Tabuteau Fletcher: New Zealand Superannuation and Retirement Income Amendment Bill — Second ReadingText is incorporated into the Bound VolumeTabuteau Fletcher: New Zealand Superannuation and Retirement Income Amendment Bill — Second Reading[Sitting date: 07 May 2015. Volume:705;Page:3328. Text is incorporated into the Bound Volume.]FLETCHER TABUTEAU (NZ First):New Zealand First stands in support of this piece of legislation but I will just touch on a few issues raised by previous speakers. Perhaps borrowing at 3 percent or even zero percent to grow your investment at what was acknowledged as 18 percent last year makes more sense in terms of Government spending than selling off capital assets that were returning such strong dividend returns to this Government and the people of New Zealand although I think actually the argument was that a surplus would be needed in order for the Government contributions to begin once again. Look this is a large $29 billion fund. It is a successfully managed fund and New Zealand First has supported it since its inception. It is still disappointing to note that the Minister of Finance has previously stated even knowing how well it has performed over recent history that he would still not have contributed to the Government’s contributions perhaps even with a surplus.If you will forgive me I will just go through some of the detail here. I was not part of the Finance and Expenditure Committee so it is important that we go through for New Zealand First some of the detail and acknowledge the work of the select committee members. The bill seeks to amend Part 2 of the New Zealand Superannuation and Retirement Income Act 2001 to facilitate the efficient and effective investment of the New Zealand Superannuation Fund by the guardians of said fund and to help protect the guardians from liability. The principal change would be to allow the guardians to control fund investment vehicles which we have discussed in quite some detail here.The committee received and considered only three submissions heard oral evidence from one submitter and received advice from Treasury. No submissions opposed the bill or identified any real problems although two matters were raised by submitters where amendments to the bill could be considered—namely the Legislation Advisory Committee’s recommendation around validation provisions and the applicability of the Official Information Act.The Guardians of New Zealand Superannuation is an autonomous Crown entity with the sole purpose of managing and administering the fund. Consultation with the guardians was undertaken on the original policy decisions prior to the submissions by Cabinet and during the drafting process which New Zealand First acknowledges. The Inland Revenue Department the State Services Commission the Ministry of Business Innovation and Employment and the Office of the Auditor-General were also consulted on the relevant issues.Questions raised related to taxation—I note that the previous speaker Russel Norman spoke to that issue which I will come back to—and to responsible investment. At present section 59 of the Act prevents the guardians from controlling any other entity. This restriction is considered inconsistent with the guardians’ obligations under the Act to invest the fund in a way that is consistent with best-practice portfolio management and to maximise the returns without undue risk to the fund as a whole. Allowing the use of the fund investment vehicles is expected to enable the Government to structure fund investments more efficiently resulting in cost savings and to manage risk more effectively—clauses 6 and 7. These clauses amend section 59 and insert new section 59A to permit the guardians to use fund investment vehicles for the purpose of the investment fund.The current legislation has had the effect of preventing the guardians from using some very effective tools. Now the guardians can own assets without the presumption or inference that they will be running the business themselves. The guardians have estimated in their information to the Government that the historical cost of not being able to control these passive holding companies for example is around $50 million. This is quantified as net opportunity costs additional risks and agency costs although they acknowledge the difficulty of doing that. Treasury’s view is that the cost savings calculated by the guardians are not the primary driver for the legislative change. Treasury notes that the $50 million itself and the $25 million cost of large short-term movements in particular investments are not in total a significant amount of money given the actual size of the fund itself.I turn to my next point. New Zealand First—and it has been spoken of as a negative by the other side of the House—has always said and always suggested that investment in New Zealand by the fund itself is a critical investment in this country and the people of this country. I note that the guardians themselves are actually working to increase the proportion of the fund invested in New Zealand assets. The limited size of the New Zealand market means it must purchase real assets as well as shares. It is my understanding that it is these fund investment vehicles that will enable the guardians to do this very thing.Prohibition on control does not preclude the fund from 100 percent ownership of assets. The select committee considered it desirable to reinforce the intention that the fund investment vehicles themselves be related to the passive holdings of entities and that the Act provides a mechanism for scrutiny and control of the Government’s arrangements. The select committee suggested two new sections. We have talked about this as a positive but there is some debate on that. But I think in this context and I think my caucus would approve this would mean that the Minister of Finance would specify the class of investment or entity for which a fund investment vehicle could be used and would stipulate governance arrangements for the entity. I think that is reasonable control. I think it is not interference by the Minister. At least initially at this stage of this piece of legislation we will support those additions.The other proposed amendments make three relatively minor changes. Clause 5 aims to strengthen confidence in commercial transactions entered into by the guardians and protects the guardians from any potential challenges that their investment decisions lack statutory authority. The select committee recommended replacing clause 5 in the bill as introduced with different formulations that would achieve the intended purpose in a much more straightforward way. The second recommendation would be to allow the board of the guardians to delegate operational functions. The third recommendation would be to make it explicit that the fund is not an entity separate from the Crown. We note that the current wording does leave some uncertainty about the fund’s sovereign nature.It is important to note that the bill also makes consequential amendments to the Income Tax Act. We were assured by the statement of the select committee but the previous speaker did note that some of these fund investment vehicles have allowed what we would consider to be classed as perhaps minor tax evasion and standard tax evasion tools. But the last thing New Zealand First would support would be introducing fund investment vehicles in order to allow large-scale tax evasion.The reason for the support for this bill from New Zealand First is that fund investment vehicles are a simple and commonly used tool that will allow the guardians to make more effective investment decisions. I note that this would allow more investment in New Zealand and would efficiently and effectively provide a suitable balance when allowing the guardians access to new vehicles in terms of the investment funds. We also note that the Act makes sure that the fund investment vehicles themselves are not subject to the Official Information Act but that the guardians are. With all that detail in mind New Zealand First will support this bill. Thank you.