Volume 692 Week 48 - Wednesday 10 July 2013(continued on Thursday 11 July 2013 )Text is incorporated into the Bound VolumeVolume 692 Week 48 - Wednesday 10 July 2013(continued on Thursday 11 July 2013 )[Sitting date: 10 July 2013. Volume:692;Page:11931. Text is incorporated into the Bound Volume.]Wednesday 10 July 2013(continued on Thursday 11 July 2013 )State Sector Amendment BillPublic Finance Amendment Bill (No 2)Crown Entities Amendment BillThird ReadingsDebate resumed.Hon PHIL GOFF (Labour—Mt Roskill):When we were last debating this legislation I made the point that the State Sector and Public Finance Reform Bill as introduced raised some serious concerns from the Labour Opposition. We opposed the first reading of the bill. What we were concerned about was how the bill as it was introduced would impact on employees. We are at a time of quite rapid change within the Public Service. That means that many people who had been loyal and devoted public servants have been at risk and have lost their jobs through no fault of their own and the bill as introduced had redundancy provisions that would have risked seriously disadvantaging people placed in that position. We raised concern too about the differential in terms of how people were treated if they were on a collective contract as opposed to an individual contract and we raised concerns about the Government’s proposal for workforce policy orders which would have had the impact of effectively being Orders in Council.I am pleased to report back to the House that as a result of the very good and very clear submissions made by stakeholders on this bill and the good work done in the Finance and Expenditure Committee—and I acknowledge the work done there by David Cunliffe—the committee actually listened to the Labour objections took those objections on board and altered the bill significantly. So we have a situation now where employees have retained their rights to redundancy payments when they are displaced from their employment other than when they are offered a job that is no less favourable than the one that they are currently in.We have a situation where with the sunset provisions those on collective contracts will have the same rights as those on individual contracts—they will not be disadvantaged—and we have a situation where the workforce policy statements as they are now known will allow existing legal and bargaining rights to be protected. I do welcome the flexibility of the select committee and in this case of the Minister in taking on board those points so that this legislation can receive wide support as it goes through the House. I only wish that that sort of flexibility and rationality was replicated on a lot of other bills that we have been considering.The principles set out in the legislation are fine but my question is given experience whether the principles set out in the legislation are actually just words on paper and the practice will be quite different. If you set out in the legislation very good provisions about how the Public Service will operate in future that is fine. We want a flexible innovative creative Public Service that is effective and efficient. The public servants themselves want that we want that and New Zealand wants that. We should acknowledge that we have a very good Public Service one that is politically neutral one that is effective and efficient and non-corrupt. But to maintain that you have to maintain the morale and you have to acknowledge the value that those public servants provide.It is all very well for the purpose clause to talk about a State sector system that meets its obligations on the part of the employer to the employees. But we have seen inpractice the exact opposite of that happening. Think back to the debacle of the reorganisation of the Ministry of Foreign Affairs and Trade probably the most effective ministry that in 15 years as a Minister I have worked with. That ministry was gutted people unilaterally had stripped from them their rights and their working conditions and that sense of disillusionment resulted in a 19 percent attrition rate the highest in the history of the Ministry of Foreign Affairs and Trade in the latest financial year.Think of the Defence Force where a thousand people have left the Defence Force—they have voted with their feet. Look at the way in which the civilianisation project was handled where people who had worked for the Defence Force for 25 years got these form letters saying: “We have measured you as having low potential.”—in capital letters. That is an absolute and gross insult to the people in the Defence Force and the cost we have paid is having the worst morale and the highest levels of attrition in the country. So let us put our principles into practice because that has not happened in the past.The other point that I would make is that this legislation talks about having the objective of clarifying the responsibilities of chief executives to their Ministers. I want to ask the question of the next Government speaker: what about the reciprocal responsibilities of the Minister to the chief executives? Why is it that Murray McCully can blame his chief executive who cannot argue back for the total botch-up in the reorganisation of the Ministry of Foreign Affairs and Trade? That was ordered by the Government and the chief executive was hung out to dry. What about the Ministry for Primary Industries where the export of meat to China was jeopardised because the restructuring was again botched? And what do we have Nathan Guy doing? Blaming his officials. Once upon a time there was a principle of ministerial responsibility in the House. Let us get back to that. Let this Government take some responsibility. Let it put the principles of this bill into practice.Hon JOHN BANKS (ACT—Epsom):What a sad and pathetic rant for so early in the morning from the ex-leader of the Labour Party Phil Goff. I remember that the late Bill Rowling when he was turfed out of the leadership of the Labour Party never carried on like that did he colleagues? He was a good man a statesman—not like we have heard from the member for Mt Roskill.I rise to support the third readings of the State Sector Amendment Bill and supporting legislation. These bills were formerly titled the State Sector and Public Finance Reform Bill. These bills make progress towards a more innovative efficient public sector that delivers better results for New Zealanders. That is crucial for improving the services provided by the Government. I want to pay credit to my bench mate the Hon Dr Jonathan Coleman for his work on these bills and the work of the Finance and Expenditure Committee.To illustrate the need for these bills I want to highlight just one of the changes made by this legislation relating to the responsibilities of departmental chief executives. This National Party - ACT coalition Government talks about responsibilities of chief executives quite a lot in this bill. In particular the bill will make explicit the stewardship responsibilities of chief executives on behalf of the Government representing the people of New Zealand. In ordinary use a steward is someone who is responsible for managing property on behalf of someone else. In a State sector context this means on behalf of the taxpayers and the citizens of New Zealand. Although chief executives have for a long time been responsible for managing the organisational health and capability of their departments this bill makes it clear that this requires proactive planning and management of the medium and long term interest. This is to ensure departmental maintenance and the ability to effectively serve successive Governments.So this is intergenerational legislation in the best interests of value for money on behalf of the taxpayers.As Minister for Regulatory Reform I am pleased to see that the bill also extends the duty of stewardship to legislation that departments administer. Although Ministers hold the key decision rights over legislation and legislative change they are not well placed to proactively monitor and manage the performance of legislation over time and to determine whether it remains fit for purpose.The ACT Party and the people of Epsom believe that for far too long Acts and regulations have been a result of undue haste poor-quality processes and inadequate scrutiny. Our statute book gets bigger and bigger every year. Hard-pressed taxpayers who produce the wealth of New Zealand face a thicket of rules. Businesses tell the Government and told the previous one that reducing the regulatory burden is what they want. The small businesses that I represent on Broadway Newmarket and around the Epsom electorate have said that for far too long they have had the Government on their backs and in their pockets too deeply. Well I have got good news for hard-pressed taxpayers and New Zealand businesses. These bills take a small step to improving the regulatory burden on New Zealanders. They create the obligation for ongoing stewardship of existing legislation and regulatory regime. Regulation should be an asset to New Zealand providing benefits that outweigh the costs to the users and the burdens that arise but unless a department is actively and systemically monitoring the performance of the regulatory regimes it administers then it will not know whether they are performing as assets or whether they have become liabilities.I agree with—and I respectfully disagree with his views onACT’s Regulatory Reform Bill and that is an argument for another day—the late George Tanner QC a former law commissioner and Chief Parliamentary Counsel. He said: “The lack of any systematic process for post-enactment scrutiny means that the routine maintenance of some very major pieces of legislation rarely happens.”—the routine maintenance of any legislation regularly does not happen. So we paint our houses and service our cars but we do not look after the laws that affect people’s lives—more important—and this legislation addresses some of that.The explicit stewardship role in these bills in relation to legislation is an important first step towards ensuring the scrutiny and maintenance takes place. Indeed the Government has already moved to outline its expectations for departments on their stewardship responsibilities for regulation. This is not exciting stuff. It does not get the House in raptures but it is important for the end-users who are the taxpayers who fund all the activities of this Government. The Government expects that departments—that is Government departments—will be actively monitoring the regimes they administer to ensure they are performing as expected. Where this is not the case departments should be advising the Government where changes could be made to improve regulatory reform and regulatory performance.Regulatory stewardship is about ensuring that the Government departments do not have a “set and forget” mind-set when it comes to regulation. Rather departments—that is Government departments—must be actively managing the regimes they are responsible for. The ACT Party would say that departments need to get better with the pruning and thinning of their regulatory forests. Removing the deadwood is good and necessary. When these bills are passed the Government will be monitoring departments’ progress on meeting its regulatory stewardship expectations and as Minister for Regulatory Reform I will have oversight for that and will be watching it very closely.Strong regulatory stewardship will ensure that New Zealand’s regulatory regimes are best placed to support growth in the economy. That is investment and growth in jobs and we will hear a lot more about that later today. Strong stewardship is crucial toimproving the performance of the State sector. So our aim should be clear in law and it starts here today this morning in this Parliament—clearly understood frequently checked for fitness for purpose and occasionally pruned. These bills are small but meaningful steps towards our objectives and this Government this coalition National Party - ACT Government says that taxpayers know all and that it is the taxpayers we are responsible to. We are servants of the taxpayers. We must make sure that any laws passed in this Parliament represent their best interests and value for money for them. That is why of course as Minister for Regulatory Reform I support these bills.Hon DAVID CUNLIFFE (Labour—New Lynn):I acknowledge the Minister who has just resumed his seat and acknowledge his role as the Minister for Regulatory Reform. His attitude to regulation is of course akin to the person with a chainsaw who cannot see the wood for the trees and chops down both. Our view of regulation is that it is a bit like a hedge. It needs to be kept pruned but it plays an important role in setting boundaries for conduct for the benefit of the whole community.Labour supports this legislation arising from the State Sector and Public Finance Reform Bill and in the third reading it is an important time for us to sum up the reasons why we do. It is worth recalling that this is an unusual process because at the first reading of the bill Labour quite strongly opposed it. We did so for good reasons and those reasons were echoed in submissions notably those of the Public Service Association—and I acknowledge the presence in the gallery of its secretary BrendaPilott—and of the Council of Trade Unions. The strength of submissions from both was notable.This is legislation where the Government and the Opposition have entered into good-faith negotiations and made major changes to the text leading to the recognised improvement of the final product. It is an example where Parliament is doing its job at both the select committee and House levels.I am going to briefly summarise some of the key issues that were amended in the Finance and Expenditure Committee. But before I do so let me recall first the overall objectives of the legislation upon which there is now near consensus in the House. It comes down to what kind of State we want to have. Do we want to have a State that has shrunk to the point where it cannot effectively serve its citizens? No we do not. Do we want to have a State that is intrusive and where civil liberties protections and civil rights are done away with as in the thread of bills currently before this House? No we do not. Do we want a monolithic State where bureaucratic action by individual agencies fails to deliver teamwork flexibility and cost-effectiveness? No we do not. We want a State that is able to operate leanly but not meanly a State that is effective and a State that fulfils New Zealanders’ aspirations for their communities. To do that we need Government agencies to be able to cooperate together and they need to be able to work in partnership with communities and thus to delegate functions and occasionally powers where appropriate and with appropriate accountability. This legislation sets the legislative framework that allows that balance to be sought and it has been much debated much argued and much amended so that both sides of Parliament have been able to contribute to the outcome.There were a number of provisions particularly in respect of the State Sector Act component of the legislation that were abhorrent at first reading. Redundancy provisions have been improved so that State sector employees retain their redundancy entitlements unless accepting a position that is “no less favourable” than the one they currently have—no less favourable. The protection of State servants’ rights upon redundancy situations has been a bottom line for the Opposition and we have benefited greatly from the work of submissions in that area.Transition arrangements have been improved so that collective agreements and individual agreements aresunsetted equally 3 years after the legislation takes effect. We have removed the possibility that individual contracts could outlive hard-fought well-negotiated collective agreements. The idea that Government Workforce Policy Orders could trammel the good-faith bargaining rights of State servants was abhorrent. I am pleased to report to the House that the select committee has rewritten those provisions so that the orders now specifically provide for the maintenance of all existing legal and good-faith bargaining rights by employees. The orders no longer exist; they are now statements that are not binding in relation to employment matters.Conflict of interest provisions enhanced governance for delegated powers and strengthened accountability requirements in State sector financial reporting have all also been amended. Labour still has some significant concerns about aspects of the legislation but we believe that the amendments secured in the select committee with the support of unions have brokered significant enough change to mean that Labour can now and will now support the passage of this legislation.I would like to take the opportunity to speak in a little more detail about some of the substantive provisions of the legislation turning first to the State Sector Amendment Bill and the amendments to the State Sector Act. The bill strengthens the role of the State Services Commission in leading the State Service and to ensure that agencies work collaboratively as a system. The amendments broaden the commissioner’s functions to include the ability to transfer chief executives within the Public Service as part of building a collaborative culture. They extend the responsibilities of chief executives to their Ministers and how they delegate statutory functions and powers between agencies subject to safeguards which have been strengthened. They create new organisational arrangements called a departmental agency as an option for providing public services in order to provide focused specific and accountable services within a broader department. I note in passing that that is in some ways opposite to the trend that we have seen with the formation of agencies like the Ministry of Business Innovation and Employment which has collectivised so many functions into one disparate group that we have grave fears for its effectiveness.The Public Finance Amendment Bill (No 2) contains amendments to the Public Finance Act. It establishes a new type of appropriation called a multi-category appropriation which is an important innovation. It means that when cooperation is mandated between several Government agencies comprising several different votes of expenditure that financing can be collectivised into a single pool thus hard-wiring the cooperation between those agencies for the project or programme. It is a good idea in principle but in order to be proper and effective it is essential that Parliament is able to trace the money going into and out of multi-category appropriations as part of a broader set of accountabilities to ensure that all funding can be appropriately traced. I am happy to report to the House that work is ongoing in the Finance and Expenditure Committee to ensure that those accountabilities are detailed and transparent right down to the sub-output level and we are working with officials to ensure that improvements are made to the structure of Crown accounts.Amendments to the Crown Entities Act 2004 in the Crown Entities Amendment Bill amongst other things require the boards of statutory entities to ensure that they collaborate where practical and broaden the grounds for the Minister of Finance and the Minister of State Services to issue whole-of-Government directions which can be issued to large or small groups of entities. The irony is that at a time when Mighty River Power—or half of it—has been flogged off the Government is taking large parts of the State sector out of the provisions of the State-Owned Enterprises Act which provides very similar powers of direction to those that we are now introducing in this bill. Wouldsomebody please establish what the Government really wants? It seems that it wants cash even when it overrides principle. This is a bill that does contain principle and so we support it. We absolutely abhor the dilution of the Crown’s asset portfolio and the loss of strategic control over New Zealand’s energy system and that is why we are going to be introducing soon after taking power next year NZ Power a system whereby consumer interests are protected and power companies are once again brought within the control of the community as a whole.We retain a number of reservations about the legislation and in closing let me just note that we have concerns which we will be monitoring closely around redundancy provisions and around payments and bargaining. We are also concerned about aspects of the implementation of Government Workforce Policy Statements to ensure that they do not in practice trammel the rights that are being protected in principle. We are going to be monitoring closely any delegation by chief executives of their powers to ensure that accountabilities to Parliament and to the public are not diluted. And we are going to be working very closely with officials to make sure that the accountability arrangements in financial reporting are tight and transparent so that the public can get the information it deserves and is entitled to in order to ensure the proper functioning of government.In process terms let me express a degree of concern about the extensive Supplementary Order Papers to the legislation which we feel should have been introduced earlier. This concern is not sufficient to cause us to vote against the legislation. It does have Labour’s support. We look forward to working to modernise and improve the functions of the State sector.DENISE ROCHE (Green):I rise to take a call for the Greens on the bills that were formerly part of the State Sector and Public Finance Reform Bill. When we vote on this legislation today we will be voting on three bills: the State Sector Amendment Bill the Public Finance Amendment Bill (No 2) and the Crown Entities Amendment Bill. The Greens will be opposing the State Sector Amendment Bill. However we will be voting in support of the Public Finance Amendment Bill (No 2) and the Crown Entities Amendment Bill.We maintain that the changes being made to the State Sector Act erode the current conditions of State sector workers. In my previous speeches on this bill I have acknowledged that the Labour Party has made substantial changes to the original bill that are improvements on what was on offer before. Even so under the State Sector Amendment Bill workers will not get the same access to redundancy as they had before because the provisions are more restrictive. More worrying is that Public Service workers will also lose their rights around transferring to a new job when the functions of their jobs and duties have shifted to another department.Given that there has been massive restructuring in the Public Service mergers of departments commissions like the Charities Commission suddenly becoming departments and the loss of over 5000 jobs in the State sector over the last 4 years taking away the possibility for staff to have some discussion and an opportunity to transfer when their jobs are transferred as of right is a retrograde step.The public sector workforce is facing ever-increasing workloads as the Government puts the squeeze on staffing levels but this has its costs. Yesterday in the Government Administration Committee we heard from the Chief Ombudsman Dame BeverleyWakem that the Office of the Ombudsman has had an increase in demand for advice and guidance from State sector agencies. When I asked why she explained that there had been a churn of people in the Public Service a huge turnover of staff and consequently a loss of institutional knowledge and a loss of experience. She explained that even though they were not strictly charged with the work it was a better use of resources for the Office of the Ombudsman to offer advice and training about theOfficial Information Act to try to reduce the number of complaints and requests coming through the Office of the Ombudsman. And there has been a sharp increase in complaints—a 30 percent increase over the last year and more Official Information Act requests than ever before.Some of this can be credited to the fact that the Public Service is finding it hard to attract and keep skilled and knowledgable workers especially since the private sector can offer better pay and conditions. In this type of environment one would think that enabling employees to transfer if their jobs shift to another department would make sense. I remind the House that this ability to transfer in this bill applies to chief executives but not to other staff. This is hardly fair—or even consistent—and it is the reason why we will not be supporting this bill.For the Public Finance Amendment Bill (No 2) we support the intent of the bill. We do believe that in the Public Service there should be ways for departments to work across appropriations and votes so that there is access to good public services. We do support the ability for there to be joined-up thinking and a joined-up Public Service and we support the provisions in this bill that will contribute to that. We do support efforts that promote innovation in the Public Service and the efficient use of public resources. We recognise that this is what has been the driver for this bill.Certainly for those who contract with multiple departments to provide services like some in the not-for-profit sector there have been ongoing concerns for years and years about the duplication and costliness of multiple reporting and monitoring systems when there is more than one Government department involved in their provision of services. Having said that we do acknowledge that the Public Service is not moribund and it can already be innovative in its approach to the provision of services. I think I have previously mentioned the gateway programmes for youth at risk where their educational health social and welfare needs are attended to across departments.There are other examples. Last week I heard a talk by Judge Tony Fitzgerald from Auckland’s New Beginnings Court. I was one of two MPs—the other was Jacinda Ardern from Labour—who slept outside for the night to raise money forLifewise an organisation that works to end homelessness in Auckland. There were over 80 participants sleeping rough for the night. We heard about this effective and innovative system within the justice system that screens out people with low-level and persistent offending—theft and nuisance-type stuff—because if a person is homeless it is likely that they will be conducting petty crimes to get by. So they are screened and they are assessed by the New Beginnings Court and then they work with the judge and a host of other agencies to address their underlying behaviour mental health or addiction issues and their housing problems as well. They report back regularly to the New Beginnings Court until they graduate—with due ceremony I might add. The results are very very heartening. They report a remarkably low level of reoffending within 6 months after graduation.The funding for this initiative comes from a range of Government departments and the provisions in the Public Finance Amendment Bill (No 2) will make it easier for these types of initiatives to access funding. That is desperately needed for the New Beginnings Court because although it has been in operation for 2 years ongoing funding is by no means secure and maybe it is even less secure given the reduction in funding that is happening in the justice sector at the moment. So although we agree with these intentions we will be closely monitoring how the multi-category appropriations in votes remain traceable and we share that concern with the Labour Party as outlined by Mr Cunliffe.We will also be supporting the Crown Entities Amendment Bill. We do have some reservations about the shifting of statements of intent to 3-yearly or more frequently ifrequired by the Minister. We note the changes in definitions of subsidiaries that will cover partially sold-off State-owned assets. However on balance we support this bill. The State services in New Zealand deserve more than mere tinkering. We echo Sir Geoffrey Palmer’s comments that the legislation needs to be examined in closer detail—he suggests through a royal commission. In the meantime the Greens will oppose any bill that leaves public servants worse off. Thank you.PAUL FOSTER-BELL (National):I rise to take a call on the third reading of the legislation arising from the State Sector and Public Finance Reform Bill—the State Sector Amendment Bill the Public Finance Amendment Bill (No 2) and the Crown Entities Amendment Bill. I would like to start by congratulating the Minister of State Services the Hon Dr Jonathan Coleman who introduced the State Sector and Public Finance Reform Bill to the House.I want to respond to some comments made by an earlier speaker. I have to agree actually with some of the things that Mr Goff said about New Zealand having a very good Public Service. In fact our Public Service I would argue is the envy of the world. It certainly would be the envy of those Middle Eastern countries that I have spent some time in.I want to congratulate the Opposition on changing its position on this legislation to one of support for it but I do want to reject some of Mr Goff’s characterisations particularly of the foreign affairs ministry. Mr Goff was a good Minister of Foreign Affairs and Trade for New Zealand but we have to remember that that was 8 years ago. Eight weeks ago I was serving in that ministry and I have to say that public servants are working very very hard in the Ministry of Foreign Affairs and Trade. They are delivering well on the Government’s priorities. We have seen just this week free-trade agreement negotiations with Chinese-Taipei concluded. Trade is up with the Gulf States. The Government is working on opening a new mission in Africa to support our UN Security Council bid and every week every month we are making progress in that campaign to win the seat that New Zealand deserves to hold on the UN Security Council. I would utterly reject the characterisation of a demoralised ministry that is not producing results because that is not correct.These proposed changes to the State Sector Act strengthen the State Services Commissioner’s role in leading the State sector. They also extend chief executives’ responsibilities to considering the collective interests of the entire Government and longer-term sustainability rather than focusing on single Government departments and agencies. This is a very positive measure as it will help I think reduce the degree of silo-isation that currently exists in the State sector and it will ensure that the State Sector Act is modern and generally fit for purpose.I also want to reject a suggestion made by the previous Green speaker Denise Roche that I think is utterly wrong and that is claiming that provisions for public servants are being eroded. A key provision of the State Sector Amendment Bill is ensuring that in cases of redundancy where the public servant moves on the next working day to a job that is comparable in its duties and responsibilities public servants do not receive redundancy. This is not actually a reduction in the terms and conditions of that public servant because they will transition into that new role and carry on with those terms and conditions.I have absolutely no hesitation in commending this legislation to the House.ANDREW WILLIAMS (NZ First):I take a call on behalf of New Zealand First on this split legislation the State Sector Amendment Bill which we are opposing; the Public Finance Amendment Bill (No 2) which we are supporting; and the Crown Entities Amendment Bill which we are also supporting.I will speak mainly on the State Sector Amendment Bill which New Zealand First is opposing. This very large complex omnibus bill purports to be about providing the legislative basis for Better Public Services and strengthening the legislative framework. Yes there are lots and lots of fine words and empty phrases of more collaboration among Government departments sharing functions and services sharing the purchasing of goods and services logistics more efficient and effective systems and greater financial and reporting flexibility. And on and on goes the rhetoric. These are the same old buzz words—“efficiency” “simplify” “collaborate” “logistics” “flexibility” “streamline” and “improved governance”—that we hear time and time again but actually where the rubber hits the road it really is not happening.What this bill does not acknowledge honestly is that the public services in this country will continue to shrink. The fabric of our public sector will continue to fray. Is it not interesting that at a time when this Government wants to decimate the Public Service on the other hand in Christchurch a mainstay of the rebuild of the central business district is based on moving public servants into the centre of Christchurch and rebuilding large buildings there to be taken up by Government departments. This Government says that the future of the Christchurch central business district is very much anchored on public servants and public services being based in the central business district. Yet here in Wellington where we have a Prime Minister who says that the capital of this country is a dying city the Government is all about decimating the Public Service and reducing it to a shadow of its former great self.This same thinking or should I say lack of thinking led to the likes of the Pike River coalmine disaster with the reduction in the number of mines inspectors. It led to theRena ship disaster where the work simply was not being done to ensure that the legislation was through to make sure that New Zealand was fully covered in a situation like that. It led to a situation where an emergency vessel that was suggested never came to be and because that was not carried out we did not have the resources here and the nearest resource to react to such a situation was in Singapore. It led to the situation of the leaky homes where again the Government took its eye off the ball and for many many years allowed this country to get into a situation of a decade of substandard building of homes schools hospitals and the like. Now this National Government having changed the rules back in the 1990s and having allowed leaky buildings to be built is having to spend the best part of $30 billion of New Zealanders’ money to fix up the problems that were created back in the 1990s under a National Government.It led also to biosecurity breaches like thePsa infestation of kiwifruit where again the Government dropped the ball and because there was insufficient oversight that occurred. It led to border control by our customs officers and immigration officers seeing some serious breaches. This is continually under threat and if the Public Service continues to be reduced our border security and our customs and immigration services will be severely curtailed. We have a situation now under this Government that visa-free access is being allowed for questionable people coming in on China Southern Airlines to fly in jump in the first available limo go straight to Skycity—which is part of the rest of its sleazy deals—and be there for a number of days virtually without any scrutiny.Again you would wonder whether this country is really being governed and really being taken care of. Is there a Government structure? Does the Government really want to ensure that we do have civil servants and a Public Service that can actually ensure the security and the well-being of this sovereign country?These issues are not going to be resolved by the State Sector Amendment Bill. The short-term ideologically based thinking that damaged New Zealand is not countered by this bill. This bill is not the solution for anything; rather it entrenches current problems.This bill will not stop the erosion and undermining of the public sector—a public sector that New Zealand has always been proud of; a public sector that has helped build the fabric and the spine of this country; a public sector that was responsible for creating our dams our energy companies our State-owned enterprises; a public sector that helped build the very infrastructure that keeps this country ticking over. I am talking about the roading the railways the airlines the military the defence forces and the Civil Service that keeps the basis and the integrity of this country ticking over.If it was all left to private enterprises—if it was all left to the Government’s mates to run as this National Government would like to see—we would indeed be in a very sad state in this country. This country has always had a very strong sound Public Service sector. We have been a welfare State for the best part of the last century. We have been revered around the world for what our State services have provided to a small country which when I was young was only 2 million people but is now 4.5 million people during which time for such a small population for a relatively small country we were able to punch heavily above our weight because we did have the State structure to support that for a very small population.This bill will not stop that erosion. Where is the evidence that this bill will bring more effective public services? Where is the evidence that this bill will lead to better-quality public services and innovative ideas in the Public Service? Why is it necessary to strengthen the State Services Commissioner’s role in leading the State Services Commission? Why do we need a new organisational arrangement called departmental agencies? Where is the justification for this increasing complexity?This bill creates an illusion of progress and improvement but the evidence to support it is sadly missing. There is no clear and compelling case that this bill takes us to better and more cost-effective public services. No we do not want a bloated Public Service and we do not want a bloated public sector but we do not want a hollowed-out one either and that is what this National Government would want to see—a hollowed-out public sector that can no longer deliver the requirements to New Zealand. New Zealand First will not be supporting the State Sector Amendment Bill.Dr PAUL HUTCHISON (National—Hunua):It is a pleasure to take a call on the legislation arising from the State Sector and Public Finance Reform Bill. What a dour sorry diatribe from Mr Williams in New Zealand First. How sad it is that they are not supporting this very enlightened legislation because after all it is 100 years of an excellent Public Service in New Zealand that we are celebrating. Indeed a country can be judged on the integrity efficiency and effectiveness of its Public Service and here the National Government in true leadership form is once again ensuring that we have a State sector that is modern flexible and generally fit for purpose.I was delighted to see in the amendments to the Crown Entities Act 2004 that collaboration—Rt Hon Winston Peters: Four hours to catch a guy fromŌpōtiki—how do you explain that?Dr PAUL HUTCHISON: I do not know what he is talking about. It seems utterly irrelevant like New Zealand First’s contribution to this debate. The last thing that I wanted to mention was the collaboration between the various public entities. Indeed that is vital as we see the various whole-of-Government approaches to matters such as the White Paper for Vulnerable Children. This is excellent legislation and I indeed support it.Hon DAVID PARKER (Labour):As David Cunliffe has already indicated to the House the Labour Party is supporting these three bills arising from the State Sector and Public Finance Reform Bill.Andrew Williams: Why?Hon DAVID PARKER: Because we think that it is important in respect of cornerstone legislation that governs the State sector and desirable that at least the two major parties can reach agreement. It is largely housekeeping legislation and it is important that we have stability in our State sector.Indeed I thought it was an appropriate time to have a bit of a reflection on history. One of the Acts that this legislation amends is a 1988 Act that was passed by the Lange Government under the ministerial direction of the Hon Stan Rodger. He lost his membership in the Public Service Association (PSA) for a while thereafter so it was not all roses for him. But it is somewhat interesting to reflect on the fact that only 30 years ago we had far less sophisticated public finances and a far less sophisticated State sector than we now have. Indeed it was not until that Government reformed the reporting of accounting information from Government departments that we moved to true accrual accounting across the Government. Until then there was dishonesty in the Government accounts of the day which could report things on a cash basis and shuffle things from year to year. That was one of the ways in which the Muldoon Government was able to hide the fact that New Zealand’s Government finances were in such a parlous state that Government debt was heading up towards 80 percent of GDP. An incredible one dollar in five of tax that was being collected was being spent on interest. It got close to one dollar in four before subsequent Governments be they National-led or Labour-led became fiscally responsible.Indeed I think it is fair to say that since that time—the 1980s—and the reforms that were around State sector performance and public finance reporting and management we have not had a fiscally irresponsible Government. We have not—it is true. The then Labour Government got the finances under control. The following National Government reduced Government debt. The following Labour Government led by Helen Clark with the Hon Michael Cullen—Sir Michael Cullen now—reduced gross Government debt from 38 percent of GDP to 18 percent of GDP and reduced net Government debt to zero.I am going to dwell on that point a little bit because it is relevant to the Public Finance Amendment Bill (No 2). We hear time and again the diatribe from members on the other side of the House asserting that they inherited a decade of deficits and that the prior Government was fiscally irresponsible. It is not true. Indeed the Budget surpluses that were run by the last Labour Government in one year was 6 percent of GDP and in another couple of years were 5 percent of GDP or thereabouts. We ran nine surpluses in a row and that enabled us to reduce debt in the way that I have previously described. Every one of those Budget surpluses was opposed by the National Party whether it was John Key as its finance spokesperson Don Brash in charge John Key in charge or Bill English in charge. Every one of them was opposed to those surpluses.I remember sitting in this House when the Opposition National Party members as they were then were shouting out that the Government was overtaxing and that it should have been refunding those taxes and having smaller surpluses. And of course if New Zealand had made that mistake if in the time of plenty we had not run surpluses and reduced Government debt the circumstance of New Zealand in the last 5 years since the recession and the global financial crisis would have been so much more difficult to cope with. The Government—and it is now a National Government—would have had to cope with not just declining revenues but high levels of Government debt relative to where it is. As a consequence it would have had far more difficult decisions as to whether it needed to be more austere in its Government spending than it has had to be in order to get Government debt under control.As it is New Zealand has been able to run one of the least austere responses in the Western World to the global financial crisis. As a consequence we have not forced oureconomy into the deflationary spiral that has been experienced in so many other countries around the world. [Interruption ] That is quite right. A major part of that has been the fact that the last Labour Government prudently managed the Government’s finances in a way that reduced Government debt despite the opposition of the then National Opposition.On that front it is interesting that the Public Finance Amendment Bill (No 2)—these things are important but leadership is more important. We again hear the Government accusing the previous Labour Government of financial mismanagement. This week the Minister of Finance had the audacity to allege in respect of mistakes in Budget reporting now alleged to have been made by National around the funding of the Solid Energy bailout that National was cleaning up the mess made by Labour. On questioning yesterday in the House he was forced to admit that at the time National took over that company had $15 million of debt or thereabouts—in the low tens of millions of dollars of debt—and by the time it was in the crap 3 or 4 years later it had close to $300 million of debt because of the ridiculous expansion plans into coal and lignite and other foolish measures that were promoted by the Government members including the Hon Gerry Brownlee at the same time that they told the State-owned enterprise to take on more debt and pay higher dividends. In the end of course it all turned to custard for them.I want to turn to a couple of particular measures in the legislation that have been changed in its course. I am talking now in respect of the State Sector Amendment Bill. As I understand it all parties agree across the House that where an employee in the State sector stops a job one day and gets an identical job the next day close to the same place and on the same pay and conditions then they should not be able to pick up redundancy from the old job and move into the new job because they have not effectively suffered a detriment that would justify that.This legislation when it came to the first reading in the House went a lot further than that. It effectively meant that people could have faced the risk that even though they had redundancy and other provisions in their employment agreement or employment contract whether it was a collective or an individual agreement those provisions would not kick in despite the fact that they would be forced to move to a job that they did not want that could have been distant physically and that could have been quite different from the job that they had previously had.We in the Labour Party thought that was wrong. We agreed with the PSA that that was just unfair. It was not the way in which a private sector employee would be dealt with in respect of similar provisions in their contracts if they were moving from one job to another and we did not think it should apply in the State sector either. So we advocated hard as did lots of other people behind the scenes and the Government moved on that and now we have got a provision in that respect that we can live with. That is one of the reasons why we are able to now support the bill.I want to say something about the directives that could originally have been given under the legislation as it came to the Finance and Expenditure Committee. They were said to be orders; they sounded like statutory regulations even though the jurisdiction of the Regulations Review Committee was ousted. The wording of the provision of the legislation was so broad that in our opinion the Government could have effectively imposed a wage freeze across the public sector through a piece of subsidiary legislation.Some of us are old enough to remember that it was a prior National Government that did that under Muldoon imposing a wage and price freeze on New Zealand that was unfair did not work and made worse the problems that there were then in the economy. So we again fought that and said that we would not support that. That has been changed. The wording has been changed. The breadth of the directives has been changed to makeit clear that they cannot ride across good-faith negotiations and therefore you cannot have a directive across Government that is tantamount to a wage freeze. That provision in its modified form finds our support too.One final point: these changes are all well and good but I do not accept the proposition that you cannot have whole-of-Government cooperation and get out of silos without these changes to the law. These changes to the law might make it a little easier but what you need is leadership. You need leadership at a ministerial level at a departmental level at a State services level. If you get that sort of leadership you can achieve change across the Public Service. It is not about—Rt Hon Winston Peters: What about foreign affairs?Hon DAVID PARKER: What about foreign affairs?Rt Hon Winston Peters: They’veemacerated foreign affairs.Hon DAVID PARKER: Oh well they macerated—eviscerated—[Interruption ] Well it was a mix of two words. I do not have time to talk about the Ministry of Foreign Affairs; perhaps the honourable member can take a call.JOHN HAYES (National—Wairarapa):This legislation arising from the State Sector and Public Finance Reform Bill is helping to improve the performance of the Government sector.Rt Hon Winston Peters: At foreign affairs?JOHN HAYES: And why is that important Mr Peters? Why is that important? I will tell you why it is important. It is because the public sector makes up about a quarter of the real economy. In the last Budget we set out on a track of improving Government finances and returning to surplus by 2014-15. This legislation is going to help us to do it because it will underpin a growing economy and a better-performing public sector. That is something that you would not know about Mr Peters because what you did was expand the size of the public sector without limit and you are putting the burden on people in my electorate to pay the tax to cover that.We need to get our economy in order. We need to get our public sector legislation in good order because we want a buffer to deal with the next financial crisis or natural disaster when it comes along. This legislation—to address the comments of the last speaker David Parker—will allow net public debt to peak at about 28.7 percent of GDP in 2014 before falling. It is very good legislation. It is the sort of legislation that enables wonderful services to be provided in our community and I support this legislation absolutely. Thank you.Dr DAVID CLARK (Labour—Dunedin North):I rise to support this legislation arising from the State Sector and Public Finance Reform Bill. The Labour Party will be supporting this legislation through the House. We do have some reservations. We certainly opposed the original bill at its first reading but changes forced at the Finance and Expenditure Committee by the State sector unions and by Labour have averted disaster for Government workers who were set to lose their redundancy entitlements and employment rights under the previous version of the bill. As I say Labour members and members of the Public Service Association (PSA) and the Council of Trade Unions are satisfied now with what has been achieved so we are now much more comfortable with this legislation.It was heavily amended in the select committee and the work of the committee is important. So I congratulate the members who worked on the legislation itself. Those negotiations have been fruitful and it is important that this kind of legislation is able to succeed Governments—go from one Government to another—and preserve stability in the sector so that people who work in the sector have some kind of surety around their employment provisions. That leads to a more settled sector and gives the people who work there the ability to focus on the job at hand rather than worrying about whethertheir conditions are going to be axed as was proposed by the Government in the first version of the bill. So my congratulations go particularly to the PSA and the Council of Trade Unions on their involvement and on what has been achieved through the select committee process.The previous Labour member who spoke David Parker drew attention to the issue of leadership and said that if you do not have good leadership by Ministers in policy terms unfortunately this legislation will achieve nothing. This legislation is there to support good policy and the implementation of good policy. Indeed that is the role of the State sector. It is there to challenge Ministers to provide free and frank advice and also to support the implementation of policy that is put forward by Ministers. We over this side of the House are not confident that this will lead to great policy by the current Government. If it has the wrong policies or no policy or no plan at all no amount of fine-tuning as to how departments deliver that absence of policy or that bad policy will help create a better New Zealand.This Government certainly has a poor record in that regard. John Key is on record as stating that he thinks that Kiwis are paying about the right amount for power. The current policy that is in place is being fine-tuned by this Government but if it is the wrong policy no amount of fine-tuning will fix it. Labour on the other hand has put forward a policy that would see the sector reformed and that would see the creation of an entity called NZ Power which would make sure that Kiwi power bills for the average family went down by around $300 a year and would put a lid on future price rises.This kind of policy could be implemented more effectively with this legislation which ensures that the agencies work together in a productive way. It strengthens the role of the State Services Commissioner in ensuring that Government agencies work collaboratively as a system. In fact for the first time the commissioner’s role is set out in legislation. In some ways it is a wonder that that has never happened before. Certainly across the sector it has been asked by many agencies what exactly the role of the State Services Commission is and this is now laying it out in a way that shows the kinds of levers that the commission has to ensure that there are clear lines of accountability within the sector that there is transparency in reporting that there are sanctions and rewards—and certainly the commissioner is responsible for making sure that the correct sanctions and rewards are in place for leaders of departments—that the appropriate policy-provider splits are in place and that other public sector management principles are observed. This legislation makes sure that the State Service is more effective that there are the right safeguards in place and that the chief executives have the power to delegate statutory functions as appropriate.The new organisational arrangement is also covered in the legislation. The departmental agency as a new organisation will be interesting to watch. We will see how that plays out and whether that delivers something more than what we currently have in place.But to return to the point there is no way that this legislation will create good policy. It cannot create good policy; that is for Governments to do. That is for them to campaign on. That is for them to put out in the open and to have tested. The public may be convinced that there are advantages in certain policies. They will elect a Government. This legislation will give the opportunity for that Government to then implement stuff effectively.The leadership of this Government has been ineffectual in for example getting the economy back on track. We know that this Government here present in the Chamber—and Mr Lotu-Iiga is concerned about it as much as I am I think going by the way he is shaking his head at the record of this Government—has the worst economic record ofany Government in the last 50 years and no amount of legislation like this can correct for that. We know that historically in the last 50 years the economy has grown much faster under Labour Governments than it has under National Governments. It has grown at a rate of 3.7 percent on average under Labour Governments and only 2.9 percent under National Governments in the last 50 years. So Labour Governments by nearly a percentage point more grow the economy faster than National Governments.But this particular National Government has the worst of any record. It is actually dragging those averages down and that is why I see those backbenchers there looking down shaking their heads. They are embarrassed and so they should be. I would be if I was in their position too. I guess that is why we see Mr Joyce and Ms Collins at the front there already jostling for position as to future leadership. Maybe they think they have a plan—certainly it could not be any less of a plan than is currently in place. This Government seems content to let things ride to let this situation continue and to see New Zealanders paying more than they ought to for power. It will not intervene.We know that housing for example is another area of policy where we see Kiwis no longer able to afford to own their own homes and that is affecting a great number of Kiwi families. Labour has said that it will implement an affordable housing policy calledKiwiBuild. This kind of legislation will enable us to implement such a policy more effectively when in Government but this Government which has no plan for housing and is content to see housing prices skyrocket out of control will not fix anything with this legislation here. This will not help it form a plan—no by no means—and we know that this Government has no plan for the economy.In the Finance and Expenditure Committee Minister Joyce was not across his portfolio when he came to speak to the select committee on economic development. He had not got his supplementary estimates questions in on time. He was a Minister who wanted to delay that. I asked that the committee postpone the hearing of evidence because Mr Joyce was not across his portfolios and the National members on the committee blocked that. That is on record. In fact I moved a resolution at that committee that said that we postpone the meeting until such time as the Minister is across his portfolios and so scared were the members of the committee that they agreed effectively—John Hayes: Not true.Dr DAVID CLARK: No no it is on record Mr Hayes and we will look forward to hearing what you have to say that would contradict this when it is down in black and white. The members of the committee for National were not prepared to postpone the meeting until such time as the Minister was across his portfolios. I think they did not believe he ever would be and that is the issue.This Government is filled with members who are not across their portfolios who do not have an effective plan for growing the economy and so ordinary New Zealanders are suffering as median wages go down. As costs go up as New Zealanders out of work cannot find a job those people who want to work hard to improve the lot of their families are faced with a Government that is interested in only the big end of town that is seeing small business suffer and that is seeing ordinary Kiwi families take home effectively less pay because the work is not there. The conditions are not right because jobs are not there. This economy is struggling with a Government that has no leadership no plan and no way of looking out for the little guy.It is a Government that is concerned about only the big end of town and this legislation will not help that. This legislation will not form a plan for the Government; it will only help to deliver on its promises a Government that actually has a plan. This Government will not be saved by this legislation.That said it is good legislation. We will be supporting it because it will enable future Governments that actually have a plan to make positive change in this House for the betterment of New Zealanders so that ordinary Kiwis can finally get a chance to get ahead in an economy that grows. That would be a Labour Government and hopefully it will come sooner rather than later.LOUISE UPSTON (National—Taupō):I commend this legislation to the House.A party vote was called for on the questionThat the State Sector Amendment Bill be now read a third time.Ayes95New Zealand National 59; New Zealand Labour 33; ACT New Zealand 1; Independents: Dunne Horan.Noes22Green Party 11; New Zealand First 7;Māori Party 3; Mana 1.Bill read a third time.Public Finance Amendment Bill (No 2) read a third time.Crown Entities Amendment Bill read a third time.Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) BillThird ReadingHon TODDMcCLAY (Minister of Revenue):I moveThat the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill be now read a third time . It has been the Government’s ongoing focus to steadily reduce inconsistencies and anomalies in our tax system in order to make it fairer for all taxpayers. This bill continues that focus.To remind members I want to briefly summarise the main contents of this bill. The bill addresses the tax treatment of assets used both privately and for earning income including holiday homes boats and aircraft. Following on from the changes to the livestock valuation rules in Budget 2012 legislation this bill contains the detailed supporting provisions rules to the general proposal of the irrevocability of the herd scheme election. A proposal to treat lease inducement payments and lease surrender payments as taxable income for the recipient and as tax-deductible expenditure for the payer is also included in this bill.A number of GST-related changes are also proposed. It is proposed that certain non-resident businesses may register for GST and claim input tax deductions for GST incurred with some restrictions to protect the tax base. It is also proposed that all local authorities move to an invoice accounting base for GST.Other substantive measures include changes to the time periods for claiming refunds under the Income Tax Act 2007 ensuring that expenditure on trees and plantings for erosion shelter and water protection purposes is tax deductible and clarification of the definition of dividend in relation to certain rights issues premiums paid under book-building arrangements and share splits by companies. Also included in this bill are two additions to the bill made by Supplementary Order Paper. These make remedial changes which respectively align the Tax Administration Act 1994 with the Search and Surveillance Act 2012 and make minor technical adjustments to the Child Support Amendment Act 2013.These are the main features of this bill. Together these measures will help strengthen our tax system and support our economy by ensuring that people more fairly pay taxthat is due. It is a good bill. I would like to thank and acknowledge officials for their contribution in developing the policy and the drafters who worked on the detail of the legislation. I would like to also thank the hard-working Finance and Expenditure Committee for its close consideration of the proposed reforms—great consideration was given—and I do know that members on both sides of the House spent extra time delightfully reading this important legislation in draft form at home in their weekends. I am pleased to commend this bill to the House.Hon DAVID CUNLIFFE (Labour—New Lynn):The Minister of Revenue talked about the Government steadily reducing inconsistencies and anomalies. The only anomaly that it is reducing in this Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill is the car-park tax which it stripped out of it. Talking about inconsistencies under that Minister’s plan if a car-park was in the central business district of Auckland or Wellington and you used it you paid fringe benefit tax on it outside work hours. If it happened to be two blocks over in the central business district fringe it did not apply. If you were in the central business district of Christchurch or Dunedin it did not apply—well it would not apply in Christchurch because there is no central business district. If you were in Tauranga or Hamilton it would not apply. But if you were in Auckland or Wellington it would. This Government is busy creating inconsistencies.So under pressure from a very interesting coalition of unions business groups and MatthewHooton the Government rolled over and stripped—not before time—the ridiculous car-park tax out of this bill. It was ridiculous because it was going to cost more in compliance costs than it raised in revenue—by some independent accounting estimates more than twice as much in compliance costs. So it is typical. National says that it is the party of low compliance costs but it is busy introducing ridiculous taxes that raise costs for ordinary New Zealand businesses and workers. It says that it is the party of prudent fiscal management but actually it has the worst economic record in how many years Dr Clark?Dr David Clark: 50 years.Hon DAVID CUNLIFFE: 50 years. This Government has never run a fiscal surplus since taking office—the last Labour Government never ran a fiscal deficit—but it would have the country believe that it somehow has had a change of heart and it is now managing the economy.In this bill we no longer have a car-park tax. We need the Government to wake up and smell the coffee on several other ridiculous petty taxes such as theiPad tax—the idea that people the public of New Zealand would be charged for the personal use of their cellphonesiPads and other devices. Imagine having to go through your phone bill and work out which were the private calls and which were the work calls apportion them for tax purposes and then somehow if you mention both in the same call share the cost. What would be the compliance costs of that?That the Government is happy to tax the public on their private use of cellphones is kind of ironic is it not because now the Government wants the Government Communications Security Bureau to listen in as well on every cellphone call you make. I wonder whether the Government is going to tax us for that privilege as well. The Government has not however got the foresight or the ingenuity to ensure that the people who make cellphones andiPads are paying their fair share of tax. The base erosion problem looms large and the Minister of Revenue is too busy chit-chatting in the House to do anything about it.Another example of this Government’s ridiculous petty tax drive is the bizarre proposal to tax clergy housing. We all know that clergy do not earn much money. They do not get full salaries; they just get stipends. Part of the way that is offset is that manyclergy get a free house to live in—a vicarage or a manse or some such. The Government thinks that should be taxed at an imputed full cost and the poor clergy or the poor church is going to have to find cash that they do not have to pay the grossed-up cost of this clergy tax. I want the Minister to stand up and tell the House he is going to fix that anomaly and that inconsistency because it is not before time.An accommodation fringe benefit tax is another thing the Government is pushing. The idea is that if you are in temporary accommodation for more than a year—and that includes in Christchurch—then that would be classed as a personal benefit and you would pay fringe benefit tax on it. Is that not ridiculous? The Government is going to be charging workers who move to Christchurch and have to stay in temporary lodgings for the rebuild a fringe benefit tax on their lodgings as if it were a private benefit. What a misbegotten ridiculous impediment to the rebuild of Christchurch. I sincerely hope that the next Mayor of Christchurch the Hon Lianne Dalziel works with the Government to remove that ridiculous petty tax.This bill does a couple of useful things. We agree with the Government on the fact that we should be charging people’s private use of baches boats and cars appropriately and if it is a business expense for a certain part of the year the tax implications ought to be proportionate. There is no argument about that. We also agree that the livestock taxation rules the valuation rules should be adjusted to prevent people turning what should be profit-earning farming businesses simply into capital gains plays because of the absence of a proper capital gains tax. This bill does not go that far but it at least tightens some of the egregious loopholes around livestock valuation.I do want to acknowledge David Bennett MP who brought some of his former professional training to bear on the drafting of that part of the bill. It is good to see the poacher becoming a gamekeeper—I wish that applied to all his colleagues. In the background of this bill is the issue that the public of New Zealand is sick and tired of waiting for this Government to show some leadership and a real economic plan. The public is tired of hearing excuses for why the New Zealand economy cannot get out of the rut and why we have to put up with some of the highest unemployment in the developed world. Previously under the Labour-led Government we had the absolute lowest unemployment in the developed world.Whether it is the global financial crisis or the Christchurch earthquakes this Government is fast running out of excuses. At a time when decisive leadership decisive action and real vision are required this Government is tooling around with petty ridiculous taxes on car-parks oniPads on clergy housing and on Christchurch accommodation and the like. It is putting up compliance costs putting up costs on ordinary New Zealanders and making it more difficult—not easier—for people to get ahead.An aspect that this bill starts to touch on is the erosion of the tax base and it makes small but useful progress on closing down a couple of loopholes. But in the meantime in the background there is massive avoidance going on through the use of company structures and the use of trusts. The sad fact is that more than half of the hundred wealthiest New Zealanders are not even declaring tax at the top tax rate. Let us say that again: half of the hundred wealthiest New Zealanders—these are multimillionaires if not billionaires—are declaring that they are not even on the top tax rate. They are declaring incomes therefore that are less than—and the Minister of Revenue is so ashamed that he has crossed the floor and will now be sitting on the Labour benches helping to bring down this Government. He is helping to bring down this Government. [Interruption ] He wants to take the next call. I yield my time to the new member of the Labour Party—well I suppose we have got certain constitutional process Todd so you can lodge your nomination at www.labour.org.nz and say: “I want to be a candidatebecause I’m jumping off the sinking rat-infested ship called National and I’m coming to work with the Labour Party to make New Zealand a better and brighter place.”We recognise that member’s foresight. It is really a death wish to stay on that side of the House because here is the most important economic legislation of the day which the Government has put right up on the flagpole: a very very limited tightening of loopholes around baches and boats. That is good as far as it goes. We will be supporting that. In the background are these two 800-pound gorillas: the fact that the bill is full of petty taxes and puts up compliance costs on New Zealand and the fact that the Government does not have a vision for getting our economy out of the rut.You can tell a lot in Parliament by the way members are sitting. Colleagues when you look across the floor and you see those members looking at their feet shuffling their papers out of embarrassment that this is the best that their ministry can do in trying to modernise the tax system you know that that is a Government that is not long for this world. Thank you.JOHN HAYES (National—Wairarapa):I am not sure what planet that last speaker David Cunliffe is on but let me contest what he is saying. I think we are seeing a Government on this side of the House that is focused on building a stronger more stable economy that can weather global storms and deliver higher incomes and more jobs. The Government has set out a very clear economic programme to support and accelerate that progress and this taxation legislation we are discussing this morning—the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill—is going to help deliver that.Under the leadership of our Prime Minister John Key the National Government approach has been clear and predictable. We have said very clearly to the last speaker David Cunliffe: “No capital gains tax. No capital gains tax.” That is why he is spitting the dummy this morning because that is the legislation he wants. We have told New Zealanders what we will do. We have campaigned successfully on our programme over two elections. We have taken New Zealanders with us by making consistent and moderate changes year after year as we have promised. In the shorter term we have worked to protect New Zealanders from the sharpest edges of recession and the people of Christchurch from the unavoidable effects of devastating earthquakes.We have incurred significant extra debt by spending in excess of our revenue to protect the most vulnerable families to maintain living standards and to support the renewal of our second-largest city. This legislation is entirely supportive of that direction. At the same time we have set out on a longer-term path to repair the damage to our economy from a decade of excessive borrowing consumption and Government spending by that last speaker’s party. We are rebuilding the economic capacity to deliver more jobs and higher incomes over the next decade.The Government is in the midst of a comprehensive programme to give businesses and families the confidence to invest in our shared future despite global economic uncertainty. There really is only one way that we can do that. We need to shift resources away from debt-funded consumption and housing investment and towards more savings and investment in export-intensive sectors. New Zealanders have a good understanding of the challenges faced by the wider economy and they understand the importance of this taxation legislation. I totally support this bill. Thank you.Dr DAVID CLARK (Labour—Dunedin North):It is not working. The member Mr Hayes who has resumed his seat has talked about this long-term plan that the Government is putting in place to support the economy and growth through tough times—all of that. The Government has been here for 5 long years and we do not see the results. This Government still has the worst economic record of any Government in the last 50 years and that is a shocking reputation to have. No amount of spin by MrHayes is going to change that fact. If the economy is not growing and if the policies are not working carrying on with the same policy is not going to change anything Mr Hayes.Coming back to the specifics of this bill the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill it is a bill that does amend the Income Tax Act. It attempts to plug a few holes here and there. There is nothing wrong with that—nothing wrong with that. It is what is not in this bill that is the most significant talking point. This bill refuses to engage with pro-growth tax reform—the kinds of things Mr Hayes was explicitly ruling out in his speech. The OECD the IMF Treasury and nearly every Western country believe that a capital gains tax is the answer to an anomaly in the tax system. It is a way to make sure that every Kiwi pays their fair share and to make sure that the investment signal is neutralised. But Mr Hayes continues on saying that his Government will not listen to the OECD. It will not listen to the IMF. It will not listen to Treasury. It will not listen to any serious economic commentator. It is determined to carry on. Mr English is there driving along the motorway—driving along the motorway—in his little clapped out 1970s Honda Civic. He is driving along and he says that everyone is going the wrong way. Everyone on the motorway is going the wrong way. The OECD is going the wrong way. The IMF is going the wrong way. Treasury is going the wrong way. They do not know what they are talking about. Every other Western country does not know what it is talking about. Mr English is the only one driving the right way on the motorway and along he goes—vroom vroom vroom! He is saying: “We will not adopt pro-growth tax reform. We want to carry on as we were. We’ve got pride. We’ve got our pride. If the economy suffers if New Zealanders suffer we don’t care; we’re going to keep driving the wrong way along the motorway.” That is where he is sitting and that is what Mr Hayes is promoting here.Well a Shearer-led Labour Government will bring pro-growth tax reform to New Zealand. We care Mr Hayes about the future of New Zealand. We care about those who are struggling. We care that the median wage has gone down under this Government in real terms and that the average New Zealand family is much much worse off than when this Government took power 5 years ago. We care that New Zealanders are struggling and that they cannot pay their power bills. We will introduce policies to make power more affordable because we recognise that it is a problem. Again this Government says that there is no problem: “Oh the system is fair. Everyone is paying a fair amount for their power prices.” That is what Mr Key says. Well New Zealanders disagree. Labour disagrees. We think that we need a plan to address these things in our country that are wrong. We will take a hands-on approach to the economy and we will address the big issues. A Shearer-led Labour Government will be out there making the changes that need to be made because that is the plan. We have a plan unlike the members opposite. We think that the matters that matter to ordinary New Zealanders need to be addressed. We are not going to stick our heads in the sand.This legislation repairs little gaps here and there in the tax system but it does not address those fundamental issues that will get our economy back on track. We know that these changes that are proposed will not close the loopholes whereby 75 percent of New Zealanders with a net worth over $50 million are not paying the top tax rate. That means that they are not declaring income over $70000. That means that the tax system is fundamentally not fair. It is not making sure that every New Zealander pays their fair share. The little guy at the bottom and the little solo mother whoever it is are paying their fair share of tax. They have got no opportunity to get around it. But many at the top end are employing the accountants necessary to avoid their obligations and are burying things in capital.It does not suit these folks here to challenge that. They have said that. Mr Hayes has said that they are not going to change that. They are not interested in pro-growth tax reform. They are not interested in a capital gains tax. They are not interested in research and development. They are content to let ordinary New Zealanders struggle whilst those who already have a lot of money protect their interests. That is where the Government’s interests lie.One of the other things that the Government has got on the table for tax reform is to start charging for clergy housing—introducing a tax on clergy housing. Yes members of the House heard it right—a tax on clergy housing. We know what that will mean. It will mean that many small struggling rural communities those who are suffering the most under this Government’s terrible policies will no longer be able to afford to have a full-time vicar or minister in their local community. Often that person is the last professional left in the community. Those vicars those ministers and those pastors in those small rural communities are often the only professionals left in town. Struggling families go to them for advice for basic legal advice or for advice on filling out forms for the Government—for all manner of things. They are not just “hatching matching and dispatching” as is the ordinary work of the vicar. They are out there supporting small communities. But many small communities will lose their vicars they will lose their ministers because this Government wants to introduce another petty tax.It introduced the paper boy tax the paper girl tax. Let us think back to that terrible Budget where the Government tried to stamp on the paper boys and paper girls of New Zealand by introducing a new tax. We have got the Government also trying to introduce a car-park tax. Well that was in this legislation until there was a popular revolt. The Government is always trying to put petty taxes on New Zealanders on ordinary struggling New Zealanders but not actually addressing the big issues not actually putting progressive tax reform in place. The Government is not willing to entertain pro-growth tax reform that the OECD the IMF Treasury and every serious economist recommends or introducing a capital gains tax that would see money flow towards the productive sector and away from the speculators. If it is not in this Government’s interests the Government will not entertain it. So we do not see it in this legislation.But those families out there in the small communities who are really hurting who are seeing the absence of jobs hit their families hardest which is a consistent feature of this Government have been given increased prescription charges by this Government. It just builds up and builds up and builds up. Those communities will not have a local minister or vicar to advocate for them if this tax on clergy housing goes ahead. They will lose those people who support their communities due to another petty tax. This Government is just after the little guy and that is a shame—that is a terrible shame.We in the Labour Party do not have any problem with the Government tightening up the tax system. We will be supporting this legislation. But we wish this Government would step up and address the big issues that would get the economy back on track that would see the kind of growth in the economy that you get under a Labour Government. I remind members of this House that over the last 50 years Labour Governments have grown the economy by 3.7 percent on average while National Governments have grown the economy by nearly a percentage point lower. This National Government is worse than most. Its record on growing the economy is the worst as we know in the last 50 years. It is worse than most. That is in part because the Government is not willing to step up and address the big issues of the day. We have the worst current account deficit in the developed world the IMF says—the worst. It is worse than that of Greece. And yet this Government does nothing about it. We see the Minister of Finance sticking his head in the sand. He is driving his clapped out 1970s Honda Civic the wrong way up the motorway saying that everybody else has got it wrong. All thosepeople in their Lexus their Toyota or their Subaru going the other way zipping past have got it wrong. The OECD—what would it know? The IMF—what would it know? Treasury—what would it know? Every other Western country—what would it know about pro-growth tax reform? Mr English in his clapped out 1970s Honda Civic going the wrong way down the motorway is convinced that he is the only one who has got it right. He will not introduce pro-growth tax reform.This Government is determined to protect the interests of the big end of town and does not seem interested in getting our economy back on track so that everyone—everyone—can get ahead so that the ordinary New Zealand family would start to see jobs being created start seeing wages go up and start seeing the kinds of incomes that they could live on to help their families get ahead which would mean that they would have the security for their future that they could save and that they could actually dream of owning a house one day. It will take a Labour Government to introduce policies likeKiwiBuild to introduce pro-growth tax reform and to bring power prices down through NZ Power. A Shearer-led Labour Government will get these policies in place and will make sure that we are addressing the big issues not these issues that we are tinkering with here in this bill. We need a Labour Government and we need it soon. Thank you.JULIE ANNE GENTER (Green):Tēnā koe Mr Speaker.Tēnā koutou e te Whare. I rise to speak on the third reading of the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill. The Green Party will be supporting this bill because it does make some entirely consistent and logical but very small moves to tighten up the tax system. But I have to say that we are very disappointed that we did not take the original opportunity that was proposed in this bill to explore extending the fringe benefit tax to employer-provided car-parks in the Auckland and Wellington central business districts. It is really unfortunate that there was such an uninformed debate about it and that the position the Labour Party took was so inconsistent with the other sorts of outcomes and objectives that it says it is trying to achieve. Of course it is just as bad that the National Government dropped it. It is always good to see it propose to tighten up loopholes particularly in the case when it is going to have added benefits for things like our transport system in our two biggest cities.The Green Party has a very keen interest in reforming our tax system to get better outcomes. The main reason that I stood for the Green Party and I am in Parliament is not just so I can collect a pay cheque; it is that we have some pretty pressing problems that we need to address. One of these is climate change. We have to transition to a sustainable low-carbon economy. If anybody was looking at theGuardian last night there is a very interesting article about a paper by James Hansen one of the foremost climate scientists in the world stating that if we do not fully decarbonise by 2030 we risk completely wrecking the planet for future generations. Obviously I think everyone in New Zealand and everyone in this House cares about their children and their grandchildren and the opportunities that they are going to have to live great lives and to have prosperous sustainable lives. All of us need to come together and figure out how we are going to address this problem. How are we going to transition to a sustainable economy—one that is not over-reliant on fossil fuels? It is not that difficult.In fact when I studied economics urban planning and transport planning and when I worked as a consultant urban planner and transport planner I found we were working on exactly these sorts of smart ideas that can easily be implemented and that are going to result in all sorts of co-benefits.So not only can we decarbonise our economy but also we can—The ASSISTANT SPEAKER (Lindsay Tisch): Taxation we are on taxation.JULIE ANNE GENTER: —do it in a way that is going to save money and get better outcomes in other parts of our lives. Tax law is exactly one of those areas where we can get those sorts of smart outcomes. What was proposed originally in this bill is a perfect example of that. What was proposed was extending fringe benefit tax to employer-provided car-parks admittedly only in the Auckland and Wellington central business districts as those are the areas where car-parks have the highest value.Interestingly early last year in 2012 there was a research report published by the New Zealand Transport Agency entitledCompany cars and fringe benefit tax—understanding the impacts on strategic transport targets . This research report had not been provided to members of the Finance and Expenditure Committee. I do not think officials at the Inland Revenue Department even knew about it when they were proposing to extend fringe benefit tax to car-parks; they were just looking for a way to raise a little bit of revenue. It turns out that there had been all this work done for the New Zealand Transport Agency. It had spoken to somebody at the Inland Revenue Department and what it found was that there were huge potential benefits from extending fringe benefit tax to car-parks in the Auckland and Wellington central business districts and potentially actually anywhere where car-parks have a high value. Of course other countries have done this. It is a perfectly logical thing to do. Australia extends fringe benefit tax to car-parks.What is the point of this? A lot of people got very unhappy about the idea and made it sound like it was a very unfair thing to do to tax a car-park. In fact the value of a car-park in the Auckland or Wellington central business districts is conservatively $2750 annually—that is a very conservative estimate of the value of a car-park. The value of an annual public transport pass is $2700—very similar. If an employer wanted to provide public transport passes to its employees it would be forced to pay fringe benefit tax on those public transport passes. If it offers its employees a free car-park it is not required to pay fringe benefit tax. This is not fair. It is not going to result in good outcomes for transport in our two biggest cities in New Zealand when we have serious issues with congestion in Auckland if employers are able to use a tax loophole—and that is what this is—to provide benefits to their employees and not have to pay tax on that.How is it fair when the majority of people commuting to work in the Wellington and Auckland central business districts do not drive and do not receive free employer-provided car-parks? How is it fair that they get taxed on the additional income they might receive instead of a free car-park or on their public transport passes if the employer decided to provide them yet we are not going to tax the equivalent benefit of a free car-park even though that incentivises people to drive into the central business districts at peak time thereby congesting the roads? Here was something that was actually going to raise a small amount of revenue for the Government was going to result in getting the incentives right direct and fair and was going to have potentially huge benefits for reducing congestion in Auckland because it would mean we were no longer subsidising single-occupant vehicle trips into the Auckland central business district.I admit there were some problems with the proposal. One of the problems was that it could have unfairly hit shift workers such as cleaners who have to go to Skycity in the middle of the night. Obviously it is entirely possible to design this in a way that it would not affect people who do not travel at peak times because the value of a car-park is highest at peak time. Actually there are a whole lot of empty car-parks in Auckland and Wellington central business districts in the middle of the night. There is no reason why somebody using a car-park in the middle of the night should be taxed for it because the value changes depending on the demand and the time of day. Since there isa huge surplus of car-parks in the middle of the night in the Auckland and Wellington central business districts I think it would have been entirely possible to design the tax in such a way that it got the outcome we wanted which was simply to remove a tax loophole that primarily benefits high-income earners. If you look at the people who drive into Auckland and Wellington central business districts for work they are all on above-average incomes and the vast majority of them are on the highest incomes—well over $100000 a year. What many people in the House have described as a sort of unfair tax that would hit hard-working Kiwis would actually have been simply taxing appropriately people who are already on extremely high incomes and making sure that they have the opportunity to benefit from consuming fewer resources.As I said before the Green Party is very interested in using the tax system to get outcomes that are win-win that are better for the economy that are better for people and that are better for the environment. It is entirely possible to do this. We have so many opportunities if we stop thinking in silos and in this kind ofreductionist way that got us into the problem we are in. If we start recognising the interconnectedness of our transport system of our tax law and of our urban planning laws we can create an Aotearoa that is decarbonised that has less air and water pollution that has better public health outcomes and that has good and equal opportunity for everyone so everyone is looked after and it is not just the rich and the children of the rich who get richer with the poorer stuck down there at the bottom. We can create this and all it takes are some smart Green solutions.It is also going to require some patient informed debate. We cannot constantly be jumping on proposals that Government members put forward that might be good just because we see a political opportunity to kick them when they are down. I welcome this Government introducing good positive initiatives that will result in better outcomes and more sustainable outcomes and a fairer more sustainable Aotearoa. I would love to see more of that from it. Unfortunately we do not see much at the moment. A perfect example is in this bill which is about to pass into law without us having taken the opportunity to get a better outcome for our transport system. Thank you.Dr PAUL HUTCHISON (National—Hunua):It is a great pleasure for me to speak on this Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill. This is yet another example of a progressive National Government working towards a best-practice broad-based low-taxation system. This is a bill that promotes fairness and integrity across the tax system and strengthens our economy. It certainly focuses in on the rural economy and it clarifies taxation regarding livestock which has been something that has needed clarification for a long period of time.It is very refreshing that the Greens are indeed supporting this bill and I was delighted to hear Julie Anne Genter make the comment that once again here are the Greens seeing the light supporting the National Government. After all this bill also supports the environment and it confirms that farmers’ riparian planting is immediately tax deductible. This is a comprehensive bill and it is entirely worthy of support.ANDREW WILLIAMS (NZ First):I take a call on this bill the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill on behalf of New Zealand First and what a pleasure it is this time to be able to speak after Dr Paul Hutchison rather than before. What a great morning in the House it is when we can alternate our positions and have a chance to comment in reverse.Dr Paul Hutchison: The member supports the environment.ANDREW WILLIAMS: Exactly—and in this case Dr Hutchison you will be most pleased that New Zealand First is supporting this bill and that we are in line with much of the thinking that is in this bill. Rather than the previous State sector legislation where we were opposing the gutting of the Public Service in this case we are supporting thisbill. In this respect we support some of the measures including the livestock valuation rule changes. We support the GST changes which remove the inequitable situation of non-resident versus resident businesses. We support that this bill provides tax deductibility for expenditure on trees and plantings for erosion shelter and water protection purposes. As Dr Hutchison just said this is a good measure because increasingly with our changing climate and the situation where we are having increasingly erratic weather conditions we certainly do need to be very mindful of the significant erosion that is occurring around New Zealand. Therefore tax deductibility to farmers and others of course in terms of the planting of trees and shelters and water protection - purpose plantings is all good for the environment and it does help to mitigate some of the adverse effects that are occurring in the environment.This bill also gives donee status to three charity organisations that operate internationally and again this is sensible for those three charities concerned. It also eliminates tax treatment mismatches to certain foreign currency hedges. Again in that foreign currency area this is sensible policy to sort out that particular matter.We were very pleased that the Government withdrew from this bill the car-park tax on the Auckland central business district and on the Wellington central business district. They were a nonsense and again they were going to cost in the order of something like $30 million to secure $17 million in tax revenue. That was a no-brainer so New Zealand First did put pressure on to have it withdrawn and we were pleased that the Government did withdraw it from the bill.Overall this is a bill that helps to strengthen the tax system. It helps to streamline aspects. It takes out quite a number of loopholes and makes improvements where they are needed. The bill makes it easier for taxpayers both personal and corporate taxpayers and so New Zealand First will be supporting it.JONATHAN YOUNG (National—New Plymouth):I am very pleased to stand in support of the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill in its third reading. I am very keen to talk about the riparian planting programme in Taranaki which this bill brings some assistance to. As you know Taranaki is a very extensive farming locality in our country and we are pleased to note that 96 percent of all Taranaki dairy farms and almost all of the ring plain and coastal terraces of Taranaki have a riparian management programme.So what this bill will do in terms of the management plans that are put in place is it will continue to encourage and incentivise farmers to plant out the 17000 kilometres of stream banks in the Taranaki region with plants that will protect our waterways. So we are a very forward-thinking region we are already at work doing this and it is great to stand in support of this bill which is going to bring a greater assistance to that programme. Thank you.Hon DAVID PARKER (Labour):I begin by also acknowledging the contribution earlier of Julie Anne Genter. I thought that was a very erudite exposition of the principles that should underlie a neutral tax system. The difficulty that the Labour Party had with this proposal was that the compliance costs as designed were high. Some of the other complexities that the member noted herself in respect of shift workers had not been fixed in the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill and the politics of it got away from the Government in a way that nobody could fix. But the member is quite right in her analysis about what a neutral tax system should look like and how that can have both economic and environmental benefits for our country. I congratulate her on her contribution.I want to whilst noting that the Labour Government will be supporting this bill for reasons that other—Hon Trevor Mallard: Labour Government—soon-to-be Government.Hon DAVID PARKER: The Labour soon-to-be Government sorry. The Labour Party will be supporting the—I am not sure whether I am ahead of myself or long behind but I am—Hon Trevor Mallard: You’re slightly premature.Hon DAVID PARKER: Premature—I like to think of it that way thank you.Hon Trevor Mallard: Well not in every sense.Hon DAVID PARKER: Ha ha! I think I might return to the bill.Other Opposition members have already acknowledged that this bill does make some minor improvements to the taxation system and that therefore it deserves the support of the House. But I want to return to the points that David Clark was addressing at the end of his contribution.We had a question in the House yesterday which the Government put up to itself where it tried to congratulate itself on having a good redistributive tax system. The problem is that it is not compared with most OECD countries and that was made clear by the OECD report on New Zealand that came out about a month ago—in June. That report said that New Zealand’s tax system is less redistributive than most OECD tax systems. What it did not say was that this Government has made it worse. This Government gave 40 percent of its income tax cuts to the top 10 percent of income earners. Mr English had the audacity to stand up and say that all is well in New Zealand ignoring the fact that the income tax system is less redistributive than it was when the Government came to power and is now according to the OECD less redistributive than the average.The same OECD report lamented the fact that income inequality in New Zealand is rising faster than in just about any other OECD country. We are no longer the equal country that we were 20 years ago. We are not as yet as unequal as some of the least fair societies in the OECD but the rate of change as we progress towards being less equal than others is one of the worst in the OECD and this Government has made it worse. It has made it worse not just through its changes to income tax but through the increase in GST that it imposed upon New Zealand.So with 40 percent of the income tax cuts having gone to the top 10 percent of income earners what was the distributional effect of the increase in GST that happened about the same time? The distributional effect of that was that it made New Zealand’s tax system less progressive and more regressive. The reason is that when you have GST it is effectively a tax on the wages of low and middle income people because their wages are all spent on GST-inclusive services with the exception of their rent and interest payments. The proportion of a low to middle income earner’s income that is spent on GST is higher than the proportion of income that is spent by a high-income person on GST. So in effect GST is more expensive for low and middle income people than it is for high-income people.That was another step by this National Government towards a less equal and more unfair society—so much so as I have already said that the OECD has been lamenting the fact that New Zealand is becoming an unequal place. Further the OECD noted that the most glaring hole in our tax system is not these little things that are being fiddled around with by this bill but the lack of any taxation on capital income. There is very very little tax on capital income.Sam Lotu-Iiga shakes his head and says that is not right. Well he is wrong. He says that is not right; he is absolutely wrong.The National Government occasionally says: “Well if you’re a trader in property you pay tax.” Yes but you are not paying tax on capital income; you are paying tax on trading income. The wealthiest people in New Zealand can construct their affairs in such a way that their income is capital income not taxable income. We do not taxcapital income in New Zealand. We on the Labour Party side are not saying that you should tax all capital income. You have to be careful that you are not taxing inflationary gains in property because that is not real income but you should be taxing capital income because otherwise you have rising inequality.You have lots of other problems as well. One of the reasons why we have got rampant house price inflation is that there is a tax bias—which is felt most in Auckland at the moment—that drives investment into rental housing because there is a tax break. Again the OECD said this in its report in just the last month. It said that the effective tax on different classes of investment is different and that drives investment patterns. The effective tax rate on capital gains from investing in residential housing is nil—it is nil. In fact you get tax deductibility from interest which includes an inflation component. You would effectively get a tax deduction for some of the inflation that you suffer when you are in society because your interest payment includes an inflationary component. You get a tax deduction for that in New Zealand. You do not get taxed on any of the gain—any of the gain—and it is just unfair. Not only is it unfair; it holds the economy back.That is why when we talk about capital gains tax we are safe when we say that a capital gains tax excluding the family home would grow the economy. It is part of our pro-growth tax reform package. We know that if you have a proper tax signal in the economy instead of overinvestment in the housing market in Auckland—which drives up house prices to the detriment of people trying to buy their first home. It also means that there is not enough money going into other more productive parts of the economy. So too much money goes into the speculative economy based on a tax bias favouring tax-free capital gains—capital income—and not enough money goes into our productive factories or into our service industries which are selling services overseas and even into other parts of our export economy. That is one of the reasons why this Government has failed completely in its ambition to rebalance the economy.National came into office promising that it was going to do a number of things. It was going to stop the drain of people going to Australia. “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” was its slogan. It has failed completely in that ambition with more than 200000 New Zealanders having since left to live permanently in Australia—an enormous number of people. It is going to show up in the census figures when they come out soon particularly in some of the provincial centres that have been so ignored by this Government.It also shows up in the Government’s failure to rebalance the economy towards exports. Exports as a percentage of GDP have not changed despite the Government’s promise that it was going to increase exports as a percentage of GDP.Of course it also shows up in the lamentable statistic that New Zealand has the worst current account deficit in the developed world according to the IMF. The OECD says that it is the second worst in the developed world and is likely to be for the next 3 or 4 years into the end of the projection period—worse than Greece’s.This is all because we do not cover the cost of our imports and interest from the value of our exports in part because our tax system has these structural biases that drive our investment capital into the wrong parts of the economy. It costs us jobs. Wages are lower as a consequence. We are a low-wage economy compared with most of the developed world now. And this National Government does nothing to change that because it has not got the gumption to put aside the interests of the cronies for whom it governs—to put aside the interests of the wealthiest in society who in the long term would benefit from the changes that we propose but who would in the short term pay a little bit more tax. This bill does not do the many things that are needed to improve the New Zealand economy.Peseta SAM LOTU-IIGA (National—Maungakiekie):It is a pleasure to take a short call on this the third reading of the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill. I thank the Minister of Revenue the Hon Todd McClay for his work on this bill also the previous Minister the Hon Peter Dunne certainly for his hard work on this and also the Finance and Expenditure Committee members who worked on this bill to bring it back to the House. As you have heard and those around the country have heard it has got widespread support here in Parliament.So what is the purpose of the bill? It foreshadows Budget 2012 and the measures that we placed within that Budget—a well-received Budget a popular Budget out in our communities. It broadens the tax base. The changes will make the tax system fairer the economy stronger and contrary to my colleague across the House who just sat down David Parker it actually will provide jobs and opportunities going forward. I see a few young people up in the gallery here. To the young people of New Zealand this bill will actually create jobs for you in your futures going forward.Peseta SAM LOTU-IIGA: The bill introduces amendments to several inland revenue Acts and regulations. It includes supporting provisions as my colleagues have already mentioned to the livestock valuation rules which make elections to use the herd scheme generally irrevocable. That is popular in both rural and provincial New Zealand.But the measure that is popular in my electorate of Maungakiekie is around the amendments to make two specific commercial land - related lease payments—namely lease inducement payments and lease surrender payments—taxable and deductible. This again reinforces the purpose of the bill: to make it fairer and to improve business efficiency across our country. The bill also tightens the rules for deducting costs of assets such as holiday homes boats and aircraft that are used by the owner both privately and to earn income.I commend this bill to the House. It continues this Government’s focus on ensuring that everyone pays their fair share of tax and its focus on continuing to support jobs and opportunities in our economy. Thank you.Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman):What a rubbish speech that was!Peseta Sam Lotu-Iiga: Oh!Hon DAMIEN O’CONNOR: Twiddling your thumbs while Rome burns. That member Peseta Sam Lotu-Iiga more than anyone else should know that what this Government has done around tax has been outrageous. I have to say I went to a breakfast yesterday morning put on by the voluntary sector. Professor Robert Wade—a Kiwi actually at the London School of Economics—was hosted by the Hon Jo Goodhew.I have never seen a Minister look so uncomfortable in my life. Here was a National Government Minister hosting a person who basically stood up and said that the taxation regime in this country is outrageous and that the changes this National Government has made—he did not refer directly to the Government he was far more polite than that; I am less polite—have created more inequality. He said the tax changes put in place by this Government—and the Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill does no more than tinker—have driven greater inequality up and down this country.Professor Wade clearly laid out what that means for a society and it is pretty sad. We have as has been explained by previous speakers a number of technical issues around holiday homes boats and aircraft and other issues and some around the livestock taxation changes which bring a bit more balance and a bit more certainty.The bottom line is that when the National Government came into power it made two key changes to taxation and I do not see a reversal of those changes in this bill here. Firstly it lowered the tax for the most wealthy in this country and secondly it increased it for everyone else through GST. People have probably forgotten that GST was 12.5 percent in 2008 and the National Government has now got it at 15 percent. It is a regressive tax because those on low incomes spend all of their incomes surviving; those at the top end spend a small portion of their income the rest they can spend in ways that do not attract GST. So not only did we have lower taxes for people at the top; we had regressive taxation and GST increases at the bottom.This bill tinkers. The people at the top will have holiday homes and boats and aircraft and they have been able to get a bit of tax break on that. People will say that is outrageous and that the National Government is very good to be moving on this area. Well do not be sucked in. This is tinkering around the edges and I am sure many of the people at the top end—people who have an aircraft and get a tax break on it or have a holiday home and use it for something else—will find another way to get around it.But the core issues of taxation are around the increase in GST. And the other one that the Government slipped in at the start of this month was of course the increase in petrol tax—3c extra for every litre of petrol for every single Kiwi in this country. The people in the regions are outraged because they are paying basically for money to go to Auckland. Everyone who does not have access to public transport is having to pay a whole lot more. That is increasing taxation to people who cannot avoid it and decreasing taxation to those who can at the top end. That has been the consistent approach of the National Party in Government.Robert Wade embarrassed the Minister there yesterday—and she should have felt that way. He talked about a just society being one where distribution is done in the right way not redistribution. What we are effectively talking about here are changes in redistribution—tinkering at the edges but not going to the core of the taxation system in this country. My colleagues have pointed out a number of other flaws. On balance we will support the bill. It makes as I said slight progress in areas tidying up a bit here and a bit there but it does not do anything to change the underlying unfairness of taxation in this country.I raise another point that a colleague brought up yesterday and that is in regard to the Inland Revenue Department and its whole running of the taxation system. Its ability to actually implement all these changes has come under serious question and of course its use of consultants is now being exposed. The Government in slashing and undermining Public Service capability is increasingly bringing consultants into the taxation system and every other area of Government responsibility at a far greater cost but they are on a different appropriation line. Sometimes it is hard to track down unless we ask the right questions.The point is that if the Inland Revenue Department is going to give effect to the changes here it has to have the capability and bringing in consultants to help it tidy up mistakes of the past or to deal with a lack of capability is not the best way forward. If the Inland Revenue Department does not get on and improve the system and if the Government does not fund it properly then not only will the computer system fall over but so too will the basis of taxation in this country. So I hope that the Government gets on and deals with it.I will just finish on an issue around livestock valuation and I would like to reinforce a point I made earlier in the debate a couple of weeks ago. The Government seems to be and claims to be very good at livestock taxation. It is the issue ofdeadstock taxation that I want to refer to. The Government’s management of the trade of meat has not been good. Once again it has squeezed a Government department and it has no ability now to manage exports from this country into what are complex markets like China.I fear that the ongoing determination by this Government to drive down Government capability is going to lead to some major problems and none more so than in the area of biosecurity once again. If biosecurity is breached—and this may be a corny connection but it is none the less an important one—and we end up with foot-and-mouth disease the result will be that although the Government has sorted out livestock taxation we will have a hell of a lot ofdeadstock taxation and a major blow to our economy.So in endorsing and supporting the bill I just want to remind the House that the Government record in the area of taxation is outrageous. It has made changes to give greater benefit to those at the top and imposed a greater burden on those at the bottom. That creates an unfair society and it is one that we do not support in any way at all.Hon Dr NICK SMITH (Minister of Conservation):I want to make just a very short contribution to commend the Minister of Revenue and to draw the House’s attention to a very sensible amendment that has some conservation significance. This Taxation (Livestock Valuation Assets Expenditure and Remedial Matters) Bill enables us to have tax deductibility for farmers for riparian planting.As we debate in this Parliament the issues of water quality all of us know that riparian planting is an important part of it. We know that in 2007 the previous provisions of the Income Tax Act made a somewhat arbitrary distinction that if you were doing shelter belt or commercial forestry planting you could deduct expenditure in the year in which it was incurred but if you were doing it for nature conservation reasons you could not. The previous provisions of the Income Tax Act also excluded the capacity to do it for shrubs; you could do it only for forests.I think we should commend this bill to the House for this sensible conservation step which is consistent with this Government’s view of working in partnership with landowners. We are now going to allow the tax deductibility of investments in shrubs trees and riparian strips to deal with the issue of both sediment and nutrients into rivers which is something I know many members of the House believe that this country needs to do better. Here is the Government taking a sensible step forward.Bill read a third time.Statutes Amendment BillSecond ReadingHon CHESTER BORROWS (Associate Minister of Justice):I moveThat the Statutes Amendment Bill be now read a second time . I would like to extend my thanks to the Government Administration—Hon Trevor Mallard: Ah come on. Stop filibustering.Hon CHESTER BORROWS: You see there are all these things—The ASSISTANT SPEAKER (H V Ross Robertson): That’s got you Chester.Hon CHESTER BORROWS: No it has not but I am conflicted with what I can say and what I really need to say and what I really want to say. I would like to extend my thanks to the Government Administration Committee for its thorough and careful consideration of the bill. The bill contains 169 clauses and amends 33 different Acts. It contains minor technical amendments to Acts ranging from the Accident Compensation Act 2001 to the Wine Act 2003 which the member will be pleased to note and many more in between. The bill is a good example of parliamentary parties working together. The committee carefully considered the seven submissions that were received and advice from officials and has recommended a number of amendments to the bill. The most significant recommendation is to divide the bill so that all of Part 27 is split off into a separate Unit Titles Amendment Bill. I move—sorry what do I do? I move the bill.The ASSISTANT SPEAKER (H V Ross Robertson): You are fine Mr Borrows.Hon TREVOR MALLARD (Labour—Hutt South):I would like to endorse the sentiments of the Associate Minister of Justice moving the Statutes Amendment Bill if not his bumbling approach.Bill read a second time.Unit Titles Amendment BillSecond ReadingHon CHESTER BORROWS (Associate Minister of Justice):I moveThat the Unit Titles Amendment Bill be now read a second time . I will apply my affable if bumbling approach to this reading.The Government Administration Committee considered that the amendments to the Unit Titles Act 2010 proposed in Part 27 of the Statutes Amendment Bill be introduced. They are minor and technical but as there are so many of them—21 in total—it was considered more appropriate for them to be considered as a separate bill by the committee so it recommended that course of action.The Unit Titles Act 2010 has been in force since June 2011. Its purpose is to allow bodies corporate that comprise all unit owners in a development to operate and manage unit title developments and the Act provides guidance to bodies corporate and unit owners to assist them in managing their property. I commend the bill to the House.Hon TREVOR MALLARD (Labour—Hutt South):I think the Government made somewhat of an error in putting these amendments into a Statutes Amendment Bill. The tradition is that there are generally only two or three amendments to any particular piece of legislation in a Statutes Amendment Bill and that they be minor. I think that most members are aware that any member can object to a clause of a Statutes Amendment Bill and it was indicated that these amendments would be objected to if they continued as part of the Statutes Amendment Bill. Therefore they were split out and became the Unit Titles Amendment Bill.I will take the opportunity though to say that there were some very good submissions at the Government Administration Committee on issues other than those that are to do with the Unit Titles Act and its needs for revision other than those that came as part of that Statutes Amendment Bill. What I would like to do is urge the Government to get on with its promised review to get the legislation into the House and therefore to get that legislation tidied up so that it does in fact work. We have nothing more to say about the bill.BRENDAN HORAN (Independent):I would like to take a very short call on the Unit Titles Amendment Bill. This issue has been around for about 10 years or so. We have people buying units and many people do not know what they are getting into. Overseas when somebody buys a unit they can also add the body corporate deferred fund. It has certainly a great measure on the cost of the units. In New Zealand for too many years we have had people actually going in blind into bodies corporate not understanding that the body corporate is simply a collection of owners. But very few bodies corporate in New Zealand actually put money into a sinking fund for deferred maintenance. So for me it is pleasing to look at this and see that measures are in this bill to correct those issues and to help owners going into unit titles. I said I would take just a short call. I would like to say that I support this bill. As it is I think it is a good bill. Thank you very much.Bill read a second time.The House adjourned at 11.18 a.m. (Thursday)