Donnelly Brian: Securities (Local Authority Exemption) Amendment Bill — First Reading 
Donnelly Brian: Securities (Local Authority Exemption) Amendment Bill — First Reading 
[Volume:642;Page:11804] 
Hon BRIAN DONNELLY (NZ First) 
: 
 Astute members of the House may have picked up last week on the fact that New Zealand First was just slightly irked by the Minister of Local Government over the public release of the rates inquiry. But I have to inform the House that we have kissed and made up and everything is fine and we will be working constructively into the future. The point I make is that while National was planning to vote for Rodney Hide’s dumb bill—I have to say that—New Zealand First used that situation to be able to single-handedly force the inquiry into local government. There are some serious issues around the revenue raising of local government. We recognise that. But we also recognise that a simplistic bill like Rodney Hide’s bill was not going to resolve those issues. We held out in fact for a high-level and independent inquiry such as we got even though we came under an enormous amount of pressure largely from our own party members. I have to give great credit to the New Zealand First caucus for steadfastly showing such resolution and sticking to its guns and finally getting this local government report. 
I have to say that the report which is commonly referred to as the Shand report will be seen as a watershed. It will stand out as the equivalent of the Royal Commission on Genetic Modification and it is against the suggestions contained in the report that decisions will be made I believe over the next two decades or more. 
I take the opportunity—because this bill and the report do dovetail together—to congratulate the chair David Shand and Christine Cheyne and Graeme Horsley on the quality of the report and the depth of their analysis. The panel has certainly served New Zealand very well and this will become increasingly obvious as time goes on— 
Hone Harawira 
: Increasingly obvious. 
Hon BRIAN DONNELLY 
: —yes it will—and as people suddenly realise. First of all they have to actually read the report. Once they have read the report and digested it they will see the wisdom that underpins it. 
One of the key recommendations made in the report is that in order to spread cost over generations councils should make greater use of borrowing for long-term capital projects—the very point that Simon Power was making. I would like to read from the relevant sections. The report states on page 156: “The panel considers that there are very good reasons for local authorities to make greater use of debt to finance long-life investments. Doing so may advance the date at which the infrastructure can be provided and spreads the capital cost more equitably across the generations that benefit from that service. Moreover central and local authorities are generally low-risk debtors so they enjoy low interest rates in debt markets.” 
Recommendation No. 19 specifically states that local government should look favourably at making more use of debt to finance long-term assets and that this should include the issuance of bonds including infrastructure bonds on the capital market not just shorter-term borrowing from commercial banks. This is where the two things dovetail together. Because as the report points out under a 1998 amendment—it was a 1996 amendment but it came into force in 1998—to the Securities Act 1998 local authorities are no longer exempt from obligations on bond issuers including the publication of a prospectus that all elected members must sign. This amendment made the issuing of bonds more costly and politically difficult for local authorities. One councillor could therefore prevent borrowing on the market regardless of the majority view. However the Government has recently announced that it will seek to amend the Act to remove the requirement for a prospectus for local authorities. So one can say this is the first legislation that has partially flowed from that particular I think extremely important report. 
I just want to talk about our own local district council. During the present term one councillor there has taken a position of opposition to literally everything that the council has proposed. He has placed himself as a matter of principle in an absolutely adversarial position in relation to the majority of the council members and his stance is not dictated by the merits of the case but simply by his political position. Herein lies the problem we have at the moment which this bill we believe will overcome. As has been stated in the report one councillor can actually hold up a decision by the council to fund capital projects through debt and through taking on debt—the very thing the report recommends councils should be making greater use of. 
If we think about it councils are created through a democratic process involving the whole of the adult population within their areas and that whole adult population has a multiplicity of different agendas that they are running and that they are voting on whereas a company and its shareholders have the common purpose of maximising profit. Therefore even if the vast majority of the population actually votes for councillors who support the raising of debt for capital projects it is easy in the democratic process for voters in one particular area to elect a councillor who has proposed not to do so and they can hold the whole process up. In other words the present situation leads to an undemocratic process. 
The rule that requires all council members to sign off on a prospectus when issuing debt securities to the public puts all of the power into any individual member’s hands. We do not believe that that is the best situation. In fact it runs contrary to the very suggestions that are coming from the advisers to the Government and also from completely independent and autonomous members of the inquiry team—and I can assure members that this went through a totally autonomous process. 
Therefore New Zealand First will be supporting the bill. We think it is a sensible bill. I think it rectifies some problems that have been observed. It certainly will encourage councils to take on board recommendation 19 of the Local Government Rates Inquiry and we think that it is going in the right direction. In fact we think it is an absolutely critical step to take so New Zealand First will be supporting this bill.