Dunne Peter: Taxation (Budget Tax Measures) Bill — In Committee Third Reading 
Dunne Peter: Taxation (Budget Tax Measures) Bill — In Committee Third Reading 
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Hon PETER DUNNE (Minister of Revenue) 
: 
 I am delighted to take a call in response to the very searing speech made by the member who has just resumed his seat and to put on record some of the history behind this issue. 
Chris Hipkins 
: Take your time. 
Hon PETER DUNNE 
: I may well. When the KiwiSaver scheme was first being put through Parliament the issue of mortgage diversion was raised. Then it was withdrawn. Then it came through again very late in the bill at the insistence of someone whose name temporarily—hopefully permanently—escapes me and it found its way into the legislation. 
Hon Trevor Mallard 
: I hope he’s escaped here too permanently. 
Hon PETER DUNNE 
: I have not heard from him and frankly I have no desire to. Be that as it may it was promoted as being a way in which people who were getting into their first home could set aside some of their KiwiSaver contributions as a contribution towards the payment of their mortgage. In fact what transpired once the scheme was put in place was that a number of the banks took the view that any diversion had to be over and above the original mortgage repayments. In other words the notion that lay behind the original concept of diversion was overtaken already. To some extent that counted against the intent of the original policy. 
I looked at this issue again earlier this year because I was curious to know what the uptake had been and in the light of the changes to KiwiSaver that were made last December I thought it was timely to look at just where this particular proposal stood. In fact we discovered that fewer than 600 people had taken up the advantage. That was at a time when KiwiSaver membership had soared to 1 million. I say to members opposite—it is worth reminding them when they talk about KiwiSaver being gutted—that in fact what has happened is that this year when membership of KiwiSaver passed 1 million we surpassed our 2015 target. We got there about 6 years earlier. It is hardly a suggestion that KiwiSaver is being run down. So 600 people max out of about 1 million - plus members suggests that this is not a particularly prudent investment. 
I say to the Green members who last night voiced some concern about this proposal during the second reading debate that the reason why we are closing off this scheme is simply that the numbers do not justify its retention. We are saying to the people who are currently in the scheme that their entitlement will remain and it will be a matter for their particular fund provider to determine whether it wishes to offer the facility. But for new entrants we needed to make a closure date and we selected 1 June as being the most convenient in order to give certainty to people and to give some sense of clarity. 
The member who spoke before me questioned why this is being done at this time when a maximum of 200 people—that was his figure—may be adversely affected. I suspect that that is an optimistically high figure actually. The number of people expressing interest in this scheme continues to diminish. 
Hon Trevor Mallard 
: It depends on whether it went to a select committee for a proper period. 
Hon PETER DUNNE 
: Well frankly I do not think the outcome would have been much different. This is a comparatively small measure. It affects very few people in New Zealand. No one will lose from it— 
Hon Trevor Mallard 
: You can’t say you know how many. 
Hon PETER DUNNE 
: I know how many are in the scheme at the moment. There is no great evidence of a huge well of people expressing interest in mortgage diversion. I would make the point that one— 
Hon Trevor Mallard 
: But if someone was just about to go into the scheme in the next few days— 
Hon PETER DUNNE 
: Hang on; I think the member is— 
Paul Quinn 
: Is this a conversation or a debate? 
Hon Trevor Mallard 
: It’s the Committee stage. Grow up and learn how it works. 
Hon PETER DUNNE 
: If the Hutt South battle could go somewhere else I will answer the member’s question. 
The point that Mr Mallard makes is actually the core of this issue and I want to if I may take a moment to go through it. What he is saying in effect is that there will be people out there at the moment potentially considering the purchase of their first home and worrying about whether the absence of this diversion will affect that purchase. The point I am making is that when the scheme was originally conceived the notion was that people would be able to divert their KiwiSaver contributions to their mortgage repayments. What has transpired subsequently is that the financial institutions have said: “No not quite. What we will do is take your normal mortgage repayment and then treat any KiwiSaver diversion over and above that. In other words you can’t do it first up. You have to be meeting your primary set of responsibilities and then we’ll look at any additional payments being diverted.” 
In other words the new-home buyer who is wondering at the moment whether he or she is being disadvantaged is not being disadvantaged because he or she would still have to meet the primary mortgage repayments before he or she would— 
Hon Trevor Mallard 
: Because the banks didn’t trust Governments on KiwiSaver. 
Hon PETER DUNNE 
: That of course was during the time of the previous Government. The member may not want to go too far down that path. But that is the background to why this provision is being removed. It was a good idea but it has not worked.