Cunliffe David: Passports Amendment Bill (No 2) — In CommitteeText is incorporated into the Bound VolumeCunliffe David: Passports Amendment Bill (No 2) — In Committee[Sitting date: 22 September 2015. Volume:709;Page:6839. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to take a short call in this Committee stage of the Passports Amendment Bill (No 2). In so doing I want to acknowledge both the Minister of Internal Affairs the Hon Peter Dunne for bringing this bill to the floor of the House and also two distinguished colleagues the Hon Phil Goff with whom I recall having a discussion about whether we would support the 10-year extension a year or two ago and the Hon Trevor Mallard who as our internal affairs spokesperson has championed the cause of the 10-year passport.With that may I turn our attention to the substance of the bill. This is the Part 1 debate—Part 1 of the bill.Iain Lees-Galloway: Go through the whole thing.Hon DAVID CUNLIFFE: Go through the whole thing? Well my point to my learned colleague was actually virtually the same point which is that 95 percent of the bill is contained in Part 1 so we would expect this part debate to be tantamount to the whole thing and to be relatively broad ranging.So let us firstly go to the principles that underlie this extension. It is essentially that the technology and the security thereof has advanced to the point where there is no greater risk to the travelling public or to the Crown from issuing a 10-year passport as opposed to a 5-year passport. Therefore it is logically in the interests of the public to have the convenience of not having to renew their passport every 5 years when a 10-year passport is possible. I do not think there would be too many people in the listening public who would disagree with that principle being applied and that is why the Committee is unanimous or near unanimous in support of this bill.However the complexity arises at the level of detail—not so much the drafting detail I think—and although there are a few technical subclauses here the intent of the bill is clear and it has been worked through the select committee process. But the main debate turned on the issue of costing. The argument is at several levels. The costing provisions of course are within this. The Government is holding the cost lower—and we support it—than the original Treasury modelling would have predicted. I turn to the regulatory impact statement on page 12 titled “Part Two Cost implications of ten-year validity passports”. In paragraph 65 it says “Using current modelling passports would cost either $199 for a five-year passport or $274 for a ten-year passport.” Treasury further advised that the fiscal cost of holding the price down to $200 for a 10-year passport may be in the order of $200 million over time which is a big number and I will come back to that issue in a second.But let us just take a moment to reflect upon the difference between the $199 and the $274. The marginal cost of production of a 10-year passport one would assume to be small or negligible relative to the cost of production of a 5-year passport. They are essentially the same type of document with the same type of technology embedded. If the Government can explain the difference—I see the Minister of Immigration shaking his head. We look forward to him taking a call or perhaps Minister Dunne may take a call and explain the difference. What I suspect has gone on is that officials have taken the fixed-cost component of running the Department of Internal Affairs’ overheads and defrayed that over a smaller number of transactions because members of the public are having to take out fewer passports because they last longer. So it is a fixed-cost spread—a management accounting fiction if you like—that has led to this result. That is why I actually support Cabinet’s decision to keep this cost down.One of the roles it is currently my privilege to play in this place is as the chair of the Regulations Review Committee. We have a couple of matters live before the select committee that we are addressing ourselves and in one case with the help—which is public knowledge—of the Auditor-General’s office looking at the question of whether departmental overheads have been correctly charged in respect of fees for service or whether by loading fixed overhead departmental costs into them they are in fact a disguised tax.What I would call on the Minister to do now for the purposes of clarity—and this is not because we disagree; we actually agree with the Government’s stand here to keep the cost down—is to explain exactly why an almost identical passport document that has a 10-year life costs $74 more on this calculation than the same document with a 5-year life. Is it because it has got five more pages or seven more pages and the pages cost $10 each? Is it because it has got a stronger binding that is designed to last in your bag for another 5 years?Meka Whaitiri: Tougher glue.Hon DAVID CUNLIFFE: Tougher glue? Is there a better-quality insignia or some flash hidden electronic innovation embedded deep within the fibres of this high-tech passport that has bumped the cost up to this extent?Or is this another example of officials building in departmental overheads to the point where business as usual in the department carries on untrammelled even though there is lower demand for the product? If that is the case then I would commend Cabinet—I do not say this very often—for making a decision to intervene and keep the cost down. That is what the Labour Party supports—New Zealanders being able to travel with the convenience and security of a 10-year passport at a reasonable cost—and we are not convinced by the cost methodology that is contained in the regulatory impact statement.If I may come to the broader point embedded as it is in Part 1 of this bill—and recognising that this is a Committee stage—to reflect upon Treasury’s estimate which I assume is an estimate over multiple years of a $200 million additional cost to keep the price down to $200 a passport against an earlier estimate of $400. Those are obviously round numbers but it does bring us back to the issue of whether this Government is being prudent with taxpayers’ money. There are some examples that are not unrelated that have caused New Zealanders to question that. The first is the $26 million on the flag—The CHAIRPERSON (Lindsay Tisch): Order! That has got nothing to do with this bill.Hon DAVID CUNLIFFE: Well the flag is embedded in the passport.The CHAIRPERSON (Lindsay Tisch): No.Hon DAVID CUNLIFFE: All right. That is why I said “not unrelated”. So I will not mention the $140000—The CHAIRPERSON (Lindsay Tisch): No.Hon DAVID CUNLIFFE: And I will not mention the $11 million—The CHAIRPERSON (Lindsay Tisch): Order! The member is testing my patience on this—[Interruption] Order! I made it very clear as the previous presiding officer did that we would come and just focus on the bill. So just focus on that.Hon DAVID CUNLIFFE: Thank you Mr Chairperson and I will take your guidance on that matter.If we look at the departmental disclosure statement it has gone through the normal round of questionnaires—yes/noes—and it has provided the further information that we would expect. It is embedded in the regulatory impact statement and we have been discussing part two of that—page 12 onwards—and we have addressed ourselves to the cost. I see that on page 14 of that document the costings that we have referred to for the required Crown revenue requirements for reducing fees for 10-year passports are set out: $13 million for June 2017 rising to $32 million for June 2023 $43 million for June 2024 $46 million for June 2025 and $41 million in 2026.That is a substantial amount of revenue but at the end of the day it comes back to my earlier point. It is only accurate if the departmental overhead costing the management accounting of this exercise is accurate. If those estimates are overblown then this revenue position is overblown. Far be it from us to come to the Government’s aid but putting these provisions aside for future cash flow will of course not help the Government reach its ascribed target of reaching surplus because it will be carrying an additional deficit of $20 million to $40 million a year from this revenue projection which may not be fully necessary depending on the validity of the overhead allocation methodology in that cost accounting. I would ask the Minister to take a call and describe to the Committee the degree to which Cabinet turned its mind to that issue in deciding to keep the fees down. Was it that Cabinet was prepared to inject that $200 million or did it not actually believe the department’s estimates? I do think these things can be a little shall we say elastic.May I conclude by just summing up where I began. Labour strongly supports this change to a 10-year passport. I commend the Minister. I also commend my colleagues Phil Goff and Trevor Mallard for bringing this to the House.