Clark David: Financial Markets Conduct Bill — Second Reading 
Text is incorporated into the Bound Volume 
Clark David: Financial Markets Conduct Bill — Second Reading 
[Sitting date: 14 February 2013. Volume:687;Page:7889. Text is incorporated into the Bound Volume.] 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 It is a pleasure— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: The Rev. Dr David Clark. 
Dr DAVID CLARK 
: Very kind of you. It is a pleasure to take a call in the second reading debate of the Financial Markets Conduct Bill. Unlike the previous speaker Mark Mitchell I will speak for a while because there are important matters in the background to this bill that require the time and attention of this Parliament. The proper functioning of markets is essential to New Zealand’s future economic prosperity. By that I do not mean the kind of hands-off approach favoured by this Government in other legislation. I mean more the proper functioning of properly regulated markets. 
Before I get into the substance of the bill I also want to join other colleagues in congratulating those who have put in the work over a very long time indeed. This bill as I understand it was kicked off back in 2008. Lianne Dalziel was instrumental in setting up the Capital Market Development Taskforce which developed a blueprint that forms the basis of this legislation. Colleagues Curran and Cunliffe who have already spoken and others were on the select committee that did the work and Mr Mitchell I believe as well. There have been many members of the National caucus who have contributed too. 
This is a piece of legislation that has been developed as I have said over a lengthy period of time. For those who are watching the debate at home the bill itself takes up a substantial number of trees. You will see that Parliament has kindly double-sided the copies that we have to use otherwise it would be a fatter piece of legislation. It is surely one of the chunkier pieces that has gone through this Parliament. 
Why is this legislation important? Well in my view it is important because it is about creating the set of circumstances that will lead to efficient functioning of markets. The correct kind of legislation will ensure transparency will ensure accountability and will ensure consequences for those who do not follow the correct set of rules. When all those conditions are in place we see that investment flows. When the incentives and sanctions for ill behaviour in the market place are clear when there is transparency and where there is accountability investment will flow and that is good for our economy. 
It is not the kind of hands-off approach that this Government has favoured in other legislation where the market is left to its own devices. We have seen the failure in the housing market in New Zealand and we have a Government that says: “Well you know the market will sort it out.” It has not sorted it out. We know that good proper regulation has its place and that is why Labour will be supporting this bill. We recognise the hard work that has gone into it and we recognise the endeavour to make sure there is proper regulation in place. 
Of course it is only part of the picture. In order to have a successful economy we actually need a vision for economic growth and that will also involve pro-growth tax reform. We need the kind of tax reform that the OECD Treasury and the IMF recommend: a capital gains tax which every other country in the OECD has except for Switzerland Turkey and New Zealand. We also need to give the Reserve Bank the monetary policy tools that it needs to ensure an export-led recovery. Inflation targeting was very important in the 1980s. This Government seems content to sit with 1980s economics generally but actually the world has moved on. So we need to give our Reserve Bank the tools to make sure that New Zealand can compete in international export markets. 
Of course we also need proper savings policy. We know that the Government cut back on KiwiSaver then it increased KiwiSaver and it has had more positions on KiwiSaver than the Kama Sutra. Labour will be very very clear that KiwiSaver should become more universal. It has always tried to get towards that position and Labour will make genuine progress in that direction. We also know that we need pro-growth procurement policies and if that has not become any clearer to the Minister of Revenue over time it surely should be after the OECD report that came out yesterday showing that the kind of tax policy that New Zealand and other countries have that is out of date needs updating to ensure a level playing field so that multinationals are not distorting investment decisions through taking advantage of tax regimes which means that overall the world is worse off in terms of investment flows. 
It is important also to talk about Labour leadership in respect of this bill because Labour started the financial markets reform process and as I have said earlier we are very pleased that the Government has continued this work. It is good work. The Capital Market Development Taskforce set up in 2008 by Lianne Dalziel set the blueprint and the action plan for development of New Zealand’s financial system. We are pleased that the Government is starting to act on those recommendations. 
One of the things that really sped up the need and showed the urgency for this kind of reform of course was the finance company collapses. We on this side of the House have some concern that not all the lessons have yet been learnt from that—that the legislation might perhaps have been further enhanced if an inquiry had taken place into the Crown Retail Deposit Guarantee Scheme and the way it was implemented. On this side of the House we have concerns that it was not properly monitored by Treasury and the Auditor-General has raised similar concerns. It seems to us on this side of the House that it would have been very good to have a look at the way in which that scheme was implemented because we are talking about tens if not hundreds of millions of dollars of taxpayer money that appears to have slipped between the cracks when the Crown Retail Deposit Guarantee Scheme bailed out firms that continued to take on risky loans long after the scheme was introduced. The risk to taxpayers rose in quite a dramatic fashion. One company had its loan book increase tenfold in a matter of 3 or 4 months. South Canterbury Finance’s loan book increased 25 percent in just a short period of time. That is because it was not being properly monitored. Treasury took its eye off the ball. The Reserve Bank which could have supplied it the data was not requested to do so and so the taxpayer liability grew. 
We have seen that Government members on the Finance and Expenditure Committee blocked an inquiry into South Canterbury Finance and the others that were supported by the Crown Retail Deposit Guarantee Scheme so we will never know—at least not in the term of this Government it seems—just how much taxpayer money was lost by poor management of the scheme under this Government’s watch. But as I said before that could be hundreds of millions of dollars. One estimate has it as high as $500 million of taxpayer money that has been lost because of poor Government oversight. 
The answers we got out of the Minister of Finance and others on this when they were before the Finance and Expenditure Committee were unsatisfactory. Treasury and the Minister responsible have refused to investigate this in order to see where in future lessons could be learnt. They have refused to quantify just how much taxpayer money was lost as a consequence of the implementation of the Crown Retail Deposit Guarantee Scheme. It was a good scheme do not get me wrong—do not hear me wrong. This backed up the banks to stop the flow of money to the run on banks. Australia gave us a day to implement it and we did. But its monitoring was inadequate and as a consequence there has been taxpayer cost. This Government has failed to step up to quantify that to investigate it and to learn how much taxpayer money has been lost. We think that that kind of investigation could have further strengthened this legislation because it would have been a good case study a recent case study and would have given some insight into the way markets work when they go wrong. 
We will overall be supporting this legislation because as I said at the beginning of my speech at the outset it is generally good regulation and it is ensuring that there is transparency accountability and consequences for those who supply products into the market and that is a good thing.