government is sending to the market place. Those export earnings are critical. If we are to progress as a nation we need to look at how our innovation and our innovative creative industries and technological industries can maximise leverage in terms of building on that export base. Therefore the ability to bring in new capital is critical. 
We have referred a few times to the fact that Labour will support this legislation because it forms part of the ongoing reform of financial products and providers which was started by Labour and has been continued by the National Government. I pay tribute and give credit to my colleague Lianne Dalziel for progressing this bill and all the other legislation that it is linked to because it is carrying on that very good work. Lianne Dalziel’s work has set the groundwork for that. I also commend the Minister of Commerce Simon Power for his sensibleness in the way he has progressed the legislation although we ask that he listens to what we are saying around putting this bill on hold. 
The bill as we have heard removes the automatic right for the six previously statutorily approved trustees to supervise issues of debt securities in some investment schemes. It introduces a licensing regime for trustees that are to be run first by the Securities Commission and then by the Financial Markets Authority. That is why we are saying the Government should put the legislation on hold. Under that new regime all trustees statutory supervisors and unit trustees must be bodies corporate and their directors and senior managers must be of good character. 
Retirement village statutory supervisors have been included in the regime in recognition of the similar role that they play to trustees in monitoring the financial position of retirement villages. There was quite a lot of discussion in the Commerce Committee about retirement villages. We heard a number of people express the view that the Retirement Villages Act 2003 already provides sufficient protection for retirement village residents. However the committee decided that retirement villages should be included to ensure that residents receive the same protection as people with financial interests in securities. Most of the submissions related to the costs and the committee recommended that the Government’s costs be reviewed. 
The bill also contains a number of provisions designed to ensure that trustees statutory supervisors and unit trustees comply with their obligations. The Securities Commission may seek pecuniary— 
Sitting suspended from 6 p.m. to 7.30 p.m. 
CLARE CURRAN 
: Thank you— 
Hon Simon Power 
: He’s back. 
CLARE CURRAN 
: He is back. I think I earlier passed on my congratulations to the new Assistant Speaker Ross Robertson but also I welcome back the Minister in the chair the Minister of Commerce. It is great to have him in the Chamber while we talk about this bill. 
I will quickly recap on what I was saying. Although Labour supports this bill we have expressed our reservations about the need for it to be passed right away and the importance as we see it of parking it while other measures we know are coming are put in place in respect of the Financial Markets Authority. We think it is precipitous to pass it as it stands at this point. 
One of the things that my colleague the Hon David Parker talked about earlier tonight on which I particularly agree with him is the possibility and the spectre that this legislation raises of the stifling I suppose of the potential ability of companies particularly those with export capacity in our new technology areas and innovation sector to raise capital in this environment. That possibility needs to be looked at. 
Before the dinner break I was talking about one of the significant issues that appear in this bill: the issue of whether retirement village statutory supervisors should be included within the ambit of the bill. I put on the record again—the Minister might like to comment on this—that this is another reason why this bill should perhaps be parked for a later date after the Committee stage. As I and my colleagues have said we support the bill but this issue is another complex issue that needs more consideration. 
We considered carefully whether it was appropriate to bring retirement village statutory supervisors within the bill’s ambit as we are aware of the view that the Retirement Villages Act 2003 already provides protection for retirement village residents. This part of the bill received quite a lot of attention and quite a lot of consideration by the select committee and a number of submissions were made on it. On balance we supported the inclusion of retirement village statutory supervisors in the licensing regime because excluding them meant that residents of retirement villages would receive less protection in certain aspects than people with a financial interest in a security. We considered that that would be anomalous and undesirable. 
The Retirement Villages Act is inadequate on its own because it lacks the sanctions against poorly performing statutory supervisors. The monitoring and sanction regime proposed by the bill would address the types of deficiencies identified in the 2009 report by the Retirement Commissioner. 
A number of submitters raised concerns about the additional compliance costs that would be associated with this bill. But it is outside of the scope of this bill to address that issue which is one of the reasons why we think that the bill due to its complexities should be parked on the Table. 
Hon SIMON POWER (Minister of Commerce) 
: 
 Part 1 of the Securities Trustees and Statutory Supervisors Bill establishes the purpose of the bill which is “to protect the interests of security holders and”—as the member pointed out—“of residents of retirement villages and to enhance investor confidence in financial markets and retirement villages”. As members will be aware a little-used provision in the Standing Orders that relates to cognate bills has as we discovered some time ago in another piece of legislation enabled us to mesh this bill and the Financial Markets Authority legislation together for the purposes of their first second and third readings but alas not in the Committee stage so we are dealing with this bill separately from the other legislation at this time. But the idea behind that little-used provision is that the substantive debate about each of those bills is so inextricably linked to the other that it would waste the House’s time to deal with them separately. Those matters so overlap that it makes sense to deal with them together at their first second and third readings. However because that is not able to be the case in the Committee stage we are dealing with this bill separately now. 
There is a Supplementary Order Paper in my name that replaces references to the Securities Commission with references to the Financial Markets Authority to reflect the fact that they are being dealt with as cognate bills. It also inserts references to the KiwiSaver Act to include non-restricted schemes within the licensing regime. A non-restricted scheme is a KiwiSaver scheme whose manager is the issuer of interests in that scheme rather than the trustee. 
The background to this legislation is simple. When I first became the Minister of Commerce one of the issues I was most concerned about was how the front-line regulator had behaved—or not behaved for that matter—during the collapse of so many finance companies. I extracted the work done on trustees and custodians from the broader Securities Act review and said that I would bring it forward and deal with it ahead of that review. If it is the Committee’s wish that the bill passes through the Committee stage tonight then we will be able to do that in a prompt and efficient way. 
One of the things I asked early on of officials in respect of this particular role of the trustees though is: what if we did not have them? What if the front-line regulator role that they had played was just removed from the equation? The reliability of the front-line regulator to talk to investors about product and how it was classified and to protect—“protect” is a strong word—or oversee and supervise the investment was the relevant job of the trustees. I came close to asking that question in a legislative sense. In other words what value does it add for the investor to have the corporate trustee in the model? 
Things had to change. The passive role that the trustees had adopted up until recently was not going to satisfy me or this Government or I imagine for that matter any party in the House that they were adding value and oversight to investors’ decision-making. In fairness to the Trustee Corporations Association they came to me and said that they were prepared to change the way they did business. This bill is a result of those discussions. The Commerce Committee has looked at it carefully and I was persuaded at the last minute that it was worth keeping them and it was worth proceeding with this legislation. The select committee has done a good job of getting into the detail of those issues. But the sticky issue for the Committee and frankly for the Government as well was the issue of retirement villages. I understand that this issue causes some consternation to members of the industry but the truth is this: if a security is being issued by way of a licence or some other instrument for those living in a retirement village they deserve the same protection as those who are purchasing a plain security or a security as we know it in terms of the capital markets or for that matter private markets. If the money and the instrument are being overseen by a front-line regulator then they also deserve the protection of legislation in the context of retirement villages. The Government moved and I note that the select committee has recommended continuing the inclusion of retirement villages in this legislation. 
This funnily enough was the first step we took for investor protection. It is now inextricably linked to the Financial Markets Authority which in itself is inextricably linked to the wider Securities Act review but progress is being made and I am grateful to members of the committee for their assistance on that. 
STUART NASH (Labour) 
: 
 I thank the Minister of Commerce for getting up and clarifying those issues. It is good to see the Hon Simon Power take a call on this bill because as we heard from Simon Bridges a while ago 40 percent of the legislation that has been put through by the National Government has been in the name of Mr Power. It will be sad to see a hard-working Minister leave and we all wonder why the Hon Simon Power has decided to leave. I suspect that he is sick and tired of carrying the rest of his colleagues. 
As the Minister mentioned it may be a little bit confusing for those people who have followed this bill. In the first reading debate we talked about the Securities Trustees and Statutory Supervisors Bill then we brought it together with the Financial Markets (Regulators and KiwiSaver) Bill so now in one speech we are talking about two quite large bills. As the Hon Simon Power said it is quite unusual to wrap two bills together. However we did that because the bills were quite similar in their intent. 
At the moment in the Committee stage we are talking about just the Securities Trustees and Statutory Supervisors Bill. I come back to Part 1 and I agree with something Mr Power said. As we know many many New Zealanders were rorted of their life-savings due to what I believe was negligence perhaps incompetence and I will not go any further than that—[ 
Interruption 
]—yes let us say negligence—on the part of a lot of the trustees or statutory supervisors managing the financial companies etc. What was needed to return confidence back to the market and to give New Zealanders confidence that they could come back to the market was legislation that would ensure that trustees and statutory supervisors could effectively perform the functions of trustees and statutory supervisors. 
Clause 3 sets out the purpose and states: “The purpose of this Act is to protect the interests of security holders and of residents of retirement villages”. That is most important and I say that because there is a very wide perception out there—and I am one who holds this perception—about the interests of security holders. I do not know much about residents of retirement villages but certainly the people who have come into my office and the people I liaise with who lost their life-savings had the perception that they were not well looked after by their statutory providers. I continue reading clause 3 which goes on to state: “and to enhance investor confidence in financial markets and retirement villages”. It then sets out three means for doing so: “by—(a) requiring persons who wish to be appointed as trustees or statutory supervisors to be capable of effectively performing the functions of trustees or statutory supervisors;”. 
It may seem that that is common sense. Of course we want the people who have been appointed as trustees or statutory supervisors to act in a competent manner but what happened was that they did not perform in a competent manner. They did not undertake their duties. I must say here that I do not want to stereotype every single trustee or statutory supervisor because no doubt there were some who did their work with diligence— 
Hon Simon Power 
: Very good ones. 
STUART NASH 
: Yes there were some very good ones so I do not mean to bring every single statutory supervisor or trustee into this. When I am maligning certain companies I think a lot of people know who or what I am talking about. A number of them have appeared before the courts a few of them have been sentenced and some have yet to come before the courts and hopefully be judged by a jury of their peers. What we need to do for every single New Zealander who has lost faith in our capital markets is ensure that confidence exists. 
There is risk every time people invest in any sort of investment and a prudent investor understands that risk and will manage that risk. That is why they get a rate of return over and above the risk-free rate of return. If we wanted no risk whatsoever we would invest in US Treasury bonds or something like that or put the money in Kiwibank—something with absolutely no risk. But there are organisations that pay an interest rate above the risk-free rate of return and the question then is about pricing risk. It is up to investors to understand that and manage it. One of the risks I believe they should not have to take into account is the risk of negligence or incompetence on the part of the statutory supervisors or the trustees. That is a risk that is never taken into account because it is incredibly difficult to quantify. 
DAVID SHEARER (Labour—Mt Albert) 
: 
 I am pleased to take a call on the Securities Trustees and Statutory Supervisors Bill. I appreciate the Minister in the chair the Minister of Commerce taking part in the discussion as he did earlier and his explanation of the link between this bill and the Financial Markets Authority legislation. They are pretty inextricably linked. That is pretty hefty legislation that we will be getting to hopefully later on this evening. Certainly I appreciated the explanation of the cognate legislation and the navigation through the intricacies of parliamentary process. 
I reiterate that Labour is supporting this legislation. As my colleague Stuart Nash just said this legislation is designed to restore confidence in our financial markets and to make sure they operate in a way that enables people who are investing to have real confidence that the thing that happened unfortunately to tens of thousands of New Zealanders in the crash of a lot of our financial institutions is not repeated. Many of our citizens particularly older citizens lost their life-savings and were put in a position where they were unable to re-earn those savings. As younger people we might have a second or third chance but as an older person we do not have that chance. 
I am particularly pleased that the Labour Party is able to support the legislation. I thank the Minister the Commerce Committee and the officials for working so diligently to bring it together. It is complex legislation. 
We are supporting the legislation because it forms part of the ongoing reform of financial products and providers that we started under the Labour Government. It is now being continued seamlessly under National and I am pleased that has happened. I think both parties as do all people in this Chamber agree on the need to make the financial markets much more secure for ordinary New Zealanders. 
To reiterate the purpose of the bill is to protect the interests of investors and enhance investor confidence in financial markets by requiring people who wish to be appointed as trustees or statutory supervisors to be capable of performing the functions of trustees or statutory supervisors. The crux of the issue is that that has not happened in the past. People have not performed that function adequately and as a result the situation over the last couple of years was able to arise. The bill enables trustees and statutory supervisors to be held accountable for any failure to perform their functions effectively. In effect it puts the onus on those people to ensure that the institutions that they represent or the trusts they are involved with perform effectively. 
As I said before some of the preparatory work was started under the Labour Government. This bill was introduced in December 2009. It is now 16 months since then and I am really pleased that the bill will I hope go through its remaining stages fairly smoothly tonight and in its subsequent reading. 
The bill will provide a regime that supervises in effect the supervisors. It looks after those people who are entrusted with supervising the various trusts and trustees of institutions. Although the role of trustees was included in the review of financial products and providers undertaken by the Labour Government there are still further concerns about the model of supervision they provided. Those concerns were raised as I said by the string of finance company collapses. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I go back to what the Minister in the chair the Minister of Commerce said about the reason for linking the bills together and his justification for that. As he knows Labour is supporting the Securities Trustees and Statutory Supervisors Bill but we are arguing—I think quite justifiably so—that this particular bill is being progressed prematurely. That is because it could have waited to be wrapped up with the Securities Act reforms and the establishment of the Financial Markets Authority. The Minister might not agree with that idea but my colleague the Hon Lianne Dalziel talked a lot about the logic of it earlier. 
As the Financial Markets (Regulators and KiwiSaver) Bill is also being progressed at the same time it might minimise some of the confusion when the bill becomes law but it is concerning that the Securities Act review deadline has been delayed until 2011. A number of my colleagues have talked tonight about the Financial Markets (Regulators and KiwiSaver) Bill in relation to the things that have not been addressed yet the importance of addressing those things and the order that they are done in. 
I take the opportunity while the Minister is in the Chamber to quickly recap something I said earlier about the issue of taking responsibility. He referred to that issue with regard to the Financial Markets Authority which is the new authority replacing the powers of all those agencies. He talked about all the agencies having a staring competition—those are the words he used—and those agencies not taking responsibility for all of their various responsibilities. In terms of taking responsibility and practising what one preaches I draw a comparison between that example and the mishandling of the South Canterbury Finance collapse which was the largest financial collapse in New Zealand history. It is one of the reasons why we are talking about this legislation and it is why both pieces of legislation are before the Committee. The issue of taking responsibility is really critical. 
A number of my colleagues have also talked about that issue tonight. After various trusts connected with Allan Hubbard as well as Hubbard himself were put into statutory management by the Government South Canterbury Finance was unable to have the confidence of investors that it needed which contributed to its demise. There are serious questions about why South Canterbury Finance was not put into statutory management and why the Retail Deposit Guarantee Scheme coverage was extended despite the negative rating and the state of the audited accounts. 
Labour supports the Securities Trustees and Statutory Supervisors Bill. I wish we could make the names of our bills a bit simpler— 
Hon Member 
: Just for you Clare! 
CLARE CURRAN 
: Just from a plain English point of view and from a financial literacy point of view. That is another issue that has been raised in this Chamber a lot tonight so it is not actually a joke. The issue of financial literacy and the ability of the ordinary person out there to understand the importance of this legislation and the other legislation we are talking about tonight is actually really critical. Understanding and de-jargonising our legislation is quite a critical issue. I hope the Minister will support me on that. 
Labour supports the bill because reform of the ways that trustees and statutory supervisors operate is essential for the prevention of another financial collapse. We have talked tonight—and on various other occasions when debating this legislation—about how all of these collapses happened why they happened and what we are doing about it. We want to prevent more collapses happening. That is why the issue of taking responsibility is so important. There needs to be greater transparency in that area as has been evident from the Government’s handling of the South Canterbury Finance collapse. 
JO GOODHEW (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
CARMEL SEPULONI (Labour) 
: 
 There is still some more to discuss on Part 1 of the Securities Trustees and Statutory Supervisors Bill before moving on to Part 2 so I thought I would stand to take a call. It is a bill I am particularly interested in. I have been having quite robust discussions with my colleague Nanaia Mahuta on this particular bill. 
To start off as I have just come to the Chamber I will state very clearly Labour’s position on the bill before I get into the specifics and the detail in relation to Part 1. Just in case members are in any doubt I say that Labour will be supporting this legislation as it forms part of the ongoing reform of financial products and providers started by Labour and continued by National although we consider it to be premature as the Financial Markets Authority is not yet established and the Securities Act review is not complete. The legislation is being passed ahead of other decisions that will impact on the whole regulatory framework and that is a concern for us. 
We acknowledge that this bill addresses a number of the weaknesses in the current supervision regime for corporate trustees and statutory supervisors. It establishes a licensing regime for the trustees and supervisors of securities and retirement villages. The regime will be administered by the Securities Commission until the Financial Markets Authority is established. We support the bill but not without concerns. As I said it is being passed ahead of other decisions that will impact on the whole regulatory framework. 
I will get into the specifics in relation to Part 1 because I am sure that is what you want me to do Mr Chair. Part 1 contains the preliminary provisions; it contains the purpose and the interpretation. Looking at the purpose of the bill we see that the bill purports to protect the interests of investors and “to enhance investor confidence in financial markets … by—(a) requiring persons who wish to be appointed as trustees or statutory supervisors to be capable of effectively performing the functions of trustees or statutory supervisors;”. We find that purpose very interesting. As I said my colleague Nanaia Mahuta and I were having quite a detailed discussion about this. The bill also intends “requiring trustees and statutory supervisors to perform their functions effectively;” and “enabling trustees and statutory supervisors to be held accountable for any failure to perform their functions effectively.” That really is the gist of Part 1 and the purpose of the bill. 
The law is being changed to provide for a regime that supervises the supervisors. Although the role of trustees was included in the Review of Financial Products and Providers undertaken by Labour further concerns about the model of supervision they provided were raised by the string of finance company collapses. Concerns included perceptions of trustees’ lack of independence and capability. 
The bill contains a number of provisions designed to ensure that trustees and statutory supervisors comply with their obligations. The Securities Commission may seek pecuniary penalties and compensatory orders against those who fail to comply. Under the bill trustees and statutory supervisors are required to report to the Securities Commission any breach or potential breach of any issue or obligation and notify the commission of the steps they intend to take as a result. It also requires that they report to the Securities Commission when any issuer they supervise is likely to become insolvent and that they notify the commission of the steps they intend to take as a result. It also requires that when requested by the Securities Commission they attest as to issuers’ compliance with issuer obligations. In circumstances where they cannot so attest they must state the reasons why. 
The bill is being progressed prematurely. We could have waited to wrap it up with the Securities Act reforms and the establishment of the Financial Markets Authority. However since the Financial Markets (Regulators and KiwiSaver) Bill is also being progressed at the same time this may minimise some of the confusion when the bill becomes law. It is concerning that the Securities Act review deadline has been delayed until 2011. 
MICHAEL WOODHOUSE (National) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 223 in the name of the Hon Simon Power to Part 1 be agreed to. 
Amendments agreed to. 
Part 1 as amended agreed to. 
Part 2 Regulation of trustees and statutory supervisors 
The CHAIRPERSON (H V Ross Robertson) 
: I say to members that this is debate on clauses 6 to 43A and I expect members to address those provisions. 
JACINDA ARDERN (Labour) 
: 
 I congratulate you Mr Chair as it is the first time I have spoken since you have taken on this new role. I welcome you back to it. I am happy to repeat my congratulations at a time when the Minister in the chair the Minister of Commerce is not distracting you Mr Chair from the effusive praise that I am heaping upon you. I could say anything right now and it would not occur to either the Minister or you. I could be breaking every Standing Order in the book. At least now we know that there is a small fault in his ability to multitask. 
I will address Part 2 of the Securities Trustees and Statutory Supervisors Bill. I think it was important to spend a bit of time talking about Part 1 because it really sets out the general direction of the bill. I agree with the Commerce Committee’s inclusion of retirement villages under the general scope of this bill particularly given that in the purpose the importance of investor confidence has not changed. 
It seems particularly timely that we are talking about investor confidence in the current environment. I do not think we can underestimate the importance of trying to improve in New Zealand investor confidence generally. We have seen in our economy the wider impact that a limited view of mum and dad investors on where their money is considered safe or otherwise has led to quite a skewed investor market. People are more interested in investing in bricks and mortar as a consequence of several shocks that they have experienced over the past decade. It is important that confidence remains a primary purpose in legislation like this even though it is dealing with a very specific part of investor confidence. 
I will carry that matter through in my brief contribution today on Part 2 of the bill. Given that I am the first to address this part I will give just a very brief overview. Under this part the bill sets out the requirement to be licensed and to comply with a licence. It removes the automatic statutory approval for the six trustee corporations. It sets out that a trustee or statutory supervisor must hold a licence that covers a debt security or participatory security to which the appointment relates. A licence holder must comply with every condition imposed on that licence. It seems all relatively straightforward and a bit of a given but of course legislation must always be clear in this regard. It is an offence for a person to act as a trustee or statutory supervisor without an appropriate licence and for a person to represent that a person holds a licence that covers the security without their holding such a licence. 
It gets a little bit interesting in clauses 9 to 18 of Subpart 1 which are about decisions on applications for licences. This is where the bill empowers the Securities Commission to license persons to be trustees when it comes to debt securities statutory supervisors etc. This is also where the commission has the ability to license persons to be statutory supervisors of retirement villages. The bill sets out that the Financial Markets Authority will take over that role when it is up and running. 
Colleagues have already pointed out that we have a concern with the overlap that exists between this bill and other pieces of work in this area. Although we support this legislation it is our view that we should have considered it as a wider package of the ongoing reform of financial products. In Part 2 we see an example of where that is an issue: there will be a transition period to the Financial Markets Authority which is not yet established. I would have liked to see this regulation contextually debated rather than us talking about setting it out in provisions in Part 2 and then having to look at a transition period particularly when the Securities Act review is also not yet complete. It is disappointing that we cannot do it coherently as one wider debate. 
I think the issue with these provisions which the Commerce Committee has drawn out is that licences are issued for 5 years. The Commerce Committee recommended that this period be extended to 8 years to avoid uncertainty for issuers. Obviously uncertainty when we are dealing in markets like this is an issue. So if the Commerce Committee thought it was good to extend the period of licences why do we not hear that rationale in relation to the transitory period where the Financial Markets Authority will later take over responsibility? 
Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) 
: 
 Tena koe thank you Mr Chair. I also congratulate you on your role as Chair of the Committee and of this particular debate. I intend to take only a brief call to really highlight some of the issues that have led to Labour’s position of supporting the Securities Trustees and Statutory Supervisors Bill. First of all at the heart of the bill the Minister of Commerce opened his comments by saying the bill is intended to protect the interests of investors and we certainly understand that in the current economic climate and as a result of the collapse of financial markets we need to improve and strengthen legislation to ensure that investors are able to be protected in terms of their assets and the investments they make. 
At the core of this bill are some essential responsibilities of trustees that the bill comments on and aims to strengthen. Firstly are trustees capable of performing their role? Can they perform their functions effectively? They should and must be held accountable for any failure to perform their functions as trustees. If we drill into the essence of what this bill is about we find that it aims to provide protections and put measures in place to achieve those outcomes. That is why Labour is particularly pleased to support the bill’s intent. 
In Part 2 in particular I will comment on two aspects of Subpart 2. Clauses 24 to 26 are around the issue of monitoring and enforcement. Licence holders must report at regular intervals between 6 and 12 months from the issue of the licence and once every 6 months after that to the Securities Commission particularly concerning the licence holder’s compliance with the terms of trust deeds and deeds of participation and continued compliance with the requirements of eligibility to hold a licence. Anyone who has been a trustee understands that part of their role and function is to implement the terms of the trust deed. 
That is a very important role. I have often had discussions with people who undertake the role of the trustee and struggle with getting their heads around the terms of a trust deed and what their actual responsibility is. That takes some self education on their part to read the trust deed and secondly to understand their full obligation as trustees in implementing the intent of that trust deed. So ongoing monitoring and enforcement in this area can only be a good thing. 
The other issue I will comment on is the variation and cancellation of licences and the removal of trustees in clauses 30 to 43 of Subpart 2 of Part 2. The bill enables the commission to vary a licence before the expiry of the licence without the consent of a licence holder. I understand that one important reason for this is the way in which “material change of circumstances” is defined. I would appreciate some clarification from the Minister in terms of what leads his thinking around this particular change and clarifying for my own part as I was not a member of the select committee how he envisages that this will improve aspects of the roles of trustees. For my part again I would appreciate that clarification from a Minister who certainly has his head around these types of issues the level of detail and the intent of the change. 
Part of this change identifies that apart from extensive powers to vary licences the bill also gives the commission powers to remove trustees and cancel licences. Again just by way of asking a question of the Minister I ask whether he foreshadows that this could be problematic; if not and I am raising an issue that is completely off on a tangent then I would be happy to be corrected. But it seems to me that there is quite a huge power there to be given to the commission to be able to remove trustees and cancel licences but I can only suspect that that is in direct relevance to the way in which the trustee may not have carried out their duty and obligation with regard to the rest of the Act. I see the Minister nodding. In some part by some great fortune my inclination was correct on that. 
This then certainly demonstrates and confirms to me that the Minister has given deep consideration to the changes required in this sector and they have been well-thought-through. I have appreciated his insight into the way in which the financial markets can be better regulated for the benefit of investors and ultimately to ensure that there are greater regulations around the roles of trustees to be able to conduct their particular function with the utmost regard and responsibility to the role they have as trustee. 
With that said I think that members of our team have identified some questions and we have appreciated the opportunity to continue to raise matters of interest. But can I say from a layperson’s point of view although this is a hugely technical bill and I am not a member on the select committee I do understand that people out there in our communities want a strong level of protection. I am delighted that the select committee gave some consideration to including retirement villages in this because quite simply the Retirement Villages Act 2003 does not address the issues and the role of trustee as this bill does. So although I understand that the submissions that came to the select committee were in part somewhat of two minds after deep consideration by the Commerce Committee its ultimate decision to include retirement villages will I think protect those good old folks those senior citizens who are in retirement villages and have a particular interest in the ongoing management of the place where they reside. Kia ora. 
Hon SIMON POWER (Minister of Commerce) 
: 
 The Hon Nanaia Mahuta raises an interesting question as to the issues—[ 
Interruption 
] No it was good. It was a good question as to why the obligations that the Securities Commission can inquire into do not relate to trustees but to licensees. There are a couple of reasons. The first is that licensees will have broader considerations to take into account—that is statutory obligations that they may otherwise have that do not relate to the direct relationship between the trustees and beneficiaries or investors which may occur as part of the mutual relationship that develops between those two parties. So what happens is that the “licensee” obligation as opposed to the “trustee” obligation imposes a wider obligation on those people who act in the capacity of statutory trustees and also draws in the statutory obligations that they might have under other pieces of legislation that the Financial Markets Authority may or may not have interest in as opposed to just the relationship between the trustee and the investor. 
The CHAIRPERSON (Ross Robertson) 
: The question is that the Minister’s amendments— 
Clare Curran 
: Mr Chair— 
The CHAIRPERSON (Ross Robertson) 
: Is the member calling? Members must call and I refer members to Speaker’s ruling 25/5. Sometimes it is a bit hard to hear and it is important that members call. 
Clare Curran 
: My apologies Mr Chair but I did call. Perhaps I need to use more projection. 
The CHAIRPERSON (Ross Robertson) 
: I call the honourable member. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I will do my best to shout into the microphone more often. In respect of Part 2 of the Securities Trustees and Statutory Supervisors Bill I would like to refer in particular to the provision that applies to retirement village statutory supervisors. I would like to return to that issue particularly given the fact that the Minister of Commerce is the Minister in the chair. I refer particularly to the provision that the retirement village statutory supervisors come within the ambit of the licensing regime that is established by the bill. This I think does remain an important issue and a slightly thorny issue if I can use that expression. It is one of the reasons why we still continue to question this. 
I am still grappling with the complexities of the issues that came before us at the Commerce Committee. Clauses 9 to 18 empower the Securities Commission to licence persons to be trustees in respect of debt securities statutory supervisors in respect of participatory securities and trustees in respect of unit trusts. The commission may also licence persons to be statutory supervisors of retirement villages. We note that the Financial Markets Authority will take over this role when it is up and running. That is one of the reasons why we have questions—particularly given the submissions that came before the Commerce Committee and the kinds of thorny issues that arose around the impact on the residents of retirement villages—and one of the reasons why we thought this issue and this particular legislation should be parked at the select committee. 
As I have said there were a number of submissions on that point. We did support the inclusion of retirement village statutory supervisors in the licensing regime because to exclude them meant that the residents of those retirement villages would receive less protection. Although we think that is anomalous and undesirable we are also concerned about the potential impact on the residents of retirement villages. As we know those people are on fixed incomes and the importance of determining what additional costs that regime may impose on retirement village residents was important because those costs could be passed on to the residents. 
We still remain somewhat conflicted by the impact of the new regime and why we think that that issue still needs more consideration which is another very good reason why it should be parked. I repeat that we support the legislation but we have concerns about that issue. I want to continue to reiterate those concerns around the potential and direct costs to retirement home residents. 
I speak as the member of Parliament for Dunedin South. There are a number of retirement homes there and I think the impact of anything that will raise costs for those residents is pretty important. It is possible that a licensing regime would increase the number of statutory supervisory firms in the market. That would lead to increased competition which could affect base rates charged by statutory supervisors and lead to an overall reduction in fees. So there is that possibility but there is also the possibility that it could end up increasing fees and that is one of the reasons why Labour remains concerned about this. 
JO GOODHEW (Junior Whip—National) 
: 
 I move  
That the question be now put 
. 
CARMEL SEPULONI (Labour) 
: 
 Before I get into the detail of Part 2 of the Securities Trustees and Statutory Supervisors Bill I need to remind the Government and anyone who is listening that Labour supports this bill. Reform of the ways that trustees and statutory supervisors operate is essential for the prevention of another financial collapse and there does need to be greater transparency in this area as has been evidenced by the Government’s handling of South Canterbury Finance— 
Jo Goodhew 
: Stick to the bill. 
CARMEL SEPULONI 
: I will bring it in—I need just to remind the Committee that it is relevant to what we are discussing today and that the collapse of South Canterbury Finance was the largest financial collapse in New Zealand’s history. 
I turn to the provisions of Part 2. The bill removes the automatic statutory approval for six trustee corporations. A trustee statutory supervisor or unit trustee must hold a licence that covers the debt security participatory security or unit trust to which the appointment relates. A licence holder must comply with every condition imposed on a licence. Part 2 outlines that it is an offence for a person to act as a trustee statutory supervisor or unit trustee without an appropriate licence and for a person to represent that a person holds a licence that covers a security without holding such a licence. We think that is very important on this side of the Chamber. 
The bill empowers the Securities Commission to licence persons to be trustees in respect of debt securities statutory supervisors in respect of participatory securities and trustees in respect of unit trusts. The commission may also licence persons to be statutory supervisors of retirement villages. The Financial Markets Authority will take over this role when it is up and running. I think that goes back to what we were concerned about before that maybe this is a little bit premature considering that there are other things coming up that are relevant to what we are discussing in this bill. 
Part 2 sets out the criteria under which licences may be granted provides that licences must be issued for a period no longer than 8 years and provides that licences may be varied. The bill as introduced provided that licences are issued for 5 years but the Commerce Committee recommended that this be extended to 8 years to avoid uncertainty for issuers operators of retirement villages and also licence holders. The commission may issue or vary a licence only if it is satisfied that: “(a) the applicant is—(i) a body corporate that is incorporated in New Zealand; or (ii) an overseas company (as defined in the Companies Act 1993) registered under that Act: (b) every director and senior manager of the applicant is of good character:” as defined in clause 15. The Commerce Committee recommended including a regulation-making power to provide for the matters the Securities Commission and the Financial Markets Authority must take into account in making a good-character assessment. Then finally the applicant either “(i) is registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008; or (ii) complies with section 13(a) and (b) of that Act:” as stated in clause 15(1) and (2). Clause 15(3) sets out in detail the factors the commission must take into account in deciding to issue or vary a licence including things like the skills and financial resources available to the applicant governance structure and other things. 
The monitoring and enforcement aspects of Part 2 are quite interesting. Licence holders must report to the Securities Commission at regular intervals between 6 and 12 months from the issue of the licence and then once every 6 months after that date particularly concerning the licence holders’ compliance with the terms of trusts deeds and deeds of participation and continued compliance with the requirements of eligibility to hold a licence. The bill provides that the commission may require a licence holder to submit an action plan if the commission is satisfied that the licence holder has breached or is likely to breach a trustee obligation or if a material change of circumstances has occurred. 
MICHAEL WOODHOUSE (National) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 223 in the name of the Hon Simon Power to Part 2 be agreed to. 
Amendments agreed to. 
Part 2 as amended agreed to. 
Part 3 Commission’s functions in relation to issuers and operators 
JACINDA ARDERN (Labour) 
: 
 It is my pleasure to be the first speaker on Part 3 of the Securities Trustees and Statutory Supervisors Bill. Unfortunately I did not have a chance to speak on Part 2 which was most disappointing for me because I had a number of matters that I wished to raise under Part 2. I may take a little bit of liberty and mix in my contribution on Part 2 into Part 3. I expect that Mr Chairperson will accept that. I have spoken only on Part 1 so he may allow me to move around the parts just a little bit. I am sure my colleagues will stick with me as I do that. 
The point I would like to raise is that there is an issue about the level to which this bill mixes up subjective and arbitrary judgments and the issuing and varying of licences. I think that probably some of the best examples of that sit in Part 2. But I am sure this is an issue that extends across the bill. If I were to draw the Committee’s attention to a couple of examples of that I think probably some of the best sit around the issue of looking at the competency the credibility or what is called the good character of applicants when applying for a licence or to vary a licence. I would be interested in the Minister’s view or any contribution from the members who sat on the Commerce Committee as to the amount of discussion on what kind of criteria would come under the idea of good character. When we look at other legislation often we will see that select committees or indeed Ministers themselves will set out in draft legislation other ways to measure this idea of good character that is relevant to the legislation. For instance for an alcohol licensing authority a measure of good character is whether one has had any alcohol-related offences. For the prostitution reform legislation where licences were issued the best way to measure good character was deemed to be whether one had committed any criminal offences in particular gang-related offences or violence-related offences because that was specific to the industry for which the individual was seeking a licence. 
However with this bill we see a mixture of measures between whether for instance individuals are registered under the Financial Service Providers (Registration and Dispute Resolution) Act or whether they are registered with the Registrar of Retirement Villages—those are very criteria-based judgments to be made. They are set out; they are clear. There are many more subjective ones which I do not think there is much of a steer on in the bill. I would be interested if the Minister has some views on what they might be and if he could put them on the record for the sake of  
Hansard 
. 
If other members of the Commerce Committee could give us a little bit of further background on this issue I would find that particularly helpful. 
There is one other issue that I wish to seek some clarity on and it sits around someone who seeks a review of a commission’s decision on an application. This is an important issue in the bill. What level of disclosure is expected to be given to an individual who is dissatisfied with the commission’s decision? This relates particularly to the issue that the decisions being made might be subjective. For instance is it expected that the commission would set out decisions on good character in writing to an applicant if a review of a decision is requested? Is it expected that the commission would disclose any information that might be provided by the Registrar of Retirement Villages? The legislation sets out that before issuing a licence the views of the Registrar of Retirement Villages would be taken into account. So would it be expected then that if there was a request for a decision to be reviewed that information would be disclosed? That might set out some issues going down the track for relationship reasons with the Registrar of Retirement Villages. That is an interesting point on which I would not mind hearing the views of the Minister and indeed others. 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I will address Part 3 of the Securities Trustees and Statutory Supervisors Bill which contains clauses 43B to 50. The bill gives the Securities Commission the power to require a trustee statutory supervisor or unit trustee to attest to the commission as to whether the trustee or supervisor is satisfied that an issuer has not breached an issuer obligation in a material aspect. If the trustee statutory supervisor or unit trustee is unable to do so the trustee or supervisor must report details of the issuer’s breach or possible breach to the commission. A duty is imposed on a trustee statutory supervisor or unit trustee who believes that an issuer has breached may have breached or is likely to breach an issuer obligation to report the breach to the commission and advise the commission of any steps the trustee or supervisor intends to take. 
I will go back to the important points we have made about the bill its complexity and the fact that it is coming at the wrong time. The bill is premature and does not address some very important underlying issues. Although Labour supports the bill as members have heard we want to know—and we would like the Minister the Hon Simon Power to address some of the wider issues that the bill has raised and that have been talked about by a number of my colleagues—why it could not have waited to be wrapped up with the Securities Act reforms and follow the establishment of the Financial Markets Authority. 
I will refer back to some of the principles that should underline the legislation on the role of trustees and statutory supervisors. I will refer to a speech my colleague the Hon Lianne Dalziel gave on 30 August last year where she referenced five key objectives that should underpin a financial services authority’s legislative framework. The principles are important core principles that relate to the bill and that have reference to every part of the bill including Part 3. The principles essentially were about market confidence and maintaining confidence in the financial system. 
Another principle was public awareness. We have talked about public awareness with regard to financial literacy and promoting public understanding of the financial system which is of critical importance and is not being addressed in the bill. I am interested to know the Minister’s views on how that will be addressed. 
Other principles were about financial stability contributing to the protection and enhancement of our financial system; consumer protection securing the appropriate degree of protection for consumers; and—going back to one of the key reasons for the legislation and the other legislation it is associated with the Financial Markets (Regulators and KiwiSaver) Bill—a reduction in financial crime reducing the extent to which it is possible for any business to be used with a purpose connected with financial crime. Those principles and objectives should underpin all reforms in this area. 
One of the things we have concerns about which we have expressed on a number of occasions today particularly and in previous discussions on the bill is that those wider principles are not addressed in the legislation. The legislation is back to front and it is being passed ahead of other decisions that will impact on the whole regulatory framework. 
JO GOODHEW (National—Rangitata) 
: 
 I move  
That the question be now put 
. 
CARMEL SEPULONI (Labour) 
: 
 I apologise because I have taken three calls tonight on bills before the Committee and I have not acknowledged you Mr Robertson in your new role as Mr Chair. I acknowledge you in that role and I congratulate you. 
Hon Simon Power 
: I raise a point of order Mr Chairperson. Like many in the Committee I too am pleased you are back in the Chair but as members will be aware— 
The CHAIRPERSON (H V Ross Robertson) 
: That is not a point of order. 
Hon Simon Power 
: It is a point of order because it goes to clarifying an issue. The House itself has not actually agreed to have you permanently as an Assistant Speaker although we have given leave for you to act in that capacity for the next 3 days. That does not take away anything from the contribution you are currently making and we are all very grateful for the level of competency you bring to the role. But in fairness I think we do not want to waste congratulatory messages at this early stage when they pre-empt the House’s taking a decision on the issue more formally. 
The CHAIRPERSON (H V Ross Robertson) 
: Thank you Minister. 
Hon Rick Barker 
: I will speak on the point of order raised by the Hon Simon Power. I say that although his point of order was heartfelt and well meant there is nothing wrong with the Chamber congratulating the honourable member Ross Robertson more than once on his elevation today. It is not out of order to congratulate him on his temporary position but that does not mean to say that we cannot then congratulate him later when the position becomes permanent. I think the member making the congratulations is entirely in order and I am sure the whole of the Committee would join with her in that. 
The CHAIRPERSON (H V Ross Robertson) 
: Thank you gentlemen. 
CARMEL SEPULONI 
: I will speak on Part 3 of the Securities Trustees and Statutory Supervisors Bill which is really about the Securities Commission’s functions in relation to issuers and operators.  
Looking at this part of the bill I see that it gives the commission the power to require a trustee statutory supervisor or unit trustee to attest to the commission as to whether he or she is satisfied that an issuer has not breached an issuer obligation in a material respect. If the trustee statutory supervisor or unit trustee is unable to do so he or she must report details of the issuer’s breach or possible breach to the commission. A duty is imposed on a trustee statutory supervisor or unit trustee who believes that an issuer has breached may have breached or is likely to breach an issuer obligation to report the breach to the commission and advise the commission of any steps that he or she intends to take. 
A trustee or supervisor must also inform the commission if he or she becomes aware of information on the basis of which a trustee or supervisor could reasonably form the opinion that an issuer is unable or likely to be unable to pay its debts or the value of the issuer’s assets is less than or likely to be less than the value of its liabilities. That really is the gist of Part 3. 
I will reinforce why Labour supports this bill. The reform of the ways that trustees and statutory supervisors operate is essential for the prevention of another financial collapse. That is why Labour takes this bill very seriously and it is why we support it. We need to recognise that across this Chamber there is a shared understanding that there needs to be greater transparency in this area. People will not want to hear this but that was evident in respect of the Government’s handling of the South Canterbury Finance situation. Just to remind the Committee again—and we all know this to be the case—that was the largest financial collapse in New Zealand history. It highlighted the need to have transparency in the sector. Although we may debate the issue of the South Canterbury Finance situation and its collapse obviously we agree that there needs to be changes in the sector and that there needs to be increased transparency. 
There were and there are serious questions about why South Canterbury Finance was not put into statutory management and about why the Crown Retail Deposit Guarantee Scheme was extended despite the negative rating and the state of the audited accounts. Hopefully as I have discussed Part 3 of the bill will create some of the transparency we need in order to ensure that we do not head down that path again that we do not end up in the same situation and that we do not end up with a lot of New Zealanders asking questions about what the Government is doing what really happened to South Canterbury Finance and where the accountability and transparency is. Those were the questions that New Zealanders were left to ask after South Canterbury Finance collapsed. 
Here we are with this bill before us. The aspects of it that I have just discussed in respect of Part 3 will hopefully ensure that in the future we do not end up in a similar or in the same situation. I am sure that Kiwis across the country will be relieved that we are looking at this issue and that we across the Chamber can agree on some things. Labour supports this bill alongside National and other parties as well. Our support is not without reservation and we have said that throughout the debate when discussing this bill but in general we still support it. 
MICHAEL WOODHOUSE (National) 
: 
 I move  
That the question be now put 
. 
Hon RICK BARKER (Labour) 
: 
 I have two points that I would like to raise; two questions to the Minister in the chair the Minister of Commerce a member of the House who is very knowledgable about the law. The first clause I would like the Minister to make some comment on is clause 45. I have always believed that the heading of a clause should be completely and entirely consistent with the substance of it. The heading of clause 45 states: “Trustee or statutory supervisor must report breach or possible breach of issuer obligation”. But when one gets into the text of the clause one finds that it has an important qualifier and that is “reasonable grounds to believe”. Reporting a breach and reporting a breach where one has reasonable grounds to believe there has been a breach are two different things. I want the Minister to explain to us whether the courts or some other institution when they come to interpret this clause in the future will be guided by the “must” in the heading without a qualification or by “reasonable grounds”. I say to the Minister that there appears to be a slight inconsistency there. One could argue that the heading is simply to set out the broad terms and that all the qualifications are put underneath it. But the heading is a very bald statement. 
The second clause I would like the Minister to comment on is clause 48 which I was interested to read. Clause 48 is quite a powerful clause. Subclause (1) states without qualification “No civil criminal or disciplinary proceedings may be brought against a trustee or statutory supervisor in respect of a protected disclosure.” It does not say what the protected disclosure is in regard to. If a member makes a protected disclosure then does that mean that the person is therefore immune from any civil or criminal prosecution? If the member has according to this legislation made a protected disclosure then no civil or criminal disciplinary proceedings may be brought against that particular trustee. 
If it was qualified that the civil or criminal proceedings were limited to being within the ambit of the protected disclosure that pertained particularly to this legislation I would say “Fair enough”. But that is not what the law says. It simply says that no civil or criminal prosecution may be brought against the member. These I think are quite sweeping powers and I would not want a court to later interpret that Parliament must have known what it meant when it drafted the bill to say that no civil or criminal proceedings may be brought against a person who has a protected disclosure. If Parliament intended there to be a qualification then I think we should have said so but there is no qualification in this particular clause. I think the Minister in the chair should dwell on that and offer the Committee some commentary. After all when it comes to interpreting legislation it is not unknown for the courts to go back and look at the  
Hansard 
 record to see what Parliament meant. If the Minister was to make a clear statement about both of those issues I am sure there is a possibility that in the future that statement will be referred to and that his learned words will be well sought by the courts. I look forward to the Minister’s response. 
Hon SIMON POWER (Minister of Commerce) 
: 
 There is the voice of experience; the member Rick Barker understands how the Committee stage is supposed to work—clause by clause and getting into the detail of some of these things. I can reassure the member in respect of his second point. Of course I could not help myself as the member would know; when questions like that one are put I have to rise to my feet and delay this bill even more than I would like to. But a challenge is a challenge right? If the member had dropped his eyes to subclause (4) of clause 48 he would have seen that the nature of protected disclosure is defined in that clause. 
To flick back to clause 45 I say that the member raises an interesting point. As I understand it amendments to the Interpretation Act take into account the heading of a clause or section whereas previously that was not the case; it was only the substantive matter in the clause that the courts paid any attention to. Having said that I point out that clause 45 makes it very clear that if the grounds are met—that is if the reasonable belief is held—then the trustee or supervisor must as soon as practicable make the report. So the matters contained in the heading to clause 45 are in fact a brief summary of what is included in the substantive part of clause 45. 
The question was put that the amendments set out on Supplementary Order Paper 223 in the name of the Hon Simon Power to Part 3 be agreed to. 
Amendments agreed to. 
Part 3 as amended agreed to. 
Part 4 Miscellaneous and amendments to other Acts 
The question was put that the amendments set out on Supplementary Order Paper 223 in the name of the Hon Simon Power to Part 4 be agreed to. 
Amendments agreed to. 
Part 4 as amended agreed to. 
Clause 1 agreed to.  
Clause 2 Commencement 
The question was put that the amendment set out on Supplementary Order Paper 223 in the name of the Hon Simon Power to clause 2 be agreed to. 
Amendment agreed to. 
Clause 2 as amended agreed to. 
Bill to be reported with amendment presently. 
House resumed. 
The Chairperson reported the Legal Services Bill without amendment the Financial Markets (Regulators and KiwiSaver) Bill with amendment and that the Committee had divided it into five bills and the Securities Trustees and Statutory Supervisors Bill with amendment. 
Report adopted. 
Airports (Cost Recovery for Processing of International Travellers) Bill 
Second Reading 
Hon DAVID CARTER (Minister for Biosecurity) 
: 
 I move  
That the Airports (Cost Recovery for Processing of International Travellers) Bill be now read a second time 
. I commend the Primary Production Committee and the submitters for their valuable contribution to this bill. I felt that it was important that industry be engaged on this bill and as such I wrote to affected airport companies in August encouraging their engagement. 
I will briefly reiterate why the Airports (Cost Recovery for Processing of International Travellers) Bill is needed before moving on to outline the issues raised at the select committee and the Government’s response. This bill is needed to ensure that border agencies have the necessary resources to provide aviation security biosecurity and customs services for new and restarting international airports and for requesters of non-routine processing. The main objectives of this bill are to ensure that international airports or requesters of non-routine services factor the border agency costs into their business decisions to manage the Crown’s exposure to an unpredictable fiscal liability and finally to ensure that agencies can maintain high standards of border protection without needing to reprioritise resources from other front-line operations to service new and restart international airports. 
The main issues raised at the Primary Production Committee were the types of costs that should be recovered whether the bill should cover the Aviation Security Service at all what length the cost recovery period should be whether use of a nationally average charge should be included as one of the options for cost recovery and when traveller processing is treated as non-routine. 
The first issue is the types of costs that can be recovered at new and restart airports. This bill enables border agencies to recover their establishment costs and their operating costs. Some submissions suggested that the bill should allow agencies to recover only their establishment costs and not their operating costs. The Government agrees with the committee’s recommendation that the operating costs should be recovered albeit for a limited period. Operating costs make up a large component of the agencies’ costs at these airports. Their exclusion would undermine the very policy objective of providing an incentive for airport companies to factor all of the costs for providing traveller processing into their decision making. 
The second issue is the Aviation Security Service’s coverage in the bill. Some submissions proposed removing the Aviation Security Service given that it is already funded via a nationally averaged charge on airlines. The Government supports the committee’s decision for the Aviation Security Service to remain under the bill. The nationally averaged charge does not cover the Aviation Security Service’s establishment and operating costs at new or restart airports; nor does it cover the costs associated with providing non-routine services required by airlines. The Aviation Security Service’s exclusion would expose the Crown to a fiscal risk and prevent airport companies from factoring all of the Crown’s costs into their decisions. 
The third issue is the length of the cost recovery period. I asked the committee to consider the industry’s views on my proposal that the cost recovery period be prescribed by regulation at 2 years. I am glad that the issue was submitted on and I thank the committee for accommodating my request. I note that the committee has recommended a cost recovery period of 2 years after hearing the views of submitters on this issue. A final decision on the cost recovery period will be taken later this year and will be set out in the regulations to be made after the Act is passed. 
The fourth issue relates to the differing charging methods that can be used. The bill provides that cost recovery at new and restarting international airports must be done by way of regulations and prescribes the methods that can be used. Examples of this include charges based on a scale or formula charges based on the actual and reasonable costs or fixed charges. 
Some submitters requested that the bill be amended to ensure that the method of a charge based on nationally averaged costs is available. The Government supports the committee’s recommendation that the bill enable this type of charging method as one of the cost recovery options. Ultimately the charging methods employed in any cost recovery regulations need to be appropriate for the airport and the agency concerned. I am confident that consultation with airport companies on the regulations will identify the most appropriate charging methods for all parties concerned. 
The last issue relates to clarifying what non-routine traveller processing is. The bill enables agencies to recover their actual and reasonable costs incurred in providing non-routine traveller processing at all international airports. The Government supports the amendment recommended by the committee. It clarifies the meaning of non-routine processing by linking it to those situations where agencies incur additional costs. These are the sorts of situations where staff are required to provide passenger processing in a different place or to a different standard from what is provided for the majority of travellers. I thank and I congratulate the Primary Production Committee on its diligence and the Government supports its conclusions and proposed amendments. I commend the Airports (Cost Recovery for Processing of International Travellers) Bill to the House. 
SU’A WILLIAM SIO (Labour—Mangere) 
: 
 I rise to provide input into the Airports (Cost Recovery for Processing of International Travellers) Bill in its second reading. 
I say firstly that Labour supports the bill. We believe that we must invest in services that will protect our country from invasive foreign pests. We believe that new international airports that place an added burden upon our investment in biosecurity and customs services should realise some of the costs. However cost recovery must be balanced against the economic development interests of the regions that new international airports service and it should not impair such development. We support the bill as biosecurity and customs services come at a huge cost to the Crown and any new international airport should realise part of those costs. New Zealand already has a very high number of international airports per capita and the development of new airports creates replication of biosecurity and customs services and creates additional costs for the Government. 
It is worth noting that when Labour proposed a similar cost recovery plan in 2004 it took a very comprehensive effort to consult the public as the cost recovery plan was part of a discussion document. We can compare that with the legislation-by-stealth approach taken by this Government with a very short time frame for submissions. The bill was referred to the Primary Production Committee on 16 September 2010. The closing date for submissions from the public was 7 October 2010. Some people say that the Government collapsed that part of the process and therefore the Primary Production Committee received only eight submissions from interested groups and individuals and heard only three submissions. 
When the Government approaches legislation in that manner either using a stealth approach or collapsing the consultation process the public sees it as indicative of behaviour by a National Government that has no plan to get our economy going. Although the bill is right to make new international airports pay their fair share of the cost of customs and biosecurity services we say that it is about time the Government started paying its fair share of biosecurity costs. 
The cutting of 54 staff from MAF Biosecurity New Zealand in 2009 must be reversed and my colleague the Hon Damien O’Connor has spoken out in support of that. Those front-line positions are vital to protecting our country against foreign pests and organisms that could wreak economic and environmental havoc. The Hon David Carter claimed the cuts were due to a downturn in visitors and car imports but visitor numbers have bounced back to record levels and car imports are on the increase. 
Federated Farmers’ submission on that subject stated: “Federated Farmers views biosecurity as a critical component in protecting land based primary production and submit that we need strong border control systems. Forward focused biosecurity systems that provide confidence to farmers are critical—the risk of an incursion such as Foot and Mouth Disease (FMD) is real. The 2008 scare in the United Kingdom with FMD is good in highlighting awareness but as a nation New Zealanders must always be alert to the economic and social devastation that new incursions can cause. Biosecurity agencies must be accountable for balancing the risk of trade facilitation with ensuring pests and diseases are kept out of New Zealand. We have natural borders and so have a great advantage we must protect. New and re-establishing airports present a considerable risk to New Zealand in that unwanted incursions could arrive via the air traffic pathway.” 
Labour calls on the Government to reinvest in securing our borders; otherwise the public will say that under National New Zealand is going backwards. Biosecurity reports from last year showed that over 400 unwanted organisms entered New Zealand including such extreme examples as cane toads. Recently it was announced that the weed velvet leaf had been found in New Zealand and could potentially cost farmers who grow crops such as maize millions of dollars. The initial $75 million cost to the Government in trying to contain the  
Pseudomonas syringae  
pv 
. Actinidiae 
 disease in kiwifruit should be a lesson to the Government that prevention is better than cure when it comes to biosecurity. 
A good first step to prevent further damage to the Bay of Plenty’s agricultural industry would be to reinstate the two biosecurity officers who were cut from MAF Biosecurity’s staff at the Port of Tauranga which had a staff of just nine. What is the cost of 54 staff compared with the $10 billion cost that foot-and-mouth disease would incur if it ever took hold in New Zealand? By not heeding Labour’s call on this issue the National Government will be condemned by the New Zealand public as being out of touch with ordinary Kiwis who are struggling to protect their livelihoods and to get by supporting their families. When this National Government arrogantly pursues its own personal interests it is a clear signal to the New Zealand public that the Government is not working for the good of our communities; it is working for its mates and for foreign interests. 
Labour will give every Kiwi a fair go and make sure everyone pays his or her fair share. That is why Labour supports the bill. Labour will make the economy work for New Zealanders. Labour will create jobs and opportunities for our children and grandchildren. Labour will work alongside every Kiwi and his or her community to make New Zealand a better place especially for future generations. 
Although Labour supports the bill—and we said that the few people who came forward to the Primary Production Committee supported it because it gives some clarity—as I have outlined tonight there are some real issues. If the bill is the best that the Government can provide at this time when the rest of the nation is looking for some plan to get the economy moving then huge questions can be asked about the ability of the Government to take the nation forward. If the bill is all that the Government is able to come forward with which is really just minor tinkering if you like and does not require us to sit here this late at night discussing it then there are huge questions to be asked about the credibility of the Government. They are questions of whether it has a plan—we would say no—whether it is prepared to take the nation forward or whether under the Government we are going backwards. I will repeat that. It is the kind of example that indicates to the rest of the public that under a National Government we are going backwards. 
I have to say that unless the Government reinstates the 54 jobs that have been lost unless it is prepared to invest at the front line by providing the kinds of jobs that will provide protection for our biosecurity and our borders then we can say to Federated Farmers who are supporters of this Government that our biosecurity is not protected that their farms are not protected and that their livelihoods are not protected. The kind of effort applied by the Government indicates to Federated Farmers that their interests are not the interests of the Government and that the interests of protecting our biosecurity are not the interests of the Government. Frankly as I have said more and more people are saying that if this is the best that the Government can provide at this time then certainly we are going backwards and the Government certainly does not have a plan for the future of our nation. 
I commend the members of the Labour caucus who were on the select committee. I appreciate the information that they gave me. I was not able to be there with them. I certainly acknowledge the Hon Damien O’Connor and Ashraf Choudhary as well as Jim Anderton. I suppose to be fair to the other side I had better recognise also the other members of the committee. It seems to me that they do not seem to have a huge agenda on their case given that they collapsed the time frame for consultation with the public that the committee had only eight submitters and that out of those eight only three were able to be heard in person. 
Although Labour is supportive of the bill it is kind of sad because the bill is indicative of why the public of New Zealand are saying to me and to my colleagues that the Government is taking us backwards. The Government is not interested in the welfare of the wider public. All it is interested in is its own personal interests plus the interests of its friends from overseas. 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 It is a great pleasure to rise in the House in support of the Airports (Cost Recovery for Processing of International Travellers) Bill. It was interesting to listen to the last speaker Su’a William Sio who is a member from South Auckland. Under the previous Labour Government that area was bombarded for 6 months by aerial spraying to control the painted apple moth. Over 9 years of that Government 8 tonnes of raw meat products were imported each year by people—on their person—mainly into the Mangere Airport in South Auckland where that member comes from and mainly from Pacific Island nations. That member can stand in the House and say National is doing a poor job in biosecurity but I would suggest that that is quite an interesting concept. 
The bill was referred to the Primary Production Committee on 16 September 2010 and submissions closed on 7 October. We listened to three of the submitters who asked to be heard; all of the submitters who asked to be heard were heard. The key points that they raised with us and that the committee took into consideration in its deliberations were described by a couple of airports Palmerston North Airport and Hamilton International Airport as having the potential to be a little short-sighted around cost recovery in their re-emerging if they could find suitable international carriers to come into their airports. The committee considered that issue seriously because it was worthy of consideration and chose to ensure that the biosecurity of New Zealand was upheld by ensuring that costs were able to be recovered by the three lead agencies involved in carrying out border control. The committee also looked seriously at the recommendations put forward by the ministry officials and it decided to accept in most cases those recommendations. I will not go over them all because the Minister for Biosecurity the Hon David Carter clearly outlined them in his speech so that is there for the record if anyone wishes to go back and look at it. 
The objective of this bill is to reduce the Government’s exposure to unexpected costs and associated costs to do with airport clearance or immigration clearance if you like through our airports and goods and services through our main ports. The agencies that are most involved are aviation MAF Biosecurity New Zealand and our Customs Service. On balance the select committee has come down in a position that clearly has widespread support in the House. I look forward to the passage of the bill and I look forward to these actions being put in place. Thank you. 
Hon DAMIEN O’CONNOR (Labour) 
: 
 It is a pleasure to speak on the Airports (Cost Recovery for Processing of International Travellers) Bill which is in an area of absolute importance for this economy. Biosecurity and border protection is probably the most important area. The amount we spend on military security is huge; the amount we spend on biosecurity is minimal. The last Labour Government doubled the amount of money spent on biosecurity. 
Shane Ardern 
: And it’s gone up since then. 
Hon DAMIEN O’CONNOR 
: The member who has just resumed his seat the previous Opposition spokesperson on biosecurity has to acknowledge that fact alone. He should also acknowledge that the first Budget under the National Government chopped $2 million off the biosecurity budget and chopped 54 front-line jobs. That is an indication of the flippant approach that National has paid to biosecurity. 
Labour supports this bill but there are a number of issues. We supported this proposal to share the costs of biosecurity and border protection at new and emerging airports so that anyone who wanted to develop a new airport could not say that they had their airport and a runway and that they wanted the taxpayer to fund the border security. There was clearly an obligation under this legislation that any new airports and those that might have been shut and are reopening will engage in a cost-sharing arrangement with the Crown and we believe that is fine. The question is why we are doing that. We proposed that when in Government as a fair way of sharing the increasing costs—the doubling of the biosecurity budget that we had put in place—with the industry. The problem here is that the National Government has chopped $2 million off the biosecurity budget and the reason it has done that and has brought in cost-sharing arrangements under this bill is so that it can pay $14 billion in tax cuts to its wealthy mates and to the people at the highest end of the salary bracket. Yes that member over there is one of them and yes so am I but not quite to the extent of the Prime Minister who gets $1000 a week back. The way that the National Government has been able to calculate that it can afford those tax cuts is by chopping the biosecurity budget and by sharing the additional costs of arrangements at new airports. 
Craig Foss 
: Where did the $1000 come from? 
Hon DAMIEN O’CONNOR 
: The chairman of the Finance and Expenditure Committee should listen a little bit because he is responsible for overseeing this absolutely immoral policy of giving back to the most wealthy and taking from those people at the bottom. It is immoral and the problem is that this bill is just one more little step in that unethical direction that National is taking us. 
This is important. The previous speaker said that 8 tonnes of raw meat was brought into the country while Labour was in Government. That is a horrific figure; I have to admit that. But I wonder how much is coming now. That member opposite cannot tell us because this Government has chopped the number of people inspecting visitors to this country so we do not actually know how much raw meat is coming into this country. The 8 tonnes of raw meat was identified and held at the border because we had a supported well-resourced front-line border system with good people. Those people have been battered around with the uncertainty of whether they or their mates will lose their jobs. I repeat that 54 front-line jobs is quite a number when we consider the people whom we have working at the airports and the ports. But as I said the National Government is intent on delivering tax cuts at the expense of core services right through this economy. 
I will acknowledge the Primary Production Committee for the most part chaired by Shane Ardern who should really be the Minister of Agriculture. He knows agriculture far better than the Minister does. Mr Ardern attempts to do a fair job but he is under riding instructions. He is told what to do by Mr David Carter. He resists that but he is told what to do. He has to bite the bullet and toe the line. He knows that the cuts that his National Government colleagues have made to biosecurity put our country at risk every single day. Last year under the National Government 400 unwanted organisms came into this country. 
Hon Rick Barker 
: How many? 
Hon DAMIEN O’CONNOR 
: It was 400 and those were just the ones that were identified. Mr Ardern knows that. He knows the risks that come with those incursions. We have the Asian bee which is now established in Australia. We have the Prime Minister on his SmartGate so that in theory each individual visitor can save 8 minutes when coming through the airports. It is 8 minutes saved by an individual visitor. 
Hon Rick Barker 
: Do the bees use SmartGate? 
Hon DAMIEN O’CONNOR 
: I think the bees might avoid SmartGate. I think the bees will be able to whistle in unhindered. Although we may joke about that we need to realise that bees are driving our biological economy. Mr Ardern knows that and he is acknowledging it now. If we get the Asian bees in New Zealand along with varroa which unfortunately is in the country we could undermine biological production in this country. People do not appreciate that. But Mr Ardern is nodding his head. He knows that his Prime Minister John Key in his determination to be popular has introduced SmartGate. He has taken front-line resources from biosecurity and customs people and has shifted them across into some photographic kind of automated system that gets people through the process 8 minutes faster. Never mind the reality that in Christchurch or Wellington people wait about 20 minutes for their bags but I do not know about Auckland. People can whistle through the biosecurity and customs clearance and then they have to wait longer for their bags because the privatised companies simply do not have enough staff on the ground. 
That is the way we are moving and unfortunately it puts our whole primary production economy at risk of things like the Asian bee and the fruit fly in Queensland. We effectively have open borders with Australia now. We will run videos. We will be nice to people and educate them. But in the end it is the people who understand neither the language well nor the implications of bringing in fruit or meat or an unwanted organism who put our economy at risk every single day. 
Labour supports this bill because we proposed it as a fair cost-saving arrangement. We do not support the ongoing direction of this Government in cutting back on core Government responsibilities and services in order to deliver additional benefits to their rich mates around the place. That is what the Government has done; that is effectively what it has done. I do not know how much my colleague Mr Barker received as a tax cut delivered by the National Government. It was probably reasonably generous was it? 
Hon Rick Barker 
: Too much. 
Hon DAMIEN O’CONNOR 
: Exactly. What did the people at the bottom get? A few cents? 
Hon Rick Barker 
: Not enough. 
Hon DAMIEN O’CONNOR 
: Absolutely. The bottom line is that we have squeezed Government services. People on accident compensation in the social welfare system in the health system and in the education system are seeing programmes chopped to pay for those tax cuts. 
This bill is one more step down the slippery slope of reducing Government responsibility and increasing the responsibility on the private sector to fund those things. User-pays is a great theory but in the end the public good—the greater good—cannot be covered by individuals individual companies or individual industries. In the end we take taxes to fund the things that are for the good of our economy and our future. We cannot allow this National Government to continue to squeeze biosecurity and front-line border services. At the moment the Government has put money into the joint border management system which involves collaboration and on the face of it it sounds good. It is about joining together and sharing information. But if it means that the jobs and resources of front-line border security people are cut that is a desperate and dangerous situation for this economy. 
GARETH HUGHES (Green) 
: 
 Kia ora Mr Deputy Speaker. I rise to speak on behalf of the Green Party on the Airports (Cost Recovery for Processing of International Travellers) Bill. In 2009 there were nearly 30000 flights into New Zealand bringing amongst other things 4.5 million people. As an island nation our international air links are vitally important to our relations and our economic prosperity. This rather uncontroversial bill enables the Crown to recover the costs of aviation security biosecurity and customs from new international airports and non-routine flights. 
Our biosecurity is vital to our economic well-being and we must be vigilant to protect our primary production base from introduced pests and diseases. This bill is about protecting the Crown’s potential liability from providing this service and internalises some of the enforcement costs but myopically it ignores the big issues facing us through international air travel. 
The bill focuses on the costs and the liabilities but in the nature of most of the legislation that goes through this House it takes a narrow view. The bill focuses solely on the financial costs ignoring all the other costs relating to the subject we are discussing tonight. The bill ignores the costs of aviation on the climate: the costs paid by people who right now are facing rising sea levels and extreme weather events. It ignores the cost to the environment from pollution as a result of international air travel and it ignores the social costs that are being paid by people who are living under next to or near to airports. Like so much in our society when we talk about costs we simply ignore the environmental costs—the externalities which are real but unmeasured and unvalued when we focus exclusively on the financial costs. 
The Greens will be voting for this bill and we welcome the modest intent that international travellers arriving in a new international airport should pay their fair share of the public services that are so essential such as biosecurity but we lament the parliamentary time spent focusing on the minutiae while we face the clear and present danger of climate change and one of its major causes. Climate change is already the greatest threat facing the planet and it is not just the polar bears and penguins any more—it is the poorest and the most vulnerable who are feeling the brunt of climate change. Former UN Secretary-General Kofi Annan estimates that right now 300000 people are dying annually as a result of climate change. Tonight as we discuss the costs we ignore the real costs of climate change and one of its major growing causes: international air travel. Ironically those 300000 people estimated to be dying right now are almost certainly among the poorest 63 percent of the planet or the 4.2 billion people who will probably never ever travel in an airplane in their lifetimes. 
Air travel is the world’s fastest-growing source of greenhouse gases and globally those 16000 commercial jet aircraft are emitting more than 600 million tonnes of carbon dioxide. All those planes flying at any one time are not only releasing carbon dioxide but also spewing a whole host of other gases into the troposphere changing the atmosphere of the planet. Even in clean green “100% Pure New Zealand” our international aviation emissions have increased by 66 percent between 1990 and 2009. 
Tonight if we are to be honest we should be discussing all the costs associated with international air travel and we should be prepared to ask the hard questions. Do we want to grow maintain or shrink our emissions from international travel? I love flying and the Greens are not opposed to flying but the question is about who pays the true cost of our decisions to fly. It is a genuine challenge to our country. We are a far-flung nation at the bottom of the world that makes its way in the world by exporting globally and having people come to visit us. As 70000 people prepare to fly to New Zealand for the Rugby World Cup we need to be asking ourselves about the costs of how they will get here. A return trip from the UK to New Zealand emits 7.6 tonnes of carbon dioxide: that is about the same as the per capita emissions of Swedish citizens over the entire year and in this case it is just on one trip. Many of those travellers will be flying into Auckland from the UK and they will already be paying a distance-based environmental impact duty of around $240. Landcare Research found that direct carbon dioxide emissions from the tourism sector were massive with over 4 million tonnes produced from aircraft which is equivalent to a quarter of our nation’s carbon dioxide emissions across the entire economy but those costs are just not counted. 
As it stands under the 1944 Chicago Convention on International Civil Aviation and the 4000 treaties it has been written into since all international travel is protected from all excise taxes and global climate negotiations have ignored it in their deals globally despite the significance of air travel. No matter what people do in their lives be it recycling changing the light bulbs or taking the bus it all quickly comes to nought if they are still flying round the world for shopping trips to Sydney quick winter breaks to the Islands or taking short-term long-haul flights. 
If we are serious about protecting the climate we cannot keep growing air travel. As the UK-based Tyndall Centre for Climate Change Research shows if we want to keep the Government’s—albeit inadequate—target of 450 parts per million carbon dioxide in the atmosphere and want to continue flying we will have to reduce to zero all the other emissions in our economy—that is our emissions from cars electricity and energy—and that is plainly ridiculous. As MPs who have unlimited flying privileges we must lead the debate on how we reduce our emissions from air miles. Although planes have become more efficient over time we are still essentially dependent on a 1940s engine design and we are already reaching close to the limit of efficiency gains. At the same time we are massively increasing the number and the kilometres of flights. In the UK in 1970 British airports were used by around 32 million people. In 2004 the figure was 216 million people and by 2030 the Government there is predicting a mind-boggling 500 million trips through its airports. 
We cannot keep growing like this on a finite planet. Alternative fuels such as biofuels may play a role but all of them so far have environmental and social costs. Biofuels contribute to rising food prices which gives us the stark choice between the stomachs of the poor or the pleasures of the rich. As George Monbiot says there is no techno-fix for the disastrous impact of air travel on the environment. Tonight as we discuss the Airports (Cost Recovery for Processing of International Travellers) Bill we ignore the real costs of international air travel. We should be asking whether air travel is too cheap. Should there be a tax on fuel? Should it be included in global climate treaties? Should we limit growth? Should we stay where we are or even try to reduce the number of flights? We should be focusing on sustainable alternatives to air travel. We should be preparing alternative strategies as our economy is just so dependent on our international air links. 
Although I have talked tonight about climate change which is impacting on us in our own time and gives us reason to act alone reducing the amount of international air travel may be forced on us. Already the price of oil has topped US$120 a barrel and recently the International Air Transport Association warned that airline industry profits will be reduced by half this year because globally the industry is facing a $166 billion fuel bill. In 2008 when the price of oil skyrocketed similar to its rise now nearly 25 airlines globally hit the dust. Kiwi motorists are already feeling the pinch at the pump as is the international air industry. As insecurity spreads in the Middle East—thanks to people’s revolutions against dictators propped up by Western nations to ensure their access to cheap fuels—as we near the natural reality of peak oil and as we enter a series of oil price-shock recessions followed by price crunches causing further recessions that pinch will hit further. 
In summary we need to look at the cost that the end of cheap oil will impose on us the cost of climate change and the cost of pollution—not just the financial cost. In conclusion as we focus on these issues we have to ask ourselves whether this Parliament is like a traveller sitting in an airplane and looking over a beautiful view out the window but instead focusing just on that dirty dot on the window. Kia ora. 
COLIN KING (National—Kaikoura) 
: 
 This is the second reading of the Airports (Cost Recovery for Processing of International Travellers) Bill. The Primary Production Committee worked very collegially on this legislation. It was quite interesting. The comment was made that we did not receive a large number of submissions. I think we received eight and we heard three. It was quite interesting that when as a select committee we heard those three submissions one part of the hearing was by teleconference. Quite a number of the airports were meeting together at that very same time and those submitters gave us the value of their knowledge. 
We must consider that we are a nation surrounded by water and that tourism is vitally important to this nation’s economy. On that basis it is important that we get the balance right between biodiversity preserving our natural state and encouraging visitors to come to this country. We believe that this bill is very sensible in that aspect because it will encourage airports that are designing a business case with regard to whether to engage with a contractor to bring international tourists to their airport to factor in the cost of providing those biosecurity and customs services. 
At the moment we have seven international airports. Part of the discussion we had in the select committee was the point that we did not want to stymie tourism. That point was brought out and we debated it at length. It was quite interesting that while we were debating that point we found out that Australia has eight international airports. We have to get the balance right. There have been airports that started off services with good intent. I believe that Hamilton Airport had an international service for some time as did Palmerston North Airport although now its services have mostly discontinued mainly because it has lost its contractor to provide international services; it is not because the airport has backed away. The seven airports where we have international services are in Dunedin Rotorua Christchurch Auckland Queenstown Wellington and Hamilton. Tim Shadbolt the Mayor of Invercargill is still waiting for— 
Aaron Gilmore 
: Aspirational. 
COLIN KING 
: It is aspirational down in Invercargill. We will just have to wait and see. 
The point of the bill is just to make it mindful to those people who want to have international services at their airport that they will have to provide for the fair and reasonable costs of providing those services. When we stop and think about it it is quite sensible because relocating families today into a particular area and training up staff is very important. It means for one that businesses have to take somebody and set up a business unit. One cannot have just half a staff number; it has to be fully staffed. The number of staff coming in may not be adequate to do that job so there is a lot to be considered. 
In respect of the bill we gave a lot of consideration to clause 6 which talks about the distinction between what is an established service and a re-established service. As a committee we were particularly conscious that there could be a bit of price gouging going on and we did not want to see the system open to a rort. We wanted to see some very clear constraints and definitions so that if it ever became an issue those who were adjudicating on it would have some clear guidance. Clause 6 adds that provision to the bill. 
The regulations in clause 11 also establish aspects relating to the grace period. That is where in good intent an airport or a provider has set up a deal and international travellers are arriving but through no fault of its own that arrangement fails. It would be given 6 months to find another contractor to be able to provide that international service. That was given fair consideration by the select committee and it was good to see that the select committee acted as a whole and supported that provision. 
Subclause (1)(b) of clause 11 “Regulations” states that regulations may be made “prescribing a cost recovery period shorter than 3 years:”. When we look at the note that came back from the select committee we see that in the particular area of the cost recovery period we designated that it should be 2 years. After this bill has progressed through the Committee stage and its third reading and then receives the Royal assent we will be looking at the regulations that come back within that 2-year period by which time if an international service can carry on that then goes back to the taxpayer-funded biosecurity and customs services. This bill in itself progresses things considerably because this has been a bit of a moot point until this stage. Previous parliaments have grappled with this particular area and have not been able to come to a resolution so it is heartening to see that there is accord across the House. 
There is agreement that where people endeavour to set up an international service at one of our airports for the first 2 years they shall carry that cost. They shall factor that cost into their business case. In the event of their business falling over there will be a 6-month grace period so that they can reinstall that international service. That is appropriate because we take biosecurity and customs services incredibly seriously. But we still want to design a service here that will not deter tourists from coming to New Zealand because tourism is one of the main planks of our economy. Of course with the Rugby World Cup coming up in September and October of this year we want to have things arranged in a way that presents New Zealand in the most attractive light. 
It was a pleasure to consider this bill. It was not controversial. However there was a range of views as was brought out in the submissions of those who previously had international services that have now stopped. I think on balance we can be very confident in this House that the work has been put into this bill and that the bill will be servicing the needs of the airports adequately along with the economy of this country. It gives me pleasure to commend this bill to the House. 
Dr ASHRAF CHOUDHARY (Labour) 
: 
 It is a privilege to speak on the Airports (Cost Recovery for Processing of International Travellers) Bill. As has been said before this bill is designed to recover costs and share costs between the Government and travellers. The idea is to ensure that our aviation security biosecurity and customs costs are shared between the Government and travellers. But clearly the issue here is biosecurity. It is not so much the cost but the biosecurity. That is where I have a problem with this Government. I know that the hearts of the members opposite who sit on the Primary Production Committee are in the right place. But the policies the Government is following in relation to biosecurity are questionable particularly when it cuts costs in relation to cutting jobs—54 front-line jobs as my colleague said earlier; they were front-line jobs. 
This Government is always saying that it wants to cut down backroom jobs and bring in more front-line jobs. The 54 jobs that the Government cut were front-line jobs. That does not give a good answer to the question that farmers are asking. This question was often asked by people who were presenting to the Primary Production Committee on various issues. This Government is not serious enough about biosecurity. That has come about because we are quite aware of some of the organisms that are brought into this country. Last year alone 400 organisms came into this country. It is simply not acceptable that we cut corners and we cut the biosecurity staff at our airports and ports particularly with the trade in cars—the number of cars imported is now going up again—and with the Rugby World Cup which is coming up. Clearly thousands of people will be coming here from Australia Europe Asia and Latin America. I personally worry as a scientist because I know that some organisms can get into this country and unbeknown to people they can cause a lot of damage. The recent example of  
Pseudomonas syringae 
 pv.  
Actinidiae  
(Psa) 
in kiwifruit has cost us $75 million already and we do not know how much more it could cost us over time to control something like Psa in our orchards.  
With hindsight we can be very wise but when this Government came in the first thing it did was cut Fast Forward research funding which the previous Government had allocated. A part of that funding was also designed for research into areas like biosecurity. Research is very important for us to determine which dangerous organisms can affect our agriculture. Be it plants animals or our fisheries we have to guard against all those potentially dangerous organisms coming into this country. Despite the Government’s promises that it is looking after biosecurity what it is doing is definitely not in keeping with what it said it would do. 
Labour supports this bill because its intent is very clear. We want to make sure that any new airports opening up have the ability to recover costs. As has been said before the Primary Production Committee agreed that there should be a 2-year cost recovery period. But the important point is that thousands of people will be coming into the country for the Rugby World Cup. A lot of those people may come on routine flights and some of them may come on non-routine flights like charter flights for example. We now have SmartGate working and the concept is very good I agree. It allows us to get in and out of airports very quickly. But as we said at the time we are really worried about potential organisms coming through SmartGate. As my colleague Damien mentioned earlier we know—and we had some information provided by the ministry—that given how many fruits for example are brought in by some of these passengers and some of it is probably not by design— 
Colin King 
: I think it was Pakistan or India. 
Dr ASHRAF CHOUDHARY 
: Well they come from somewhere. But the point is that sometimes very savvy travellers come into the country and maybe unbeknown to them or unconsciously they bring in some apples or other fruit. That is a worry particularly for those who are very regular travellers. They come through SmartGate. The worry is that unless we have the biosecurity side of things covered we could have problems in this country. Pests like fruit flies Asian bees or stuff like that could come into this country and create real damage. 
The other thing I will say is that the Primary Production Committee heard only three submissions on the bill. I know that my colleague has already said that time was short it was getting close to Christmas and people probably did not have enough time to submit. We received eight submissions and we heard three submissions. I agree with colleagues on the other side of the Chamber that there were submissions from airports there were combined submissions and most of them agreed that there was a concern about food coming into the country and bringing organisms with it. 
Clearly there were other issues such as what costs should be covered what should be the aviation security cost and how long it should take to recover those costs. As has been said we agreed on a 2-year cost recovery period. We think it is appropriate in the circumstances. 
Although this Government promises that it will look after farmers and look after agriculture its deeds clearly show that it is not really interested. It is not interested whether it is agricultural science or biosecurity. This is really a worry when all this freight is coming in and cars are being imported. We have a potential problem with ballast. Those are issues of concern and the fact that 54 jobs were cut in MAF Biosecurity will not be helpful. I just hope that this Government will take note that in a few months’ time thousands of travellers will be coming here and it is about time the Government planned for that. I know that it has no real plans but for the sake of biosecurity it should at least make some plans ahead of time. Maybe it should have more staff trained and ready to be at our airports and ports so they can ensure that we do not have any of those organisms particularly unwanted organisms coming into the country. If that happened it could create a lot of real biosecurity problems. 
As I said this Government is not serious about some of these agricultural issues. I know we will be discussing a number of issues in relation to agriculture bills that are coming forward— 
Colin King 
: And biosecurity. 
Dr ASHRAF CHOUDHARY 
: —and a biosecurity bill—but it is piecemeal work. This Government never does anything in a considered way. It is always in a piecemeal way. This is a biosecurity bill there will be another biosecurity bill there will be one agriculture bill and then another agriculture bill coming up. The Government is never serious about it. There is no long-term planning or long-term thinking about this. In relation to the economy for example where is the plan? Where are the opportunities for jobs? The Government is looking at now— 
Shane Ardern 
: Watch this space Ashraf. 
Dr ASHRAF CHOUDHARY 
: I say to Mr Ardern that he knows very well that the number of agricultural students in our agricultural universities is going down. 
CRAIG FOSS (National—Tukituki) 
: 
 A previous Labour speaker said Labour was going backwards under this National Government. He was right; Labour is definitely going backwards under this National Government. Incidentally its first speaker up in this debate had a lot to say about the Airports (Cost Recovery for Processing of International Travellers) Bill but I cannot see his name mentioned as having been one of the members who sat on the Primary Production Committee as we heard submissions on the bill. Just for the record I say yes we did hear submissions. Every submitter who wanted to be heard was heard. An earlier speaker said there were only eight submitters but he failed to mention the fact that the first submitter was the Board of Airline Representatives of New Zealand and the second was the New Zealand Airports Association. So in fact all airlines and all airports that operate in New Zealand were represented and gave submissions on this particular bill and that was on top of the ongoing consultations that had gone on for quite some time. Maybe Labour cannot count correctly or something which is perhaps why the Labour Opposition is going backwards under this National Government. 
This bill gives clarity to airports and fairness and certainty to those who may want to re-enter or start up as international airports. On that note I note the concerns I raised about Hawke’s Bay Airport—or Napier airport as some may call it—which is currently undergoing an extension thanks to the hard work of the local hard-working MPs Mr Tremain and another humble MP from Tukituki. One day that airport may become international but at the very least right now it will soon become jet capable. Interestingly the debate moved on to the scenario that if New Zealand and Australia perhaps become one domestic air market then discussions about international flights potentially going into or out of Hawke’s Bay Airport would become irrelevant because it would be a domestic airport and other legislation and regulation would deal with such matters. But I congratulate Mr Tremain and his hard-working colleague on their successes so far in the Hawke’s Bay. The northern extension of the airport has now been built and the southern extension should also be open some time in June. 
On that note I say it will be very interesting to see the first carton of Hawke’s Bay apples go fresh on a flight from Wellington or Auckland to Australia. All of that is again due to the hard work of many people in Hawke’s Bay as well as of the two somewhat humble MPs there who have been working on the issue of access to the Australian market for apples for quite some time. I commend the bill to the House. 
Bill read a second time. 
Sittings of the House 
CHRIS TREMAIN (Senior Whip—National) 
: 
 The House has made excellent progress tonight. I seek leave for the House to rise early returning tomorrow at 2 p.m. 
Mr DEPUTY SPEAKER 
: Leave is sought for that purpose. Is there any objection? There is no objection. 
The House adjourned at 9.51 p.m.