Shaw James; Rurawhe AdrianHon JAMES SHAW (Associate Minister of Finance): Thank you Madam Speaker. I'm rising on behalf of the Green Party to speak on the first reading of the Venture Capital Fund Bill. It's always a pleasure to follow the Hon David Carter who conveniently has provided me with a number of points that I'd like to rebut in my time on my feet in this.But I actually wanted to start with some of the comments made by Andrew Bayly who has had a slightly confused afternoon. On the previous bill in the House the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill he didn't know which reading he was speaking on. He thought he was speaking on the second reading when in fact we were speaking on the third reading. In this debate on the Venture Capital Fund Bill I think that he has confused the venture capital fund that's being established by this with the New Zealand Green Investment Fund. A number of times—at a couple of points in his speech—he acknowledged me for all the work that I've done over the years to bring this to the House. I'm grateful for that acknowledgment except that I didn't. I'm quite happy to take credit where it's due but in this regard I had almost nothing to do with this to tell you the truth before it came in. But I thank Mr Bayly.I want to make sure that this is on the record because when he was conflating the two funds—the New Zealand Green Investment Fund and the venture capital fund—he talked about the required rate of return. I just want to point out that New Zealand Green Investment Finance Ltd which is now established and is up and running does have a required rate of return at the New Zealand Government bond rate over five years plus 2 percent. So it is important to know because we put that rule in place that it had to have that rate of return across the portfolio over five years because it's required to demonstrate its commerciality to the private funds who we're hoping to get as co-investors into it.That brings me to the next point that I think David Carter was talking about which is the size of this fund at $300 million. He pointed out that at $300 million it is only 10 percent of the size of the Provincial Growth Fund which is one of the other funds that we've established. It's also three times the size of New Zealand Green Investment Fund Ltd which is a $100 million fund. I want to point out that when we set up the Green Investment Fund we actually asked the private capital markets what they felt the minimum viable proposition was and they said You can't do it for less than $100 million." We said "Great. Well we'll start at $100 million then." because we actually want to force the fund to have to crowd in private finance. We actually want it to stimulate the private market not to replace the private market. So we said we actually want to start with the minimum viable. I guess if it's wildly successful a future Government might want to put more capital into it and expand it and so on. But actually with these funds—the New Zealand Green Investment Fund and the venture capital fund—we actually want to start small because the point is to stimulate the private finance market.The Provincial Growth Fund has an entirely different purpose. It is largely grant funding; it's not commercial investment. It doesn't require that rate of return in the same way. And so the whole basis of its decision making is it's actually there because there hasn't been private investment in the regions. It's actually trying to put some money in where it hasn't been commercial to do so. So to compare them—to compare the Provincial Growth Fund the Green Investment Fund or the venture capital fund—is actually erroneous.Anyway I just wanted to return to the point about why this was necessary. A couple of the speakers on the Opposition side did talk about it. Everybody who pays attention to this will continuously tell you New Zealand has very thin capital markets and it has been very difficult for early-stage high-growth companies to get access to capital in New Zealand. Whilst there has been a growth of private equity funds in New Zealand and there has been some angel funding getting off the ground actually there is still a gap in that point in the chain which is around that kind of early-stage high growth to kind of get companies that are up and running that are trading and that are starting to turn a profit to expand.I just want to make this point because the Hon Paul Goldsmith in his speech referred to how David Parker the Minister responsible for this wanted to bring in a capital gains tax and couldn't. Of course one of the reasons why New Zealand has thin capital markets and doesn't invest in the productive part of the economy is investment is entirely skewed towards property in this country because our tax system directs people towards tax-free capital gains on property and not to put their money into the kind of deep and liquid capital markets where you would get a venture capital fund like the one that we're having to launch.So in a sense we're actually having to launch this to plug a gap because the Opposition was so vociferous in its opposition to levelling the playing field through the tax system which would have enabled financing and investment to flow from the unproductive property investment markets and into early stage capital. So we're actually having to compensate for the poor decisions that the Opposition have made. I also just wanted to address a point that they've raised about the links between this venture capital fund the existing Venture Investment Fund and the New Zealand Superannuation Fund. And actually that's part of the design because what we're trying to do here is to create a series of linked funds—right?—that actually have relationships with each other and can essentially—and it was Andrew Bayly talking about the chain of investment from angel to venture capital to expansion capital to private equity and that actually what we're trying to do here is to create an ecosystem of funds where New Zealand businesses can get started in the garages and so on and kind of attract capital at different stages and actually kind of grow and evolve through those.That is why the relationship between the super fund and the Venture Investment Fund and this new venture capital fund is so significant. And I agree I think it should be explored in select committee just to allay some of those fears one of which David Carter pointed out which was the notion—and I want to dispel this—that we're directing the super fund what to invest in. We're actually not. We're not saying which companies they should be investing in. What we're saying is that of the capital that they hold $240 million should be set aside for early stage expansion capital rather than for the later stage part of the market. It would be interfering if we were telling them which businesses to invest in but we're not.Now Madam Speaker I want to direct attention to a particular part of the bill and that's—ah! Mr Speaker—clause 35 in the bill and about two paragraphs down it mentions the directions that the policy statement may include and the guardians must have regard to. Then three bullet points down it says "(c) the Government's commitment to a low-emissions economy:". The reason why I wanted to draw attention to this part of the bill is the Productivity Commission which the previous National Government established an inquiry into about how to get to a low-emissions future had in their report a number of recommendations that related to investment decision making and to particularly the innovation system. They made the very good point that as the Government does work its way through its economic development priorities and as it looks at its research science and technology policy and its investment funds and so on that actually all of those things together need to at the very least not result in supporting businesses that would result in a higher emissions profile for the country. So at the very least they should be neutral and in an ideal world we should be investing in and supporting start-ups and businesses that support the transition to a low-emissions economy. You know there has been commentary in the past about the fact that for example the ACC fund doesn't have a climate-related strategy; the New Zealand Superannuation Fund does and it's one of the world-class funds in its kind of category. But what we're actually saying with this fund—and we also did with the Provincial Growth Fund—is to include in its decision making that the people who are making these investments need to consider the businesses that they are investing in in terms of what that could do to—ASSISTANT SPEAKER (Adrian Rurawhe): Order! The member's time has expired."