Hodgson Pete: Local Government Borrowing Bill — In Committee 
Hodgson Pete: Local Government Borrowing Bill — In Committee 
[Volume:675;Page:21166] 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 I think it is really good to be able to say something nice about the Government and in particular about the ACT Party. It is a rare event. I think this Local Government Borrowing Bill is a mighty fine idea and I would like to congratulate the Minister in the chair the Minister of Local Government on it. I welcome the speedy passage of the bill. The origin of it is something I know a little bit about because we have had trouble with our capital markets for a long time. They have never been particularly deep and we have had difficulties in many many areas especially in the private equity area. When I was Minister for Economic Development we established yet again a group to take a look at the issue of capital markets in New Zealand. One of its recommendations was this idea and I believe it actually made it—although I could have my history wrong—through to the National Government’s attention if you will by way of the Job Summit immediately after the change of Government. Whatever its origin and wherever it came from it is a really mighty fine idea. 
It is not a new idea. There is a bit of a health sector bank that exists. It does not go to the public to sell bonds it does not raise money from mum and pop investors but what it does do is keep the transaction costs for some financial activities of district health boards lower than they would otherwise be. Where district health boards have bridging finance issues or they are buying and selling land or they are dealing with Treaty settlements or whatever then having a bank for all district health boards is a hell of a lot cheaper than not. This idea which is not a bank so much as a fund—I understand the difference—is none the less of a similar ilk. I just think that the Government should be congratulated on progressing it. I could get sniffy about the delay. It really is quite a long time and quite a lot of savings will have been forgone as a result of that delay. But if the savings are worth $25 million and I understand that is the estimate then that is $25 million of impost that does not fall on ratepayers around the country and that has got to be a good thing. It is just straightforwardly a good idea and it is to be commended. 
Different local authorities behave differently. Some of them are well-to-do and some of them are not. For example Dunedin at the moment is characterised by an awful lot of local authority trading enterprise activity and by an awful lot of debt. Some of it was occasioned by the recent construction of the stadium. Indeed pushing out that debt to a 40-year horizon instead of a 20-year horizon is currently being debated by the good burghers of Dunedin. I do not think they will do it. I think the interest costs will be just too high. But this bill with this idea takes their problem and makes it a fractional bit less and it is really excellent. We just heard from Brendon Burns a member from a city that is in incredible stress in the form of Christchurch. We heard the member for Christchurch Central tell us about the difference it will make for his region and other regions. The next one up the line from Dunedin is Waitaki. Waitaki frankly does not have a level of indebtedness. It is really rather well-to-do albeit rather small. So the difference will vary around the country but none the less it is a great idea. 
It does occur to me that there is no particular reason why the idea should stop there. As I think through different parts of the economy I kind of find myself alighting on tertiary education as an area that may enjoy a similar arrangement. As it happens most universities do not have any debt. In fact the only one with a lot of debt is the Auckland University of Technology. But nearly every polytech does and I just think that we should look at the possibility of extending that facility into other parts of what one might call the broader public sector. I might be wrong and financial analysis is no strength of mine but I know having been the Minister for Tertiary Education that some tertiary education institutions do face considerable financial pressure with their indebtedness and of course the Tertiary Education Commission likes to maintain interest cover ratios and all sorts of things at certain levels. It would be the case I am sure that some mum and dad investors would be very open to the idea of responding to bonds issued in respect of the tertiary sector as well. 
The idea need not stop at local government but the next thing of course is to make sure that it can start at local government. That means the passage of the legislation and it then means the establishment of a fund. I do not know whether the Government will put any more money into it. I think $5 million has gone in—the Minister of Local Government will tell us. 
Hon Rodney Hide 
: It’s $5 million allocated. 
Hon PETE HODGSON 
: It is about to go in—OK. I do not know whether the Minister is of the mood; it is up to him but he might want to tell us whether he thinks that that is the right sum and if so why and whether he thinks the Government should be doing any more than that. There is a really good case for not doing so but then again if the fund is to be able to be administered it has to have some capital. I do not know whether the Minister is of the mood but I will resume my seat in the fond hope that the Minister will give us some idea of what he thinks the role of the Government will be in the case of this fund. I have no particular prejudices about it myself but it would be interesting to hear about his thinking.