Twyford Phil: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeTwyford Phil: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — In Committee[Sitting date: 25 March 2015. Volume:704;Page:2595. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—Te Atatū):I look forward to debating this bill through the Committee stage taken as one question. I want to begin by speaking to clause 6 of the bill which is the operative clause for what I think is the most significant thing the bill sets out to do which is to enable members of KiwiSaver schemes to withdraw not only their own contributions but also the member tax credits or the Government contributions in a KiwiSaver scheme in order to get a deposit together that would enable them to take advantage of a Welcome Home Loan. This bill is an enabler of the Government’s HomeStart subsidies which were announced during last year’s general election campaign.We are going to focus our discussion this afternoon on the clauses in this bill but let me just note in passing that members on this side of the House—Labour members in particular—have been very critical of the policy for which this bill is an enabler. If I can just summarise briefly our criticisms we agree with many of the highly critical things that have been said by the Reserve Bank Treasury and so on about the effect of increasing homeownership subsidies in a market that is already supply-constrained where there is already significant excess demand compared with supply. Many commentators including the officials from the Ministry of Business Innovation and Employment Treasury the Reserve Bank and the officials who briefed us in the select committee were clear that those were the problems associated with this bill.Labour as we have made clear in earlier debates is going to be voting for this bill because putting aside for a second the HomeStart policy and the expansion of homeowner subsidies which we think will drive prices up and will actually make housing more unaffordable the bill itself is at best I suppose slightly benign. But as I was saying clause 6 is the one that basically amends the KiwiSaver scheme rules and I suppose the question in relation to clause 6 is what difference is it going to make to aspiring homeowners—to first-home buyers? Our calculations are that at best it will allow possibly a couple of thousand or maybe a few thousand extra dollars to be contributed to a deposit.Put that in the context of what is happening for example in the Auckland housing market where over the last 12 months the average house price increased on average by $1700 every week—$1700 every week. A bill that is going to enable people to add just a few thousand dollars of their own retirement savings—so this bill gives people the opportunity to raid their own kitty and really to pay the price of this Government’s failure to address the housing crisis. But the quantum is all wrong. So at best it is going to allow people to withdraw a few thousand dollars extra. It might be the equivalent of 2 weeks or 3 weeks of Auckland house price inflation and I think that puts it in perspective. That shows how incremental how marginal the benefit from this bill will be.I want to point to some of the comments that have been made by officials in relation to the expansion of the subsidies including the ability to withdraw one’s own retirement savings in order to put a deposit together. Treasury advised the Government in July 2013 about the earlier change to the rules around eligibility for the KiwiSaver home deposit scheme. Treasury said that “The KiwiSaver Home Deposit Scheme increases the cash available to homebuyers for deposits. Increasing eligibility may encourage buyers to take on more debt/seek more expensive houses. This could exacerbate house price pressures.” That is what we are talking about here.Later that month Treasury advised that increasing KiwiSaver withdrawal subsidies would have an impact on the very same financial and macro-stability issues that the Reserve Bank Governor comments on on almost a weekly basis. Treasury said that the impact on financial stability would be negative and that it would undermine the effectiveness of loan-to-value ratio lending restrictions which is the main tool that the Reserve Bank has brought in to try to reduce the financial stability risks of an out-of-control Auckland housing market. Treasury said: “Government subsidies for home ownership are low value for money and tend to be regressive.” This is advice that Treasury has given elsewhere. They are low value for money and they tend to be regressive. So by raising the price caps and increasing the subsidies and the eligibility the Government is actually reducing the targeting and the value of the policy to make a difference to the people who need it most and it is expanding the pool of people who are likely to take it up.On the draft Cabinet paper—again on the previous changes but I think they are just as apposite for this bill—Treasury said: “Experience with homeowner grants in Australia suggests that such programmes tend to push prices up in a supply constrained environment by supporting greater demand rather than improving affordability.” and there is a risk that by expanding eligibility—as this bill does and as the wider policy does—for the KiwiSaver deposit subsidy the Government will end up undermining affordability for first-home buyers.So I think that is a pretty good summary of the official advice about the implications of clause 6 which allows the member tax credit or the Government contribution to be withdrawn. I think it is pretty clear that the benefit here is very very small compared with what is happening to house prices which are up by 1700 bucks a week in Auckland. But the median house price for the whole of New Zealand has been going up over the last 12 months by $1000 a week on average—$1000 a week. So the benefit of this bill for aspiring first-home buyers is pretty marginal and is probably the equivalent of about 2 or 3 weeks of house price inflation. Thank you.