Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
Text is incorporated into the Bound Volume 
Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
[Sitting date: 14 December 2004. Volume:622;Page:17838. Text is incorporated into the Bound Volume.] 
Public Finance (State Sector Management) Bill 
Second Reading 
Hon MARK BURTON (Deputy Leader of the House) 
 on behalf of the 
 Minister of Finance 
: I move  
That the Public Finance (State Sector Management) Bill be now read a second time 
. This bill is the culmination of significant work intended to strengthen and improve the accountability transparency and effectiveness of the public service and wider State sector. 
Sitting suspended from 6 p.m. to 7 p.m. 
Hon MARK BURTON 
: As I noted ever so briefly before the dinner break the Public Finance (State Sector Management) Bill is the culmination of significant work intended to strengthen and improve the accountability transparency and effectiveness of the public service and the wider State sector. The bill consists of eight parts covering three important areas of change: first changes to the Public Finance Act including integration of the Fiscal Responsibility Act; second amendments to the State Sector Act; third the creation of a new Crown Entities Act. At the end of the Committee stage the bill will be divided into its constitute parts as set out on Supplementary Order Paper 316. 
The Finance and Expenditure Committee has considered and addressed a range of issues raised in submissions—in particular the submission received from the Clerk of the House raised issues from a parliamentary perspective. I thank the committee and officials for working effectively through these to ensure that the primacy of Parliament has been upheld and to clarify the intent and application of the bill. 
The key amendments the committee has recommended to the Public Finance Act in Part 1 of the bill relate to the estimates and multiclass output appropriations. The committee has also recommended that the appropriations provisions precede the fiscal responsibility provisions in order to recognise the central importance of the appropriation process. The committee considered that the estimates provide important information and also wish to allow for future developments. The committee has therefore recommended that clause 8 be amended to provide for the retention of the estimates and to require the Minister of Finance to consult the House on significant changes to the format or content of Budget documents including the estimates. The Government agrees with these changes. 
The bill provides for output classes to be grouped within a single appropriation. Submitters expressed concern that this may reduce the level of information provided to Parliament thus reducing accountability and parliamentary scrutiny. That is certainly not the intent. Rather it is intended that output classes remain the basis for parliamentary reporting and accountability. The committee has therefore recommended amendments to clause 8: first to clarify that individual output class information is still required; and secondly to safeguard use of multiclass output appropriations by requiring approval from the Minister of Finance. These changes will ensure that accountability to Parliament is maintained while allowing greater flexibility for Ministers and departments to focus on delivering the best results for New Zealanders.That is always at the heart of this Government’s legislative intent. 
Part 2 amends the State Sector Act extending the mandate for the State Services Commissioner to the wider State sector and establishing the shared responsibility of the commissioner and chief executives for the development of senior leadership and management capability. The committee has recommended only minor changes to this important part of the bill. 
The proposed new Crown Entities Act in Parts 3 to 7 of the bill sets out a consistent governance and accountability framework for all Crown entities while recognising that different types of entities have different relationships with the Crown. I think the differentiation and the recognition of it are very important. 
The most significant changes recommended by the committee relate to the intent of and procedural matters around the proposed whole-of-Government direction of power. To address concerns—in particular those raised by the Regulations Review Committee—the select committee has recommended that clause 152 be replaced with new provisions that directly authorise the Minister of State Services and the Minister of Finance to issue jointly whole-of-Government directions rather than by Order in Council. The Government again agrees with these recommendations which will contribute to alignment across Crown entities. 
In addition the committee has made recommendations that clarify the application of the bill to two categories of Crown entities—namely school boards of trustees and tertiary education institutions. A number of submissions expressed concern that the bill would result in onerous burdens on school boards of trustees. To address this concern the committee has recommended a positive list approach—that is the inclusion of a new schedule detailing the provisions that apply to school boards of trustees. 
Submissions from tertiary education institutions argued that they should cease to be Crown entities. The committee and the Government consider that the separate category of “Crown entity” is appropriate and recognises their distinctive nature. The committee has recommended that a positive list approach also be applied to tertiary education institutions. I welcome the committee’s practical suggestion. 
Two Supplementary Order Papers were released on 7 December. Supplementary Order Paper 316 divides the bill into its constituent parts. Supplementary Order Paper 315 amends the bill as reported back and covers changes to commencement and transitional clauses simplifies the application to tertiary education institutions and contains technical amendments and consequential amendments to other legislation. This includes a correction to the commencement provisions of the Gas Amendment Act 2004. 
Finally I wish to thank the Finance and Expenditure Committee for working constructively and improving the bill. I am pleased as I know the Minister of Finance is to note that the committee unanimously recommended all the amendments. The Government supports these amendments. This legislation represents the most significant enhancement of public sector management for over a decade and will help set a new benchmark for Government transparency and accountability in New Zealand and indeed internationally. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 This bill does have some positive changes for public sector management but the heart of the debate over it is going to be whether this Government can be trusted with this particular tool kit. This is a Government that has overturned most of the conventions and understandings by which the public service has operated. The public service operates at its best when it has clear direction from a Minister and a Government and is allowed to get on with the job. Part of that job is always going to be dealing with the political pressures that arise around Government decisions because Government decisions will not always be greeted favourably. That means that public and political pressure will come on those decisions and on the public servants who execute them. What happens then is absolutely vital and is the real test of whether the Government is managing the public sector properly. If the Government changes its position just as a matter of whim because of political pressure and if it blames the civil servants for the embarrassment that is caused by their carrying out the Government’s own decisions then the public service has less capacity to function with independence and integrity. 
I will just point out a few examples which raise questions about the Government’s intent in respect of the civil service and therefore the effectiveness of this legislation. One would be the fate of the Community Employment Group. They made the mistake of implementing Government policy. That is a bad mistake when Steve Maharey is the Minister in charge of one’s department. He had this idea of the Social Entrepreneur Fund which turned into a slush fund for all sorts of mad schemes. These were gradually revealed to the public. They were an embarrassment as they should have been because it was a stupid policy and under a Minister who cannot implement anything. 
So what did he do? He then turned round and abolished the Community Employment Group altogether. He did not just shut down the Social Entrepreneur Fund; he decided to punish by sacking those people who he believed had embarrassed the Government. As it happens the Community Employment Group is one of the more useful social bureaucracies around the place. It has made valuable and long-lasting contributions in my electorate but it is gone. 
What impression does that leave with the civil service? Civil servants believe that the Government is putting in place a bad policy but carry it out because they are professional civil servants then find that the Government comes along and punishes them when the inevitable political embarrassment arises. That is one reason why this Government cannot be trusted. 
I will give the House another example—the Christchurch Polytechnic Institute of Technology and its saga over Cool IT. That raises a number of questions about public sector administration. The Minister has in recent weeks decided to withhold money from the polytechnic. Is that because he believes that it did something with public money that it should not have? No it is the result of 12 months of public embarrassment for the Government in the media. 
Everyone who is involved in the sector knows that. The Minister has moved simply because the political pressure has become sufficient that he feels he has to or he will lose all credibility. Again those actions cut across all the conventions and understandings of the way this legislation imagines the public sector would work—where there are clear delineations of responsibilities where there is transparent accountability for the money where the Minister has powers but does not use them except in extreme circumstances and where public servants can operate in an environment of certainty and predictability. 
That is why I worry about things like the whole-of-Government direction that is in the bill. It is couched in the usual loose terminology of good intentions in the same way that local body legislation prescribes that local government is now responsible for the environmental social economic and sustainable good of their communities. It is meaningless garbage in legislation. It could mean anything. It could mean nothing. That is the kind of thinking the Government will bring to bear through mechanisms like the whole-of-Government direction. I hope that in the Committee stage some attention will be paid to the kind of approach that is implicit in the bill. 
I am particularly concerned about the effect of the bill on the tertiary education sector. I draw the House’s attention to that because that is probably the group that is most opposed to the bill and in my view for good reason. The second-most opposed initially was the Clerk of the House. I must compliment him on the best example of a senior public service leader standing against the tide. The Government’s initial legislation was a disgrace. It showed its contempt for Parliament and for the accountability that must go on in this place. The Clerk as at times the Speaker should stood up for Parliament and put a case. A committee of parliamentarians—rather than Ministers thank God—heard that submission and changed the bill substantially. I record the Opposition’s gratitude for the role that the Clerk and his office played in holding back the steamroller of the executive. 
I return to the tertiary sector because as I said people in that sector were among the strongest opponents of this legislation. The relationship between government and universities in particular but also polytechs is a somewhat delicate one. Their ownership is unclear. The accountabilities are relatively clear but the role those institutions have to make autonomous decisions of their own is absolutely vital. It is absolutely vital that they do not feel stood over by the Government. It is vital that they can act as Parliament has charged them to do as the critics and conscience of society. 
Now I have to say I approached the argument of the tertiary institutions with some scepticism because in the last 5 or 6 years they have cravenly supported in just about every respect the Government’s tertiary policy—up until 6 months ago. That tertiary policy has put together a whole mechanism of control. The Tertiary Education Commission a $50 million extension of the Minister’s office is a hopelessly complicated bureaucracy that for all the wires pulleys and computers actually does almost nothing. 
So there should be no surprise that the Government has taken from the tertiary sector the message that it can do pretty much what it likes. All those fine academics who used to denounce past Governments with such vigour have lain supine while the Government rolled over them. Finally they decided to stand up for themselves and oppose the provisions in the bill and I fully support them on that. It should be absolutely clear that tertiary institutions—universities in particular—are independent of government and particularly independent of this Government which believes that it knows better and can do jobs better than the people doing them. It thinks it can run universities better. That is why it is bringing them in under the provisions of this bill. It can run the public service better than the civil servants can and that is why some new tools have been included in the bill for the Government to use. 
This debate is essentially about trust. On its own in the hands of a Government that respects the civil service the bill will be useful constructive and forward-looking but in the hands of a Government whose dead political reach goes into every corner of life in New Zealand and whose politicisation of the public service including the police is a disgrace this bill could end up being quite dangerous. 
GEORGINA BEYER (Labour—Wairarapa) 
: 
 I take a short call in the debate on the second reading on the Public Finance (State Sector Management) Bill. The bill is designed to strengthen the public service make it more transparent and flexible allow a more integrated response to complex social problems involving a number of State agencies and invigorate the culture of the State sector. It stems from the 2001 Review of the Centre and represents the first major change to State sector governance in a decade. There are a number of main points and I will name just a few of them now for the benefit of members. It integrates the Fiscal Responsibility Act into the Public Finance Act and it broadens appropriations in order to allow Ministers more flexibility while retaining levels of reporting and accountability to Parliament. It also enhances departmental reporting to ensure that a broader range of information about intended and actual performance is disclosed. It also makes the Auditor-General’s controller function become more effective and requires Ministers to report to Parliament on serious breaches. 
I hope the House will debate this bill fully as it goes through its stages and I reiterate my support for it. 
CRAIG McNAIR (NZ First) 
: 
 In speaking to the second reading of the Public Finance (State Sector Management) Bill I note that it covers the main legislation that governs public finance and the management of the State sector. I also note that the bill is the culmination of a review of public management. The Review of the Centre suggested there should be initiatives to support better integration greater flexibility and an increased focus on results without losing the system’s current strengths of transparency accountability and financial management. The Minister of Finance Michael Cullen stated that the bill was “designed to strengthen the public service make it more transparent and flexible allow a more integrated response to complex—” 
The question was raised by Simon Power that a Minister was not present in the Chamber. The Assistant Speaker declared that a Minister was present. 
CRAIG McNAIR 
: Before I was interrupted I was saying that the Minister of Finance said that the bill will “… allow a more integrated response to complex social problems involving a number of state agencies and invigorate the culture of the state sector.” as the previous speaker said. 
But after looking at the bill and after being on the Finance and Expenditure Committee and hearing the concerns of the submitters as they came to the table one by one I say that the bill sadly will not achieve those objectives. The New Zealand First members of the select committee myself and the Rt Hon Winston Peters wanted to see whether the bill did what Michael Cullen said it would do. We also wanted to hear the submissions to find out whether submitters believed the bill achieved its goals. After doing that I still feel strongly that it does not in many ways. In some ways it does and in other ways it does not.This bill amends the Public Finance Act and the State Sector Act and creates a new Crown Entities Act. The Government says that it will improve transparency and accountability. Sadly I really feel once again that that will not happen under this legislation in its current shape and form. 
I believe that this bill is appropriately named—not because it is good legislation but because it represents more State control by the Government. This Government is sadly all about State control. I believe that it wants to have a stronger grip on anything and everything in our society. It does not want to allow the elderly RSA members who fought for our rights as a nation to have a cigarette at the local “Razza”—it does not want them to do that. The Government wants to have more State control over our taxes and our education system as we can see in this very bill. I will get to that point later on. The Government wants to have more control over our values and what we believe in. I believe we are going down a very scary road. 
Representatives from our educational institutions came before the select committee and they were very very concerned about this legislation. They along with the Clerk of the House and others were concerned about it. The Clerk had a lot of concerns that the Government members on the committee listened to. I like Bill English admire the Clerk for standing up against this legislation and honestly saying that it will not work in its current form—that it will not float as it were. In the same way I admire the tertiary education sector. The institutions joined forces came to the select committee and told us of their fears and concerns about the control that this bill would give to the Government. Some people may say that the intent of the Government is very admirable—or it should be admirable whatever the Government is. But we cannot be 100 percent sure of that in view of some of the things that we have seen go through this House in the past few months. I strongly feel that a lot of the issues in this legislation need to be clarified more comprehensively. Speaking of the submitters it was amazing to see each submitter come into the select committee one by one and to find that a lot of them had similar concerns. They had a wide range of concerns but in many ways those concerns all centred around the issue of still wanting to be independent—or the fear that they would lose their independence. 
Ultimately at the end of the day New Zealand First members had to look—as did all members of the select committee—at this legislation as a whole and ask whether it would be best for New Zealand in the long run. Sadly we had to say that no it would not. 
Darren Hughes 
: Was it a close vote? 
CRAIG McNAIR 
: It was 13 to nil. New Zealand First opposes this legislation. 
GORDON COPELAND (United Future) 
: 
 I rise to take a call on the second reading of the Public Finance (State Sector Management) Bill. It is a long time since February 2004 when this bill received its first reading. Also it is now a few months since the Finance and Expenditure Committee of which I am deputy chair reported the bill back to the House. At 500 pages this is a pretty massive bill and it introduces major changes to the way that the Crown accounts record the public finances of New Zealand. Before I proceed into some of the nitty-gritty provisions of the bill I would like to mention the use of the word “Crown” in a New Zealand context. When I was growing up those accounts were known as the “public accounts” or the “Government accounts”. I think the adoption of the Crown terminology is a step backwards. 
To most Kiwis—and that includes Maori Kiwis—the Crown terminology conjures up images of the Queen or the Governor-General. But in truth the accounts referred to in this bill belong not to the Queen or the Government but rather to the people of New Zealand. They represent and record for example assets purchased with funds taken in the form of taxes from the people of New Zealand borrowings and other liabilities that are incurred for and on behalf of the people of New Zealand and expenditure that is funded from taxes duties and levies compulsorily imposed on the people of New Zealand. The Government should always remember that no money it spends has not first been collected from the people. 
Maybe in the long run we should look at ditching the references to Crown accounts Crown agencies and Crown entities etc. I think it would be good if terminology was eventually adopted that more strongly corresponded to the reality that those entities and agencies and their accounts belong to the people and are there to serve them. Then we may again have—who knows—civil servants and put more emphasis on the centrality and importance of civil society in New Zealand. However that debate is for another day. Perhaps it could be taken up by the constitutional inquiry that will be launched by Parliament during this week of urgency. 
As a member of the Finance and Expenditure Committee I acknowledge the centrality of the input we received from the Clerk of the House Dave McGee QC and the way that he led us through the various constitutional arrangements that lie at the heart of the public finance accounts and therefore of this bill. Without Dave McGee I am not sure quite where this bill would have ended up. He brought us back to emphasising that in matters relating to public finance the centrality of Parliament must remain all-important. It is in Parliament that the people of New Zealand place their trust. It is a trust that could be likened I guess to trusteeship and it is also a privilege to make huge decisions involving literally billions of dollars for and on behalf of the people of this country—for their welfare. Parliamentarians are the only elected people in New Zealand. We must never surrender the sovereignty that belongs to the elected assembly of New Zealand to unelected and sometimes faceless bureaucrats. 
In the first draft of this bill there was definitely a slant in that direction. We needed the advice of the Clerk of the House in order to put the right balance back. I guess that just illustrates how relatively easy it would be for us to kid ourselves—particularly probably the executive members of any Government—that somehow we are the people who really constitute the sovereignty of this country together with our army of civil servants and other paid employees. But we need to continue to clearly express the fact that the people of New Zealand are sovereign in this country and that we in Parliament are in a very real sense here to serve them and their interests. 
Another very interesting thing happened in the course of our extensive consideration of this enormous bill. We had for example some submissions that put before us a conspiracy theory. That is quite unusual—I think it is the first time since I have been in Parliament that people have come to the select committee and asked us not to pass a bill because it was really a conspiracy to usher in a one-world Government. From the people who made the submissions to us we almost got a sense that Armageddon was right behind us—that we would have a one-world Government tomorrow and the end of the world the next day with the Antichrist somewhere in the distance. They were actually quite well-qualified people but the bottom line is that their criticism was really alarmist and ill-informed. They could be excused I guess for drawing some of those rather fanciful theories together by the sheer complexity of this bill. I have to admit that when one significant piece of legislation is being amended by another then in relation to technical areas such as public finance and State sector management it really takes something of a wet towel to get one’s mind around some of the amendments and the way they fit into the existing legislation. 
However the central goal of this bill—and I think we have got pretty near to it—is basically to ensure that the public accounts of New Zealand—the various statements made to introduce fiscal policy through the Budget Policy Statement and so forth and through the Fiscal Responsibility Act—are kept according to standards that represent best international practice. That I think has been the driving force behind the bill and the committee has got us as close to that as possible—certainly within the level of the competence not only of ourselves but also of the many people who worked tirelessly to give us advice in those areas. 
I also think that the changes to State sector management in the bill will be positive. I welcome the drive to put in place standardised procedures including ethical guidelines that will apply across the board to all State agencies entities and whatever other names we choose to give such bodies. We have all those categories of autonomous ones semi-autonomous ones independent ones and so forth. But whatever those agencies are called I think we need to ensure in the interests of the people of New Zealand that they all carry out their functions in accordance with high ethical standards and with the best interests of the people at heart. Really those are the important things about the bill. We have cleared up a number of grey areas and a number of situations where the existing legislation was unclear about lines of accountability and responsibility. 
In summary I signal that United Future is reasonably happy with the outcome on this bill and with the work of the select committee. We will therefore support the bill through the Committee stage and its third reading thereby assisting it to become the law of the country. It will then be up to the same civil servants that I mentioned earlier to put it into practice and that will be a great challenge to people in Treasury and in the State Services Commission in particular. I express my own satisfaction with the high quality of the people we have in those organisations. 
DEBORAH CODDINGTON (ACT) 
: 
 I rise on behalf of the ACT party which is voting against this bill. We support the extensive changes that occurred in the select committee under the guidance and hard work exhibited by the Clerk of the House but we are still voting against this bill for two main principles: the first concerns the spending of taxpayers’ money and the second is the enormous threat this bill poses to the autonomy and academic freedom of universities. 
In fact with regard to the second principle I find it astonishing that a Government most of the senior Cabinet members of which have been privileged to go through a university education and enjoy the academic freedom that that brings—one of the few areas in life where one can have that kind of protection—is now passing legislation that has outraged the Vice-Chancellors Committee. It has caused the vice-chancellors a huge amount of grief and has forced them to go public with their concerns after repeatedly lobbying and making submissions on what the legislation will do to the autonomy of universities in bringing them under the control of the Government. 
But first of all I would like to talk about the changes that this bill is bringing about to—the watering down of—the Fiscal Responsibility Act. Every single day in New Zealand every taxpayer should go down on his or her knees and thank the Hon Ruth Richardson for bringing in that Act. It places a safeguard—it is a gatekeeper—on the amount of taxpayers’ money that Governments can spend and where. Politicians love spending taxpayers’ money. They write out cheques for things they would never write out cheques for if it were their own money. What politician what MP would write out a cheque for $500000 to send a port-a-loo that makes a noise like a donkey to an international art exhibition? If there are any politicians or MPs who would do that I challenge them to get out their chequebooks and do that right now with their own money. 
What politician would write out a cheque for thousands of dollars for a hip-hop tour or for bounty hunters to go around suburbs mostly in Auckland in vans pick up little children and collect a bounty for enrolling them in an early childhood centre? They are not checking the quality of the education that the children will get in that early childhood centre or checking to see whether they will stay in that centre then go on to school and learn to read—all those things that taxpayers’ money should be spent on in terms of adding value to or improving the lives of people. No the money is just for ticking a box. No politician would write out a cheque for his or her own money to do that. If politicians wrote out a cheque for children to go to early childhood centres they would make damn sure that the children were getting a good education and that they would come out each day having learnt a little bit more than they knew when they went in. 
What politician would write out a cheque for $400000 to double the salary of a newsreader who was not actually poached by a rival television company? Because negotiations had gone on for so long and were so inept the newsreader could have walked so the salary was doubled. No politician would do that but when it is taxpayers’ money it is another story. Other people’s money is a drug—it is an opiate—and politicians get high on it. 
That is why instead of watering down the Fiscal Responsibility Act we should be building on that Act. We should be passing legislation that requires value-for-money tests. In fact we should go so far as to have a taxpayers’ bill of rights that safeguards taxpayers’ money by limiting Government spending to the rates of inflation and population growth. To spend more than that a referendum would need to be held; if 75 percent or more of the people give their support politicians could spend more money than that. Instead this legislation is as it says almost a watering down of the Fiscal Responsibility Act. 
Trevor Mallard has said that this legislation gives greater financial transparency in ensuring the proper spending of taxpayers’ money. It does nothing of the sort. It still leaves the way open for Governments to succumb to the temptation to spend money to buy votes. With a 3-year term a Government can save it all up in the first and second years and spend it in the third year to ensure that it will get in again at the following election—or promise more. That is what we will see more of and that is why we cannot support this legislation. 
I would like to move on to the issue of universities and academic freedom. Crown entities will include universities as organisations in which the Government has a controlling interest. The ownership of universities is an interesting issue. They are on public land but students have to pay to go there. They also get quite a lot of private funding. More and more universities look to the private sector for sponsorship and funding. That private sponsorship and funding saves the taxpayer millions of dollars. If members have been to Auckland University and seen the Icehouse which grows entrepreneurs and young business people they will know that just about all of that has come through private donations and private funding which the vice-chancellor worked very hard at getting. How will private institutions feel about sponsoring or putting money into universities when they see what happens to universities under this legislation? 
There will be a Minister specially designated to control universities. The Minister will have the ability to sack members of the council if the university is not carrying out Government policy. I seriously question how the Government can say this bill is not a threat to academic freedom. If it is not a threat to academic freedom how come the Vice-Chancellors Committee hardly the most libertarian organisation in New Zealand has taken it upon itself to write a public letter seeking support from senior businessmen and senior academics—and many graduates and alumni as I said are in this House—to oppose this bill? But the lobbying has fallen on deaf ears. 
I will continue on this issue in the Committee stage. I will be urging those in the Government who are concerned about academic freedom to think again before they include universities in this bill and I will do so again during the third reading. As I said this bill in its present form is not a bill we can support. 
ROD DONALD (Co-Leader—Green) 
: 
 The Green Party will be supporting this bill in the second reading the Committee stage and the third reading. I say that with some relief because if substantial changes had not been made to this bill at the Finance and Expenditure Committee we would definitely have been opposing it in this House. 
The process that this bill is now undergoing mirrors I believe the bad process that has occurred from the outset. Here we are on Wednesday night—Wednesday night as far as the rest of the world is concerned but Tuesday night as far as the parliamentary timetable is concerned—dealing with a bill that is 500 pages long under urgency in a fashion that I think is totally inappropriate. We are having the second reading debate then we will have the Committee stage—and this bill has something like 18 questions to be debated. The third reading debate will immediately follow the Committee stage. So there will be no opportunity for appropriate consideration of this bill no opportunity to reflect on its detail during the Committee stage and no gap between the Committee stage and the third reading in which to consider introducing last-minute changes as a result of the Committee stage debate. I think that is very poor lawmaking. 
That I am afraid epitomises this bill. When it came to the select committee in the first place it was a shambles. It was a dog’s breakfast. I have to say that the original bill exposed both the ignorance and the arrogance of the executive. The bill as introduced significantly undermined the status and role of Parliament. I am not asking members to believe me when I make that statement although members ought to because we are now supporting the bill; I would just recommend that members read the submission of the Clerk of the House David McGee. His submission was scathing. I have never seen a submission from the Clerk quite like that one. Even his criticism of international treaties was moderate compared with the way he completely demolished the content and structure of this bill. To give members an indication of the depth of his concern I point out that his submission was 24 pages long. It contained 6 pages of recommended changes including some most significant ones. 
The bill as introduced removed the terms “estimates” and “supplementary estimates” from our legislation. It allowed for the aggregation of votes. It reduced parliamentary consultation. It reduced ministerial accountability to the House. It removed obligations to present and publish departmental annual reports. It restricted the supply of information to Parliament and it allowed for capital expenditure to occur without appropriation. I will just dwell on that for one moment; Mr McGee’s comment was “Parliament should regard with inherent suspicion any proposal to appropriate permanently.” and we totally agree with that. Last but certainly not least he raised concerns about excessive delegation of power and the one that we in the Green Party are particularly concerned about is the one that to quote David McGee amounted “virtually to an open-ended power to require Crown entities to comply with international treaties to which New Zealand is a party.” I will not go though everything in David McGee’s submission because it was not the only one that was extremely critical of this bill. Even the usually mild-mannered and reserved Controller and Auditor-General’s submission raised a number of concerns as did many submissions from members of the public and key organisations such as the Vice-Chancellors Committee. 
I am happy to say that the bill has been extensively rewritten hence its length. It has been rewritten because of those concerns but I have to ask the Government why it ever brought a bill to this Parliament in the first place without thoroughly consulting key interested stakeholders such as the Clerk of the House the Vice-Chancellors Committee the Public Service Association and all the other organisations that will be intimately affected by this bill and such as the Controller and Auditor-General who is in conventional terms Parliament’s man and is there to look after our interests. It is simply bad lawmaking for a select committee to have to spend months wading through report after report to fix up a mess that should not have been created in the first place. But thank goodness that people like McGee did make strong submissions because in the end he did win the day and what we have before us is a considerable improvement on what we started with. 
It is still far from perfect. A number of people such as Sue Newberry believe that we should unwind many of the changes that originally came in in 1989 such as the move from cash to accrual accounting. I know that the vice-chancellors want to remove from this bill any embrace of universities under the Crown entity category and to have them put completely under the Education Act. I would say to both groups that I understand their concerns but I think in both cases the bill as reported back addresses many of them. One has only to look at Supplementary Order Paper 315 on the Table to see that the Government has to a large extent capitulated to the requests of the universities by removing a number of the requirements under schedule 6B that apply to universities to keep them onside. Mr Mallard was right when he said in a recent interview that the status quo remains because the Supplementary Order Paper for example removes the application to tertiary educational institutes of sections 174 175 199 210 and 212 of the Act. That goes some way to addressing the vice-chancellors’ concerns. 
But there are other improvements that could be made to this bill. I foreshadow a set of amendments which I will be putting on the Table that do a number of useful things from our point of view. I will listen with interest to John Key’s comments on whether he supports particularly the addition of contingent liabilities to the requirements under section 26J in clause 8 so that the Government’s long-term objectives with regard to contingent liabilities are set out in a Fiscal Strategy Report. We also want to see an extension of the requirements under section 26P in clause 8 to cover overseas trade in goods and services reserves of natural resources social well-being and environmental quality because we want the Government accounts to move to a triple bottom line. We also want to see more transparency with regard to securities derivative transactions investment and guarantees. We want to bring that into section 27 in clause 10. I am sure that many members of the House particularly Matt Robson will be keen to see that we want the Security Intelligence Service to have to present its accounts to the House. At the moment it is let off. For all those Labour members who are concerned about workers’ rights we want to bring in employee representation for Crown entities and a pay and employment equity programme. Second to last but not least we want building societies to be treated on the same basis as banks as far as their being a place where Crown entities can invest their money. 
Ultimately we are keen to accommodate what the Government Superannuation Fund Authority wants which is to be treated equally with the Guardians of New Zealand Superannuation but our solution is to turn the New Zealand Superannuation Fund from an autonomous Crown entity into an independent Crown entity. That should not keep either of those bodies happy and that is exactly what we are keen to do because we want them to— 
Hon Dr Michael Cullen 
: I think National will vote against that too. 
ROD DONALD 
: I am sure National would. It is the old two-party club situation. Both of them have the same attitude when it comes to many aspects of the economy which is why this House needs the Green Party here to present an alternative perspective to Tweedledum and Tweedledee. 
PANSY WONG (National) 
: 
 When the Public Finance (State Sector Management) Bill was introduced to the House in February this year we were told that some of the drivers behind the bill were concerns about Crown entity behaviour and problems with leadership development within the State sector. The bill aims to improve flexibility and retain accountability for public moneys etc. The National Party played the responsible Opposition party role and in the interests of demonstrating goodwill towards the reasons that we were given for the bill we supported the bill to the select committee and raised a lot of reservations. 
I am afraid that after the passage of this bill through the select committee we are not convinced even following the major rewrite of Part 1 that it has answered our major concerns with the philosophy of these changes and I will proceed to outline them. National will not be supporting the bill in its second reading unless there are dramatic changes in the Committee stage. I also call on United Future and the Green Party and say that those two parties owe it to the public not to casually give away their consent to support this bill through the Committee stage and third reading. 
It was quite disturbing to hear the Green Party co-leader Rod Donald say that this bill is far from perfect and they would accept it. I did not know that the Green Party campaigned to come to the Parliament so it could support anything that is less than ideal or perfect. I think it is a demonstration of how unfortunately in this Parliament the United Future party and the Green Party seem to fall over each other to gain favour from the Labour Government. In doing that they have given away a chance to make sure this important legislation the Public Finance (State Sector Management) Bill gets the attention it deserves. 
A bombshell was dropped at the Finance and Expenditure Committee when the Clerk of the House brought in a 26-page submission. At this stage I have a question to ask and I look forward to the Minister of Finance during the Committee stage answering some of the queries that some of us have. Was it intentional for the executive to bring in Part 1 which allows the executive to override the supremacy of the Parliament in making sure that members of Parliament would not be able to request information from various Government departments unless under some strict conditions and also limit the ability to examine the accounts? I want to know whether there was a deliberate attempt by the executive to instruct the writers of the legislation to achieve that effect and indeed they have been caught out by the Clerk of the House. 
Equally worrying is whether the executive actually did not intend to do that. But the legislation has ended up in such a shape that a question has to be asked whether the principal advisers the architects who are responsible for the drafting of this bill set out to rewrite this bill in this way. The Green Party and United Future say that Part 1 about which the Clerk of the House has raised a lot of concerns has been substantially rewritten so there is no problem in supporting the bill. But what happened to Part 2 which concerned the State sector management part and also Part 3 where the universities have expressed a lot of concern about the intrusion of the Government into their academic freedom? 
So why should those two parties the Green Party and United Future simply accept that Part 1 has been caught out by the Clerk of the House and simply cave in to support Part 2 and Part 3? No doubt Mr Speaker you will allow us time to raise rigorous questions during the Committee stage. 
We also raise objection about some of the other issues. The first is that during the last 10 years the Fiscal Responsibility Act has played a significant role in guiding the focus and behaviour of past Governments. It has served the people well. We are opposed to the collapse of this independent legislation to become part of the Public Finance Act. Of course the Minister and others have argued that it is no big deal because the substance of the Act has been maintained and the parts strengthened. But the reality is that the form and perception is just as important. 
We were told during the select committee stage that when the Fiscal Responsibility Act first collapsed to become part of the Public Finance Act it was going to be Part 1 of that Act. At the end it became Part 2 of the Act. The reason we were told was that it was really important to demonstrate accountability and presentation of the Government accounts was important so that had to be Part 1 and the Fiscal Responsibility Act had to become Part 2. 
This example in itself demonstrates that the order of presentation and the collapse of independent legislation to become part of other legislation is just as important to set the tone of the intention of the executive. The executive is sending out a message that the focus on constraining Government spending through a forward-looking document such as this independent legislation the Fiscal Responsibility Act is not as important. I point out that at times form is just as important as substance. We are not convinced that the Fiscal Responsibility Act particularly under this “tax and spend” Government is ready to be collapsed and lose its independent status. 
The other point is that the second part is meant to strengthen the public service sector. One of the newly introduced functions in this legislation allows the State Services Commissioner to review the machinery of government across all areas including allocation of functions to and between departments and other agencies and the desirability of the creation of a new department. One assumes that this new provision is not intended as a one-off but as a permanent ongoing function of the commissioner. What concerns us is that the process was not spelt out as to who can request a review by the State Services Commission and how often and what were the criteria for setting up new departments. One has to have a lot of confidence when vesting so much power in a Government department. 
JOHN KEY (National—Helensville) 
: 
 The Public Finance (State Sector Management) Bill is a mammoth bill. It is 500 pages and is a rewrite of the 1989 Public Finance Act. It is a bill that the House should take a great deal of interest in and have a great deal of concern about. From a financial perspective it is one the landmark pieces of legislation that this Parliament is based on. Along with the Fiscal Responsibility Act which becomes entwined within this bill and the Reserve Bank of New Zealand Act it is probably the most significant legislation in relation to the way in which the machinery of government is run and the $46 billion of tax revenue is spent by the Government. 
The bill came on the back of a Public Finance Act that from its early days until today set significantly high standards of practice for the public sector. In that sense it came from a strong starting point. This bill was brought about in terms of the review that was undertaken to look at the Government and the way in which the State sector was operating. In some respects I am forced to say that the review was flawed. It lacked rigorous definition of the problems involved analysis and the criteria for assessing the options available to it. As a result of that flaw the first draft that came out in terms of the public finance legislation was extremely substandard. 
We have already heard a bit about the submissions made to the select committee and I will address some of those individual submissions in a moment. But first I will just take a moment to thank the advisers to the committee of whom there were quite a number from a number of departments. They worked tirelessly for a long time to try to knock this legislation into shape. 
If we start with the first of the submissions it was by the Clerk of the House David McGee. David McGee is well known around Parliament as one of the truly great brains in this area. He has great knowledge. He has written a number of books on constitutional issues here in New Zealand and on the role of Parliament. When someone like David McGee comes to a select committee and says that the bill is “a Trojan horse” “virus-like” and “post-modernism gone mad” one takes a step back and asks whether this is well-drafted legislation. 
One needed only to take a look at the face of the select committee chairman Clayton Cosgrove when Mr McGee was giving his address to the select committee to know that the Government was firstly going to be found out for what it was trying to push through Parliament and secondly that the Government would buckle at its knees because it could not get the bill through the House in its original form with the support of the Progressives and United Future because neither of those parties would have even thought about voting for the legislation in that form. 
Let us be under no illusion as to what the bill was attempting to do before David McGee had the chance to tidy it up. It was the dead hand of government—the creeping hand of this socialist Government—trying to entwine itself in all parts of our State sector and to get control of things like Crown entities that had been deliberately quarantined off by Acts of Parliament. I will come back to that very point in a moment because I have in my hand—as Chamberlain once said—in this case a letter from the vice-chancellors of the New Zealand universities and it has been signed by eight of them. 
It contains an interesting part that I want to reflect on and if I may I will take a moment to read from the letter sent to alumni of the universities: “Universities were given an undertaking by Ministers Mallard and Maharey that in stage one represented by the bill currently before Parliament the Government would strictly maintain the status quo.” But the letter goes on to state: “In stage two which will lead to further legislation in the future changes to the status quo are being considered. The power to review the functions and activities of universities and to advise on the establishment and abolition of universities is being considered.” 
I want to go back to David McGee’s submission for a moment and to talk about what was in the bill before the Clerk of the House got a chance to tidy it up. [ 
Interruption 
] Mr Hughes has a habit of interrupting because he does not have time in his busy schedule to go and read very important legislation. I offer Mr Hughes a bit of advice. I could give him about a dozen documents. I realise that he can pick up the bill that he is now advanced in his adulthood and is able to clutch a group of papers 500 pages thick with his vice-like grip but that does not mean that the member can actually read. Nor has he demonstrated any ability to understand. My advice to Darren Hughes is to pick up the bill have a read of it and while he is doing that to read the commentary and a couple of the submissions because he will learn a thing or two. 
For instance the member might learn that under the bill in its original form estimates were about to be removed from this Parliament. That would be a substantial removal of Parliament’s ability to scrutinise anything. Under the Official Information Act Parliament was going to be limited in its ability to question the executive because under legal grounds—not political grounds—it would have been quite possible for Government departments to refuse to answer questions or to provide information. That would be on political grounds a disgraceful position to find ourselves in. 
I also note that it was not just the Clerk of the House who came before the select committee. Others to appear before the select committee were the Commerce Commission led by Paula Rebstock the Chief Ombudsman John Belgrave and others. They made telling submissions to the select committee and had some impact on changing the bill. 
But in particular I want to make reference to the submissions by Sue Newberry and Alan Robb. I want to say—before the Minister of Finance has a meltdown—that I do not support those submissions. I do not support their position which was that derivatives should be excluded from the State sector. The State sector—really the Debt Management Office—demonstrated to the committee that it has a very solid grip on its very limited derivatives use. To argue that it is somehow exposing the New Zealand taxpayer to what could be an Armageddon of Enron-type derivatives is an exaggeration. 
I want to touch briefly on three major points before my time runs out. The first concerns the embedding of the Fiscal Responsibility Act in this legislation. That Act was an iconic piece of legislation. It was a piece of legislation that stood this Parliament and this country in fine stead. To take away from its significance by burying it within the Public Finance Act is in my view a retrograde step. Secondly I want to talk about the move to aggregate outputs and to define things in the form of outcomes. While that is a noble thought and while it has some great possibilities if it is administered correctly I think there are huge risks that outcomes will in fact become very woolly thinking from very woolly ministries and will be pretty difficult to understand. 
Hon Dr Michael Cullen 
: It is always a risk. 
JOHN KEY 
: It is always a risk. I would fully accept that in one sense looking at the Immigration Service the outcome we want there is to have immigrants coming to New Zealand settling here and making a positive contribution. That is the right outcome—not necessarily the output which could be that we are processing people through our Immigration Service sufficiently. We actually want the right people processed. I think there is a risk. 
Thirdly I want to mention the Crown entities. As I mentioned earlier in relation to their role in universities I think this legislation will have some impact on them and I think that is probably unnecessary. We look forward to the debate at the Committee stage. 
A party vote was called for on the question  
That the Public Finance (State Sector Management) Bill be now read a second time 
. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Bill read a second time. 
Instruction to Committee 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That it be an instruction to the Committee of the whole House on the Public Finance (State Sector Management) Bill that it take the bill part by part 
. 
A party vote was called for on the question  
That the motion be agreed to 
. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Motion agreed to. 
In Committee 
Part 1 Amendments to Public Finance Act 1989 
JOHN KEY (National—Helensville) 
: 
 Part 1 in many respects cuts to the heart of what this debate is all about which is the spending of Government money. If this Government knows anything it knows how to spend money. It loves spending money and it will spend $23.4 billion worth of new money over the next 4 years. So the Government should have a lot of interest in this bill. I have no doubt that one of the reasons it decided to push this legislation through Parliament was that it knew it was going to spend so much money and thought it had better have a darned good idea of where the money was going and how it was being spent. I fear for the Minister of Finance because under this legislation he will probably be giving Government departments not only more money—and when I say more money I mean a lot more by any standards—but also a lot more authority and accountability. 
We have seen in Government departments some quite excessive spending in recent times in a number of areas. I do not need to get up in this Chamber and talk about things like hip-hop tours and twilight golf—stuff that we know the Government has enjoyed funding and looks forward to funding. We have seen excessive spending and wasted expenditure across a lot of areas. It is easy to look at things like health and education and to argue that because they are such important parts of our economy and our society somehow we should not challenge the idea that the money being spent in those areas is being spent correctly. For a moment let us look at health spending in New Zealand. It will have gone from around $6 billion to around $10 billion by the end of next year—a $4 billion increase or around 80 percent of the original Budget spending. When I look through Part 1 of the bill I do not feel a great deal of confidence at all that the $10 billion worth of expenditure in that very important area will be spent well. 
One of the reasons why I do not have a warm fuzzy feeling in my tummy when I look at Part 1 and think about the $10 billion that will be pouring into health is that this bill will allow for the aggregation of appropriations. It will allow a Government department to put together a number of appropriations into a much larger appropriation which will be much more difficult for Parliament to scrutinise. I would feel a lot better about that if when I put parliamentary questions to the relevant Ministers I got answers that were worth anything more than the garbage that often pours out the other side. Maybe I will pop up to my office and pull out a few of the juicier answers. Maybe I could spend 5 minutes in this debate tonight on reading out the answers to questions like this: can the Minister explain to the House why $3.4 million of unallocated expenditure in XYZ vote has taken place? The answer: “That’s for me to know and you to find out.” or something like that is not an extreme example of the kinds of answers that come across my desk. What is this legislation going to do? [ 
Interruption 
] Actually I got one the other day about $5.7 million for the Seasprite helicopter. [ 
Interruption 
] No it is true. The Minister of Finance answered it. The Minister of Education who is also the Associate Minister of Finance and who answers a few of those questions is not very hot though. 
What will the aggregation of appropriations allow? 
Hon Dr Michael Cullen 
: He’s the dark side of the force. 
JOHN KEY 
: Well there is definitely a dark side yes. He is the yang part of the yin and yang is he not? Does the Minister have any hints as to what that member’s new portfolio will be on Monday? Perhaps we should not go there. I thought of the customs portfolio. 
Hon Dr Michael Cullen 
: Better than anything the National Party would be offering. 
JOHN KEY 
: It will certainly be better than anything we would offer him; I am prepared to accept that. As long as he does not become the junior whip; we are very fond of the existing one. 
Hon Dr Michael Cullen 
: Been there done that. 
JOHN KEY 
: Oh he has been there and done that. Well one comes and one goes. 
Hon Dr Michael Cullen 
: He hasn’t got the hair for it these days. 
JOHN KEY 
: He does not have the hair. But it is little like public finance Acts: one comes and goes with that sort of stuff. The aggregation of appropriations will lead in some portfolios to real ambiguity about what is going on. We can see what will happen.The game will be played a little bit like this. The ministry will see how much it can hoodwink the relevant Minister in the chair by putting together as many as it can of the most ambiguous and unrelated appropriations into one. So we will have the coffee service money being allocated and put together with the money for the new Seasprite helicopter parts for the one that crashed the other day. They will be put together in one appropriation. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I recall that a long time ago as a stage 1 English student I learnt about stream of consciousness novels. We have just had a kind of stream of consciousness speech. I am still trying to work out what Mr Key was trying to say in that speech. As I recall it he actually said that the National Party really supports this bill but is desperate to find some reason to oppose it. Apparently the reason to oppose it—if I have it right—is that output appropriations may comprise more than one class of outputs. I ask the member whether that is correct. That is the provision in the bill? 
John Key 
: Yes that’s right—that’s one of them. 
Hon Dr MICHAEL CULLEN 
: That is right. That provision is designed to give a little more flexibility in what is occasionally a very rigid system within the Public Finance Act in that respect. 
This is an important part of the bill because it is the part where the Clerk of the House raised some very important issues. Contrary to what Mrs Wong seems to think the Clerk is happy with the bill as reported back. He believes that the amendments in the bill take care of the objections that he had to the bill. [ 
Interruption 
] Well I have no problem with the Clerk raising issues. I would be worried if the Finance and Expenditure Committee had not listened carefully to the Clerk and dealt with those issues but it has. So I say to Mrs Wong that she should celebrate success. She should stop living in the miserable little world of defeat that she inhabits at the present time. She should come out—come out if I may say so and as I would say to a number of members of the National Party—and celebrate success along with the Government at the present time. 
I also want to deal with very few other matters. What has happened in the bill is that the fiscal responsibility part which was Part 1 has now become Part 2 so Part 1 is now the appropriations part. Part 1 is important in a very crucial constitutional sense. It is about the fact that the Government has to go to Parliament to seek approval for appropriations. That is the whole function of Parliament around the issue of confidence and supply and the fact that the Government can survive if it can command a majority in those matters. But it is also about the issue of how we present those accounts and how they are seen to be properly presented. I think that the member was right if I can allude to a previous statement to say that outcomes can be very fuzzy. I do not think there is any way of solving that. There will always be attempts to try to define outcomes more closely and there was always a tendency for the Government to drift back towards focusing on outputs rather than outcomes because they are easier to measure and easier to show results with. Nevertheless I think that the legislation is right as the 1989 Public Finance Act was right in terms of the focus on outcomes. 
There have been some strange things going on in terms of some of the criticism of the bill from outside. The select committee has quite properly dealt with some of those criticisms and some of them were just basically tipped straight out of the window—as they should have been; they were really rather peculiar. One of the most peculiar of those criticisms was the notion that Parliament or the Government—it was never quite clear which—should set the accounting standards by which the Public Finance Act operated and under which the Government operated. Now I have been in politics long enough to remember the time when the Government used to set its own accounting standards. I think it is fair to say that when it did so the standards tended to be rather low and somewhat elastic and it was very difficult to work out what was actually going on within the Government accounts. The Government can no longer engage in that kind of behaviour. It is very clear within the public accounts if the Government tries to engage in accounting fiddles. 
The second part of that was the notion—which it is probably more appropriate to discuss later although we can deal with it in this part—that somehow or other under accruals accounting it is easier to sell assets. I have to say to the people who have that strange view that the public’s objection to selling assets has nothing to do with the accounting treatment thereof within the Public Finance Act. There is a quite simple political issue around Government ownership and public ownership of assets. That is the political test that the Government will always have to face on that issue. Accruals accounting gives a much more accurate measure of the fiscal consequences of the sale of assets as long as those assets are properly valued and that is one of the difficulties on occasion with the valuation of some State assets. 
I think that this is a good bill. There will always be some arguments around the fringes of this bill. I make no apologies for bringing the Fiscal Responsibility Act within the bill. That was the original intention; it is what Treasury supported in 1993-94. I think that Treasury was right at the time because everything within the Fiscal Responsibility Act is appropriate to put within the Public Finance Act. The final point I would make in response to the member is that it is not for him to preach to me about fiscal responsibility. It is the National Party that wants a looser fiscal policy not Labour. 
CRAIG McNAIR (NZ First) 
: 
 I do not intend to take too long on this part. 
Brian Connell 
: Take as long as you like. 
CRAIG McNAIR 
: About 5 minutes is not too long; I will have made my point. I just want to compliment the Minister of Finance. He is a real character sometimes. He has a wicked sense of humour and he is very entertaining to listen to sometimes. 
Simon Power 
: Is this his valedictory? 
CRAIG McNAIR 
: No no—do not worry. The Minister was talking about the valuation of State-owned assets. I have a better idea: the Government should just not sell them. Then we will never get into problems with the valuation of those assets and we will be able to steer clear of any ambiguity or problems that might occur. 
I believe that Part 1 is a very important part of this bill just as Part 2 is. Part 3 is also important because it involves the academic situation. I think Part 1 is important as John Key stressed as it allows for the allocation of money and expenditure—the Government’s finances. It includes all of that. When we add up the billions of dollars that go through the Government coffers we see that Part 1 is a very very important part of this legislation. Apart from the Minister talking about how some members of the National Party need to be a bit more clear and some of them might need to— 
Opposition Member 
: Careful careful now! 
CRAIG McNAIR 
: That is what the Minister was saying as far as scrutiny is concerned. Something I would like the Minister to clarify is whether at the end of the day the Government will be able to cover up a fiddle and if it could how that would happen and what would happen. 
Hon Dr Michael Cullen 
: Hell no—you cannot even cover up Judy Bailey’s salary. 
CRAIG McNAIR 
: Well that is a very good point. But that is something I would like the Minister to address. 
PANSY WONG (National) 
: 
 It is really sad to hear that the Minister of Finance could not find anybody even on his own side of the House to go out and celebrate with him whatever he wants to celebrate. He is so desperate that I cannot resist taking a call to say to him that I am struggling to see how I can go out and celebrate Christmas when he refuses to answer the call from my colleague John Key to put some turkey on the table. 
Hon Trevor Mallard 
: Turkey’s on the table! 
PANSY WONG 
: I say to the Minister that if he does not want to put the turkey out maybe some Peking duck might do the job! Well that got the Labour members excited; they have not felt like that for a while. 
I really would encourage the Minister to take a few more calls. It is very encouraging to see that he is taking calls at such an early stage but he has still not answered my question that I posted in the second reading. Was the inclusion of the cock-ups in Part 1 that were picked up by the Clerk of the House a deliberate move by the executive or was it incompetence in drafting? That is a very simple question and I feel that the Minister of Finance owes it to the public to say what happened.The select committee process is not an invitation for submissioners to rewrite legislation; it is a chance for them to say whether they have any actual concerns. However the submission of the Clerk of the House led to a major rewrite of Part 1. 
I would like the Minister to take a call on a very thoughtful submission made by Dr Graham Scott the former Secretary to the Treasury. He raised good points and I am looking forward to the Minister answering them. Dr Scott said that the changes proposed in Part 1 were meant to lead to more accountability in the way that information might link output to outcome. But he reckoned that would not be achieved by the attempts in this bill to aggregate the outputs. Indeed a better outcome can arise only if a department started to express its outcome statement in more practical and assessable terms. That is so true. Sometimes we pick up the copy of a Government department’s statement of intent and find a statement that it will improve the well-being of New Zealanders. I think that is a very admirable outcome but to translate it into output certainly would be very difficult. 
If a department wants to demonstrate that it could have a set of good outputs that lead to the outcomes specified by the Government then it should have a management plan that truly reflects the Government’s intention. We are not too sure that what is expressed in Part 1 about aggregating outputs etc. would lead to that. Dr Scott also pointed out that if we really wanted a major improvement in a Government department’s output statement and in the outcome-oriented approach Ministers themselves have to show a lot more interest in their Government departments and be prepared to take responsibility for expressing those goals and those high-level outcomes in terms whereby the Government departments can translate them into outcomes that are practical and measurable. 
As well as questioning the rewriting of this legislation we question whether there will be investment in research and in the training of those Government departments. One example I encountered just recently was during the financial review of the Takeovers Panel when the Chairman Mr John King expressed dismay to the Commerce Committee that although the Government had promised it money for research into how the Takeovers Code could be made more effective that funding had not been forthcoming. 
ROD DONALD (Co-Leader—Green) 
: 
 I appreciate the opportunity to speak on what is now Part 1 of this bill. As Dr Cullen pointed out it is Part 1 only because of the excellent work done at the Finance and Expenditure Committee and particularly as a result of the submission made by David McGee the Clerk of the House. In the Public Finance (State Sector Management) Bill as introduced this very important part the Public Finance Act was dumped at the back; now it is at the front where it rightly belongs. I can see the crocodile tears now from Dr Cullen. I know that it may be symbolic but as Mr McGee pointed out in his submission it is absolutely crucial that we get these things round the right way. 
It is also crucial in our view that we get the content right and I look forward to support from other colleagues in the Chamber particularly those from the Government for the amendments I am putting up to Part 1 and I would like to draw members’ attention to our amendments that are on the Table. 
The first amendment I would like to put up is simply to omit subclause (4) of clause 6 “Interpretation”. This bill does an extraordinary thing; it actually deletes from the Act the definitions of “contingent liability” and “cost”. I would have thought that in this time of increasing contingent liabilities the last thing we would want to do is to delete that definition from the Act but that is exactly what the Government wants to do. I am surprised that other parties in this Committee have not already raised this concern. Yes I know that contingent liability is defined under generally accepted accounting practice but that is not an excuse for removing it from the existing legislation. 
The twin of that amendment is that we are proposing to insert total contingent liabilities under new section 26J in clause 8 because we believe that the Fiscal Strategy Report which sets out the Government’s long-term objectives should not only cover operating expenses and revenues and the balance between them the total level of debt and the total net worth; it should also state the Government’s long-term objectives for contingent liabilities in particular. 
But wait there is more. If members look at our amendment to section 26P “Economic forecasts” in clause 8 they will see that we believe that the economic forecast requirements are far too narrow. What is there is of course all well and good but we believe that the economic forecasts in section 26P(1) should also include forecasts of movements in New Zealand’s overseas trade in goods balance our overseas trade in service balance and our reserves of natural resources. I would have thought that given the Maui gas debacle that would have been an obvious addition to the economic forecasts—to actually know what the state of our stock of natural resources particularly fossil fuels is. But that is currently an omission from the economic forecasts and I hope the Minister of Finance will see the merit of supporting this amendment so that it can be added. 
Of course those economic forecasts should also include some measures of social well-being and environmental quality. The Government has a lot to say about triple bottom lines. Its members go off to Johannesburg to Rio Plus Ten and present a report the Hon Marian Hobbs the Minister for the Environment puts out a statement about the Government’s intentions on triple bottom lines and the Prime Minister Helen Clark waxes lyrical at conferences about triple bottom lines. But do members actually see it in the Economic and Fiscal Updates? No we do not. I think it is time for the Government to put its money where its mouth is when it comes to presenting a whole-of-Government perspective on these issues. We would extend that to new section 27(2) in clause 10 so that in the annual financial statements the Government also reports on the environmental impacts of Government activities on water use energy use waste emissions and discharge and use of hazardous substances and in relation to the impact of Government activities on people and communities such criteria as life expectancy— 
DEBORAH CODDINGTON (ACT) 
: 
 We are debating Part 1 of this huge bill and I want to deal with clause 6 “Interpretation” which deals with the definitions of Crown entity and Crown entity group and the meaning that is given to a Crown entity. The Government argues that the amendments on Supplementary Order Paper 315 in the name of the Hon Dr Michael Cullen exclude tertiary institutions and universities from that. In fact all that it has done is to exclude them from some of the requirements to provide information. But the Government is not preserving the status quo. In fact it is being very tricky with regard to its definition of the status quo. The Minister may say that he is preserving the status quo because in practice the State Services Commission may offer policy advice on higher learning issues to tertiary institutions—the commission may offer that advice.Yes that is the status quo but the commission does not have a statutory legislative requirement to do that. In fact if we are to legislate for the commission to be brought into doing that why do we have the Tertiary Education Commission and the Ministry of Education? Are those not the proper agencies for the Government to seek policy advice from? Why trick around with the definition of the status quo? The Minister knows that in reality that is what he is doing. He looks bewildered but he knows exactly what I am talking about. He has seen the same correspondence that I refer to. He knows that the status quo in practice is not the same as it is in statutory terms. 
The other day I ran into the Rt Hon Sir Geoffrey Palmer in the Koru lounge. 
Hon Trevor Mallard 
: Name-dropper! 
DEBORAH CODDINGTON 
: I had never met Sir Geoffrey Palmer before so yes I am name-dropping. He is one of Labour’s people. It was on the same day that the  
New Zealand Herald 
 had published an editorial that decried the undermining of academic freedom by this bill. I showed Sir Geoffrey Palmer the editorial and he was astounded by it. He said that he had understood that when the amendments to the Education Act were passed he had safeguarded the universities from that very issue. He was appalled that the party he had led—his own people—now that it was in Government would do that to the universities when he had tried not to do that. 
There are polytechs that have behaved appallingly when it comes to public money and they should be brought under control. Nobody is arguing against that. Christchurch Polytechnic is a case in point. However this Government is using one institution—and there are more but I am naming one—as a Trojan Horse to rope all tertiary education institutions into the same corral and exert control over them. The universities have presented numerous submissions to the Government on this issue. In fact they were assured in the words of the former State Services Commissioner Michael Wintringham that the universities had been brought into this legislation “more in the nature of a cock-up and not a conspiracy.” They were assured by Mr Wintringham that tertiary education institutions would be excluded from that provision but all that the Government has done as a sop to the Vice-Chancellors Committee is to bring in a Supplementary Order Paper that excludes them from the reporting requirements set out in clauses 174 to 176. 
That is not enough. The Minister needs to take a call to explain why this Government wants to include universities and public tertiary institutions under the definition of Crown entities. I refer to clause 48(1); the Minister has seen it. The universities are clearly listed in it. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I will take a brief call because this is an issue that has had a certain amount of public discussion of rather low quality I have to say. The ACT party once used to show some backbone—if I may put it that way—in dealing with special pleading that came from interest groups. Apparently now it is just another populist party that waves in the wind and sticks its wetted finger in the air to see which way the wind is blowing. For the information of the member I will explain that tertiary education institutions have been Crown entities since 1993. The Public Finance (State Sector Management) Bill does not make them Crown entities; they are right now. Nothing has changed in that respect. What they wanted was to cease to be Crown entities and to be totally not related to the Crown in terms of a financial interest by the Government in tertiary education. That is what they wanted. They are not going to get that and nor should they get it. The Finance and Expenditure Committee rejected overwhelmingly that submission from the universities—and quite rightly so. 
Those institutions are bodies that do not pay rates on the basis that the Government has a financial interest in them. On reading the rubbish I have seen in the last couple of days I have been tempted to offer them complete independence in return for them paying rates to their local authorities. I think they might change their minds at that point and come scurrying back under the skirts of nanny State rather rapidly in terms of the financial implications that that would have for Auckland University and Victoria University in particular given the value of their properties within the central areas of Auckland and Wellington. 
We have put aside for the moment some important issues—for example the issue of the argument around ownership. We have put aside the issue of consolidation which is being addressed by the Financial Reporting Standards Board. The only change the bill makes is that the State Services Commissioner has the legislative mandate to be able to advise on the wider State sector which includes all the different varieties of Crown entities—advice only and nothing more than that which he or she of course can do anyway without a legislative mandate. It is not a requirement that the commissioner has to give advice. He or she may advise and I think that that is perfectly appropriate. We appoint members to the councils of those bodies. Successive Governments have done so for many years. We still provide the largest part of the funding of many tertiary education institutions. The overall majority of the funding still comes from the Government. Indeed the member herself used the term “public tertiary institutions”. It is hard to use that term and then to argue that those institutions should not in some sense be encompassed within a very narrow and quite specific definition of Crown entities which is much less restrictive upon them than the general definition of Crown entities within this bill. 
I have been appalled as an ex-academic at some of the comments that have been made by the universities in that context. They show a remarkable lack of understanding of what is within the bill. It is a play not for the status quo but for a major shift in terms of the status of universities within society at the present time whereby the Government has no financial interest within the universities. That is interesting. When I was an academic we took that interest for granted. My goodness me we were subject to the State Sector Act. I was automatically dismissed as a university lecturer on being elected on election day in 1981 because I was a public servant under the definition of that Act. It did not affect in the slightest what I taught in my courses. I did not feel that academic freedom was constrained in any sense in terms of the opinions I expressed at the result of what was happening within the State Sector Act as it was in those particular times in the predecessor of the current legislation. I have to say that the submissions made by the universities on the bill were pretty much without merit. 
We have tried to take on board a number of technical issues and have dealt with those. The select committee was pretty overwhelmingly of the view that the bill in this respect should be pursued. I think the Opposition parties were by and large in agreement with that particular position and that is a wise move. There are some difficult issues still to be worked through in terms of consolidation. There is an issue to work through in terms of the so-called ownership interest—what it is and what it means. That matter is put aside; it is not affected by this bill. 
JIM PETERS (NZ First) 
: 
 Contrary to what the Minister said that is a very revealing and partial viewpoint. It is certainly not one the universities came to the committee with or still have on this very day despite the Minister’s amendments. 
The position as he knows and as has been stated is that the Public Finance Act set out the new Crown entity. A large number of entities were constructed although the term was not properly defined in that Act. Instead they simply became Crown entities because the Act said they were and there are many others such as polytechs colleges of education school boards of trustees the Commerce Commission the Securities Commission housing bodies district health boards and so on. In fact the designation in the Public Finance Act as stated at the select committee had little practical effect. 
That was so because most sections of that Act do not deal with universities. I am reliably told that in that Act the Minister covered only five sections relating to universities. They concerned such matters as one would expect as the preparation of annual statements and auditing. Those sorts of matters are properly and were at that time part of the Act and universities never found those matters unreasonable or burdensome at all. 
Those sections did not impinge upon the universities’ autonomy. They related back to the discussions that took place under the Lange Labour Government and the work done by the then Professor Keith and others to put together a settlement because the University of Auckland and the University of Canterbury took a case against the Labour Government of the day. The universities were of the opinion quite rightly that the Government had failed to consult them on the Learning for Life reforms. 
That is the historical background to the statements made by the Minister just now. As a former university lecturer he knows how important and precious—precious in the real sense—universities have valued autonomy and academic freedom. I speak personally because I have had a long-term association with the University of Auckland. The work that university has done was recognised by Oxford University in its appointment of Dr John Hood to the university. The size of Auckland University and the quality of the work it has done are known throughout the country and internationally. 
The real contention for Auckland University and for other universities as well is the question why this Act has changed the core nature as they see it of the relationship established under the Public Finance Act particularly as the Education Act set out the intention very clearly that universities would have as much independence and freedom to make academic operational and management decisions as was consistent with the services they provided and the efficient use of national resources in the interests of the nation and so on. The Act also declared in section 161 that it was the intention of Parliament that academic freedom and the autonomy of institutions were to be “preserved and enhanced”. Universities feel that greatly. Finally section 161(4) states: “In the performance of their functions the Councils and chief executives of institutions Ministers and authorities and agencies of the Crown shall act in all respects so as to give effect to the intention of Parliament as expressed in this section.” 
That is the background the university group presented to the select committee. Despite what the Minister said it feels that the intention of those sections of the Education Act and the thrust of the work done by the Keith committee are deliberately being thwarted. I will talk more about that when we debate Part 3. So contrary to what the Minister said those university representatives feel that this bill in its original form and even with its recently proposed amendments does not give effect to what they thought they had and what they had hitherto exercised at universities council by council. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to Part 1 of the Public Finance (State Sector Management) Bill what I am curious to observe in this legislation we are debating tonight is an unprecedented backdown by a Minister in presenting legislation to this Parliament. As I count the pages in Part 1 that have been struck out by the Finance and Expenditure Committee it seems to me that three-quarters of the original Part 1 introduced into this Parliament has been struck out and replaced; only a quarter of the Minister’s original intent remains. That is unprecedented. I do not recollect in my time in this Parliament any other occasion where a Minister has had three-quarters of what he or she had proposed to Parliament struck out by the select committee. What is more troubling is that I gather a lot of this was struck out on the strong submission of the Clerk of the House. 
What this legislation is all about is the public scrutiny of what a Government is up to. Having been deputy finance Minister for a number of years I understand to some extent what the Minister was trying to achieve. The issue is the compromise between the achievement of outcomes the Government is seeking to achieve and the outputs specified in estimates. I understand the problem—that at times there is difficulty in making sure how well the outputs specified which this Parliament approves estimates to fund can ensure the achievement of the wider outcomes the Government wants. 
I think a number of issues need to be explored by this Committee in some detail tonight because if we look at the parts of this Part 1 that are “struck out” we can see that it is troubling that so much of what is struck out is not amended in the new provisions in Part 1 inserted by the select committee. A lot of this stuff is just struck out. For example I am looking at all the provisions struck out under the bill’s original clause 8 where a number of those provisions related to some of the principles around and the fundamentally important parts of the Fiscal Responsibility Act. They have simply been struck out. 
But incorporated in the new unanimous provisions of Part 1 and particularly in new clause 14 are the estimates. They have been reinstated. I think the Minister should explain to the House how the balance of what he was seeking to achieve remains within this bill because a number of clauses around the Budget Policy Statement the various fiscal updates and the pre-election fiscal update are all in the “struck out” parts of Part 1 and there are a number of reinstatements of estimates requirements in the new unanimous clauses. 
This is such important legislation because it involves the transparency of the Government’s spending plans and the ability of this Parliament to scrutinise Government spending and the way that that spending relates to the outputs and outcomes of Government departments. Yet it is not clear from Part 1 what the final balance of all that is. Quite clearly when the Minister introduced this legislation he intended that there should be more discretion for departments: that outputs would be aggregated and that departments would have greater flexibility—perhaps to pursue the Government’s wider outcomes. The problem with that is that this Parliament has less ability to scrutinise particular expenditure in detail because the aggregation of outputs leaves departments more flexibility. 
I can understand what the Minister was trying to achieve but he should explain to this Parliament what the changes delivered by the select committee to this bill will mean in that balance. What kind of balance will we now see given these new clauses here with the specific outputs those estimates provisions will reinstate in the legislation and the way they will tie in with what he was trying to achieve? I think this legislation is so important that Parliament should hear some serious comment from the Minister on how the select committee changed what he sought to do. 
BRIAN CONNELL (National—Rakaia 
 I start by thanking my senior whip for giving me the opportunity to come down here and debate this legislation this evening keeping me away from the media party and so looking after my health. I very much appreciate that. 
Today is something of a red-letter day because I find myself agreeing with something Michael Cullen said about polytechnics. I think he is right on this issue. I believe there is an issue relating to polytechnics as opposed to universities in terms of responsibility and accountability and how polytechnics spend their money. It is a matter of public record and concern that they have been engaged in activities that are less than satisfactory. I do not blame them for that. I am simply saying that a loophole has been exploited and on this issue I think the Minister is quite right in closing that loophole. 
Hon David Carter 
: It’s Government policy. 
BRIAN CONNELL 
: I accept there is that responsibility but on this particular issue I think the Government is exercising good judgment in closing it down. I also think the House owes David McGee a debt of gratitude. The work he has done in bringing the legislation to a point where it is reasonably constructive and able to be debated rationally is something we should be grateful for. 
The issues that concern the National Party with some gravity are the appropriations. More than one class of output has been combined. On the face of it that seemed a reasonable idea. A lot of the issues that come before Ministers are minor. Therefore giving Ministers the flexibility to make judgments within their portfolios and within their budgeted expenditure is reasonably sensible. But the problem arises as to the quality of the Minister. Once a Minister is given the flexibility the range and the scope to deal with appropriations if he or she is not capable of dealing with that then we have an issue. I know there are some members of the Government who probably have no idea that the letters “bs” stand for “balance sheet”. I think their abilities to manage cash read cash-flow statements etc. are something that would concern most members of the business community if they realised just how big some of the budgets the Government has are. So anything that enables or allows that lack of accountability or control is something we simply cannot agree with. 
We are talking here about accountability for taxpayers’ money and we in the National Party take that extremely seriously. We have only to look at how some of the money in this country is being expended today to understand why we have concerns. We know that some members of the Government are very enthusiastic spenders. Today on television Dr Cullen waxed lyrical on how he intends to spend more rather than reduce taxation or costs and that gives rise to the types of concerns I am talking about. 
For example the National Party is concerned about the level of welfare expenditure in this country which is running at something like $20.5 million a day. We are experiencing the best of times yet the working-age population on welfare is bigger than the city of Christchurch. The Government in its latest Budget intends to extend that welfare trap to middle New Zealand as well which is why we do not support the legislation and why we need the ability to hold the Government accountable. 
GORDON COPELAND (United Future) 
: 
 I will take a brief call on section 26N “Statement on long-term fiscal position” inserted by clause 8. This clause obliges Treasury no later than the second financial year after the Act comes into force—and by my reckoning that will be before 30 June 2006—to present to Parliament a statement relating to a period of at least 40 consecutive financial years. That would be if you like a long-term forecast of New Zealand’s financial position—or more correctly the financial position of the Government or the Crown—for the next 40 years. That will be a very welcome development because one of the things that has bedevilled New Zealand in the last 30 years or so has been the concentration of successive Governments on short-term goals—something that is understandable in a highly-politicised environment—often to the exclusion of longer-term strategic thinking about the direction of the country. 
Yet that longer-term thinking if we think about it is vitally important in a number of areas. I will mention just a few of them. The first one is superannuation. We actually need to know here and now what the liability of the Crown for superannuation is going out 40 years. We would be well served if we had a well-researched actuarial assessment of what superannuation will cost the country over the next 40 years. I know that some work has already been done on that and I have seen some of the projections which of course bring into account the demographics over that period of time and other assumptions. Such an assessment would make the situation very very clear for those people who still have doubts for example about the worth of the New Zealand Superannuation Fund commonly known as the “Cullen fund” and it would hold those parties to account in terms of throwaway lines about how we should just wrap the whole thing up and pay off some debt or whatever. It is not so simple and a 40-year projection would illustrate that for all concerned. 
There are other things. Roading for example lasts for at least 40 years if not longer. In fact it is a bit like the carpenter’s hammer—as long as one keeps it maintained and upgraded from time to time it will last forever. Transmission for the national electricity grid is a similar thing. Most of the transmission grid we have now has been in existence for 40 years. Hospitals are another case in point. Most of our hospitals have a very very long life and recently we have been going through a period of replacing many of them. Then we look at things that will be introduced in the future I hope like public-private partnerships. Certainly if United Future has a bigger say in the next Government that will be something we will be looking at much more seriously. 
 Interruption 
] I would have thought the National Party might actually be in agreement with some of these policies but maybe those comments just illustrate the point I am making about concentrating on short-term political expediency to the exclusion of longer-term considerations. 
Public-private partnerships could be used for prisons roading—as we already have in our legislation—hospitals and so on and could enable the infrastructure development in New Zealand to proceed much more quickly. I am a bit concerned at times that we seem to be focused on funding all those capital costs out of current revenues when we could take a longer-term view smooth it intergenerationally and end up with better outcomes for our nation. So I think the new provisions in the bill will be positive for the country. They are a very good inclusion and I will look forward to seeing before June 2006 the first 40-year projection prepared by Treasury. 
Hon DAVID CARTER (National) 
: 
 I missed the contribution from Dr Cullen but from the ensuing debate I gather that Dr Cullen suggested to the Committee that the Public Finance (State Sector Management) Bill which we are debating tonight will actually ensure that we get better accountability for things like the debacle associated with Christchurch Polytechnic. Well I have to say the Christchurch Polytechnic matter is about bad Government policy. It is the policy that gave something like $6.5 million to that well-known Labour Party lackey Vicki Buck and that needs sorting out. I would not have thought it took a bill of some two or three hundred pages to be passed under urgency—at the same time as the press gallery party is being held—to sort that out for the future. It always surprises me that a debate on legislation like this seems to be timed for when the press gallery has its annual party. [ 
Interruption 
] The Minister suggests it is all about more scrutiny of taxpayers’ money but maybe on this occasion he actually does not want the press gallery to scrutinise the debate. He does not want the press gallery to scrutinise the legislation. 
It is fine for Gordon Copeland to stand up and suggest that he has worked on the Finance and Expenditure Committee and has accepted the word of the honourable Minister. 
Martin Gallagher 
: How can you think the press gallery is so shallow that they would not be here for this really important debate? 
Hon DAVID CARTER 
: I invite the member to raise his eyes skyward and look at the press gallery. It is absolutely empty! If the member cleans his glasses I am sure he will see for himself that not one member of the press gallery is there and that is probably the very reason the Minister decided to run a large piece of legislation through on the argument which he gave the House that it will improve transparency. I am sure that as we get further into the debate tonight we will come to the conclusion—certainly on this side of the Chamber—that this legislation is not about increasing transparency of expenditure. 
This is all about Dr Cullen being worried about transparency. He has been caught out and is so embarrassed at this huge gift of taxpayer money that has gone in the pocket of Vicki Buck that he has brought this legislation into the Chamber during urgency. When the press gallery— 
Hon Brian Donnelly 
: Isn’t that National Party policy? 
Hon Dr Michael Cullen 
: Yes it was absolutely. 
Hon DAVID CARTER 
: Excuse me there is no need to suggest that this legislation that effectively wipes the Fiscal Responsibility Act is National Party policy. I assure Brian Donnelly that he has not done his homework if he thinks that this party will give way on the Fiscal Responsibility Act. It has worked well. We have had accountability as we have seen with the Government being totally embarrassed by the recent Vicki Buck gifting affair at the Christchurch Polytechnic. We have seen the embarrassment it has caused the Government. Maybe Brian Donnelly should take a call if the Minister will not and assure us that this legislation will provide more transparency. I do not accept that argument at all. 
Hon Brian Donnelly 
: Criticise them for not fixing it up—that’s fair enough. 
Hon DAVID CARTER 
: I do criticise them for not fixing it up. But I understand that Dr Cullen made a contribution earlier suggesting that this legislation will mean those sorts of horrific wastages of public expenditure will be seen more easily. I do not accept that. Dr Cullen has rolled in this legislation so that we do not have the chance to really examine the estimates—he is making sure it will be more difficult with the passing of the legislation—and I have become concerned. What argument is Dr Cullen advancing that we need to be able to aggregate the outputs? I do not accept that from the Minister and I am surprised that Brian Donnelly has come here and found that it does not need further examination. I suspect that we will have dumber Ministers being led by their departments. That is what will happen. 
Hon Dr Michael Cullen 
: We’re ahead in the polls don’t worry. 
Hon DAVID CARTER 
: Dr Cullen says that this legislation can pass because Labour is ahead in the polls. I say to Dr Cullen that that has nothing to do with this at all. 
Hon Dr Michael Cullen 
: It has not got a lot to do with dumber Ministers. 
Hon DAVID CARTER 
: It certainly does have a lot to do with dumber Ministers; I see one just coming through the door. Certainly what the Opposition is worried about is that this legislation before the Committee today gives more control to the departments. 
DEBORAH CODDINGTON (ACT) 
: 
 I rise to challenge the Minister Michael Cullen who seemed to imply earlier that I was arguing that universities were calling for no accountability at all. He knows very well that that is not what they were calling for. He confuses State control with accountability for public money. There is no way that the universities are saying they should not be accountable for public money. Why does the Minister not take a call and say why he thinks it is necessary to breach the spirit of sections 160 and 161 of the Education Act why he thinks it is necessary to do away with the convention that academic freedom is protected and why he thinks this Government should be—as the academics have called it—such a control-freak Government eroding universities’ independence and stifling their academic freedom? 
The Minister should give one example of a university in New Zealand that his Government has had serious problems with in terms of the spending of public money. He knows perfectly well when he twists words and says that my argument is spurious because universities have always been Crown entities that the Government is redefining the meaning of Crown entities in terms of Government control. That is what this legislation is about. 
Hon Dr Michael Cullen 
: No no it doesn’t. 
DEBORAH CODDINGTON 
: The Minister should take a call instead of sitting there shaking his head and repeating the word “No”. The universities are not resisting public accountability. There is already existing legislation that requires them to be publicly accountable. The fact that some polytechnics have got away with not being accountable is the fault of this Government’s own tertiary education— 
Jill Pettis 
: Don’t be ridiculous. 
DEBORAH CODDINGTON 
: That member can take a call too instead of shrieking like a gooseberry. This Government’s Tertiary Education Commission does not do its job. It goes in and audits those institutions and gives them a clear bill of health and it is not until the Opposition parties raise concerns about the spending of public money that it is revealed that they need to be brought under greater control. But not one of those issues has involved a university. The Minister should get up and instead of arguing about the status quo and Crown entities explain why he thinks it is necessary in New Zealand—in a Western liberal democracy—to pass legislation that seriously undermines the autonomy and academic freedom of universities. 
Can the Minister assure us for instance that he will not create a Minister responsible for tertiary institutions? Will we see a Minister responsible for tertiary institutions? 
Hon Dr Michael Cullen 
: We’ve got one already. 
DEBORAH CODDINGTON 
: We already have one. And who is that? 
Hon Dr Michael Cullen 
: Steve Maharey. 
DEBORAH CODDINGTON 
: I thought he was responsible for tertiary education and not a Minister for universities. Is that what he already thinks he is? That is interesting. Will university council members be able to be dismissed for just cause? Can the Minister assure us that that will not happen too? I challenge the Minister to take a call and answer that query. 
What will happen to the private funding of universities when they come under the scrutiny of the Government if it feels that they are not promoting Government policy? Those are all fears the vice-chancellors have expressed in the negotiations they have tried to have with the Government—negotiations that have severely broken down. How will borrowing from universities be affected by this legislation? What effect will it have? Will the Minister for tertiary institutions have the right to conduct inquiries into the academic affairs of universities? Will research and papers produced by universities come under the proposed Public Records Bill? 
Hon Dr Michael Cullen 
: What? 
DEBORAH CODDINGTON 
: That is what the Vice-Chancellors Committee has asserted. Perhaps the Minister can stand up and explain why that will not happen. 
Hon Dr Michael Cullen 
: They’re talking codswallop. They’re away with the fairies. 
DEBORAH CODDINGTON 
: Of course it is a nonsense but will they? I challenge the Minister. 
ROD DONALD (Co-Leader—Green) 
: 
 I think we can all breathe a sigh of relief that the previous speaker has sat down before she embarrasses herself any further. I wish that Deborah Coddington had taken some advice from whoever the ACT member was on the Finance and Expenditure Committee when it considered the bill. I know that the ACT membership changed midstream because of the party’s change of leadership. The other thing Deborah Coddington should do is read the Government’s Supplementary Order Paper which removes a number of the requirements on tertiary institutions from this bill including the Minister’s power to request information relating to clause 175 “Good reasons for refusing to supply requested information” and omits and substitutes provisions in clause 199 relating to bank accounts. However I do not want to use up my 5 minutes on that. Everything I have heard Deborah Coddington say tonight relates to Parts 3 to 7. At the moment we are dealing with Part 1 so it was entirely inappropriate for the previous speaker to talk about schedule 6B. 
I return to Part 1 to discuss further the amendments I have put on the table. The first one which I talked about before relates to triple bottom line reporting—the Government’s commitment to triple bottom line reporting and the fact that it has not put its money where its mouth is. The Government says a lot about triple bottom lines but is not prepared to incorporate them in this legislation. It ought to in section 27(2) inserted by clause 10 and in section 45B inserted by clause 17. After all what will be crucial to the future of New Zealand is not just its financial well-being but its environmental and social well-being. So I invite the Government and other parties to support our amendments on that. 
I also invite the Government and other parties in this Parliament to support our amendments to section 27(2)(b) inserted by clause 10. I am looking forward to Mr Keys’ comments on that—as a man with considerable experience in this area; in fact as someone the select committee relied on a lot for technical advice about derivative transactions securities investments and guarantees—and whether he thinks we need to insert a subparagraph that adds to the Government’s annual financial statements a statement of all securities derivative transactions investments and guarantees. We think it appropriate for that to be specified in addition to the requirements under generally accepted accounting practices. It is very much a belt and braces approach in relation to derivatives. 
We do have some concerns there which is why we also propose that in section 30(2) inserted by clause 14 in addition to the requirements that the Auditor-General must audit the annual financial statements of the Government the Auditor-General should also conduct an annual performance audit of the management of Crown debt. When I discussed this issue with officials they said that that was a rather unusual and exceptional thing to require the Auditor-General to do. But the extent to which the Government is engaging in derivative transactions usually for the right reasons does require such a performance audit. I am concerned that the internal scrutiny of the Debt Management Office could be changed through a change in management practices but there is also the need for some external scrutiny. 
The next amendment we will be putting up is to section 39(1) inserted by clause 17 which is simply to remove the words “(other than an intelligence and security department)”. We believe it is appropriate for Parliament to know what the intelligence and security services are doing in relation to future operational intentions. That is after all something that every other Government agency does and we do not see why those services need to be an exception. There needs to be much more accountability to Parliament about the work of the security services. 
That effectively encompasses the additions we want to see to Part 1. We believe that the part would be more robust if the Government took a triple bottom line approach to all of its forecasting reporting and accounts and if the Government extended its economic reporting to include trade in goods and services reserves of natural resources and social well-being and environmental quality. 
JOHN KEY (National—Helensville) 
: 
 I want to respond to the amendments proposed by the Green Party in relation to derivatives and to make some comments around those because the Finance and Expenditure Committee received quite a number of submissions on them led mainly by Sue Newberry and Alan Robb I think of the University of Canterbury. I did not agree with their submissions at all. They were based on the fact that they believe that under section 55 of the Public Finance Act—which makes the New Zealand public unlimited guarantors of all public debt—derivative transactions entered into by the Crown would effectively be guaranteed by the taxpayer of New Zealand. In one sense that is correct. But—and I think this is the “but” people have to consider before they get too extreme—we need to look at what might be happening in the State sector in relation to derivatives and at who is actually using them. My understanding and the understanding of the select committee is that derivatives are being employed by the Debt Management Office. The derivatives are fundamentally interest rate derivatives. Basically the office is looking to swap its exposure from fixed to floating and from floating to fixed. There is some limited use of credit derivatives although I am not sure it has progressed to the latter. 
Essentially for all intents and purposes the first thing the Committee needs to consider is the liability around when the Crown actually purchases derivatives and when it sells them. When it purchases derivatives it is like purchasing insurance. It has a liability totally quantified by the premium under which it pays and therefore the Committee should not feel at all concerned about that. Where the Crown writes derivatives that can pose a liability. We have seen examples of where fraudulent activity takes place and Nick Leeson is a great example of that in Barings Bank. But I think there are quite a number of safeguards. 
We questioned the select committee about the process under which the review of derivative transactions was taken within the Debt Management Office and the segregation and separation of who was able to undertake those transactions. I think it was quite clear to the committee that there was a rigorous process in place in respect of derivative transactions where they were transparent where they were mark-to-market where they were consistent with the size of the portfolio where they were very vanilla derivative transactions and where they were not of the nature to which Sue Newberry and I think her fellow submitters wanted to claim that the Crown was exposed. 
It is also worth recognising—because one or two others internationally have also made statements around that sort of Armageddon scenario in derivatives—that derivatives can reduce risk and exposure for the Crown quite significantly. It all comes down to the people who are undertaking them and to the rights and responsibilities they have in the process for managing that risk. At this stage unless some select committee has been misled—and I have no reason to believe that one has—then I do not think there is a risk to the Crown and it should be able to continue to use those. Where other Government departments or parts of the State sector wish to undertake derivative transactions then first there would have to be some very solid reasons for doing that. It would be unlikely that most Government departments would although some actually can manage their own foreign exchange exposure and on that basis they could have currency derivatives. Again as long as those are handled in the right way with the right process and the right procedures then I do not think that is something for alarm and concern. 
The amendment put forward by the Greens to section 27(2)(b) really just says that a statement of all securities derivative transactions investments and guarantees should be listed. In one sense that is a fairly benign statement. I would not argue that the world would cave in because we had that in the legislation but my understanding is that that would be exactly the risk a committee would be looking at and reviewing. As long as the risk committees of those various departments of Government are doing their jobs properly and are in fact looking at those I cannot see why we need to insert that physically into the legislation. 
So I do not agree with the position taken by the Greens. I certainly do not agree with the position taken by Sue Newberry and I do not think we should have any degree of alarm. My involvement with the Debt Management Office in a professional sense goes back for the last 20 years and in my opinion it acts extremely professionally in the marketplace and does a very good job of managing New Zealand’s debt. We should in fact be quite proud of what it does. 
JILL PETTIS (Senior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I am grateful for the opportunity to speak on this riveting legislation. I am sure that for many in the Committee who bothered to scrutinise the legislation—other than perhaps Dr the Hon Lockwood Smith—this will be the first time they have actually seen the appropriation process down on paper. 
The bit I want to see if I can get some answers about is section 26A inserted by clause 8 about the transfer of resources between output expense appropriations. I think it is pretty obvious to anyone who has worked in the system that that is probably not a bad idea because Ministers can find themselves having to grapple with a rigid process to make comparatively small adjustments that would be much more easily dealt with outside the appropriation process without upsetting accountability. The problem of course with that multi-output class appropriation is just how far it can be pushed. 
I will use an analogy that is nothing to do with the Government’s finances but is to do with the parliamentary process. We have seen the way that flexibility in drafting legislation is being used to create bills with very few parts so that we do not have long Committee stages. Parliament goes along with that flexibility except it can be abused—and often is particularly under the watchful and penetrating eye of the current Leader of the House. It is not hard to imagine at all that this provision could also be manipulated and pushed beyond the boundaries this Parliament has imagined. 
Tonight we are taking a pretty benign view of the provision because I suppose we all believe it will be used in good faith. But when I look at the restrictions on this capacity they do not seem to me to be very robust. Could the Minister tell us for the benefit of our information whether there are restrictions to do with accounting standards the Standing Orders or any other process of Parliament that would hedge the way a Minister of Finance is able to use these capacities. 
There are quite vague definitions like “similar output classes”. How similar is similar? I can look through the education estimates and see at the moment a long list covering everything from school transport to curriculum support covering hundreds of millions of dollars in about 50 different categories. Could I as the next Minister of Education collapse that into one appropriation? I do not know the answer to that question. It is not evident to me from the bill which is why I am asking the question. 
Hon Dr Michael Cullen 
: It would have to go to a regulations review and it would have to be confirmed in an appropriation bill because it’s a regulation. 
Hon BILL ENGLISH 
: Yes it is a regulation. 
Hon Dr Michael Cullen 
: So you’ve got a double check. 
Hon BILL ENGLISH 
: So the answer is yes subject to any pressure from the Regulations Review Committee. 
Hon Dr Michael Cullen 
: It would be most unlikely. 
Hon BILL ENGLISH 
: Well there could be a purpose in it because any Minister would love more flexibility than he or she has. Ministers would love to be able to move money around without being subject to too much scrutiny. 
Hon Dr Michael Cullen 
: The 5 percent levy would make that very difficult. 
Hon BILL ENGLISH 
: That is probably the most meaningful. The provision refers to the amount transferred not increasing the appropriation by more than 5 percent. I do not quite understand that because if there are a number of outputs within an appropriation I could shift them around without making any difference to the total appropriation. 
John Key 
: That was the limit wasn’t it? Five percent was the previous limit. 
Hon BILL ENGLISH 
: But it is a limit on increase. 
John Key 
: I think you could only move up to 5 percent before. 
Hon BILL ENGLISH 
: But now I have the capacity to bunch output classes under one appropriation. [ 
Interruption 
] The question is not so much about the increase in the appropriation—I am not worried about that—but about how far I can go at the start to bunch them up. 
Hon Dr Michael Cullen 
: The one you’re adding to can’t increase by more than 5 percent so that is actually quite tight. 
Hon BILL ENGLISH 
: So when a new Budget cycle starts I cannot bunch them in a way that adds more than 5 percent to an existing appropriation. If that is the right answer then I will feel a great deal less concerned about the flexibility. 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Motion agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 6 be agreed to: 
to omit subclause (4). 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 8 be agreed to: 
to add to new section 26J(1)(a) the following new subparagraph: 
(vi)total contingent liabilities. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 8 be agreed to: 
to add to subsection 26P(1) the following new paragraphs: 
(e)overseas trade in goods balance 
(f)overseas trade in services balance 
(g)reserves of natural resources 
(h)social well being 
(i)environmental quality. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 10 be agreed to: 
to insert in new section 27(2)(b) above subparagraph (v) the following new subparagraph: 
(iva)a statement of all securities derivative transactions investments and guarantees. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 10 be agreed to: 
to add to new section 27 (2) the following new paragraphs: 
(c)include statements that show the impact of Government activities on the environment. This will include but is not limited to a statement of: 
(i)water use 
(ii)energy use 
(iii)waste 
(iv)emissions and discharge 
(v)use of hazardous substances 
(d)include statements that show the impact of Government activities on people and communities. This will include but is not limited to a statement of: 
(i)life expectancy 
(ii)physical well being 
(iii)social connectedness 
(iv)employment and unemployment 
(v)income inequality 
(vi)housing affordability 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 14 be agreed to: 
to add after paragraph (a) of new section 30 (2) the following new paragraph: 
(ab)conduct a performance audit of the management of Crown debt; and. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 17 be agreed to: 
to omit from new section 39(1) the words “(other than an intelligence and security department)”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 17 be agreed to: 
to insert in new section 45B(2)(a) after the word “position” the words “including contingent liabilities”.  
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 17 be agreed to: 
to add to new section 45B(2) the following new paragraphs: 
(d)include a statement of environmental performance that includes but is not limited to a statement of: 
(i)water use 
(ii)energy use 
(iii)waste 
(iv)emissions and discharge 
(v)use of hazardous substances 
(e)include a statement of social performance that includes but is not limited to a statement on: 
(i)staff turnover 
(ii)ethnic and gender representation in management positions 
(iii)stakeholder perceptions 
(iv)community involvement 
(v)pay and employment equity 
(vi)employee health and safety. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 315 in the name of the Hon Dr Michael Cullen to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Part 1 as amended agreed to. 
Part 2 Amendments to State Sector Act 1988 
The CHAIRPERSON (Ann Hartley) 
: Part 2 clauses 33 to 45 includes debate on schedules 3 and 4. 
JOHN KEY (National—Helensville) 
: 
 Those who have taken some time to review the bill will understand that it is quite complex in parts. Part 1 is about amendments to the Public Finance Act Part 2 alters the State Sector Act and Parts 3 to 7 affect Crown entities. 
Part 2 is very interesting indeed because it looks to extend the role of the State Services Commissioner in building a strong State sector and showing leadership. It is very interesting because this bill came to the House at the time when the Amokura Panoho incident broke. The Government did not necessarily like it that someone in her position was involved in the Maori Party. As I understand it a number of Ministers less than covered themselves in glory. In fact to put it bluntly from memory the Minister in the chair Mr Mallard shot his mouth off on public radio and was forced by amongst others the Minister of Finance to make a few conciliatory statements and apologies. 
Hon David Carter 
: Cool it. 
JOHN KEY 
: “Cool it.” I think was the expression. A lot of “cool it” was going on at that time. It is quite interesting because this provision will allow the State Services Commissioner to go out and set a code of practice and a code of ethical standards on the way that the State sector should behave. 
Hon David Carter 
: Does he belong to the Labour Party? 
JOHN KEY 
: That could be part of the dictum that comes from the State Services Commissioner’s role. 
It is interesting that one of the areas where I think there is likely to be quite intense debate and it goes back to the Panoho incident is behaviour during the run-up to an election. The State Services Commissioner is likely to come out and say that here is the code of conduct for the way that State sector employees should act in the run-up to an election. There is nothing wrong with that. In fact there is a bit of sense in having a code around the way that State sector employees should act and the way they should engage. They could clearly have a conflict of interest and we would acknowledge that. 
However in the submissions that took place the Public Health Association made quite an interesting point. The association supported the provision in general but raised the point that the commissioner has no statutory requirement to consult with relevant parties in developing a code. There is no responsibility at all to consult with anyone in terms of developing a code. So we could see all sorts of different spin being put on exactly what that code could do. But equally this is all about central government starting to try to dictate more and more in a statement of conduct the way things will happen extending it to some really interesting parts of the State sector and potentially on into Crown entities and the like. 
The second element of the code that will be developed by the State Services Commissioner was referred to by the Nurses Organisation which thought that the code not only was unnecessary but also could be unfair to employees. We have seen some interesting behaviour by one or two Ministers and by one Minister who is sin-binned at the moment when they have felt challenged or threatened by members of the State sector and their involvement in potential political parties— 
Hon Trevor Mallard 
: That’s actually the public service. It’s not relevant to this bit. If you are already a public servant you will not be affected by these changes. 
JOHN KEY 
: The Minister should take a call and clarify the matter but we accept that point. 
The second issue I want to raise is the extension of the State Services Commissioner’s power to issue codes that are more widely intended and could override the existing professional codes in place. While that is not the intention it is possible that the professional code could cut across existing codes of conduct that are actually in place. 
In part the whole issue around the State sector its behaviour the way it interacts and the way in which it should be able to operate is likely to create some interesting situations not only as we go into an election but at various other times. At the moment the Judy Bailey incident is quite an interesting example of where the State sector on the one hand is telling— 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 Part 2 has more of this wishful thinking that the Government tries to write into legislation. The Government seems to believe that if it puts it into law it will happen or that somehow it elevates it or makes it more certain when it is behaviour that anyone should be involved with. Most of the provisions in this part to do with senior leadership and management capability in the public service should simply be the functions of a good employer. There is nothing particularly special about the need to ensure succession and that there is capability coming through the ranks. It does not really matter whether one is running a garage with two apprentices and a boss or running the public service the same requirements are there. So the Minister needs to explain just why he is bothered with all of this. 
It states here that the State Services Commissioner has to make sure that there are sufficient senior employees able to fill chief executive and other senior management positions. Well I have never seen a vacant one. I have never seen a department without a chief executive. Sometimes an acting chief executive fills in and sometimes it can take a wee while to get one but there is absolutely no reason to believe that legislating the provisions in clause 40 will change any of the processes for finding the right person for the job. 
I have a question for the Minister in the chair the Hon Trevor Mallard. Is this restricted to the New Zealand public service? It has had an injection of Australian capacity—I would like to call it talent but let us just settle for capacity. It has often had civil servants from the UK where there is a pretty neat fit between the public service— 
Hon Trevor Mallard 
: Chief executive? 
Hon BILL ENGLISH 
: We have had chief executives come from Australia. How can we tell whether the State Services Commissioner has not fulfilled the objects of the Act? Is it when there are not enough New Zealanders to fill chief executive and other leadership positions or is the whole world covered by the scope of this object as long as there is someone somewhere? This provision does not mean anything unless it can be breached and I want the Minister to tell me that. If this is a law how do we break it? If this is in legislation how does the State Services Commissioner fail in his responsibilities? How can an Opposition tell? The trouble with a whole lot of this wishful-thinking legislation is that we cannot tell whether they did it or they did not do it. 
It is like the tertiary education legislation. The Tertiary Education Commission was able to show that an information technology course given out to 18000 people on a disk when only 600 people completed it fitted brilliantly with the objectives of the tertiary education strategy and I would say that it is the same here. Whatever the State Services Commissioner does about anything to do with this public service will fulfil this law. So can the Minister tell us what he has to do to make sure that he has not fulfilled the requirements we are about to vote on? 
I am also interested in the provisions to provide advice. The commissioner has to provide advice and training on career development for staff in the public service. What has the commissioner ever done except that? That is the job. The commissioner must provide advice and guidance to employees within the State services at times that affect the integrity and conduct of employees within the State services. Well we do need that because the current State service is operating in an ethical vacuum. We had the worst example of conflict of interest in a public body that I have seen in 20 years around the public service down at Christchurch Polytechnic. 
Hon Trevor Mallard 
: It’s not the public service. 
Hon BILL ENGLISH 
: It is covered by this bill. 
Hon Trevor Mallard 
: The member should get his terms right. 
Hon BILL ENGLISH 
: It is covered by the broader bill and here is how it is connected. Ministry of Education officials could not see the conflict. Even though the details of it were given to them experienced civil servants like the chief executive of the Ministry of Education could not see the problem and from my questioning at the select committee the other day they still cannot see it. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I want to pick up from where my good colleague the Hon Bill English left off because this is just junk law. As Bill English told the Committee a moment ago there is no purpose in having this prescriptive garbage in our law. How on earth do we determine whether someone has breached it? I draw the Minister’s attention to clause 41 in Part 2 and in particular to new section 57 in that clause. New section 57 purports to lay out standards of integrity. In fact section 57(1) states: “The Commissioner may set minimum standards of integrity and conduct that are to apply in—(a) the Public Service: (b) all or any Crown entities:”—and that is what Bill English was getting at as Crown entities of course include tertiary institutions—“(c) the Parliamentary Counsel Office: (d) the Parliamentary Service.” But then if we go on to new section 57A it states that if the Minister approves under section 57A(2)(a) they do not have to have any integrity. 
Hon Bill English 
: And this Minister would be the first. 
Dr the Hon LOCKWOOD SMITH 
: The Minister in the chair the Hon Trevor Mallard would be a classic to say: “No no you don’t have to worry about that.” Section 57A(2) states: “However an agency referred to in section 57(1)(b) to (d)”—which is the public service Crown entities the Parliamentary Counsel Office and so on—“may derogate from a particular standard …”. So they can actually be excused from performing with integrity if the Minister says that they can. What on earth does that provision mean? What is the Minister proposing should be allowed there that necessitates that law? I think we deserve an explanation of that. If the Minister proposes to say that a Crown entity can tell lies he should tell Parliament now. If not why is that provision there? Why on earth does the Minister require a provision in the law that states that the Minister can give approval for a Crown entity or the public service— 
Hon Trevor Mallard 
: Wasn’t this member in charge of trade? Would the member like to talk about that? 
Dr the Hon LOCKWOOD SMITH 
: The Minister owes it to this Parliament to tell us what that clause means. What was that bit from the Immigration Service about “lying in unison”?So now we can have the public service lying in unison if the Minister gives it derogation to do so. Is that what this clause is about? I think the Minister owes Parliament an explanation. If he expects Parliament to support this junk law—which is what it is—he owes us an explanation. This Parliament should not pass this part without an explanation of why the Minister wants the opportunity to tell the public service it can lie in unison and sing from the same song sheet because this is about integrity. This clause says the Minister can allow a department not to exercise integrity to deviate from the standards set out. 
What does it mean? I think we are owed an explanation of what it means. If the Minister is not prepared to tell the Committee what it means does that mean he supports lying in unison? What is it that the Minister seeks with that clause? What kind of lying in unison and singing from the same song sheet is that clause meant to allow the public service? The public service is important to this country. I believe that the public service has integrity. This kind of junk law actually belittles and damages the public sector the State sector because it puts in our law a provision for the public service to behave in a lesser manner than the manner expected from the principles of integrity. I think this Chamber deserves to know what on earth this clause means. I am prepared to sit down so that the Minister can take the call and explain to the Committee why he has put this clause into the legislation. 
RODNEY HIDE (Leader—ACT) 
: 
 This part suggests that our State Service is in dire straits under this Government. It says we need a special part of legislation simply to say: “Provide for new leaders to come through.” That is what new Part 4 inserted by clause 40 does. I ask the Minister why on earth we need good leadership training and planning to be included in legislation. That is the bit I cannot figure out. Are things so bad that we have to pass a law in Parliament under urgency making the State Services Commissioner responsible for “developing and promoting a strategy for the development of senior leaders and managers in the Public Service;”? Is the Minister seriously telling us that that is not happening? Why on earth are we passing a law to make that happen? 
Hon Ken Shirley 
: Not a whisper. 
RODNEY HIDE 
: Not a whisper! Has that not been happening all along? Then we see that a new clause has been put in. We are going to require some general principles and the chief executive of each department must: “operate a personnel policy that complies with the principle of being a good employer;”. What does this mean compared with the Employment Relations Act? Is this an extra burden upon the chief executive of a Government department? I ask the Minister whether this requirement to be a good employer is something in addition to the Employment Relations Act. What on earth is this about? And what happens under this legislation if a chief executive is not a good employer? 
Hon Bill English 
: Nothing. 
RODNEY HIDE 
: Nothing. So why are we sitting here under urgency debating this? Now I come to something else. I have to say that it is a bit rich coming from this Government particularly with this particular Minister in the chair that the legislation requires that the State Services Commissioner “may set minimum standards of integrity and conduct”. Trevor Mallard is telling the civil servants: “Hang on fellas you’ve got to set some rules for integrity and conduct.” This is from a Government in which the Prime Minister forges paintings—and she is going to make a rule about minimum standards of integrity and conduct! This is from a Prime Minister who then has the evidence destroyed! This is from a Prime Minister who goes steaming through Waimate at 100 miles an hour and does not— 
John Key 
: Like a bat out of hell. 
RODNEY HIDE 
: No she was going behind on her broomstick; that is how she did not know! She was going through like a bat out of hell—and she says that the Government is going to require minimum standards of integrity and conduct! This is from a Government that has breached contracts. This is from a Government that had a Minister who received $195000 and paid no tax on it. And this Government is going to set standards of integrity and conduct! Here is the interesting thing— 
Jill Pettis 
: Forty-seven percent in the polls! 
RODNEY HIDE 
: Isn’t Jill Pettis great! Has anyone ever heard Jill Pettis give a speech in this Chamber or does she just growl on like the Wicked Witch of the West calling out from her chair unable to get up and string two sentences together at this time of night? God knows what she has for dinner but she can never string two sentences together. Then one notices an interesting thing. [ 
Interruption 
] Is that the woman who has a pint of blood and then hangs upside down in the wardrobe at night for an hour or two? 
The CHAIRPERSON (Hon Clem Simich) 
: Order! Come to the bill. 
RODNEY HIDE 
: Clause 41 provides for new section 57 “Commissioner”—wait for this—“may set minimum standards of integrity and conduct”. Is anything stopping the State Services Commissioner now from setting standards of integrity and conduct? I do not think so. Notice that he is not required to do so; the legislation just says he may. [ 
Interruption 
] 
Trevor Mallard is breaking all the rules beside the Chairman. I raise a point of order Mr Chairperson. I point out that the Minister is in a very privileged position being beside you. At any stage he can take a call and contribute to this debate but the idea that a Minister can interject through a member’s speech using your microphone while you do nothing is actually an insult to this Chamber. I expect an apology for that. 
The CHAIRPERSON (Hon Clem Simich) 
: I think we were proceeding quite nicely. I thought it was helpful to the member and I intend to leave it at that. 
RODNEY HIDE 
: I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Hon Clem Simich) 
: I have made a ruling on that point. Does the member have a new point of order? 
RODNEY HIDE 
: I raise a point of order Mr Chairperson. Are you saying that it is OK for a Minister from his seat beside you to interject on an MP speaking at the Committee stage? 
The CHAIRPERSON (Hon Clem Simich) 
: No it is not OK and the Minister will not be doing it again. I did not think he was interjecting. I am doing the judging. I thought the Minister was being helpful to the member. I may have been mistaken. No apology is required. 
PANSY WONG (National) 
: 
 Quite a few submitters came before the Finance and Expenditure Committee and complained about the provision that the State Services Commissioner “may set minimum standards of integrity and conduct”. The complaints came particularly from the education sector—from the boards of trustees and the principals. They told the select committee that teachers were already subject to two three or four sets of codes of conduct they were not sure how demanding that was and asked what was meant by the provision that the State Services Commissioner might proceed with another set of standards of integrity and conduct. 
I must say that I personally have a lot of concern with the State Services Commissioner setting minimum standards of integrity and conduct. I wonder how far it would have stretched because the present commissioner is one Mr Mark Prebble and I know that Mr Mark Prebble has quite a lot to say about the dress codes of public servants including that they should shop at The Warehouse or at Farmers not wear earrings etc. I would like to know how far the public service can expect the State Services Commissioner to intrude into the dress code of employees or into the behaviour of individual departments. 
The other power that this provision is supposed to give to the State Services Commissioner is the ability to review the machinery of government across all areas of government including the allocation of functions to and between departments and other agencies. On the one hand it could be scary if the State Services Commissioner is to interfere in each individual department’s functions thereby causing unnecessary undermining of the department’s head but on the other hand one has to question what authority is granted to the State Services Commissioner when he or she can only review. What happens after he or she reviews? Does the commissioner once again report to the relevant Minister? What if the State Services Commissioner reviews and recommends changes to Government departments that concern two Ministers or even three or four Ministers? Would that review yield any tangible result? 
We also see this provision giving the State Services Commissioner the desirability or need for the creation of new departments and other agencies. Now this is quite interesting. I wonder whether the State Services Commissioner can do that based on his or her own opinion or does the State Services Commissioner have to seek guidance from some higher authorities such as the Ministers about the creation of new departments and agencies? How can we ensure that the provision does not become a tool that might be used to undermine Governments and agencies that might be proving too difficult to deal with? Of course the one thing in a positive light that I can think of is that it could be good for the State Services Commissioner to interfere in the current saga of TVNZ where the Prime Minister is complaining about it exhibiting a culture of extravagance. 
BRIAN CONNELL (National—Rakaia) 
: 
 I have to start by saying that I have heard some nonsense in the time that I have been in this Chamber but this would have to be the worst type of nonsense I have heard thus far. 
Craig McNair 
: Apart from the Civil Union Bill. 
BRIAN CONNELL 
: Apart from the Civil Union Bill as some member has called out. Why do we need to legislate for this type of fundamental activity that we would see in any business? This is plain good old-fashioned human resource management. I have to say to the Minister in the chair Mr Mallard and to members that if I came across a chief executive officer who was not doing this as a matter of course then I would simply fire that person because he or she would not be worthy of having that job title. This is the sort of thing that we expect would come naturally to any senior executive in any organisation across this nation that we would care to name. Putting this type of stuff into legislation will not change that one iota and that is a great fallacy. That shows the inexperience of the Minister in the chair and of some of the Ministers in this Government who think that if they put this sort of stuff into legislation then it will suddenly happen. 
Well let me tell those members that it does not change anything at all. If this is not inherent in one’s make-up as a senior executive then it will not happen just because it has now been put in writing and is legislated for. What a waste of this Parliament’s time and a waste of taxpayers’ money this is. How many minions are crawling over this part of this bill putting this sort of stuff in place? 
The State Services Commissioner will become a very powerful person if this legislation gets up and running. That is dangerous because if we read part of what is intended in this bill he or she can be manipulated by the responsible Minister and that is a very dangerous principle. The commissioner would surely be intimidated by a member of this current Government because it is morally corrupt and we have seen the evidence of that time and time again throughout the course of the last couple of years. 
The Government is asking members of this Parliament to accept that it is a Government that will set minimum standards of integrity. I look across to the Government benches and see Jim Sutton. He sat in the back of a speeding car all the way from Waimate up to Christchurch airport so that the Prime Minister could go and watch a game of rugby—which she does not like in the first place—simply so that she could be seen to be there. The Prime Minister’s defence was: “I didn’t know how fast I was going because I was having a conversation with Jim Sutton.” Well no one can have a conversation with Jim Sutton for more than 5 minutes let alone 1½ hours but we are expected to believe that. 
The great nonsense about this bill is that all those requirements are already in legislation anyway. This is the law. Let us look at some of the requirements such as employers have to be good employers and adhere to equal opportunity legislation. Is that to be sure to be sure? Are we legislating to be sure that the legislation that we have already legislated for will be adhered to? It is already in the law. This is good old-fashioned succession planning. We will legislate to make sure that we know how to get succession into chief executive roles in New Zealand corporations or State services. How pathetic is that? It is the law but here the Government is repeating it again and again. 
Let us look at some of the examples. Clause 40A “General principles” proposes to substitute section 56(1) of the State Sector Act with a new section 56(1) that will provide: “(1) The chief executive of a Department must—(a) operate a personnel policy that complies with the principle of being a good employer; …”. I ask the Minister what will be different in future from what is already happening in New Zealand in any business that he could care to name? How will that provision change anything? Well the Minister should get on his feet and take a call because it is a very fair question. How will that provision change anything? 
Hon MARK BURTON (Deputy Leader of the House) 
: 
 I move  
That the question be now put 
. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I want to ask the Minister to explain just how clause 41 which substitutes a new section 57 of the State Sector Act will work. Let us establish first of all that by way of example Christchurch Polytechnic is a Crown entity—so I do not want to hear from the Minister that this provision is not relevant to it. It is proposed that the new section 57 will provide that: “(1) The Commissioner may set minimum standards of integrity and conduct that are to apply …” in this case to Crown entities. Now it so happens that as far as I am aware the State Services Commissioner has not set standards with regard to Crown entities like the Christchurch Polytechnic but under this legislation he or she can. I want to know from the Minister whether this legislation will compel the commissioner to set standards that would prevent the kind of conflict of interest that arose at Christchurch Polytechnic. If the Minister is not familiar with those circumstances I can tell him that a senior employee of the polytechnic was able to make substantial private gain by virtue of the way that employee used her public position. Will the standards be high enough to prevent that? 
The next question is: what happens when someone does not comply? I would imagine that any standard that the State Services Commissioner sets for a polytechnic would prevent senior employees from getting themselves in a position where they could make substantial private gains from their public offices. It should go further than just stating they have to declare an interest. The minimum standard should be that there be no conflict of interest and not just that a conflict of interest is declared. But if senior employees do not comply with a standard set by the commissioner what will happen? New section 57B inserted by clause 41 states that if there is a breach of the minimum standard “The Commissioner may advise the responsible Minister if … a serious breach … has occurred or is likely to occur.” That is it—the commissioner advises the responsible Minister. I presume that the real powers are there under new section 57C(1) which refers to the powers in sections 7 to 9 of the principal Act that “the Commissioner may exercise in respect of Departments including the powers in section 25.” Can the Minister just tell us what will happen apart from the responsible Minister being advised? In the case of Christchurch Polytechnic senior civil servants including those in the State Services Commission knew about the conflict of interest. We know they advised the Minister—because the official papers show this—that an individual holding public office there was a shareholder in a company that had pocketed $6 million of public money and nothing has happened. Absolutely nothing has happened either to the individual or to the Crown entity. 
So the Minister needs to explain to me why it is that even with paraphernalia like that in place—not exactly what this bill provides for but like it—when there was a clear breach of not only the formal standards but any general understanding of the role of someone in a Crown entity nothing has happened. The State Services Commissioner the chief executive of the Ministry of Education and the Minister have done nothing about the worst breach of any kind of public service standard that I have seen in 20 years. So the Minister needs to tell us why this wet lettuce leaf will make any difference at all. None of this law will matter if there is no determination on the part of the Government to enforce the standard. In the absence of that determination this measure is a total waste of time. It is worse than a wet bus ticket because it gives people the impression that something may happen. They will think they can go somewhere and something will happen—that they can tell someone and that at least those responsible will get slapped with the bus ticket. But in fact without the will to do so nothing can happen. That is why I say the public service is operating in an ethical vacuum right now. 
This measure is all rhetoric. It is meaningless and it is hollow because in the one chance that the Government has had to enforce it it did not do anything. 
HELEN DUNCAN (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Motion agreed to. 
A party vote was called for on the question  
That Part 2 be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Part 2 agreed to. 
Part 3 Preliminary provisions relating to Crown entity reform 
JOHN KEY (National—Helensville) 
: 
 Part 3 which as members can see includes clause 46 “Purpose of Parts 3 to 7” refers to Crown entities. The real dilemma in this whole part and in the amendments that are to take place to the Crown entities has a quite simple context actually. The Government established Crown entities under independent Acts of Parliament and with independent boards so that those boards could be responsible for the management of those autonomous Crown companies essentially. The entities were able to be controlled if one likes by the Government through the changing of the boards. That was the fundamental process under which Crown entities were established. The risk of this legislation is really as simple as this I think: if this Government wants to go and start meddling in the Crown entities under its control what it risks doing through this legislation is going around the independent boards and independent autonomous companies that have been set up and starting to meddle in their activities. 
That creates two dilemmas. The first is that one starts to have Crown entities such as tertiary institutions all of a sudden feeling as though their position of autonomy and academic freedom is jeopardised. So one would have the universities rightfully saying that they are Crown entities—and as Dr Cullen correctly pointed out have been so since 1993—but that all of a sudden their independence under the Education Act which has been so cherished from an academic and a freedom point of view is being challenged through the alterations to the crown entities legislation. So the first dilemma is that the Crown entities and Crown companies could in some form or another be influenced through this crown entities legislation. The second dilemma is one of accountability and we saw a lot before about that in Part 2 of the bill which looked at the role of the State sector in terms of putting leadership and guidance in there. The risk for board members or for the management of Crown companies is simply a situation whereby the Minister goes around the boards and somehow influences Crown entities. Then when things go wrong—as they surely would—those boards would come back and say a particular action took place not because they wanted it to take place and not because it happened under their guidance but because the Minister dictated somehow that it was to take place. 
There are quite a number of categories of Crown entities—there are now five defined categories—and I want to take a second if I may just to talk about the different categories. One of the issues is clearly around the boards of trustees. Quite a lot of submissions were put forward to the Finance and Expenditure Committee around the definition of boards of trustees and one issue was that they somehow could be either overly responsible or indeed liable—it was the issue of liability as opposed to responsibility. Liability was one issue around their independence and their ability to do things. 
I want to also mention if I may for a second some of the other definitions in Part 3 because one definition is quite interesting. It is that of the fees framework and it is quite pertinent and relevant I think to what is taking place at the moment.If I can take a moment of the Committee’s time to read that definition it states quite simply that the “fees framework means the framework determined by the Government from time to time for the classification and remuneration of statutory and other bodies in which the Crown has an interest including statutory entities and their subsidiaries and tertiary education institutions”. What does that mean? Does it mean that when Judy Bailey’s salary is doubled from $400000 to $800000 in what is not actually technically speaking a Crown entity but is nevertheless a Government-related activity that is now at the discretion and under the framework of the Government? If I look at that in relation to tertiary education institutions and if I read the fees framework correctly—and the Minister may like to take a call to enlighten the Committee on whether I am correct—it looks to me as though the Government will be able to control the remuneration of people working within tertiary education institutions. If it is correct that that is what the fees framework as defined in clause 51 means I can understand why the vice-chancellors from eight universities in New Zealand including Raewyn Dalziel who is the acting vice-chancellor of Auckland University Derek McCormack at the Auckland University of Technology and Bryan Gould at the University of Waikato— 
Hon TREVOR MALLARD (Associate Minister of Finance) 
: 
 I shall take a brief call on this part because I think it is appropriate at some stage to remind members of the history of this legislation and to place on the record of the Committee my thanks to the Hon Simon Upton for the work he did in the preparation organisation and initial policy work that led to this legislation. It is a way to introduce consistency— 
Sandra Goudie 
: Bound to be deserted by this current Government. 
Hon TREVOR MALLARD 
: The member should not refer to Simon Upton in that way. I think it is most inappropriate. Mr Upton— 
Brian Connell 
: I raise a point of order Mr Chairperson. You may not have heard but I heard my colleague very clearly. She did not comment on Simon Upton at all. She said— 
The CHAIRPERSON (Hon Clem Simich) 
: No that is not a point of order. 
Hon TREVOR MALLARD 
: The brief point I shall make is that Mr Upton left a legacy of quite a lot of policy work in this area. We held a debriefing as good Ministers do. I had an excellent debriefing with Mr Upton; I could not say quite the same about Dr Smith “junior”. However I had a very good debriefing and Mr Upton indicated to me that one of the ways in which he would measure the performance of this Government would be to see whether we had progressed this legislation in roughly the same form. It has been slightly improved. The review of the central part has been helpful and I am sure that when Mr Upton makes it back to the country and looks at the legislation he will be well pleased. 
JIM PETERS (NZ First) 
: 
 I thought that when the Minister stood to give us an explanation he might have given us an explanation about the very section in Part 3 that relates particularly to tertiary education institutions and their understanding of past history. Instead he went right back to the dim distant past as far as I could see. 
I believe that the Minister should also have taken more time and relayed to us why tertiary education institution representatives particularly members of the Vice-Chancellors Committee are so upset about what they see as the understandings of the working party that that Minister helped to develop but that they feel in the actual development of Part 3 seem to have been so misconstrued. I take that point because the title of Part 3 and the suggested amendments begin with the words “Preliminary provisions”. I would like the Minister to take a call to tell the Committee exactly what that means. 
I have been informed and I know that the select committee was informed that not only are tertiary institutions concerned about the actual language of these provisions in Part 3 but they are also very concerned about the implications of these provisions being passed in this Parliament put into practice and having implications for them following that. As I said earlier they really feel that there is a shift from the known administrative matters under which universities are working. Instead this is about a movement to a completely new framework where in the language here there is consistency in the way Crown entities operate in the Government’s operation of Crown entities and in accountability—all of which by the way are matters tertiary institutions feel they do rather well right now. 
Does the Minister really want to have responsibility in the comprehensive sense for every tertiary institution? I know that we have heard some discussion here about polytechnics. One can think of the major tertiary institution in this country the University of Auckland and the size of the university as it is today with almost 4000 staff coping with 33000 students and with approximately only 36 percent of its funding coming directly from the Government. Its accountability is in the public domain with regard to what the Government seeks from the university. In relation to research the work that is done by a leading university such as Auckland University and others in all cases has sponsors who demand accountability. Students themselves increasingly and wisely so demand accountability today as well. Donors to universities demand accountability. Why then does the Minister in the course of his or her year seek to have the overriding power that is implied in the part before us? 
Again I would like the Minister to tell us what “Preliminary” really means. If that had been explained along with the explanations we have had from the select committee about submissions made by the universities there may have been another path on the part of the Vice-Chancellors Committee. But at this very point in time and as I speak the Vice-Chancellors Committee and in particular representatives of Auckland University have expressed their extreme concern publicly in the last few days about what Ministers really desire with regard to the autonomy and academic freedom of tertiary institutions. 
ROD DONALD (Co-Leader—Green) 
: 
 I think it is time to shed a little light and a little less heat on Part 3 and in particular on schedule 6B. I look forward to Deborah Coddington taking a call on this part her having spoken on it when we were debating a previous part. 
I too listened very carefully to the concerns of the tertiary educational institutions—as expressed by Mr Stuart McCutcheon in particular and also by Mr Robin Mann whom I see quite often—and I have really struggled to understand what it is that they are concerned about which is not to say that I am indifferent to their wish to maintain the autonomy and academic freedom of tertiary educational institutions. The Green Party strongly backs the vital role of those institutions as critics and as the conscience of our society. But after some considerable examination we simply cannot see how this bill undermines the autonomy and freedom that those institutions have. Balanced against their desires is the need for the Government to exercise a degree of accountability for any organisation that receives taxpayer funding and to ensure that there is a degree of transparency as to how that funding is applied. 
I find it intriguing to hear John Key from the National Party wax lyrical about the constraints that tertiary educational institutions are under given that they became Crown entities in June 1993. I am sure that the Minister can confirm for me that in June 1993 the National Party was in Government and therefore it was National that added tertiary educational institutions to the fourth schedule of the Public Finance Act and therefore it was National that would have done any undermining that Mr Key is now complaining about. It is quite a contradiction on his part to claim that this bill is undermining tertiary educational institutions when in fact at the end of the day particularly because of Supplementary Order Paper 315 this bill maintains the legislative status quo for tertiary educational institutions. Indeed in schedule 6B they are given a separate category of Crown entity in recognition of their distinctive character and relationship with the Crown. So I will be interested to see whether National members take any more calls to criticise their own behaviour in 1993 because in effect that is what they are doing. They are now admitting they made a mistake back then and they want to reverse it—or perhaps they are just grandstanding. 
We have before us a bill that has been significantly amended from when it was first introduced. In relation to tertiary educational institutions particularly because of representations made by the Vice-Chancellors Committee Supplementary Order Paper 315 makes a significant number of concessions to the tertiary sector by removing from schedule 6B the application of sections 174 175 199 210 and 212. That really does put the situation on a par with the status quo. I know—because the select committee was told—that one of the outstanding matters the issue of consolidation is being addressed by the Financial Reporting Standards Board. The tertiary educational institutions agree with that. 
I accept the tertiary sector’s concern and I am sure I will be lobbied further on this matter but I believe that on balance the status quo is maintained—a status quo that was introduced by the previous National Government. We believe that the Education Act 1989 provides tertiary educational institutions with sufficient protection from Government interference and that this bill provides the degree of accountability and transparency that Parliament and the Government require. 
PANSY WONG (National) 
: 
 Part 3 separates the various entities into five categories. In clause 48(1)(a) under “statutory entities” we have types of entities that are known as autonomous Crown entities versus independent Crown entities. Autonomous Crown entities must have regard to Government policy when directed by the responsible Minister whereas independent Crown entities are generally independent of Government policy. I looked at schedule 5 to see what type of entity came under the autonomous category and what type came under the independent category and I had some questions I want answered. 
I invite the Minister to take a call and explain why the Families Commission is classified under autonomous Crown entities whereas the Children’s Commissioner is classified under independent Crown entities. I was very relieved to read that the Children’s Commissioner is classified as an independent Crown entity because that means it is independent of this Labour Government’s direction in policy matters but it is quite frightening that the Families Commission is classified as an autonomous Crown entity which means that it has to pay regard to Government policy. We all know what the Labour Government’s definitions of “family” can mean. We were told at one stage and I am not sure whether it has changed that gang members can be classified as “family” or people who are perceived to have an attachment. So the definition of “family” according to the Labour Government’s vocabulary is a very strange concept that is nowhere near what the average New Zealander would consider a family to be. 
The Minister should take a call and demonstrate to us that robust analysis has been applied to classifying those various entities into the right category. How can the Families Commission be categorised differently from the Children’s Commissioner? I think that only the Labour Government does not consider that “family” and “children” logically belong in the same category. If it is good enough for the Children’s Commissioner to become an independent Crown entity but not the Families Commission does that mean the Government does not have confidence in the Families Commission? On second thoughts maybe the Labour Government has no confidence that the Families Commission will follow Government policy in light of the fact that the creation of the Families Commission was a condition of its securing the support of United Future. Maybe my colleagues in United Future will take a call and explain whether they are comfortable that the Families Commission is having to pay respect to the Labour Government’s policy on families. I wonder what type of family it has in mind. 
I point out that the school boards of trustees came before the Finance and Expenditure Committee and said they were very worried about the level of reporting requirement that might be imposed on these volunteers—on members of school boards of trustees. The officials reassured them that they would not be subject to very onerous requirements in terms of reporting. But then I turn to schedule 6A and 6B— 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 In speaking to Part 3 I want to pick up on a contribution the Minister made a short while ago when he alleged that these reforms were originally the work of the Hon Simon Upton. That is a classic example I suspect of political licence—to be kind. Mr Upton may well have been involved in the initial concepts around reform of State sector management but he surely would not have approved of some of the detailed prescriptive measures in the bill. 
I am particularly interested in asking the Minister what he seeks to do. Again I think the Minister owes the Committee an explanation about some of the provisions. In particular I draw the Minister’s attention to clause 51 “Interpretation” where the definition of “direction” states: “direction means a direction given by a Minister under this Act”—the Minister should know what this means because it refers to him—“or the entity’s Act to an entity”—that is fair enough; OK it might be possible for the Minister to give an entity a direction—“or to a member or employee or office holder of an entity”. 
I think the Minister should explain what he seeks to do with this provision. Why would the Minister want to be able to direct an employee of an entity to do something? What is it that the Minister is seeking to achieve there? Because the whole idea of Crown entities is to have them governed by a board to have them separate from political interference. That is the whole idea. Our tertiary institutions are Crown entities. Are we going to see this Minister able to give an employee of a university a direction to do something? Because it would seem on the face of this bill that that is possible. What is it the Minister wants to do with that definition? Why does it include an employee or office holder? What is it? What is the intent? I think the Committee is owed an explanation about that. 
If the Minister in the chair Trevor Mallard wants to give a general direction to a Crown entity that is one thing. It makes me a bit nervous because the whole idea of Crown entities having their own boards is that it makes them a bit more separate from political interference. But when the definition of “direction” goes right down to “employee” what is it the Minister is seeking to do? Why have that wording? Why have that in the bill? I think we are owed an explanation. What is intended with that? It is not unreasonable to request the Minister to explain that. 
While I am on clause 51 I will go to the “fees framework” definition which states: “fees framework means the framework determined by the Government from time to time for the classification and remuneration of statutory and other bodies in which the Crown has an interest including statutory entities and their subsidiaries and tertiary education institutions”. What is it the Minister is seeking to do with that provision? Are we going back to the pre-1990 provision that the Minister’s colleague the Hon Phil Goff would be familiar with where the Government set fees for tertiary institutions? Why is “tertiary education institution” specifically included in the definition of “fees framework”? Are we talking here about going back to the Crown being able to tell tertiary institutions what their fees will be? That went out in the law in the early 1990s and the tertiary institutions appreciated getting— 
Hon Trevor Mallard 
: No the upper limits were set under your legislation. 
Dr the Hon LOCKWOOD SMITH 
: There were no upper limits under National’s legislation. The tertiary institutions were free to charge fees. Now what is it? The Minister should take a call and explain exactly what the Government is trying to do here. It may be OK but it is not clear. There are two issues under clause 51. One is the issue of directions by the Minister to an employee of a Crown entity including tertiary institutions it would appear. That is dangerous. The whole issue of academic freedom is at question here. I think we are owed an explanation. 
HELEN DUNCAN (Labour) 
: 
 I move  
That the question be now put 
. 
GORDON COPELAND (United Future) 
: 
 I was grateful in a funny kind of way to Pansy Wong for waking us up at this hour of the night to talk a little bit about the reference she managed to find in the Public Finance (State Sector Management) Bill to the Families Commission. Then she went on to talk about the fact that she could not quite remember how the family was defined in the Families Commission Act so I thought I would take a call to refresh her memory of that definition because it just so happens that I have the definition with me. For Pansy Wong’s information this is the definition of “family”: “family includes a group of people related by marriage blood or adoption an extended family 2 or more persons living together as a family and a whanau or other culturally recognised family group.” So I hope the member might find some time to write down the definition because she has brought it up several times in the Chamber and she manages to get it completely wrong every time. I thought it would be a good idea to get it on the record once and for all. 
DEBORAH CODDINGTON (ACT) 
: 
 I find it interesting that United Future thinks it has a monopoly on morals and on what defines a family and that if two people are living together and are not married—well it actually makes one want to rush out and sin when one hears speeches like that. Chance would be a fine thing! I want to draw the Committee’s attention to some anomalies in this legislation that Lockwood Smith has already highlighted—that is the definition of “direction” and the direction given by a Minister to an employee of a Crown entity. If one looks at the definition of Crown entities one finds under “Autonomous Crown entities” that the New Zealand Symphony Orchestra is included in the schedules. The New Zealand Symphony Orchestra actually comes under the definition of Part 2 of schedule 5 which means that it “must have regard to government policy when directed by the responsible Minister”. We have two responsible Ministers here: the Prime Minister and the Hon Judith Tizard. What does this mean when the first violinist who is an employee of the New Zealand Symphony Orchestra is playing “dead white man’s music” which the Associate Minister for Arts Culture and Heritage has publicly said is not Government policy. She said that it is not Government policy that we should be playing “dead white man’s music”. The New Zealand Symphony Orchestra should be playing the music of people like Gareth Farr— 
Rod Donald 
: Fantastic music. 
DEBORAH CODDINGTON 
: I do not deny that Gareth Farr and some of our New Zealand composers such as Jack Body are very good composers but we have a very dangerous situation when any Government or any Minister can direct what sort of music a symphony orchestra can play just because we have State funding of the arts. I would like a situation of having a free society where there is totally private funding of the arts. I know that that is not a reality at the moment so I will not advocate that there should be no State funding of the arts. But there should be a strictly hands-off State funding. 
This is one of the issues this legislation raises. When we have a definition of “direction” meaning “a direction given by a Minister under this Act” to a member—or to an employee as the Hon Lockwood Smith pointed out—of what can be an autonomous Crown entity that has to have regard to Government policy when directed by the responsible Minister then we start treading in quicksand. We get into swampy ground. 
These are the sorts of things that this legislation should not be concerned with. It brings me back to what the Vice-chancellors Committee is concerned about. It is the principle of the Government’s clammy hands encroaching on all areas of life. Now I am very sorry that I am keeping the Minister up but it was his Government’s choice to go into urgency so he has to endure another hour— 
Hon Trevor Mallard 
: I haven’t been so bored for a very long time. 
DEBORAH CODDINGTON 
: Well as I said it is his Government’s choice to do this. I object to Ministers responsible like the Prime Minister and Judith Tizard directing a symphony orchestra but the Minister should think of the principle. He might enjoy the music that the Prime Minister and the Associate Minister direct that the employees of the Symphony Orchestra should play. He should think about what the implications would be if I were the Minister for Arts Culture and Heritage and directed that the New Zealand Symphony Orchestra should play the music of say Diana Krall. 
Hon PHIL GOFF (Minister of Foreign Affairs and Trade) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 61 
New Zealand Labour 51; United Future 8; Progressive 2. 
Noes 58 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Green Party 9. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 315 in the name of the Hon Dr Michael Cullen to Part 3 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 3 as amended be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Part 3 as amended agreed to. 
Part 4 Establishment and governance of Crown entities 
JOHN KEY (National—Helensville) 
: 
 I am happy to rise to speak to Part 4 of the Public Finance (State Sector Management) Bill. If ever this bill was living evidence of some of the drivel that has been written into our legislation we do not need to go any further than Part 4. If we have a bit of a look through it we will see some of the absolute nonsense that has been written into legislation and in particular into this bill. I draw the Committee’s attention to some of the quite startling findings I made as I flicked through Part 4 earlier. 
Here is an example. Clause 70 “Method of appointment of members” lists a long and convoluted series of things that happen when either the responsible Minister or the Governor-General appoints someone. For instance when the notice is sent out to the responsible member it has to state the date when the appointment will take place. The member cannot start before he or she gets the letter. The letter has to state how long the person will be a member. That is pretty basic stuff. It is not exactly mind-blowing stuff that needs to be— 
Hon David Carter 
: Do they have to be current members of the Labour Party? 
JOHN KEY 
: No they cannot be a member of Parliament funnily enough. 
Simon Power 
: Where’s the Minister in the chair? 
JOHN KEY 
: That is right. It is nice of the Government to pay attention as we debate this stuff. Then we get to the good bit. Clause 72 “Qualifications of members” states what it takes to be disqualified from being a member. The Minister in the chair Trevor Mallard will be delighted to know that he is disqualified under subclause (2)(e) because he is a member of Parliament— 
Hon David Carter 
: Under paragraph (a)! 
JOHN KEY 
: Subclause (2)(a) refers to a person who is an undischarged bankrupt. I do not want to go into his personal business! My point is that under subclause (2)(e) he is discharged because he is a member of Parliament—at least until the next election. I want to go through these points. We are not intimidated by them. These are the interesting bits. There are all sorts of reasons under clause 72 why one can be disqualified from being a member of a statutory entity. [ 
Interruption 
] He may fail on a number of instances. A disqualified person is for instance an undischarged bankrupt a person who is prohibited from being a director or promoter of or who is concerned with a company under section 382 of the Companies Act—that subclause goes on and on—a person who is subject to a property rights order a person who has been convicted of an offence punishable by imprisonment for a term of 2 years or more or a member of Parliament. 
Hon David Carter 
: What about heterosexual males from Wainuiomata? 
JOHN KEY 
: A heterosexual male from Wainuiomata? 
Hon Member 
: Are there any? 
JOHN KEY 
: Some are and some are not. [ 
Interruption 
] That is right. 
Simon Power 
: Roaming the savannah of Wainuiomata. 
JOHN KEY 
: They roam the savannah of Wainuiomata! But that is not the interesting bit. [ 
Interruption 
] The Serengeti of the Wainuiomata! I have not been there for a while but I am sure it is a great spot at which to holiday at Christmas. That is not the interesting bit. The interesting bit is that those are the qualifications and the things for which one can be discharged. 
Clause 76 “Validity of members’ acts” and clause 77 “Validity of appointments” are really quite interesting. Clause 76 states: “The acts of a person as a member chairperson or deputy chairperson of a statutory entity are valid even though—(a) a defect existed in the appointment of the person; or (b) the person is or was disqualified from being a member; or (c) the occasion for the person acting or for his or her appointment had not arisen or had ended.” In other words there is a long list of reasons why a person may not be eligible. [ 
Interruption 
] Mike Williams gets there anyway. Even if one is ineligible and then all of a sudden one wanders along and does something under clause 76 that is all valid. 
But the real classic comes when one reads clause 77. The Minister is looking around. I know it is late in the night but he really should pay attention to this stuff because it really is outstanding legislation and I have absolutely no doubt that it is worth the Committee’s time being here in urgency! This is the best bit. Clause 77(1) states: “The appointment of a person as a member chairperson or deputy chairperson of a statutory entity is not invalid only because a defect existed in the appointment of the person.” In other words— 
Jim Peters 
: Nobody’s perfect. 
JOHN KEY 
: Yes that is right who is perfect anyway? People can have all the defects and can totally contradict clause 72 and it does not matter what they do that will not stop them from getting the job. Everything will be OK anyway. We are here in urgency writing down on bits of paper that people cannot become members until they have received the letter and cannot be removed until the notice has been in the  
Gazette 
. People cannot be members if they do not comply with all those different things but if they do become members they need not worry because it is all absolutely OK fine and hunky-dory. Under this Government they can lie in unison and lie straight in bed at night with absolutely no problem. 
ROD DONALD (Co-Leader—Green) 
: 
 I appreciate the opportunity to speak and will just comment that I was disappointed in the previous Chair for taking a closure on Part 3 as quickly as he did because he did not give some of us the opportunity to contribute a second time to that debate. Although Part 3 is short it is a significant part and I will briefly take this opportunity to promote my amendment to Part 3; it relates to the list of Crown agents in schedule 5. 
The Government Superannuation Fund Authority took the unusual move of making a submission to the Finance and Expenditure Committee asking to be reclassified as an autonomous Crown entity. I guess it wants the same status as the Guardians of New Zealand Superannuation. My amendment certainly gives it the same status but through the process of shifting the Guardians of New Zealand Superannuation from being an autonomous Crown entity to being a Crown agent. In the Green Party’s strong view if that fund is to continue then it needs to give effect to Government policy rather than to have regard for it as it does now. We have real concerns that the Guardians of New Zealand Superannuation will rush off and make investments in public-private partnerships that it sees potential profit in but that do not deliver the whole-of-Government outcomes that we believe our taxes should be invested in. That is why it would be preferable for it to become a Crown agent. 
The other matter that should have been traversed to a much greater degree given the concern of the tertiary education institutions is the very clear clause 47B(2) which states categorically that with the exception of the provisions set out in schedule 6B “… Parts 3 to 7 of this Act do not apply to tertiary education institutions and their Crown entity subsidiaries.” I found it extraordinary that Opposition members from National and ACT having waxed lyrical about how bad this bill is for the autonomy of tertiary education institutions then proceeded to vote against Supplementary Order Paper 315 which actually removed some of the constraints that the Government was originally going to place on those institutions in the bill. They actually voted against the very thing they were calling for. But then again we cannot expect intelligent input from some members on the Opposition side especially on a night like this when it is the press gallery party and some members are clearly “tired and”—what is the phrase? 
Hon Trevor Mallard 
: Spirited. 
ROD DONALD 
: I think “tired and emotional” is actually the point. I move to Part 4 quickly and say that we offer a very constructive—[ 
Interruption 
] Some members would like to go to the press gallery party. Well in approximately 49 minutes they will be able to get back to that party. My colleague Nandor Tanczos has been monitoring the party and apparently it is still flowing very well—indeed it is. 
Turning to Part 4 I invite members of the Committee to look at my very constructive amendment to clause 71(2)(b) which is simply to insert the words “and employee representation” after the words “promoting diversity”. If Mr Key is concerned about Part 4 being terribly politically correct we can make it even more so for him if he likes by saying that we think it is in everyone’s interest but particularly in the interests of those people who work for Crown entities for there to be an employee representative on the boards of those entities. We are not requiring it; we are making the suggestion in the spirit of clause 71(2)(b) which would then state that “… in appointing or recommending an appointment must take into account the desirability of promoting diversity and employee representation …”. That would be a step toward a more cooperative model of governance which is something the Green Party has long stood for because we are strong advocates of workers’ cooperatives. In fact many of us have a business background in workers’ cooperatives and we believe that those same excellent governance principles that work effectively in the private sector could be adopted in the Crown entities of the public sector. 
JIM PETERS (NZ First) 
: 
 I wish to speak very briefly with regard to Part 4. I see that the Minister is smiling and the only reason I can think of for that is because he is thinking of the Teachers Council one of the autonomous Crown entities which at the present time—and unfortunately on the very day that most primary schools in the country close for the year—has huge problems. No doubt the Minister is thinking quietly to himself about clause 82 which refers to how the Minister with as little formality and technicality as possible is permitted by natural justice and a proper consideration of the matter to bring appointments to the Teachers Council board to an end. If ever a council needed that thorough listing of issues of concern such as accountability and delivery of service it is the Teachers Council. The Minister ought to look at that very very closely because so many people in front of classrooms in the last term had no training were not qualified or registered or were people with limited authority to teach who had not been verified or checked. 
The situation in a number of schools that I can mention is such that the Teachers Council has no ability whatsoever on behalf of the Minister and the ministry to monitor the work of those schools at all. Secondly the council does not seem to be able to keep chief executive officers. They have come and gone so I suggest to the Minister very strongly that the provisions of section 82 need to be put into practice as soon as possible. When this bill is passed the Teachers Council should be the very first body to be addressed by this clause and the actions the Minister ought to have taken should be taken under this bill as soon as it becomes law with the Queen’s assent. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 This bill goes from bad to worse to the bizarre. As we look at Part 4 we see that it is bizarre. I draw members’ attention to clause 57 which sets out the core things that statutory entities can do. What does it state? It states: “A statutory entity may do anything authorised by this Act or the entity’s Act.” What a stupid clause to put in. Obviously statutory entities cannot do things they are not authorised to do. Clause 58 is: “Other things statutory entities can do”. They can do anything “a natural person” can do. 
This is typical of this Labour Government. The legislation it is passing through this Parliament is just junk law. If we look at clause 65 “Interpretation” we see that the word “do” is interpreted and that its meaning includes: “(a) to do an act;”. I know that one should not bring the Speaker into the debate but just in passing may I suggest that Mr Speaker Hunt would be horrified at the grammar in this bill. What on earth do we mean by: “to do an act”? For example clause 59 “Acts must be for purpose of functions” states: “A statutory entity may do an act …”. For goodness’ sake! What are we coming to in this Parliament when we pass legislation that includes language that is not even English? I do not know what language it is but “to do an act” is surely not English. 
It gets even worse than that. I draw to members’ attention clauses 67 and 69. Clause 67 spells out the accountability of members of entities to the responsible Minister. It states that members of entities—I presume that includes individuals and can even include employees—are accountable to the Minister for any directions given to an entity. They are accountable to the Minister yet if we look at the original clause 69 struck out by the Finance and Expenditure Committee we find that now the Minister is not accountable to this House. Members of Crown entities are accountable to the Minister but the Minister in relation to this bill does not appear to be accountable to this House. I think the Minister should explain to Parliament why that provision was in this part and why there is no clause requiring him to be accountable to this House when statutory entities or their members have to be accountable to him. 
I come back in particular to the provisions of clauses 59 and 65 where we get down in law to interpreting the word “do”. I imagine that in court we will have problems with that. In courts of law there will be problems because “do” has a general meaning in the English language and if legislation like this one seeks to redefine what “do” means I suspect there will be problems with the law. I think the Minister should explain why on earth it is necessary to interpret what the word “do” means in legislation and why on earth this bill includes the language “to do an act”. 
John Key 
: It sounds sordid actually. 
Dr the Hon LOCKWOOD SMITH 
: I do not want to put that kind of unsavoury interpretation on it but I think that if the Minister expects this Parliament to treat his legislation seriously he should explain why on earth he is coming along to this Committee with that kind of language in a bill. Clause 59 states: “A statutory entity may do an act …” under various sections “… only for the purpose of performing its functions.” What on earth is that kind of language in our law for? I think the Minister should explain that. As for spelling out in clause 65 “Interpretation” what “do” includes—it includes firstly “to do an act”—that is just bizarre lawmaking. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 Here we have in clause 71 another example of pointless legislation. If we read the heading of clause 71 it gives us the impression that there are some criteria for appointments or recommendations made by the responsible Minister. 
John Key 
: What are they? 
Hon BILL ENGLISH 
: Well there are not any. When we read through the clause we see that it states: “(2) A responsible Minister—(a) may only appoint … a person who in the responsible Minister’s opinion has the appropriate knowledge skills and experience …”. That has not prevented the president of the Labour Party from being appointed to eight different Crown entities with a rumoured salary of about half that of Television One’s favourite newsreader. 
Deborah Coddington 
: How much? 
Hon BILL ENGLISH 
: Well it is just rumour. I would not want to represent it to the Committee as fact. 
So that part of clause 71 means that there are actually no criteria. I ask the Minister in the chair Trevor Mallard to ask his officials what the criteria are so that he can advise the Committee. “Criteria” means exclusion. “Criteria” has no meaning unless it excludes some things. I guess that is a matter of the philosophy of logic or something but in this clause it includes everything. So the Minister can get up and tell us who could be excluded from being appointed to any Crown entity by clause 71 which is headed: “Criteria for appointments or recommendations by responsible Minister”. Of course there is a set of unofficial criteria. 
Then the Minister can tell me what clause 71(2)(b) means. Talk about weasel words! Clause 71(2)(b) provides that a responsible Minister: “(b) subject to subsection (1)”—which means he must appoint the people consistent with the criteria which do not exist—“in appointing or recommending an appointment must”—there is strong language—“take into account the desirability of promoting diversity in the membership of Crown entities.” So it does not state that he must ensure diversity. If it were to do so at least that particular clause would then have some integrity because it would be a directive to the Minister or a requirement in the law that he must ensure diversity—but it does not say that. 
So one could breach that clause. It could actually mean something because one might not do it but the clause states that the Minister must take into account the desirability of promoting diversity. So it is not even the desirability of diversity itself; it is the desirability of promoting diversity. It actually means nothing. How could one ever show that a Minister has not taken into account the desirability of promoting diversity? I desire to promote diversity—absolutely! Who would not? It does not mean that I am compelled to appoint anyone in particular for any reason at all. 
So clause 71 is a complete waste of time. It has no legal effect. I would welcome it if the Minister could get up and tell us. He has four officials here at half past 11 at night. He should go and ask them some questions. What is the legal effect of clause 71? Who does it exclude and who cannot be appointed? What behaviour of a Minister would amount to a breach of clause 71 and if there is a breach of that clause what would happen then? Who will take action against the Minister over the provision that mentions the desirability of promoting diversity? 
The old Labour Party used to be just for diversity. It used to ensure it and it used to make one do it. 
John Key 
: This is the third way! 
Hon BILL ENGLISH 
: It is the fourth way actually. The third way was to promote diversity and the fourth way is to ensure the desirability of promoting diversity. 
Of course what Labour members do when they get up in front of diverse audiences is say something quite different. If they stood up in front of the Maori community and said: “This is the section that guarantees you are going to get appointed to Crown entities.” the audience would laugh because they would know it means nothing. What Labour members get up and say is: “We will make sure absolutely that you are going to get there.” 
Hon KEN SHIRLEY (ACT) 
: 
 I have been somewhat stunned by joining this debate and picking up on the points that have already been made. I am particularly alarmed by clause 71(2). I will carry on with the point made by the Hon Bill English who touched on the issue—I do not think he made the point firmly enough—that the president of the Labour Party Mike Williams is involved in eight State agencies. 
John Key 
: So far! 
Hon KEN SHIRLEY 
: So far. I understand they are: rail; historic places I think; health; Genesis Power as I recall; and geological and nuclear science—this is an extraordinary man! Who can honestly believe that that fulfils the criteria of clause 71(2)? That clause states that the Minister “(a) may only appoint or recommend a person who in the responsible Minister’s opinion has the appropriate knowledge skills and experience to assist the statutory entity to achieve its objective and perform its functions.” Is this man Mike Williams the president of the Labour Party an expert on rail? He may have had a train set as a boy but does that make him an expert on rail? What does he know about historic places? What does he know about health energy or geological surveys and nuclear science? The Labour members will be telling us he is a nuclear physicist next! 
This is extraordinary. What it stinks of—because there is a very very bad odour associated with this—is that the Labour Party wants its full-time president travelling the country selecting candidates and always having an excuse to be in Oamaru tonight or Te Awamutu next week because if one has eight State agencies one can virtually be anywhere anytime sucking into the public purse. That is what it is about. 
Rod Donald 
: Like Ross Armstrong. 
Hon KEN SHIRLEY 
: It does smell a bit like Ross Armstrong a great friend of the Prime Minister Helen Clark as the member from Christchurch Mr Donald will remember. That is what this smells of. 
I recall when we made the major State sector reforms in the late 1980s. In the honourable Labour Government that I was a proud member of we made a point of transparency. We made a point of not appointing party hacks; we appointed people on merit. I believe that the National Party in Government throughout the 1980s maintained to a lesser standard that same principle. But what we are seeing now is an overt appointment of party hacks and party cronies to high-paid public agencies. We hear in this debate—and I hope that people in New Zealand listening to this debate will appreciate this—that the president of the Labour Party has been appointed by this Labour Government to eight boards! He is chair of some but he does not have and no one can sensibly believe that he has the competence and the abilities that are outlined in clause 71. That is an outrage. 
The Minister sits there like a maturing cheese. He has not said boo all night. He will not get off his chuff. He will not get up on his hind trotters and explain this appalling legislation. I say to the Minister in the chair that he should wake up take a call and answer these serious questions that are being put to him tonight. It is an outrage; this Parliament is offended; the New Zealand public are offended. It is a gross gross arrogance and it is just an appalling situation. 
I ask the Minister in the chair Mr Mallard to please take a call. He needs to respond to these serious questions. How is it that the president of the Labour Party so far has had eight appointments to those high-paying public bodies? There have been eight appointments including some of chairman. He could not do justice to them all. I put it to the Minister that it is just a guise and way for this Labour Government to abuse its executive powers in order to pay its party hack its president to travel the country. 
HELEN DUNCAN (Labour) 
: 
 I move  
That the question be now put 
. 
BRIAN CONNELL (National—Rakaia) 
: 
 I have been waiting very patiently to make a contribution on this part. I want to start by commenting on clauses 57 58 and 59. My colleague Lockwood Smith touched on this territory as well. Clause 57 “Core things statutory entities can do” refers to the fact that an entity may do anything authorised by this legislation or by the entity’s Act. That is fine. I wanted to check to see what that meant so I turned to clause 58 which tells me the other things that statutory entities can do: “A statutory entity may do anything that a natural person of full age and capacity may do.” That was not terribly clear so I thought I would take a call and ask the Minister in the chair Mr Mallard to get to his feet and explain to the Committee exactly what it means. But I thought that before I did that I would read on so I looked at clause 59 “Acts must be for purpose of functions” which states: “A statutory entity may do an act …”. 
That is the issue that my colleague Lockwood Smith raised. A natural person is someone who does an act. 
Hon Ken Shirley 
: What is an unnatural person? 
BRIAN CONNELL 
: That was the question I was going to pose of the Minister so let me do that. I ask the Minister what an unnatural person is and what acts he or she does. [ 
Interruption 
] That is the natural conclusion is it not? 
Hon Ken Shirley 
: Ask the Minister of Police. 
BRIAN CONNELL 
: Well OK I will ask the Minister of Police. What is an unnatural person and what does such a person do? The Minister in the chair does not want to rise to his feet and take a call. But the question remains. A natural person does an act—and we are meant to take this legislation seriously! I turned over the page to look at some of the other clauses and saw that clauses 61 62 63 and 64 go on to deal with natural acts. I am none the wiser as to what those clauses relate to. I ask the Minister to take a call if he dares—if he can and if he will—to explain to us exactly what is meant by those clauses. 
I now turn to clause 73 “Requirements before appointment”. Mr Key and Mr English talked about that and Mr Key used the word “drivel”. I can only concur with his analysis. The clause states: “Before a person is appointed as a member of a statutory entity the person must—(a) consent in writing to being a member;”—I think that is fair enough—“ and (b) certify that he or she is not disqualified from being a member;”. I wonder whether we have got the order wrong. Surely when this legislation was being drafted the first question that should have been asked was whether a person was qualified or disqualified before we got the person to write stating that he or she consented to being a member. The clause goes on to state: “(c) disclose to the responsible Minister the nature and extent (including monetary value if quantifiable)”—and I am sure Mr Williams would like to tell us what is quantifiable in terms of his money—“of all interests that the person has at that time or is likely to have in matters relating to the statutory entity.” I thought that was reasonable. Then I read on to subclause (2) which states: “The board of the entity must notify the responsible Minister of a failure to comply with subsection (1)(c) …”. 
So what we have is a member of a board who may be disqualified but we find that out only after he or she has consented in writing to becoming a member of the board and then we find out that once appointed if a member has not disclosed the fact that he or she has some conflicts of interest then he or she can no longer be a member of the board. I have been around a bit but I would have thought that sensible reasonable practice would have applied and it would have been ascertained in the first instance whether someone did not qualify to be a member of a board because of some clear disqualification. 
JILL PETTIS (Senior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Motion agreed to. 
The question was put that the following amendment in the name of Rod Donald to clause 71 be agreed to: 
to insert in paragraph (b) of subclause (2) after the words “promoting diversity” the words “and employee representation”. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 9 
Green Party 9. 
Noes 110 
New Zealand Labour 51; New Zealand National 27; New Zealand First 13; ACT New Zealand 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 315 in the name of the Hon Dr Michael Cullen to Part 4 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 4 as amended be agreed to. 
Ayes 71 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2; Maori Party 1. 
Noes 49 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9. 
Part 4 as amended agreed to. 
Part 5 Operation of Crown entities 
JOHN KEY (National—Helensville) 
: 
 We are at the tail end of the Committee stage— 
Simon Power 
: We’re only halfway. 
JOHN KEY 
: OK we are getting near the tail end of the evening session. I see that we have a new Minister in the chair the Hon George Hawkins and I am looking forward to some comments from him. 
Dr the Hon Lockwood Smith 
: We’ll be here until Sunday morning. 
JOHN KEY 
: We are finishing on Sunday morning—OK. I want to look at clause 148 “Power to direct Crown agents to give effect to government policy”. That is interesting is it not? 
Simon Power 
: That’s reassuring. 
JOHN KEY 
: It is very reassuring. There is some flaky Government policy being developed and we are now going to be able to roll it out to our Crown agents to give effect to that flaky Government policy for whatever we want. So let us take a moment to dwell on what sort of Government policy we might possibly see from this Government. 
We have seen all sorts of things from this Government in relation to Government policy— 
Simon Power 
: Closing the gaps was one. 
JOHN KEY 
: Closing the gaps is the first one that comes to mind. That policy was rolled out by the Prime Minister— 
Dr the Hon Lockwood Smith 
: A flagship policy. 
JOHN KEY 
: It was a flagship policy. We had a situation whereby the Government’s policy was closing the gaps and many Ministers were running to their relevant Crown agents and telling them “This is the direction we want you to follow.” I wonder at what point when the polls were not doing too well— 
Simon Power 
: The focus groups. 
JOHN KEY 
:—and when the focus group was making the worm look as if it were about to crash into the earth the Government said that that particular policy was to be a policy no more and that Ministers had to run out and tell Crown agents that there was to be a U-turn and a new direction. 
There are many other such Government policies as well. For example there was getting back into the top half of the OECD. 
Dr the Hon Lockwood Smith 
: That was a good one. 
JOHN KEY 
: It was a good one. They even had graphs on that one. 
Dr the Hon Lockwood Smith 
: Signed by the Prime Minister. 
JOHN KEY 
: Yes there she was proudly down at the printers standing beside that thing except that nowadays we are not allowed to talk about that either. 
Simon Power 
: There was the change in the speeding policy. 
JOHN KEY 
: That is right. So it is moderately interesting that there is that power under clause 148 in Part 5 of the Public Finance (State Sector Management) Bill to direct Crown agents. 
It is very interesting that under clause 149 the same powers exist to direct autonomous Crown entities to have regard to Government policy. I do not want to spend the whole of my 5 minutes debating the failed Government policies of this Government— 
Simon Power 
: Go on. 
JOHN KEY 
: I could do but I do not want to rub salt into the wound. The Minister looks a bit tired. He has suddenly realised— 
Simon Power 
: He’s grumpy these days. 
JOHN KEY 
: He is a little grumpy. He used to be a lot of fun when I first came here. He was good when I first came here and he would not have brought in a 500-page doorstop like this then. But no problems—that is fine. 
Clause 149 is entitled: “Power to direct autonomous Crown entities to have regard to government policy”. The good bit comes as it always does when one reads on in this bill. It is really interesting; it is a bit like a fairytale. When we get to clause 150 we see that lo and behold Ministers have no power to direct independent Crown entities or Crown entity companies on Government policy. So the rules are that under clause 148 a responsible Minister may direct a Crown agent and under clause 149 a responsible Minister may direct an autonomous Crown entity. But lo and behold under clause 150 a responsible Minister may not direct an independent Crown entity. So what is the difference between an autonomous Crown entity and an independent Crown entity? 
Dr the Hon Lockwood Smith 
: Ask Christine Rankin. 
JOHN KEY 
: Yes. 
Pansy Wong 
: They can ignore Government policy. 
JOHN KEY 
: They can ignore Government policy. I ask out of interest exactly at what point something is Government policy because it is clearly not necessarily Government policy if the Government is still talking about it. We know for a fact that a lot of things Government members talked about are no longer Government policy—for example getting back into the top half of the OECD—so clauses 148 and 149 are very interesting. 
I now want to refer to clause 156 “Employment of chief executive” which states: “(1) A statutory entity must not agree to the terms and conditions of employment for a chief executive … without—(a) consulting the State Services Commissioner; and (b) … the responsible Minister.” That is an interesting provision. I actually agree with that clause and I am not arguing that it should not be there but my point is simply that when a chief executive makes a hash of something in a Crown entity I do not want to come down to the Chamber and have the Minister tell us that he or she is not responsible. 
PANSY WONG (National) 
: 
 I want to go back to a provision that I am developing a lot of anxiety about. I am referring to clause 157(2) which is to direct the Crown entity to be a good employer. Apparently to be a good employer it has to operate a personnel policy and that policy has to recognise the aims and aspirations of Maori and their employment requirements. I do not have too much problem with the clause up to that point but clause 157(2)(d)(iii) refers to the need for the involvement of Maori as employees of the entity. The Minister in the chair the Hon Trevor Mallard should take a call and say whether the employment of Maori staff does not naturally mean they are employees of that entity. It is a very strange provision that states that after Maori staff are employed they are required to be treated as employees of the entity. 
Of course it gets even more interesting. For me coming from an Asian background I looked to see whether the Minister or the chief executive would make sure that other ethnic minorities would also be involved as employees. Apparently not. All that clause 157(2) states is: “(d) recognition of—(i) the aims and aspirations of Maori; and (ii) the employment requirements of Maori;”—whatever they are—“… and (f) … the cultural differences of ethnic or minority groups;”. I ask the Minister to take a call and explain to us whether that provision means that a chief executive would be labelled as a good employer if he or she were somehow to employ ethnic minority staff without involving those staff as employees. One has to scratch one’s head and ask what that is all about. 
When it comes to women the provision simply refers to the recognition of the employment requirements of women. So somehow a good employer does not have to recognise the aims and aspirations of women but just their employment requirements. That is all very strange. 
The Minister should take a call and say what the different requirements mean for those chief executives. I think that the chief executives of some Crown entities might find it difficult to make that distinction. I presume that if they employ European males then they do not have to pay attention to the aims aspirations and employment requirements of those males or involve them as employees. It is all very very strange so clause 157 “Crown entity to be good employer” needs a lot of explanation before people like myself in the future can conduct financial reviews of Crown entities and ask them to explain themselves when they may not be aware of those specific requirements. 
Clause 174(1) states: The board of a Crown entity must supply to its responsible Minister any information relating to the operations and performance of the Crown entity that the Minister requests.” I thought that that sounded pretty fair. However clause 175(1) states that there are exceptions when the Crown entity can withhold information on the grounds that it is necessary to protect the privacy of a person or that it will limit the ability of the Crown entity or its members etc. “(b)… to act judicially or to carry out the statutorily independent functions of the entity”. 
I think the Minister should take a call. I am not sure whether that provision is helpful to him. After all if we refer back to Part 4— 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I want to take up exactly where my very good colleague Pansy Wong left off. Clause 157 “Crown entity to be good employer” in Part 5 is blatantly racist legislation. I want the Minister to explain to this Committee why he expects us to pass racist legislation like that. It is an insult to Maori. I am speaking specifically with respect to clause 157(2)(d). What on earth is it about being a good employer that requires a Crown entity to recognise the aims and aspirations of only Maori? What about people of Pacific origin and people of other ethnic backgrounds? Why does this law require a Crown entity in order to be a good employer to recognise the aims and aspirations of only Maori? That is blatant racism. I expect the Minister to explain that clause because I suggest that it is offensive to Maori as well as to anyone else. Does the Minister think Maori are pathetic? What does the Minister want with regard to that clause? I think this Committee deserves an explanation because that clause can only be described as racist legislation. 
Clause 157 mentions no group of people other than Maori. Why should the aims and aspirations of Pacific New Zealanders not be relevant? Why should the aims and aspirations of people of European descent in New Zealand not be relevant to a Crown entity being a good employer? Why are only Maori referred to? I thought the Prime Minister had made the Minister in the chair the Hon Trevor Mallard responsible for dealing with this kind of racist legislation yet he has brought to this Chamber legislation that perpetuates racism in our law. That is disgraceful. Why is it that in order to be a good employer under clause 157(2)(d)(iii) Crown entities have to consider only “the need for involvement of Maori as employees”? Why do they have to consider only that? What about other New Zealanders and their need for involvement as employees? What would occur if a Crown entity were involved in other issues around for example Pacific Island New Zealanders? Some Crown entities may be involved in such specific issues. But no they will have to consider the aims and aspirations of Maori and the need for involvement of Maori as employees. This Committee deserves an explanation of that because we should not be asked to pass such blatantly racist legislation without explanation. 
I also want to draw the Minister’s attention to clause 165. I think we deserve an explanation of what the hell it means. Clause 165 “Saving of judicial protections from liability” states: “A Judge who is appointed as a member of a statutory entity has the same immunities and limitations or other protections from liability when acting as a member of that entity as he or she would have as a Judge.” Now if the Minister appoints a judge to any old Crown entity why should that judge have the same protections that he or she has when acting as a judge in a specific judicial role when the appointment to the Crown entity may not be in a judicial role? In fact I can think of plenty of judges who have been appointed to Crown entities where they are not acting in a judicial role. Why should those judges have the same protection as they have when they are performing a judicial role? I think that should be explained to the Parliament if the Minister expects us to support this legislation. 
Even though it is close to 5 minutes to midnight the Committee does deserve an explanation because this is important legislation. It affects the entire Crown entity sector. Here we have in clause 157 blatantly racist legislation. I also think we need to be given an explanation as to what the Minister is seeking to do under clause 165 by providing to those members of the judiciary who are appointed to Crown entities the protections that they have when acting as judges. I am prepared to take my seat so that the Minister can answer before we rise. 
BRIAN CONNELL (National—Rakaia) 
: 
 I take the call on Part 5 of this doorstop of a piece of legislation. I want to help out my colleague Mr Key. He asked a very good question of the Minister. The question was: when can a Minister give direction to a Crown entity? It appeared from my reading of Part 5 that there were contradictions in the legislation so I thought I would help my colleague out. I went to page 166 and looked at the definitions of statutory entities Crown entities and Crown entity subsidiaries. I thought that if I cleared this matter up for my colleague he might go to bed tonight with a smile on his face because I knew it would keep him awake otherwise. 
If we look at the definition of “Statutory entities” we see there are three different types. The first is a Crown agent. I say to Mr Key that the subtle difference here is that Crown agents “must give effect to government policy” autonomous Crown entities “must have regard”— 
John Key 
: What’s the difference? 
BRIAN CONNELL 
: The member should save his questions. Independent Crown entities “are generally independent of government policy”. So there is the distinction. The independent Crown entities “are generally independent” the autonomous Crown entities “must have regard to government policy” and the Crown agents “must give effect to government policy”. I wonder whether that has cleared the question up for Mr Key. 
John Key 
: No. 
BRIAN CONNELL 
: Well I do not know how to explain it more clearly because I have read the explanation from the bill itself. What I suggest we do now is ask the Minister who is the architect of this legislation to get to his feet and enlighten the Committee at 3 minutes to 12 on Wednesday—no it is Tuesday the 14th—so we can all go down to the press gallery party have a drink and relax in the knowledge that this issue has been cleared up and my colleague Mr Key can sleep well tonight. 
Before the Minister does take that call I also want to ask him to answer the question as to the difference between the entities whose definitions I have just read out and Crown entity companies. This is particularly important as to when a Minister can give direction to a Crown entity. I will pause and let the Minister take that call. Will the Minister enlighten us? No I see that he will not. I will direct members then to look at clause 157 “Crown entity to be a good employer”. This bill because it contains a whole lot of repetitious arrant nonsense is so heavy that it is no wonder a strong man like me can hardly lift it. We dealt with the nonsense—the nonsense I am about to talk about again in clause 157—when we debated Part 3. This clause deals with exactly the same issues we dealt with then. It states that a Crown entity must be a good employer. Well hello that is news to us! A Crown entity must be a good employer and it must operate a personnel policy. Now that is earth-shattering news. I am sure the Minister could not wait to draft that line and get it into legislation. Then we get to the issue that my colleague— 
Simon Power 
: There’s no Minister in the chair. 
BRIAN CONNELL 
: No Minister in the chair! I thought he was on his feet to take a call. I ask members whether the Minister was on his feet to take a call and answer my questions. 
Hon Dr Michael Cullen 
: When the member sits down. 
Simon Power 
: No don’t sit down. 
BRIAN CONNELL 
: No I was not going to—not until the bell rang anyway. 
Debate interrupted.