Volume 622 Week 77 - Tuesday 14 December 2004(continued on Wednesday 15 December 2004) 
Text is incorporated into the Bound Volume 
Volume 622 Week 77 - Tuesday 14 December 2004(continued on Wednesday 15 December 2004) 
[Sitting date: 14 December 2004. Volume:622;Page:17745. Text is incorporated into the Bound Volume.] 
Tuesday 14 December 2004 
( 
continued on Wednesday 15 December 2004 
) 
Aquaculture Reform Bill 
In Committee 
Debate resumed. 
Part 5 Maori Commercial Aquaculture Claims Settlement ( 
continued 
)  
PHIL HEATLEY (National—Whangarei) 
: 
 The Committee was asked when this full and final settlement will come round to bite us again—because of course the 1992 fisheries settlement is only just over 12 years old yet we are readdressing it. I pointed to the Government orders of the day listed under “Business before the House” on yesterday’s Order Paper to answer that very question of when the settlement will come back to us. I pointed to the list of bills on the Order Paper running through Nos 1 to 15 16 to 31 and 32 to 35. Just after No. 35 is the Ngati Awa Claims Settlement Bill. If members turn to clauses 118 and 119 of that bill they will see that those clauses deal with an aquaculture settlement specifically with the iwi of Ngati Awa. So there we go. In the next few months that bill will pass through Parliament and it will deal with aquaculture space specifically. So this settlement that gives 20 percent of existing aquaculture space to Maori and up to 40 percent of new aquaculture space to Maori will come round again in a matter of months. 
What does that bill state? It states that the deed of settlement will include a provision that when the Minister of Conservation offers up by public tender any part of the marine coastal area—specifically part of the Ohiwa Harbour—Ngati Awa will have a preferential right to purchase up to 5 percent of that coastal space for aquaculture. Interestingly enough this is not the first time there has been a specific aquaculture settlement. The Nga Rauru Kitahi in Taranaki has the right under its October 2003 settlement to participate in preferential tendering for aquaculture space. Ngati Ruanui in Taranaki signed a deed of settlement in 2001 that gave it a preferential right for aquaculture. Ngati Tama of Taranaki under its settlement of November 2001 has a preferential right to buy at the tender price 10 percent of the allocated marine space. Lastly the Ngai Tahu Claims Settlement Act of 1998 specifically granted to that iwi a preferential purchasing right of 10 percent of the allocated space. 
So there we have five iwi that have gone to the Government of the day—one to the previous National Government and four to the Labour Government—and argued on merit that there is a settlement to be made. The Government of the day has accepted on merit that the claim was fair and it has addressed the claim with a preferential right to purchase aquaculture space. That has happened five times on a case by case basis on merit without affecting any other marine farmer in the country and each time there has been a deed of settlement to point to. There is nothing wrong with that but a blanket give-away of 20 percent of aquaculture space right across the country as this part attests to regardless of any involvement in the marine area is unjustified. 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
: 
 It would be useful if I made some comments I think both in respect of the misinformation the Committee has just heard and in relation to some of the comments made last night. I will begin by addressing the issue of the genesis of this—I think—very sensible and very progressive settlement. It is most important that I quote for the benefit of the Committee from the Wai 953 report. It states: “He”—Doug Kidd—“thought that the Treasury had wanted to bring aquaculture into the quota management system but he”—Doug Kidd—“had personally forbidden Treasury officials from mentioning the matter during discussions on the deed of settlement since it would confuse an already complex set of negotiations.” So for members of the National Party to stand here and say that that matter has been dealt with is typical of the sort of claptrap we hear repeatedly from that party. I thank New Zealand First United Future and the Greens for supporting a really sensible pathway forward. Like the industry and like local government this Government is concerned about good outcomes and making progress and not about wheeling out the same old boring racist nonsense as that Opposition party constantly does. 
The CHAIRPERSON (Ann Hartley) 
: The member cannot insinuate that a member or a party is racist. I ask the member to stand and withdraw that remark. 
Hon David Benson-Pope 
: I withdraw and apologise. 
IAN EWEN-STREET (Green) 
: 
 The 20 percent allocation of aquaculture space to Maori is a very strange course of action for the Government to take. I basically support the allocation but the Government seems to have gone about it in a very odd way. The National Party talks about unfinished business. I accept that there is some question about that but I do not really want to visit that question. What the Government is trying to do right now is to legislate for a full and final settlement. Crown Law opinion states that the Crown does have the right to do so but my reading of it is that the Treaty of Waitangi settlements must be negotiated. There has not even been consultation with iwi Maori on this settlement. How can the Government legislate for a settlement when it has not even consulted with the people it is settling with? The 1992 deed of settlement stated that Maori were entitled to 20 percent of all new species as those species were admitted to the quota management system. Green-lipped mussels and I understand oysters are not part of the quota management system so they are not triggers for entering into a Treaty of Waitangi settlement either. 
It seems to me that the Government is creating a potential loophole. On the one hand it says that this is a full and final settlement of the Treaty of Waitangi claim but on the other hand it leaves the door open for Maori to say it is very nice to have the 20 percent for which they thank us very much but that now they will go ahead with their treaty negotiations—and we would support them in doing that. Another problem—a practical problem—that this legislation brings up is the idea that the 20 percent of space allocated to Maori will be “representative space”. How does one actually identify what representative space is? It is not just 20 percent of an area. Water space actually varies in much the same way as land does: there is high country which is not very productive and there are lowlands which are very productive. So it is not simply a matter of saying Maori can have a particular space and that it is equal to a space that has already been taken. It is probable that the space that has already been taken by existing marine farmers will be the best space that was available so anything that is given to Maori is likely to be less than average. So how do we find the space? It is a real practical problem. 
The legislation states that Maori are to get 20 percent of all new space. On the surface that seems straightforward enough notwithstanding the productivity question. I have heard some very odd comments from various people who say that that does not mean actually 20 percent; it means 40 percent. The question of 40 percent comes up only because the legislation states that from 1992—the year of the deed of settlement—until the present there has been existing space and 20 percent of that is to go to Maori. If that space cannot be bought or obtained in some way by the Government and passed on to iwi Maori then the amount has to be made up from new space. It could be that Maori will get up to 40 percent of the new space in order to make up for the 20 percent that the Government cannot give them from the existing space. It is a bit complicated but at the end of the day taking the existing space and the new space together the amount is 20 percent and not 40 percent. The amount is up to 40 percent of the new space but not 40 percent of the overall space. 
Another question that has come up is the use of Te Ohu Kai Moana Trustee Ltd as the allocation body using the model from the fisheries settlement. Almost without exception—I think there was one exception—the iwi groups that made submissions to the Primary Production Committee opposed the use of Te Ohu Kai Moana Trustee. Now we must be doing something right if everybody dislikes it. The problem was that we kept asking those groups who they did want to be the allocation group if they did not want Te Ohu Kai Moana Trustee and their answer was that they wanted to negotiate directly with the Crown. Obviously when there are multiple groups all around the country it simply will not work like that. So for better or for worse we have decided that Te Ohu Kai Moana Trustee is the organisation with the skills to do the job. At one level I do accept the Maori argument that the Government is just passing off a complex problem to another group and saying to Maori that it is their problem and that they should get on and deal with it. 
There have also been questions raised about who gets the allocated space in a mixed area. Let us say a piece of foreshore has open water and a harbour and there are two adjoining iwi one having the rohe of the open water and one having the rohe of the harbour. If the open water is not suitable for aquaculture then basically that is just tough bikkies for that particular iwi. 
BERNIE OGILVY (United Future) 
: 
 Part 5 which members are speaking to sets out the procedures so that we may have clarity as to how to go about the allocation of aquaculture space—not only members here in Parliament but also regional councils Maori and iwi. I think that this is a very good part because it sets out the procedures. The Committee has become bogged down in some of its discussion as to whether it should even start on the procedures but once it has moved past that initial question there still need to be clear outlines on how things should take place. In other words I note that this part answers the question of how the settlement is to take place for iwi and Maori. As somebody has just tried to explain the amount that is set aside for Maori is 20 percent of all the space in aquaculture management areas. That is done in two stages. There is a stage from 21 September 1992 through until today—the existing farms or space that will be converted into aquaculture management areas—and then there is everything from the passing of this legislation. Overall this bill makes it clear that iwi will be settled with no more than 20 percent of that available space. The amount is not 40 percent of the space as someone correctly pointed out. The space must be representative space. It has to be economic in size for people to use and it has to have not less than average productivity as I recall some of the clauses point out. 
The space will go to Te Ohu Kai Moana Trustee to be held by that body as trustee and Part 5 lays out the procedures that relate to the passing over of that space to Maori. With regard to the assets that some people referred to when they said that the trustee would receive all the money and would run away with it that type of talk is not supported by Part 5. In fact what is being transferred is just space and there are no financial possibilities of others misusing or abusing space in itself or of people taking the money going elsewhere or holding up progress for a long period of time. There is no money involved and I think it is very important to understand that. The roles of the trustees the authority that is set out for them and their ability to do things is set out in Part 5. There is a dispute resolution process set up—going right through to the High Court if need be—so that no one can be in any doubt. I believe that this part sets out a good due process so that no one can misunderstand the intention and the conclusions that are desired for aquaculture to get started into a full thrusting sense from the passing of this legislation. 
There are other harbours that have been referred to in the bill. We have looked at them. As a party United Future will certainly vote for clause 105B which amends the Foreshore and Seabed Act and also for the amendment to that clause that has been tabled in Supplementary Order Paper 322 in the name of the Hon David Benson-Pope. We as a party feel that this is good legislation. It will really help Maori people to get settled and with them being settled the rest of the industry will therefore settle down and get on with practising aquaculture. 
JIM PETERS (NZ First) 
: 
 It is interesting in view of the speeches made last night and at the beginning of the day by National Party members that there seems to be a lack of understanding as to why the 20 percent threshold is there. It is certainly not a misunderstanding on the part of the industry. Yesterday morning’s  
New Zealand Herald 
 with regard to the very matters that we are looking at in Part 5 stated: “The industry has never been opposed to the fisheries issues of the treaty settlement.” That is the exact view that I had confirmed for me by a major player in Northland on the weekend. And why is that? It is because in 1992 a threshold was set by the then National Government as to what would be a fair allocation of the fishery resource at that time. As I stated yesterday so important was that at the time that the then National Government shot the whole deed of settlement in its legislative form through in one sitting as it were—introduction second reading Committee stage and third reading took place all at once. That shows how keen the Government and particularly Dr Smith were at that time to “provide a full and final settlement” which is exactly the language of clause 59 in Part 5 of this bill. 
So New Zealand First came to this as I said yesterday with an understanding of the 20 percent threshold established. Therefore we took up the issue as Mr Woolerton did in the Primary Production Committee of providing for the allocation and management of aquaculture settlement assets. We found nothing incompatible with that notwithstanding the fact that in 1992 Peters I and Peters W voted against the deed of settlement. Since then we have maintained major clarity as to issues concerning Maori and fishing. 
However the issue before the Committee is whether that will work. I want to bring to the Committee’s attention the fact that there will not be a huge amount of space out there ready to be absorbed. In Northland there are 149 farmers at present and going through and taking the Minister and the Government at their word over the last 2½ years we have consulted widely. The industry’s wish for 135 sites has been finally narrowed down to 19. When we go back and look at the actual space those 19 farms will use it is very small. So there will not be a large amount of space out there notwithstanding the fact that some operators or industry developers may want to go for some of the large farms such as we have seen in Akaroa Opotiki and other places. But in general if we take into account the criteria set out in this bill define it and work through it with regard to the local community having regard to the requirements of the Resource Management Act there is not a vast amount of space available. 
So that 20 percent allocation for Maori will be a significant issue because the space is very small and it is additional space. I say again that in the thinking of the bill the committee has done very well under the Hon David Carter in the previous part in setting out the rights of those who at present hold consents or licences. Those rights have been upheld as they were not in the original bill and those people have security virtually for life. There is nothing much more that one could expect despite what was said yesterday by my friends on my left with regard to lifetime security. 
So for the part of New Zealand First we as a party with a great affinity with the Maori world are very conscious of what this can do and would do. It is not unfair it is principled and most of all it is based upon the National Government’s mind in 1992 in setting that threshold. In concluding may I say that I find it very strange that there is so much concern about our national assets by a party that willingly sold off Telecom and New Zealand Rail to the wider world. 
GERRARD ECKHOFF (ACT) 
: 
 I would like to refer back to just a moment or two ago before the last couple of speakers to the Minister’s outburst and that is really all it could be described as. If in fact the Minister had some real justification he would have stood in this Chamber and explained to the Committee and to the people listening to this debate why the Crown Law Office blanked out three pages of advice—or what should have been advice—that should have been put in front of this Committee. I ask the Minister to explain to the House why we got three blank pages of Crown Law on this issue but I am perfectly certain that he will not do it. 
In talking to Part 5 I believe that without question there should be an open-door policy to aquaculture in this country. We have a huge coastline massive amounts of water available and there should be an absolutely open-door policy. The policy that this Government is operating is a brown-door policy because if the person is Maori then that person gets special treatment. The people of this country are sick and tired of this racist nonsense. Maori are perfectly capable and always have been perfectly capable of running their own industries. Let us look at Ngai Tahu in the south for example. They do not need special help or special attention because they are more than capable and have been extraordinarily successful. I suspect that what is happening is that Ngai Tahu and other Maori are laughing up their sleeves at this Government’s naivety. They will be saying: “If they are prepared to give us 20 percent for nothing—totally unjustified—then we will take it.” They treat this Government as the village idiot. They will keep on grabbing from the Government as long as the Government is silly enough to hand out this extra 20 percent. We know why it is being done. We know it is being done for votes and to protect the hides of the Labour Maori caucus. It is payback for the foreshore and the seabed legislation. 
But I want to talk about the space that is to be allocated that must be of an economic size. I wonder whether any of the officials or the Minister could tell me what an economic size is and how it will be determined. For if we look at this whole question of an economic size in terms of agriculture for example an economic size of a farm in Southland might be 400 acres. The same carrying capacity in the high country of the North Island or South Island might need to be 40000 acres to carry the same amount of stock. Really this is what we are talking about. [ 
Interruption 
] 
Did I hear some sort of utterance from a member of the Government? Those members do not know what they are talking about. The carrying capacity varies hugely from region to region between bay and bay where the aquaculture might be sited. How on earth is an economic size to be determined by a bunch of officials or indeed a regional council? It cannot be done. The way it is done is that people put their ropes into the water and after a period of time work out that growth is not occurring quickly or there are too many ropes or they need extra size. So in many areas the aquaculture areas might be too small to allocate 20 percent extra because the economy of scale to that marine farm will be lost if they lose that extra 20 percent. 
This is a practical common-sense situation that I personally have experienced and the farming community has experienced. The same concepts can be applied to aquaculture and essentially the same principles apply. It is possible to get water that is full of nutrients and like the Southland plains is highly fertile and can sustain a high carrying capacity. What happens in open water or in another bay where there is little or no nutrient by comparison is that the size will have to be doubled trebled or quadrupled sometimes to achieve the same carrying capacity. 
Dr LYNDA SCOTT (National—Kaikoura) 
: 
 I want to go back in Part 5 to the issue of Maori settlement. When we talk to a lot of New Zealanders and we start talking about contemporary claims for Maori it sends a shudder down their spines. Most people have signed up to the fact that they want to settle past grievances but contemporary claims make them feel that the treaty industry is never going to end. This is a very good example of the reason. 
I want to read the deed of settlement between Her Majesty the Queen and Maori from 1992 for the fisheries settlement and this is the permanent settlement of commercial fishing rights and interest. Under the treaty this settlement was supposed to actually answer the question of past grievance about Maori’s ability to have free access to their traditional grounds for collecting seafood and for fishing. It states: “Maori agree that this settlement deed and the settlement it evidences shall satisfy all claims”—all claims—“current and future in respect of and shall discharge and extinguish all commercial fishing rights and interests of Maori whether in respect to”—and members should listen to this bit—“(c) coastal or inland fisheries including any commercial aspects of traditional fishing rights and interests whether arising by statute common law including customary law and aboriginal title the Treaty of Waitangi or otherwise and whether or not such rights or interests shall be the subject of recommendations or adjudication by the courts or the Waitangi Tribunal.” 
This was the deed of settlement that we are now relitigating with aquaculture. I want to tell the Minister that the Hon Doug Kidd who was the member for Marlborough is clear that aquaculture is actually part of this settlement deed. But here under the Aquaculture Reform Bill what do we have? We have Crown Law Office advice from 26 January 1996 looking at whether there was any allocation of aquaculture tenures and coastal consents. It could not find any evidence that this extended to aquaculture. This is Crown Law Office advice. It did not extend to aquaculture. 
New Zealanders are getting really tired of the continual handouts when one has Maori on the other side of the fence saying: “We don’t accept this. There is no deed of settlement.” We heard speeches in this Chamber last night and today we will hear more I am sure saying that Maori do not acknowledge this action. They are being handed out 20 percent. They do not acknowledge it. There is no deed of settlement. They did not ask for it. They much prefer to have case-by-case negotiated claims and they do not want this. So New Zealanders are paying for 20 percent of aquaculture management areas when they have already had 10 percent of the total allowable catch 50 percent of Sealord’s and 20 percent of new quota which is what went to Maori under the deed of settlement in 1992 under the Fisheries Act. 
How long does it go on for and how much more will there be? Maori are not happy with this. This Government is handing out this 20 percent space—basically it has done a deal over the foreshore and seabed legislation. 
I was surprised by New Zealand First last night. Doug Woolerton was saying that New Zealand First is supporting this because it will forestall a fight. I do not think so at all. I do not think it will forestall anything. We are still going to see difficulties about this. In the Marlborough Sounds—the area that I represent—30 percent of marine farms are already owned by Maori. Everyone wants to see everybody in this country being able to do well advance themselves and have access to industries that will be for the betterment of this country. 
Hon DAVID CUNLIFFE (Minister of State) 
: 
 I move  
That the question be now put 
. 
Hon DAVID CARTER (National) 
: 
 I want to deal with the misinformation that was given to the Committee earlier by the Minister of Fisheries in his rabid outburst when he suggested that when Doug Kidd negotiated the 1992 settlement he deliberately took aquaculture off the agenda. That is absolutely untrue. I shall clarify for that Minister if in fact he is mistaken—but I doubt it—that what Doug Kidd forbade further discussion on was a Treasury report that was around at the time that investigated whether aquaculture should come into the quota management system. Doug Kidd said that that notion was off the agenda and was not to be discussed. David Benson-Pope suggested to the Committee today that Doug Kidd’s statement could be taken as his saying that aquaculture was not to be part of the discussion. What Doug Kidd said was that aquaculture coming into quota management was not a discussion topic on the agenda of the Government of the day. 
I shall deal with whether aquaculture was part of the discussions associated with the deed of settlement. I refer to Gardiner and Parata’s report commissioned by Te Puni Kokiri in 2002. Gardiner and Parata quite specifically asked the people involved in the 1992 settlement whether aquaculture had been excluded from the deed of settlement. I previously mentioned Mr Phil Major a senior adviser to the Minister of Fisheries at the time; he said that he could not recall the matter being explicitly on the table during discussions between Ministers negotiators officials or advisers. Doug Kidd also has confirmed to me that at no time was aquaculture seriously on the discussion trail. Hauraki Greenland the manager of Te Puni Kokiri said that although he had joined the discussion late in the process of the deed of settlement he had no recollection of aquaculture being recorded. Belinda Clark the manager of Te Puni Kokiri at the time said quite specifically that Te Puni Kokiri had not been part of many of the meetings around the detail of the deed of settlement but to her knowledge from the meetings she had attended the matter of aquaculture had not been raised. George Habib an adviser to the negotiators gave a very lengthy interview but to summarise he quite specifically said that there had been no specific mention of aquaculture. 
So it is a mistruth for the Minister to suggest to the Committee that aquaculture was taken off the table. That was not the case at all. It was simply that nobody bothered to raise the issue because everybody involved in the process genuinely saw the deed of settlement as full and final settlement of commercial-fishing rights—inshore offshore and coastal. 
I want to deal with another matter that the select committee spent a lot of time on and that is what we got to call the patchwork quilt. That is the issue whereby the allocation of 20 percent of space to Maori—in the case of new space 40 percent—may result in Maori getting a whole lot of space that effectively is useless to them. Mr Benson-Pope said in the House yesterday that the select committee had solved that problem. I assure the Minister that the select committee did not solve the problem. We went a long way towards alleviating the problem but this legislation still has a mechanism whereby when a current aquaculturist successfully applies for a private plan change to extend space in order to create a new aquaculture management area adjacent to an area where he is operating aquaculture at the moment Maori get 20 percent of it. That is wrong. It is wrong to ask the industry to go through all the costs associated with the creation of new areas then to gift 20 percent of them to Maori. It is absolutely unprincipled. But what will happen is Maori will end up with 20 percent of perhaps 1 hectare of extension and that will be of no use to them at all. If David Benson-Pope is so out of touch with his own portfolio that he thinks the select committee managed to solve that situation he is absolutely wrong. 
This legislation will cause bitterness and grievance. 
DAVE HEREORA (Labour) 
: 
 I move  
That the question be now put 
. 
PHIL HEATLEY (National—Whangarei) 
: 
 Here is the bottom line. The 1992 fisheries settlement went through negotiation and discussion a deed was signed the assets were put into Te Ohu Kai Moana over a period of 12 years the issues about allocation were resolved and this year the Maori Fisheries Bill was passed giving power for that allocation to happen. With this aquaculture treaty settlement which the Minister of Fisheries thinks is full and final there has been no negotiation. The Minister cannot table any deed of settlement. Goodness knows how long Te Ohu Kai Moana will be arguing and chasing its tail going round and round in circles in order to get an allocation acceptable to anyone and here we have legislation that will pass aquaculture space into Maori ownership! 
Maori have said themselves that they do not accept this as a settlement. That is what they have told us. They have said that no one negotiated with them no one signed a deed of settlement with them. They reject this as a settlement. That tells us only one thing and that is that the Indians are coming over the hill again—that there will be another claim on aquaculture space. So why does the Minister not admit to this House that Part 5 “Maori Commercial Aquaculture Claims Settlement” is simply a horse-trading deal with Maori whereby if the Government throws Maori 20 percent of aquaculture space Maori will be satisfied over the seabed and foreshore deal? That is what this is all about and it has satisfied no one. 
Maori came to the select committee quite concerned. They were worried that they would end up with two worthless things. One was aquaculture space designated to them by regional councils that they never would have chosen for themselves and the second was aquaculture space that was so small and insignificant—for example 20 percent of a development of 5 hectares which would give them 1 hectare—it was of no use or value to them whatsoever. They could not understand why the Government did not negotiate with them over this. We set them right and the lights went on. “Ah!” they said “This is to buy our silence.” Even the dim light of Doug Woolerton went on. He went: “Ah I see now. This is a deal. We’re tossing Maori 20 percent of aquaculture space and they’re to shut up about the seabed and foreshore legislation. The Government is trying to buy them off.” When the lights went on in Maoridom and the dim light of Doug Woolerton shimmered everyone understood what was going on. Part 5 talks about that. 
I can tell members that Maori submitters and the member from Gisborne will concede this were concerned that there was no negotiation no settlement and they are wondering whether they should come back for more. I am intrigued that this particular so-called treaty settlement—I shall call it a pseudo - treaty settlement—is post-1992. Maori can still make claims pre-1992. Here is a question for the Minister: if Maori can make claims pre-1992 and this settlement is post-1992 what did New Zealanders do to Maori after 1992 that means they deserve 20 percent of aquaculture space? What have we done in the last 14 years— 
Hon David Carter 
: Go to a Labour Government. 
PHIL HEATLEY 
: Is that what it was? What have we done in the last 12 to 14 years that means for some reason we owe Maori 20 percent of aquaculture space? 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
Hon DAVID CARTER (National) 
: 
 Madam Chair I thank you for the call because I have been going through the documents presented to the Primary Production Committee and I want to ask the Minister of Fisheries and Labour Party members whether they have respect for Sir Tipene O’Regan and his word. I am not getting an answer to my question so I want to put on the record that I have huge respect for Sir Tipene O’Regan and his word. 
I shall quote Sir Tipene’s answer when he was asked to recall the 1992 settlement and the discussions that occurred at that time and to answer the huge question of whether aquaculture had been on the agenda or off the agenda. The interview was undertaken at the request of Te Puni Kokiri and the result was presented to that ministry in May 2002 by Gardiner and Parata. That firm had asked Sir Tipene O’Regan a question that is fundamental to this gifting of aquaculture space to Maori. The question simply was whether aquaculture had been excluded from the deed of settlement. Sir Tipene responded: “The settlement was about commercial fisheries rights. Such rights include aquaculture.” Nothing could be clearer in the mind of Sir Tipene O’Regan. 
The Minister in the chair David Benson-Pope shakes his head. Let him be assured that I am not misquoting the information in front of me. That is a direct quote of what Sir Tipene said to the interviewing firm Gardiner and Parata so I doubt whether it is incorrect. Nothing could be clearer: the 1992 deed of settlement was full and final for commercial fishing and aquaculture was included. Yet here we are 12 years on debating this bill because the Labour Government is totally embarrassed about the way it has treated Maori over the seabed and foreshore legislation. Helped by United Future and by New Zealand First and knowing that Labour is about to lose votes in every Maori electorate the Government has trumped up this deal which is without principle. It is giving Maori up to 40 percent of new aquaculture space as a means of buying votes. 
The really interesting thing is that Maori find this settlement unacceptable as well. They are prepared to accept the gift—why would they not—but every Maori submitter told us that in his or her view this was not a settlement it had not been negotiated and he or she was not accepting it as full and final settlement. So today we are passing legislation that not only does not settle Treaty of Waitangi grievances but reinvents the grievance industry and gives it a whole new lease of life for generations to come. That is a very sad development for race relations in this country. 
There can be no justification for it at all particularly when we see the words of Sir Tipene O’Regan. He was heavily involved in the discussions with Ngai Tahu. That very good settlement was negotiated by the National Government in 1996 and the House signed up to it. Even Labour voted for it. Because Ngai Tahu wished to be involved in aquaculture as part of that settlement they negotiated the right to 10 percent of space in their area on a pre-emptive tender basis. They did not expect a gift. They were quite happy to pay for it when it was tendered. 
That is absolute proof in my mind that Sir Tipene was absolutely right. He knew that aquaculture had been addressed in the 1992 settlement and nothing will change my mind on that matter. Labour is desperately attempting to justify this measure by referring to “unfinished business”. The “unfinished business” was “finished business”—until this Government opened it up again. I say to David Benson-Pope that he has opened up a can of worms. 
RUSSELL FAIRBROTHER (Labour—Napier) 
: 
 I move  
That the question be now put 
. 
A party vote 
 was called for on the question  
That the question be now put. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Orders Papers 319 321 and 322 in the name of the Hon David Benson-Pope to Part 5 and the following amendment to clause 87(2) in his name be agreed to: 
to insert after the word “assets” the words “ and representing the interests of iwi”. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 5 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Part 5 as amended agreed to. 
Part 6 Amendments to Te Ture Whenua Maori Act 1993 
PHIL HEATLEY (National—Whangarei) 
: 
 Part 6 will of course be broken off and form a separate bill as will the other parts that we have been and will be debating in the Committee stage. It concerns the amendments to the Te Ture Whenua Maori Act and is all about the Maori Land Court dealing with disputes—in particular those relating to aquaculture in various regions throughout New Zealand. Members will recall that there was negotiation there was a deed of settlement and there was an Act passed for the Maori fisheries settlement in 1992. There was a period of 10 or 12 years when Te Oku Kai Moana the Treaty of Waitangi Fisheries Commission had to work with Maori up and down the length and breadth of the country in order to resolve who had a genuine claim to a fisheries allocation in particular regions. That was a very long-winded process. It involved lots of necessary hearings in front of the Maori Land Court and resulted in a bill being brought into Parliament late last year that we looked at during the first part of this year. Interestingly enough even the Fisheries and Other Sea-related Legislation Committee when it got that legislation after 12 years’ work made some changes in relation to some iwi making claims to a fisheries allocation. 
These amendments in the Aquaculture Reform Bill are to go through the same process as that so that iwi can put their case as to their right to the allocation of space. They will be doing that primarily before the Maori Land Court. That is why we are looking at Part 6 “Amendments to Te Ture Whenua Maori Act 1993”. The difficulty will be that there were 12 years of disputes over the Maori fisheries settlement—and that was when back in the early 1990s there had been negotiation a deed of settlement and an Act passed that dealt with that allocation. So members can imagine the disputes we will have before the Maori Land Court arising from this legislation given that there has been no negotiation no deed of settlement and no Act specifically dealing with this particular treaty settlement. The Maori Land Court which is referred to in these short clauses will be very very busy indeed. 
It was interesting when doing the Maori fisheries settlement to talk about coastline disputes. That was just one type of dispute that was possible—a dispute about where the coastline began and ended for a particular whanau iwi and hapu and if there was disagreement on that who had to resolve it and how it was done. The coastline agreement had to do with inshore fisheries only rather than offshore fisheries as well so it was major in one sense but not wholly significant. The coastline agreements with regard to aquaculture will be absolutely essential when it comes to deciding which hapu and iwi have claim to a particular aquaculture management area. I can say now to the country that there will be huge arguments over that particular issue. Iwi will be fighting iwi for years and years to come. We will hold our heads in our hands and weep. Had the Minister negotiated with Maori signed a deed of settlement with them and got buy-in perhaps all that could have been avoided. So if the Minister in the chair David Benson-Pope thinks that this part is some kind of silver bullet that will solve aquaculture disputes in the marine management area over the next decade he is dreaming. That is why we have to have these amendments to the Te Ture Whenua Maori Act. 
GERRARD ECKHOFF (ACT) 
: 
 It is quite extraordinary that in the Aquaculture Reform Bill—in which we are attempting anyway to resolve the issue once and for all—lo and behold we see Part 6 is totally and specially dedicated towards conflict resolution. One entire part is about conflict resolution when this is a reform bill in which the whole issue is meant to be sorted in a full fair and final way. It is quite extraordinary that the Government itself and the Minister in the chair David Benson-Pope who is sitting there and chewing his cud do not seem to understand that they have just opened up another period for Maori to fight one another to argue and to make the lawyers rich. I can see Donna Hall right now just beaming from ear to ear at the thought of the millions of dollars she will be gleaning from Part 6 because of the total ineptitude of the Government. I can tell the Committee right now that the lawyers will be getting the snapper and the ordinary Maori will be getting the empty net as always in these sorts of settlements. 
This legislation will not achieve anything that is near to the nice warm fuzzy belief that the Greens New Zealand First United Future and the Government seem to have about what will occur once it is passed. It is a recipe for the continuance of the grievance industry. It will pit Maori against Maori iwi against iwi and even I guess relative against relative in the argument as to who is entitled to what. I can only say again that it is extraordinary to see in a bill of this size an entire part—not a clause or a couple of clauses—dedicated towards trying to resolve conflict or setting in train the principles by which conflict resolution can occur. It is amazing that the Government has predetermined that there will be conflict and in trying to pre-empt it has put in a whole new part. I guess I am still thinking to myself that there can be only a clause or two on that surely. But no an entire part consisting of a dozen pages or so is dedicated towards the resolution of the conflict that must occur as a result of this legislation. I find that to be absolutely amazing. I can only concur with my colleagues from the National Party on that. 
Tipene O’Regan was dead right. The Minister should know that he was dead right. If the Minister was doing his job properly he would get on the phone to him. When I was last aware Tipene O’Regan was still living in Otago so it would not even cost the Minister a toll call to get on the phone and ask him what actually happened and what his recall of the process was. We would not even need Part 6 if the opinion of one of the most highly regarded members of Maoridom and of the New Zealand community had been sought by the Government. If the Government had consulted Tipene O’Regan at an early stage I suspect the whole conflict resolution process would have been unnecessary. We would not be sitting here in urgency trying yet again to ram another piece of legislation through Parliament that is in my view totally unprincipled and not even based on consultation with Maori to determine whether it is necessary. 
Hon DAVID CARTER (National) 
: 
 As we move to Part 6 I want to pick up on the comments made by my Primary Production Committee colleagues Gerry Eckhoff and Phil Heatley. In Part 5 we have created a huge dispute and grievance between Maori New Zealanders and non-Maori New Zealanders. Now we move to Part 6 which is a significant part of the bill. It is totally devoted to trying to find solutions to grievances between Maori. We have talked throughout the debate about Maori getting up to 40 percent of new aquaculture space but nobody has taken much interest in defining who is Maori and how that space will be actually allocated. I note that no Maori member of the Labour caucus has even bothered to take a call on any part of the legislation let alone helped the Committee with this very important part. 
I confess right at the outset that I do not have a huge appreciation of Maori politics. I would have thought it was incumbent on some of those Maori members to help the Committee through this debate. They should tell us how the various iwi or hapu will be recognised so as to receive their entitlement. My colleague Linda Clark—no Linda Clark was never a colleague of mine but I accept that she was a colleague of the other side! My colleague Lynda Scott has just mentioned that eight iwi claim to have an affiliation to the Marlborough Sounds which is the area that has been at the forefront of leading aquaculture development in this country. I pay tribute to the Marlborough District Council for the job it has done. This legislation will give Maori in the Marlborough Sounds up to 40 percent of new space to be created. We have acknowledged that that will be complex enough to build into this legislation a dispute resolution process for how the aquaculture space will be divvied up within iwi. 
There are no boundaries for this. There is no map of the Marlborough Sounds that states that a particular iwi has an affiliation with a particular bay and that another iwi has an affiliation with another bay. If Maori use their brains—and I am sure they will—they will look at the Marlborough Sounds and ask where the most productive areas are. They will then go into a lengthy process of trying to prove to the Maori Land Court that they have an affiliation to that area—not because it is where they used to fish but because that is where the most productive space is. The Maori Land Court cannot handle claims at the moment. We will have to resource it. 
Dr Lynda Scott 
: More money. 
Hon DAVID CARTER 
: More money from the taxpayers of New Zealand will resource yet another court to try to sort out claims between various Maori because the Labour Government is passing legislation that is unprincipled and simply will not work. I want the Minister to rise to his feet and tell us how much additional workload he sees as being put on the Maori Land Court. Let us have a statement from the Minister in charge the Hon David Benson-Pope to prove that he has given some thought to that question. I bet it has not even crossed his mind. He will not be the Minister of Fisheries after the reshuffle of the next few days. Helen Clark knows that the industry is totally disappointed in that man. He has been a disaster. He does not even understand the basics of this bill let alone the complication associated with Part 6. 
Darren Hughes 
: Is this the man who got demoted off the front bench? 
Hon DAVID CARTER 
: I assure members that Darren Hughes the soon to be former member for Otaki does not have a clue about this legislation. I know that Nathan Guy the National Party candidate who is door-knocking in Otaki at the moment knows more about this legislation because I have spoken to him. He knows more about this than Darren Hughes would. 
Darren Hughes 
: Why was this man dumped from the front bench? 
Hon DAVID CARTER 
: I say to Mr Hughes that at least I got there. That is further than that member will ever get sitting in the second row before he is dispatched back to get another job. That is what will happen to that member. 
I want to debate the issues. 
Dr LYNDA SCOTT (National—Kaikoura) 
: 
 I want to follow on from where my honourable colleague David Carter left off. This debate is not just about the eight iwi at the top of the South Island. We are talking about hapu and whanau as well. How will it be decided who has access to the 20 percent of aquaculture management areas? It is extremely difficult. I grew up in the Marlborough Sounds at a place called the Portage Resort Hotel. It is a really lovely tourist hotel and was a wonderful place to grow up in. I always remember that on the wall we had this big painting of Maori carting their canoes over from the Kenepuru Sound to the Queen Charlotte Sound. That is why the area is called Portage—Maori used to take their canoes across at that lowest point. 
There are many different Maori groups that do not put up a wall gate or fence to say that a bit of land is theirs. They live in an area and move to other areas. They were a very mobile society. We all know that Te Rauparaha used to come down and wage war in this area. There would be huge casualties; whole hapu would get wiped out and then other people would move into that area some time later. The disputes will be very difficult to sort out. 
A Maori chap came into my office a few years ago and said—I always remember him saying this—that when there was no land no fisheries and no money people did not care but “now we do”. He was in dispute with his brother over a patch of resource that he would have liked. 
Hon David Carter 
: Plenty for the Maori Land Court. 
Dr LYNDA SCOTT 
: That is right. Where do people go? The whole of Part 6 directs people to the Maori Land Court to sort out their disputes. There will be massive disputes. Ian Ewen-Street gave an example before that if Maori are looking at a coastal area or an inland tidal area and if they happen to be from a hapu or iwi that was based out on the coast and there is aquaculture in a lagoon they would want to claim rights to the lagoon. They will miss out. But members can bet their life that they will not want to miss out so there will be a dispute. Some Maori will say that there were plenty of times when they planted crops and harvested food from that lagoon. What happens if eight different iwi all claim the same space and we cannot sort it out because at different times they did all use that land? Will they get one-eighth each? Is that what will happen? 
Nobody knows how this issue of 20 percent of aquaculture management areas will be resolved. That is the whole problem with Part 5 and Part 6. There was no deed of settlement. Maori have not accepted this legislation; it has been foisted on them. Sure they will take the 20 percent—who would not take a free handout from the Government? Everyone will do that if the Government is silly enough to give it. But there was no deed of settlement. It has not been worked out with Maori. The whole of Part 6 sets up mediation disputes resolution the procedures of the court and how a judge will make determinations. 
In those situations there are costs. This legislation will cost New Zealand more. The 20 percent of aquaculture going to Maori will cost and then there are the costs under Part 6. We do not even need Part 6. It does not need to be in the bill because we do not need the deal whereby 20 percent of aquaculture management areas will be handed out to Maori. The Government has done this to try to buy off the anger associated with the seabed and foreshore legislation and make Maori a little happier with it so that it might get a few votes at the next election and not have the Maori Party clean it out. That will happen. 
Maori in this situation have said—and we have heard Maori members say in this Chamber—that they do not accept this. So we will see disputes. Earlier I read out the deed of settlement from the 1992 fisheries legislation which clearly stated that it was a full fair and final settlement. I think that will go down in New Zealand history. How many full fair and final settlements will we see in this country? 
Hon DAMIEN O'CONNOR (Minister for Racing) 
: 
 I move  
That the question be now put 
. 
SANDRA GOUDIE (National—Coromandel) 
: 
 I want to take up where my colleagues left off in Part 6. Dr Lynda Scott is absolutely right: the deed of settlement was absolutely clear that it was full and final. Now what are we doing through this bill? We are setting up a whole new raft of situations where there will be dispute between different iwi. They will have to take their matters to the courts—to the Maori Land Court and the Maori Appellate Court. Those will be the courts to adjudicate in the mediation between disputing iwi. 
I know of situations where iwi have joined together just to help progress the fisheries settlement. After 12 years of that they will now be able to litigate their part again and what they can achieve through this process. There will be a lot of disputes that will clog up the Crown process of the court. I guess one saving grace is that applicants to the court for adjudication will pay for that part of the process. I guess that that is the only saving grace but I am sure it will be funded by the taxpayer somewhere along the way. So that is what this part is about. 
If we go to section 26Z inserted by clause 107 “Unsuccessful mediation” I would like to bring the Minister’s attention to an issue there on which he might like to take a call and give an explanation about what it really means. Subsection (3)(b) states that a judge who refers unresolved issues to the court may be the judge who hears the matter or who provides advice. So I see that rather than have a fresh look at the matter one has the same judge who then hears the matter in court after being involved in the mediation process. 
Perhaps the Minister might like to take a call and give an explanation for that as he has not taken many calls on this bill at all. We do have to wonder whether the Minister really understands everything involved in this legislation. I would like him to take a call and give an explanation about why the judge who hears the mediation can also then hear the matter during the court process. 
There will be plenty of matters to be heard. Iwi up and down the country will be looking to see what they can get out of the aquaculture system. They will be looking to see what portion they can get out of whatever is on offer from that 20 percent. I know that in my own area there will be conflict between some groups. Ngati Maru have an interest over on the Auckland side of the Firth of Thames as well as one on the Thames side and I can well imagine that disputes will arise as a result of their interests conflicting with those of other iwi who perceive that they have an interest over and above that of Ngati Maru on the Auckland side of the Firth of Thames. 
Even on the Coromandel side of the Firth of Thames there are already competing interests. Maori groups have united for the fisheries settlement but I believe that that position will change when they perhaps have an opportunity to go for claims for aquaculture. They will be seeking to go to the Maori Land Court in accordance with Part 6. 
There will be huge litigation from this part and while adjudicators have to have some understanding of tikanga Maori I do not know how that will help with the competing interest groups who have their own ideas around what is relevant to them in terms of tikanga Maori. So when that type of understanding is being asked for there will be conflicting interests within that situation as well and conflicting understandings of what tikanga Maori will mean to different participants. 
I see a whole raft of litigation and I see courts being bogged down so I believe that this part does not serve Maori at all. It does not serve New Zealand well at all and perhaps the Minister could take a call as to why matters have not been resolved so that we do not actually need a resolution disputes process. That should not be necessary if the legislative process had been followed correctly; and if legislators had taken heed of the deed of settlement the document Dr Lynda Scott read from before it would not be necessary. If the 20 percent had not been allocated as a part of any aquaculture application the disputes resolution process would not be necessary. 
Hon HARRY DUYNHOVEN (Minister for Transport Safety) 
: 
 I move  
That the question be now put 
. 
STEPHEN FRANKS (ACT) 
: 
 Part 6 as has been clearly explained by previous speakers sets out a large new section for Te Ture Whenua Maori Act and gives a whole lot of new roles and responsibilities to judges. Essentially they are the sorts of things that practising lawyers—certainly lawyers from general practice—would be very familiar with such as the bitterness that is engendered in disputes over unearned money and over undeserved money. Anyone who has ever practised in a family practice concerning wills and estates knows just what happens when there is a bunch of unearned money at stake. They know how intractable the dispute is and how little regard people have for assets when they would really rather poke one another in the eye. So it is no surprise that we get a really extensive range of remedies and proposals in this Part 6. 
I am interested in the mediation proposal there. First I do not think it will work because people are not looking for solutions; they are actually looking to score points off one another. As they know deep down that they did not earn or deserve the money they are quite willing to see it squandered in dispute. So mediation may be a bright idea but it is much more likely to be simply the precursor to litigation. But on looking at that issue I see that a mediator in this case can be appointed not as a person with experience in tikanga but as one with the skills and experience to undertake mediation on issues arising under Part 5. Well Part 5 is the part we have just dealt with that sets out the entitlement conditions for the windfall. Part 5 for example states that by 2014 the Government must have provided equivalence in value to Maori of 20 percent of all the existing aquaculture areas. Now when one looks at that and thinks of what sort of expertise that mediator will have to have under the proposed new section 26V of Te Ture Whenua Maori Act one is driven back to wondering just how anyone can have that skill and experience. 
Part 5 is so badly drafted that it is actually hard to know what Part 6 will be looking for. Part 5 where it talked about valuation talked as if valuation was valuation—stupid! Well I ask: valuation when? When this mediator is going to look at it will the value be determined as at 2014 will it be determined as at the date that aquaculture areas are created or will it be determined as at the date that tendering or any other allocation process sets a value? Will it be determined when the aquaculture areas are in full production or is this an unimproved-value calculation? 
Sandra Goudie 
: It will go for the maximum. 
STEPHEN FRANKS 
: It will go for the maximum—obviously. What it will do is provide an enormous range of issues on which guidance will be needed: first as to matters of law before a mediation can be properly conducted and second on all the juicy opportunities there are for the beneficiaries of this completely undeserved windfall to poke one another in the eye. Even then mediators will have to go back and look at the underlying facts because no one can tell from this woefully badly drafted and badly conceived piece of law just what kind of valuation is concerned. Why did someone not just look at the Rating Valuations Act? Why did someone not take a slight bit of interest in going behind the slogan and asking what would happen in practice? Just what kind of valuation is expected? Is it on a going concern bare land or a development potential? What about the situation where the area has a reserve or where the underlying allocation is still in dispute? We do not know. But there will be rich pickings in this and there will be rich pickings because this legislation has no principled foundation. 
It is a bad-faith piece of work. It shows bad faith on the part of Maori who have taken advantage of a wimpish Government. I would like to test whether Arnold Schwarzenegger’s term of description for the Democrats would be unparliamentary in New Zealand. He called Kerry and his colleagues “girly men” and I think that what we have seen here is a bunch of girly men fronting up to some pretty tough negotiators— 
DARREN HUGHES (Junior 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 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 319 in the name of the Hon David Benson-Pope to Part 6 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 6 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Part 6 as amended agreed to. 
Part 7 Aquaculture reform (repeals and transitional provisions) 
PHIL HEATLEY (National—Whangarei) 
: 
 I have an amendment to this particular part that I would like to put before the Committee. It relates to the exorbitant time frames these reforms allow for decisions to be made by regional councils by the Chief Executive of the Ministry of Fisheries and by the Minister of Conservation. On their own the decision time-frames for each of these particular actors in the process of allowing an aquaculture marine area to proceed seem fine although one would have to ask why it takes 6 months for the Chief Executive of the Ministry of Fisheries and others involved in the process to make a decision. The officials came to us and said that 6 months is the time it takes to gather together all the information to talk to submitters to process the information to go back to submitters to work through all the science then to come back with clear concise and reasoned answers. So we took their word for it. 
But if we add that 6 months to another 3 months for the regional councils to make their decisions to have appeals and to go through further processes we see that the process from go to whoa to set up an aquaculture management area right through to awarding consents can take many years indeed. So I would like to present an amendment to clause 145 regarding the Chief Executive of the Ministry of Fisheries making a decision on an aquaculture management area. I commend officials for the sensible decision to have the Ministry of Fisheries involved early on in the process of setting up an aquaculture management area. A regional council goes to the Ministry of Fisheries and says: “We’d like an aquaculture management area in this particular bay of this size. What do you think—will it affect commercial fishers?”. The Chief Executive of the Ministry of Fisheries looks at it goes through this process over 6 months then says: “Yes it will affect commercial fishers. Yes the effect is adverse. Yes it is a significant adverse effect.” or that there is no effect whatsoever or that it is somewhere in-between. 
My concern is that the chief executive in taking 6 months can actually go back to the regional council and say that more information is required to make a rational decision. That is not a bad thing; in fact it is common sense. Clause 145(1A) states that the chief executive may request more information from the regional council. But clause 145(1B) states: “… the period beginning on the day when a request for further information is made and ending on the day when the information is provided is excluded from the 6 month period …”. That means that the time from when the request for further information goes out to when the information comes back is added to the 6-month period. My amendment would insert new clause 145(1C): “A regional council may reject the call to provide further information and have the decision stand solely on the information already provided.” In other words a regional council can elect to say to the Minister of Fisheries: “No we won’t provide you with more information. That is our choice. We would rather you made the decision on the information already provided and if it’s a negative decision so be it.” 
Why I say that is that when under the Resource Management Act process councils endlessly come back for more information the clock stops and time drags on. They go back through the process more information is requested the clock stops and time drags on. Then yet more information is requested. The difficulty is that in a regional council process or even in an Environment Court process going back for further information can be genuine because further information is needed to make a rational decision but sometimes it is a way of slowing down the process stalling a decision and putting it on the back-burner because it is all too hard. I see no reason why in this case a regional council cannot say: “We have provided as much information as we can. It’s very costly to provide further information. In our view we have provided enough information for you to make a decision. Could you please make a decision on merit based on the information we have already provided. We’ll take the punt. If you turn down the application for an aquaculture management area well so be it but we’d rather have the decision resolved as soon as possible.” 
So I put it to the Committee that we insert that new clause. It does not take away from the fact that the chief executive still has 6 months to decide. It does not take away from the fact that he might request new information. It does not take away from the fact that the regional councils might choose to provide that information which would be the sensible course. But it does give the regional councils an opportunity to say: “We’d rather that you made a decision based on the information we have already given you.” That seems reasonable to me and I hope members of the Committee will support my amendment to add new clause 145(1C). It reads: “A regional council may reject the call to provide further information and have the decision stand solely on the information already provided.” That amendment will be voted on at the end of the debate on this part. 
Interestingly enough we also have issues around clause 140—which I will not be providing amendments to—regarding the revocation of the Freshwater Fish Farming Regulations. There was a huge sigh of relief from freshwater fish farmers when they learnt that the regulations tying them down were to be dropped but they are concerned that they will have to face a new set of regulations in the future. They asked the select committee why that was. The answer that came back from the officials whom I would like to acknowledge today was a sensible answer. There are two reasons. One is that a degree of regulation is needed so that we can police fisheries sensibly. I talked about paua yesterday. We do not know whether someone farming paua has got it legally or illegally. We do not know whether someone claiming to have received paua from a fish farmer has received it legally or illegally or indeed has received it from that farmer. We need a way to track that and to keep fish fees accountable. We need a degree of policing regulation and that seems fair. 
The other good argument that came forward regarded biosecurity and traceability. Freshwater fish farmers on land need a degree of biosecurity protection as well. We do not want our markets to be up in arms because in some way we have had a biosecurity breach overseas that has reflected on our aquaculture industry. So there has to be a degree of traceability when it comes to freshwater fish farming regulations—and I have been drifting into the land-based aquaculture argument as well. That seems fair enough to us. We understand why there is revocation of the Freshwater Fish Farming Regulations. We understand why new regulations are coming into force to cover those farmers. We understand that land-based aquaculture farmers need a fair degree of regulation when it comes to policing compliance and biosecurity and also in regard to discharges. Land-based farmers often take in water—it often is sea-water species if a sea-water species is being farmed—and that sea-water is then discharged and under the Resource Management Act a permit to discharge is needed. 
So I do not think our aquaculturists can argue that they can be completely free of regulations nor should they be. I understand the revocation clause and I understand why other regulations have to be put in place under the auspices of this particular Act. 
IAN EWEN-STREET (Green) 
: 
 One of the issues that concerned marine farmers was their ability to alternate between species on their farms. They felt they should be able to vary between green-lipped mussels blue mussels Pacific oysters rock oysters—well perhaps not rock oysters—and so on according to the economics of farming at the time. Their analogy was that they wanted to be able to operate in the way that a land farmer does—alternating between sheep cattle deer pigs goats or whatever—and the members of the Primary Production Committee agreed with them. We thought there was a good argument for marine farmers to have a degree of flexibility. 
The only conditions we put on it were first that they had to apply when they originally got their consent to farm multiple species; once their applications were approved they could move between species. The other constraint we put on it was that they could do it only amongst filter-feeding fish. We were very aware that fin-fish farming uses a considerable amount of additional supplementary feed so there are problems in terms of waste material the effluent from the fish themselves and the fact that a species like salmon consumes something like four times its own body weight in fish that is imported usually from South America. While it may be highly profitable locally it is totally unsustainable on a global scale. 
I want to move to the transitional provisions in Part 7. The existing holders of leases and licences for marine farms are deemed now to have coastal permits for another 20 years from the date of the passage of this Act. That will be very good news for existing farmers. It will give them certainty for 20 years obviously. But where application is made for a new aquaculture management area space or an expansion of existing farms there will be some problems and that is where the transitional provisions apply. A regional council that wishes to enlarge an aquaculture management area will invite the Chief Executive of the Ministry of Fisheries to make an aquaculture decision. In the past the obtaining of a fisheries permit after a resource consent has been granted has been a source of huge frustration for marine farmers. They have their consent and they are ready to go; they wait for their fisheries permit and they wait and they wait. There is no time limit on how long they have to wait. We have heard of examples that were just outrageous—of farmers waiting for many years. This bill is trying to bring forward the input from the Ministry of Fisheries in the process so that when somebody applies for a coastal permit he or she gets approval—or not—from both the ministry and the local council. 
What we are doing though is putting very strict guidelines on the activities of the Chief Executive of the Ministry of Fisheries. I have to say that general confidence in the Ministry of Fisheries amongst fishers and others is low. I hope things will change. The ministry has a new chief executive and maybe the culture will change. But my having said that we have decided that strict time lines and objectives need to be laid out so we have said that in deciding whether to make a determination or a reservation about an aquaculture decision the chief executive can have regard to only three things. They are the effect of the aquaculture marine area on first the biological diversity of the aquatic environment; second the productivity and biological abundance of fisheries resources; and third habitats of known significance for fisheries management. The bill also specifies that the aquaculture decision must be very explicit in terms of the species affected and whether commercial recreational or customary fishers are affected. 
We have also been very clear that we are putting a time limit on the chief executive and the time limit is 6 months. Over and above that we have also allowed for an appeal to the High Court. Anybody who has made an application or the chief executive or the council can appeal to the High Court on matters of substance. It is not just matters of process which is what used to apply in terms of judicial review; matters of substance can now be sent to the High Court. 
These transitional provisions are excellent. I think they give marine farmers a degree of certainty that they have not had in the past. A lot of them have said that they would go overseas. 
GERRARD ECKHOFF (ACT) 
: 
 I am happy to take a call on Part 7. This part of course provides for transitional matters relating to the ending of the moratorium under the Resource Management Act of 1991. It has taken 4 long years for this moratorium to be finally lifted in I think early January. For 4 years the potentially most exciting industry that this country has come up with in recent years has been held in abeyance held back champing at the bit to get on with it because of the procrastination of this Government and its inability to have a little vision owing to its concern about what might happen around the coast. Now we must therefore apply hugely stringent rules to the transitional matters relating to the end of this moratorium. 
It seems to me that if we really take a hard cold calculating look at what has happened around the coast in terms of the loss of our biodiversity the loss of our aquatic life we see that it is not the marine farmer it is not the aquaculture industry that has caused any problems for the district councils or regional councils. It is in fact more likely to be members of the public who have caused problems. It is those who strip the coast bare of shellfish with bits of piano wire. It is those who jump in their fizz-boats and go out for a bit of recreational boating—and why should they not? Often as not the boat goes from one area to another and transfers an unwanted organism from one area to another. Those problems have caused huge angst to this country. For example the ballasts of ships cause more harm to our biodiversity and our coastal waters than anything a marine farmer could throw up. Marine farming is essentially a static industry. It does not move from place to place. We have just had problems in some South Island rivers caused by apparently fishermen who unbenownst to them had transferred unwanted organisms on their fishing gear—on their rods their boots their clothing or whatever. So why do we not have transitional requirements that apply to those people? They have caused more problems than anything that the aquacultural industry could possibly come up with. 
I find it quite distressing when I look at the number of transitional requirements. An authoritarian attitude is being taken by the regional councils on a constant basis towards this fledgling industry. It has to survive it has to grow and yes it will make the odd mistake from time to time. For goodness’ sake there is no effort without error. If the Government thinks it can manage the risk of new organisms entering our systems and our coastal waters by regulation and control I tell it that it will not work. Certainly by educating people and by getting through to the recreational users we have a greater chance of ensuring that our coastal waters remain as good as they possibly can. 
The Minister and this bill must recognise that the problem is not the marine industry and it is not aquaculture; the problem comes more from those outside the industry as I said earlier especially from ships coming in and discharging ballasts. Has the Government applied regulation and controls around that aspect? Ships and pleasure boats coming in from the Islands for example may bring in unwanted organisms. Where is the control that the regional councils should be applying over those individuals or boating organisations rather than their applying control over the marine-farming industry? It seems to me that the marine-farming industry is being used as the whipping boy. We are adding huge compliance costs on to that industry which is struggling to survive under this Government. 
Hon DAVID CARTER (National) 
: 
 As we move towards the concluding stages of the debate in the Committee stage of the Aquaculture Reform Bill I ask the Committee to take note of Part 7 “Aquaculture reform (repeals and transitional provisions)” because it is a very important part that ensures that this legislation proceeds and works. I want the Committee also to note the considerable changes that have occurred to it through the select committee process. I raise that point because it is an absolute truth that the legislation as presented to the House was totally unworkable. It is a shame that the Minister of Fisheries the Hon David Benson-Pope who is the Minister in the chair is not prepared to stand and take calls to address questions about this part. He should be explaining how he ever ticked off legislation that was so poorly drafted it was totally unworkable. 
Clayton Cosgrove 
: That’s a bit rough. 
Hon DAVID CARTER 
: Clayton Cosgrove who sat on the Primary Production Committee but who has not been prepared to take even one call now interjects and says that my comments are a bit rough. I suggest to Clayton Cosgrove that he should get out the notes he made at the select committee. He will find that the majority of the changes made— 
Ian Ewen-Street 
: I thought he was asleep. 
Hon DAVID CARTER 
: I will not comment on that. If Clayton Cosgrove gets out his notes and has a look at the significant amount of change that occurred throughout the select committee process he will see much of it is in this part. 
One of the important issues presented to the select committee was the district plan for the Tasman area. It is an area of New Zealand that would be eminently suitable to aquaculture but it is one that has been tied up in the Environment Court I think I am right in saying for almost a decade. Submitters came to us and said they were nearly at the end of a huge process. They said they were waiting now for a judgment from the Environment Court and this legislation as drafted by the Hon David Benson-Pope would mean that all that work and the hundreds and thousands of dollars they had spent would be completely nullified. So the select committee has had to tidy up the work of the Hon David Benson-Pope yet again and we have had to make a significant amendment to clause 153(4) to ensure that when the Environment Court rules on the Tasman Bay situation which we understand is imminent all the work and process that have occurred over the last 10 years are not nullified by this legislation. 
I want to move on to the deletion of clause 120. When this legislation left the desk of the Minister of Fisheries it contained a clause that stated that in the future all salmon farmers would have to apply for another consent in order to feed fish. 
Sandra Goudie 
: A tax rort! 
Hon DAVID CARTER 
: My colleague Sandra Goudie says that it is a tax rort and I am sure that more costs would have been associated with it. The important thing is that those salmon farms have been operating for years. We visited one on a select committee tour in order to make ourselves familiar with the exercise. There is an operation in the Marlborough Sounds worth millions of dollars and what it does is to corral the salmon into cages and then logically it has to feed them so that they will grow. But the Minister did not seem to realise that part of the process of salmon farming is to feed the salmon. He suddenly suggested sending the farmers away to obtain another consent. What a nonsense that was from David Benson-Pope! It is absolute proof to me that he has not bothered even to go and look at how a salmon farm works. The good news is that the select committee was able to delete clause 120 entirely and that we have tidied up an inconsistency—a technical illegality—by making a minor amendment to clause 117. 
I now want to move to the issue of all coastal permits being extended with the passing of this legislation for one 20-year period. I want to take some time to talk about that provision because the workability of the 20-year extension was raised with us by one submitter Akaroa Salmon. Effectively its concern was that all the permits would roll over on exactly the same day in 20 years’ time once the law was enacted and it wondered whether the local authorities would be able to handle that. The select committee took note of Akaroa Salmon and the submission it received from Tom Bates because he is one of the most respected salmon farmers in New Zealand. He is a man who can be described as a true Kiwi battler. He does not have a big operation. It is nowhere near the size of that of King Salmon in the Marlborough Sounds. Akaroa Salmon is a relatively small operation that has been built on Tom Bates’ ingenuity and his commitment to the industry. I pay tribute to Tom Bates in the debate today because he typifies what aquaculture can do for this country if only we can get legislation enacted that allows it to happen. With regard to the argument raised by Tom Bates and his co-submitter Peter Cotton—both of those arguments were about the ability of councils to cope with all the renewals on the same day in 20 years’ time—I think that given 20 years to prepare for it local authorities will actually be able to cope. So we are not recommending an amendment with regard to that issue. 
I move now to another important change we have had to make which goes to the issue of off-site marine farms. I refer to clause 159. The select committee was staggered to find that in many cases existing marine farms are not operating according to the coordinates of their original approval. They have moved—some maybe inadvertently and some maybe quite deliberately. We now need to ensure that we pass legislation that corrects that and makes sure that the area of an existing farm at the moment becomes the authorised area for its continued existence. Submitters then raised the issue that if councils or the Ministry of Fisheries had allowed those farms to operate incorrectly and in the wrong positions who should pay the costs of making sure that we right those particular inaccuracies? We have recognised that there will be costs. In fact I think the Northland Regional Council said there would be significant costs. I think the committee was of the opinion at the end of the day that although there will be costs they will not be very significant. But in order to make sure that we get that particular aspect right we have changed the legislation to give councils the opportunity to initiate changes that correct inaccuracies. If we had left that to the individual farmers in some cases they might have seen a correction as necessary and worthwhile—and that was the way the bill was drafted—but in other cases individual aquaculturalists might have decided that because they had got away with inaccuracies for the last 5 years they would continue to get away with them and they would not have moved to tidy them up. I think that yet another valuable change made by the select committee was to allow the councils to initiate a change in that situation. 
Those are certainly the major points that spring to mind immediately. But as I said earlier anybody who is prepared to study what the select committee has returned to Parliament in Part 7 will see that the select committee as a whole worked very hard to change this part. The real question that arises is why the bill was so poorly presented and why it caused the industry so much angst in the first place. The only possible answer is that as many people have said in the Chamber in the last couple of days as we have debated aquaculture reform aquaculture is a very complex industry and it requires a competent Minister. I certainly hope Helen Clark is listening on the ninth floor to this debate and that she will take the opportunity to try—and I know it will be a desperate thing—to find somebody within the Labour Party ranks who is confident enough to handle fisheries. Harry Duynhoven has just put his hand up. 
Sandra Goudie 
: Impossible. 
Hon DAVID CARTER 
: Sandra Goudie says it is impossible. Well the industry deserves better than David Benson-Pope. That is the main thing—the industry deserves better than the Minister it has now. The Minister may be good at driving civil union bills through Parliament—that may be his real interest in life—but certainly he has shown that he does not have a lot of ability when it comes to managing the fisheries of New Zealand. 
CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I move  
That the question be now put 
. 
STEPHEN FRANKS (ACT) 
: 
 Part 7 is Mr Hodgson’s shame. This is the part that one goes through mechanically. [ 
Interruption 
] He is not the Minister in the chair no but I ask members to remember he was the Minister who kicked all this legislation off—the former Minister who said that aquaculture was running wildly out of control. 
Hon David Carter 
: Yes the “Minister for Moratoriums”. 
STEPHEN FRANKS 
: The “Minister for Moratoriums” said aquaculture was wildly out of control and the councils did not know what they were doing so we should all have a breather and we would get a logical rational structure. He said we would get something in place that everyone could understand so that the industry could step forward confidently. Well when I read Part 7—and this is the first time I have read it—I find that it is an absolute catalogue of shame. It is stuffed full of interim solutions reservations and opportunities to second-guess and undermine. The clear property rights that it should establish are clearly not available and Part 7 recites the reasons for that. 
I know that the Minister is not taking calls here but Mr Carter’s very interesting speech referred to the specific requirement in clause 20 to obtain a permit for feeding or for the discharge of contaminants. 
Hon David Carter 
: 120. 
STEPHEN FRANKS 
: Clause 120. Where has that clause gone? 
Hon David Carter 
: Unnecessary. 
STEPHEN FRANKS 
: So it has been cleaned out completely. I congratulate the Primary Production Committee on that. It is very rare to see a whole tissue of nonsense removed entirely without someone trying to save face by putting something back in to cover it. I take it then that the Government does not have a back-door way of getting at the same objective as that of the conditions that were dealt with in the feeding and discharge of contaminants clause. Although the table that appears in clause 111 sets out a process when I looked through it I could not see where the contaminants assessment came in. But maybe it comes by implication under the requirement for a resource management consent. 
Certainly after going through the transitional provisions the deeming provisions and the attempt to bring all that within one context it seems clear that either the legislation was over-ambitious in the first place or there has been a change of objective whereby it is now thought to be easier to leave people as they were. All the various lobby groups and interest groups and in particular the private fishers or non-commercial fishers whom the Government keeps talking about in this legislation are left to face a continual temptation to be affronted to keep negotiating and to constrain and limit the aquaculture areas without the legislation imposing on or giving aquaculture permit owners the best long-term incentive to look after their environment which is the right to take the residual benefit that goes with perpetual genuine freehold title. 
When I see the opportunities under this part for the Minister to intervene for forfeitures for variations and for changes through the registration processes it is very evident to me that this is a very different kind of asset for farmers to invest in from genuine property. With genuine property people get the benefit of looking after the property. They get the benefit of the improvements they make and they get the detrimental effect of ruining an area—of ruining the environment they are in. We can draw on the common law—which over the years has filtered itself—concepts of nuisance. This legislation has to rely instead on an inspectorate process—on a process of prescribing in advance what people can and cannot do and of filtering everything through experts who wield extraordinary powers. I have just been looking in the Regulations Review Committee at a set of regulations to deal with contaminants in an animal food chain. What strikes me there is the same point that comes through in this part of the bill: there is a view that people will only behave themselves if they are told what to do. 
DARREN HUGHES (Labour—Otaki) 
: 
 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 Phil Heatley to clause 145 be agreed to: 
to insert the following new subclause: 
(1C)A Regional Council may reject the call to provide further information and have the decision stand solely on the information already provided. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 36 
New Zealand National 27; ACT New Zealand 9. 
Noes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Amendment not agreed to. 
The question was put that the amendments set out on Supplementary Order Papers 321 and 319 in the name of the Hon David Benson-Pope to Part 7 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 7 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Part 7 as amended agreed to. 
Schedules 
The question was put that the amendments set out on Supplementary Order Paper 319 in the name of the Hon David Benson-Pope to schedule 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 1 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Schedule 1 as amended agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 319 in the name of the Hon David Benson-Pope to schedule 2A be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 2A as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Schedule 2A as amended agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 319 in the name of the Hon David Benson-Pope to schedule 3 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 3 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Schedule 3 as amended agreed to. 
A party vote was called for on the question  
That schedule 4 be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Schedule 4 agreed to. 
Clauses 1 and 2 
Hon DAVID CARTER (National) 
: 
 In talking to the title clause clause 1 I point out to anyone who has been following the debate over the last day or so that this is nothing about reforming aquaculture. It is about getting rid of the incompetence of the previous Minister Pete Hodgson whose response to difficulties within the aquaculture industry was to impose a moratorium. It was too hard for the Minister to handle and he did not have the intellectual grunt to sort it out so he hands it over to David Benson-Pope who the Prime Minister thought had the intellectual grunt to sort out the aquaculture industry. That is why the Primary Production Committee had to spend something like 70 hours sorting out this mess for the Government. We should be calling this bill the “Treaty of Waitangi Grievance Industry Reform Bill” because that is what this legislation will do. This legislation extends the issue of grievance associated with the Treaty of Waitangi into the next generation the generation after that and generations after that. 
The legislation does not provide for the settlement of Maori grievances—quite the opposite. The submitters who came before the select committee particularly Maori said that this would not settle anything. Maori said: “We will take the gift if you are silly enough to give us up to 40 percent of aquaculture space. We will take it but don’t expect that we are bound to a settlement because you have never negotiated with us.” 
That is where this Government is making such a mistake. If there are grievances associated with the Treaty of Waitangi then they should sit around the table to sort them out and sort them out the way the National Party did with Ngai Tahu in 1996. But I say to you Minister that you cannot negotiate a settlement by decree. You cannot negotiate— 
The CHAIRPERSON (H V Ross Robertson) 
: The member should not bring the Chair into the debate. 
Hon DAVID CARTER 
: I do not want to bring the Chair into the debate. I want to bring the Minister into the debate. I would be delighted if the Minister would come into the debate instead of sitting there fiddling with his comics and not prepared to take calls. Actually I would be delighted if anybody in the Labour Party came into the debate. Janet Mackey was on the select committee as deputy chair. Has she taken one call on the Aquaculture Reform Bill? We then had Clayton Cosgrove who did take just one call—he sought a closure. He was so embarrassed. He knows that this legislation will not be popular in the Waimakariri electorate. He knows that it is race-based legislation so he took one call to close down the debate. 
But we have other Labour members on the select committee. We had the Hon Harry Duynhoven. He sat through most of the debate over the last day or so but I do not think that he took a call. Does anybody remember Harry Duynhoven taking a call? They will not because he did not I tell the Minister. He was not allowed to take a call. 
Finally we had the Hon Dover Samuels. He is the member from the Labour Party who promised to deliver proof to the select committee that there was unfinished business associated with the Treaty of Waitangi settlement. He evaporated on that promise because he does not have any proof of unfinished business. So I say that I had no intention of bringing the Chair into the debate but I would be delighted to bring any member of the Labour Party into the debate. That is the purpose of the legislation— 
Lianne Dalziel 
: Give us a good speech. 
Hon DAVID CARTER 
: Oh Lianne Dalziel is going to take a call. She would know nothing about aquaculture. If she did take a call one would have to wonder whether it was the truth anyway. 
The other thing that we have before the Committee today is not one Supplementary Order Paper but four Supplementary Order Papers after the bill left the Primary Production Committee. The bill was reported back was meant to be ready for passing and the Minister found not one mistake but four mistakes associated with the drafting. 
Dr LYNDA SCOTT (National—Kaikoura) 
: 
 It is a pleasure to talk on the title debate of the Aquaculture Reform Bill. This bill makes changes to the Resource Management Act the Marine Farming Act the Fisheries Act 1983 and the Fisheries Act 1996. I have to pay tribute to some of the very key industry players people such as Jim Jessop. In Marlborough we call Jim the father of aquaculture and the father of marine farming. It was people such as Jim Jessop who absolutely developed this industry from 30 years ago. He forged an industry in New Zealand that has developed into a multimillion-dollar earner. Also Paul Lupi and Terry Schwass are people who have put so much effort into this industry. We had the Marine Farming Act in 1971—23 years ago. That shows that this is a very new industry for New Zealand but it is actually— 
Ian Ewen-Street 
: That is 33 years! 
Dr LYNDA SCOTT 
: Oh yes 33 years ago. But it has been a long time coming to this point today where we actually have the Aquaculture Reform Bill. We had the previous Minister as the Hon David Carter said who did not have a clue what to do with aquaculture. We have fisheries on one side and the Department of Conservation on the other. We have the Resource Management Act on one side and local government on the other. Here we have the poor aquacultural industry stuck in the middle with no one sticking up for it. Pete Hodgson certainly never did. He never stuck up for the industry which was so disappointed in him. Members should have heard what the industry had to say; it was not very complimentary. 
So there was a change of Minister to try to drive this through. But what happened was that the Hon David Carter as chair of the Primary Production Committee actually managed to make a huge number of changes to this bill. Lianne Dalziel over there squawks and squawks but she does not ever take a call. She knows nothing about aquaculture. She lost her ministerial warrant and all she can do now is come to this Chamber and try to be nasty and criticise other people. Maybe she should try being substantial. 
I thought she was good when she first came in. She has got worse and worse. I was so wrong. I thought she was going to be a good Minister but all she did was get worse and worse. She will be very lucky if she keeps her seat. People are very disappointed in her. It is a pity she does not take a call. But she could not take a call because she knows nothing about this bill. She could not even debate a title clause. 
The moratorium has stalled this industry in the gates of the 21st century. In Marlborough aquaculture was our biggest income earner. It went from 20 percent growth down to 0 percent growth. The industry players were so frustrated. The reason we had the delays on this bill and that we are debating it only now is due to the foreshore and seabed legislation. This Government wanted to do a deal with Maori that was about the 20 percent of aquaculture management areas. It had always been rumoured that this would be the case. But we know that the 1992 Maori fisheries settlement included aquaculture. We have heard that through the debate. We have also heard that Labour promised to come up with some sort of evidence that aquaculture was not included. It never did that. 
The overview in the commentary to this bill states: “the settlement of post-1992 contemporary Maori claims to commercial aquaculture in the coastal marine area”. Well many New Zealanders are going to shudder at that thought of contemporary Maori claims—not the settlement of past grievance. This is a contemporary claim. The Maori grievance industry is never going to end and this bill is one of the reasons why it is not going to end because there is no deed of settlement. It was not negotiated with Maori. We will have huge disputes over which iwi and which hapu will be entitled to this 20 percent. 
The marine-farming industry is very pleased with one thing and that is the first right of refusal. It is very pleased with that because it has invested huge amounts of its time money and effort even though it did not get as much as it wanted. What it did not get was the one-stop shop and it is still very concerned about that. At the moment the industry has to go through a Resource Management Act process as well as through the Ministry of Fisheries. We know that it has been taking over 2 years to get permits from the Ministry of Fisheries and it has been extremely frustrating for those players in the industry. They go through the hugely expensive resource management consent process but then they cannot get a ministry consent. 
R DOUG WOOLERTON (NZ First) 
: 
 I want to just— 
Stephen Franks 
: Embarrass myself? 
R DOUG WOOLERTON 
: No I was not going to do that. I have had good lessons because I have seen the ACT party and the National Party embarrass themselves right through this bill and I do not intend to do that at all. 
The Aquaculture Reform Bill is aptly named. It does not reform the aquaculture industry as such. It gets rid of a moratorium. Why the National administration did not do that years ago I have no idea. I have heard all sorts of criticism about what is happening in this bill. However I did not see any lead given to the industry in the formative stages of this industry—not even to the degree of help. In my opinion National cannot really talk. It is not the industry itself that is being reformed here; it is the administration of the industry and that was well overdue for reform. 
One thing I have to mention that was not mentioned in Part 7 was the business of off-site farms. I mention that to show the sort of administration that needed to be reformed—that is over the years in many parts of the country aquaculture farmers through the best will in the world I am sure have let their farms become off-site. In other words they are not where they are supposed to be on the sea floor. They are not in the right space like some members of the National Party at the present time. They are not quite in the right space. Aquaculture farmers have to bring back their farms into the space that they are supposed to occupy. 
That is all very well and so on but who will pay for that? New Zealand First implores the Minister to give some consideration to helping local councils with that because it was lack of oversight and control by the Ministry of Fisheries that has enabled those situations to happen. We see it as hardly fair to now require local councils to put those things right. We implore the Minister to look at that and to be understanding of that particular matter. 
The 20 percent allocation to Maori my goodness me has caused a furore and National and ACT have got really excited about that. I would just mention again for the fourth time that the precedent for the 20 percent was set by the National Party back in 1992. At the time my leader and his brother carried on by a third brother in Parliament today said when they were part of the National Party that those things would happen and they have. This Aquaculture Reform Bill could not have been passed without the 20 percent allocation in it. Quite clearly that would otherwise have been challenged in the court and those challenges would have succeeded. 
I wanted to mention where New Zealand First was coming from on those issues and say that they were mentioned by the Peters brothers many years ago when the precedents were jammed through the House by the then National Government. It is no use those National members wimping on about a 20 percent allocation when the 20 percent precedent was set by the National Government. If that was not continued clearly it would have been open to challenge. Whatever the people of the day thought and whatever was written down we are dealing with those things now. 
So I think the title is particularly apt. New Zealand First is supporting the bill. Those involved in aquaculture have our support and regard. I am sure they will carry on to make this the wonderful industry that it has been from the start and will continue to be. 
I cannot sit down without thanking the officials who guided us through. I also give credit to the chairman the Hon David Carter but especially to the officials without whom we would have been in trouble. 
GERRARD ECKHOFF (ACT) 
: 
 We come now to debate the title of the bill which of course we should all know by now is the Aquaculture Reform Bill. But what a misnomer that is. The aquaculture industry has not been around long enough. It has not been in the arena long enough to be reformed. This bill is in fact the “Aquaculture Restriction Bill 2004”. Goodness knows how long it will be before we come back to this House and ask ourselves why that industry is not performing. We will then start to look at the controls restrictions and cost structures that this legislation will impose on the industry. It is about restriction; it is not about reform. There is nothing really to reform the industry from. The aquaculture industry is a fledgling industry. It was trying to find its way in the world working things out—and I have heard members talk of individuals in the industry icons of the industry who were almost doing this thing by the seat of their pants working it out as they went. 
The industry is too young to reform. One cannot reform a fledgling industry. However the Government came along and said that it knew best. Regional councils and their planners knew best. They had never put a foot in the water never put a rope down never actually worked out how the green-lipped mussel or the oysters actually grew but they said they were hugely concerned about environmental considerations. 
When we look at the title and the purpose of the whole bill that is really what it comes down to. It is not about ensuring that the industry generates the sort of income that many in the industry have talked about which is billions upon billions of dollars. It is not unrealistic to suggest that potentially the industry could bring to this country between $8 billion and $10 billion given the massive coastline we have. But that will not happen because of the control and restrictions we are placing on this fledgling industry. 
I always find it ironic when I read a bill like this and there is the word “plan”— “We have a plan.” That comes up constantly. I throw this question open to the Committee: what happens if the plan is wrong? If we allowed people all over the country to determine what was appropriate for themselves they would work it out do the thing and would not be constrained or controlled by a plan. This is what I call the driftnet approach—that is one size or a huge driftnet that snares everything and that is what one must do because somebody in Wellington or somebody somewhere has said: “This is the plan this is the legislation and you will follow it.” Why not allow the regions to develop their own plans systems and controls if necessary. Why could we have not done that instead of having this top-down approach in the form of this so-called Aquaculture Reform Bill? 
It is a complete and utter misnomer to call it a reform bill. It has nothing to do with reform but this industry has everything to do with the future. There was enthusiasm amongst the men—and the odd woman was involved too—for the future of the industry. The select committee went around the country talking to members of the industry and some asked why the Minister had not come out to talk to them. Most of them were hugely enthusiastic about the future of the industry although there were huge concerns and the select committee has attempted to address them. But the concerns I have about the security of tenure and the role of the Department of Conservation with regard to the bill have essentially been ignored. 
SANDRA GOUDIE (National—Coromandel) 
: 
 In speaking to the title I wonder whether the bill could be called the “Mishmash Reform Bill” or the “Gift and Grievance Bill” because that is what the legislation will establish—it will establish a 20 percent gift. Contrary to comments made by a previous speaker National did not set that precedent way back in 1992. There was no precedent set to give Maori 20 percent of a new area that has been applied for in order to carry out aquaculture. Clearly that is a gift and I reiterate the concerns expressed by my colleague Dr Lynda Scott. We were supposed to have settled all grievances related to the fisheries in the deed of settlement. She read that out and it was quite clear that that was it—the finish. Now we are seeing through the process of this bill that that is not the case. So the public have cause to be duly alarmed and they will be. This will all come back to bite the current Government because it is totally unacceptable to be making a gift of 20 percent of the area to Maori on the establishment of new applications. 
I see that the iwi organisations are defined by referring back to the Foreshore and Seabed Act. They are drawn from mandated iwi organisations and there are opportunities to withdraw from them. It states that in the case of the iwi of Hauraki or the iwi of Te Aroha any iwi of a group may withdraw if it so chooses from the mandated iwi organisation of the group. That signals that iwi can withdraw from the current organisations. We have seen in this bill—the “Mishmash Reform Bill”—that under the disputes resolution processes in it iwi can compete. Because they are all going to want some of the aquaculture asset they will compete. So if an iwi is currently in an organisation it may want to break away from it and then compete for part of the 20 percent of the space that may be up for grabs. Iwi will certainly want to do that. Aquaculture is an industry that is on the rise although we have lost a huge amount of capability overseas. Because of the moratorium and the time it has taken to get things through the process a lot of our competent capable experienced and specialist people have gone overseas have taken their expertise to places like Australia and elsewhere and are setting up aquaculture activities there. 
This legislation is about gifts and grievance because the Maori Land Court will be clogged up with grievances as iwi dispute among themselves over who has rights and to what. Of course members will be aware that the iwi organisations as defined in the Foreshore and Seabed Act come under the definition of “Maori organisation” in the taxation Act which allows them to have a taxation rate of 19.5c in the dollar. That does not provide a level playing field so it is another preference that is being shown to Maori although it is not accorded to other operators of aquaculture activities. So there is one standard for one group as opposed to another. There definitely is not one rule for all and we see plenty of examples of that throughout this bill. [ 
Interruption 
] Mr Cosgrove is trying to interject. He may like to take a call. Although he has been exhorted to take a call he has not done so. 
This bill is so messy that in clause 111(4) it states: “The purpose of this section is to present alternative arrangements for ease of reference and nothing in this section limits or affects the other provisions of this Part.” We have all sorts of listings of different parts of the bill for ease of reference which clearly illustrates that it is a bit of a mess. It is very hard to follow because so many different Acts are being amended. If we look at the heading of clause 141 we see it referred to the Resource Management Act 1997 and the date was then amended to 1991. For some reason the Minister must have thought there was a Resource Management Act of 1997 although I am not aware of it. Perhaps he may like to take a call. 
Hon JUDITH TIZARD (Minister of Consumer Affairs) 
: 
 I move  
That the question be now put 
. 
PHIL HEATLEY (National—Whangarei) 
: 
 Much has been made in this debate of the fisheries settlement post-1992 the aquaculture settlement where Maori have been passed for free 20 percent of the aquaculture space throughout this country as a broad-brush approach to appeasing their concern over the seabed and foreshore issue. We have explored that. We have examined the facts that pre-1992—and that was not very long ago—Maori were still able to claim aquaculture space. In fact five iwi have already done that successfully. The list in the back of the Maori Fisheries Act adds another 70-odd iwi that may soon be coming over the hill to make a pre-1992 claim. So we have not seen the end of the aquaculture treaty settlement process. It will go on for some years now. We will sit and watch on the Opposition benches for a few months and see the whole process turn to custard for the Minister of Maori Affairs for the Minister of Fisheries and for the Minister for treaty settlements. 
I would like though to bring members back to an issue that has not been discussed at length during the debate on the bill and that is the degree to which the Minister of Conservation has powers to gazump or thwart the process of setting up marine farms and aquaculture management areas. There are actually three areas where the Minister of Conservation can come in and thwart a marine farm proposal. The Minister of Conservation has the power to direct regional councils in relation to the allocation of space in the coastal marine area. First the department through the Minister can be an objector under the Resource Management Act to the establishment of an aquaculture management area. That is the first opportunity—the department can be an objector to the establishment of an aquaculture management area. If the department fails there when a marine farmer puts in for a consent to establish a marine farm in that aquaculture management area his or her plans can be objected to by the department. So the department can secondly be an objector under the Resource Management Act to the issuing of an individual consent. So that is the department’s second swipe at marine farmers’ interests—being an objector under the Resource Management Act to an individual consent. The third opportunity for the department is that the Minister of Conservation can effectively veto an allocation at the last hurdle under the guise of “giving effect to Government policy”—that is a quote—if the department initially fails at the first two opportunities. 
We are quite concerned that the allocation of aquaculture space would be at the whim of the Government policy of the day. I was quite intrigued to see that it is not just Government policy that could torpedo an aquaculture application but in fact a requirement to meet some sort of historical treaty grievance in an aquaculture management area. That should be of concern to the Committee. It is not fair that the department and the Minister of Conservation should have three opportunities to interfere with effective vetos in the coastal marine area. 
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 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Motion agreed to. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Clause 1 agreed to. 
The question was put that the amendment set out on Supplementary Order Paper 322 in the name of the Hon David Benson-Pope to clause 2 be agreed to. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Amendment agreed to. 
A party vote was called for on the question  
That clause 2 as amended be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 37 
New Zealand National 27; ACT New Zealand 9; Maori Party 1. 
Clause 2 as amended agreed to. 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
: 
 I move  
That the Committee divide the bill into the Resource Management Amendment Bill (No 4) the Fisheries Amendment Bill (No 5) the Conservation Amendment Bill (No 2) the Biosecurity Amendment Bill (No 3) the Maori Commercial Aquaculture Claims Settlement Bill the Te Ture Whenua Maori Amendment Bill (No 3) and the Aquaculture Reform (Repeals and Transitional Provisions) Bill 
 pursuant to Supplementary Order Paper 320 in my name 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 9. 
Motion agreed to. 
Bill reported with amendment. 
Report adopted. 
Third Readings 
Mr SPEAKER 
: I advise members of the House that at the conclusion of the third reading debate I will put the bills as separate questions. 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
: 
 I move  
That the Resource Management Bill (No 4) the Fisheries Amendment Bill (No 5) the Conservation Amendment Bill (No 2) the Biosecurity Amendment Bill (No 3) the Maori Commercial Aquaculture Claims Settlement Bill the Te Ture Whenua Maori Amendment Bill (No 3) and the Aquaculture Reform (Repeals and Transitional Provisions) Bill be now read a third time 
. 
These bills create a new regime designed to allow the rational development of the industry while ensuring that the impacts of new aquaculture activity can be fully considered in relation to all coastal marine users. We have acted to protect the coastline for all New Zealanders. The whole purpose of the reform is to provide users with clarity and certainty which were not there before. The aquaculture industry has been held up under the moratorium for a number of years after an overload of marine-farming applications left councils and communities struggling to assess projects and keep up with demand. The aquaculture reform bills secure a sustainable future for New Zealand’s aquaculture. I am confident they balance economic development environmental sustainability and community concern. The bills make the Resource Management Act the main legislation for managing aquaculture. That will enable councils to effectively manage aquaculture and encourage the industry to develop in a sustainable way. There was need for change. We listened hard to industry concerns and have responded providing them with greater flexibility certainty and fairness. 
Let me firstly thank the industry which has set aside any unease it may have had and worked in a highly cooperative manner with the Government to reach this point. I also thank the Primary Production Committee and the officials who supported the committee for working under great time pressure so that the moratorium could be lifted on the due date. Their work has helped us reach our goal of having a number of bills that support clarify and define aquaculture’s place in the marine environment. To that group I add the very cooperative attitude of local government which yesterday and today is working with the Ministry for the Environment to make sure that the implementation of the legislation is highly successful. 
The bills also address Maori interests in commercial marine farming space by providing iwi where possible with 20 percent of marine-farming space allocated since 1992 and 20 percent of any future new space. That is an important step. Settling contemporary commercial claims removes a potentially huge impediment to progress and certainty in the industry. It is clearly in line with the 1992 fisheries settlement aquaculture being the unfinished business of that deal. The 2002 Waitangi Tribunal report entitled  
Ahu Moana: The Aquaculture and Marine Farming Report 
 states plainly that Doug Kidd who was the then National Government’s Minister of Fisheries and Minister of Maori Affairs had forbidden officials from including marine farming in that settlement. It is time that National members put aside their obsessions. We need to talk about solutions not empty slogans. 
Although it has taken time to reach this point I am confident that we have come up with a workable solution that will take us into the future and will see the exciting potential of the marine-farming industry realised. I am delighted to commend the legislation to the House. 
Hon DAVID CARTER (National) 
: 
 Aquaculture is an exciting industry full of potential that in recent years has been totally stifled by the Labour Government. The Government’s response to challenges regarding the future of aquaculture was to impose a moratorium. Then when it was still bereft of ideas it took the opportunity to extend that moratorium. I am pleased today to be associated with legislation that finally lifts the moratorium on aquaculture and allows this exciting industry to develop to its potential. It is potentially a billion-dollar export industry for New Zealand. We parliamentarians have a duty today to pass legislation that allows that industry to get on and do the job. I sadly think this legislation will not prove to be of huge assistance. 
It became evident to the Primary Production Committee that other countries embrace the potential of aquaculture. Committee members heard about New Zealand marine farmers—both large and small operators—who have now relocated part of their enterprises to Australia. Australia makes it easy for aquaculture and New Zealand makes it hard. Representatives of other companies came to the select committee and talked about those companies’ substantial potential investment in countries like Chile. 
This legislation still makes it costly to operate in our environment. It is costly to get a consent. We have a process now whereby aquaculture will be within the regime of the Resource Management Act but that means it will pick up the warts and the difficulties still associated with that Act. It means that anybody who proposes aquaculture must be involved in a consent process that gives everybody the chance to have a say. People who have no standing at all still have the potential to object to an aquacultural proposal. What is even worse is that in many cases some of those environmental organisations whether they are based in Auckland or in Queenstown can make an objection to proposals for aquaculture in for example the Marlborough Sounds. If they form themselves correctly they can actually apply for and obtain legal aid to do so. That is a nonsense. 
If one manages to get through the Resource Management Act process one still has to contend with the Department of Conservation. In this legislation that the Government will pass today we stupidly have given a provision whereby the Minister of Conservation can veto a proposal. That will not give the industry the certainty that people want. 
I move now to the most contentious part of this legislation—the Government’s decision to gift to Maori up to 40 percent of new space— 
Janet Mackey 
: That is not true. 
Hon DAVID CARTER 
: The member says that is not true. She should have paid more attention and not doodled at the select committee. Under this legislation Maori will get up to 40 percent of new space to be created so that at the end of a 10-year period they will have 20 percent of the aquaculture space that has been created since 1992. I say to Janet Mackey that that is the absolute truth. 
The Minister of Fisheries David Benson-Pope has pushed this legislation through the Labour Cabinet and caucus without foundation and without principle. The saddest thing is that we are now seeing a proliferation of the Treaty of Waitangi grievance industry. Maori themselves came before the select committee and said that they would accept this gift but that they did not see it as a settlement because they had not been involved in the process. We are gifting this huge resource to Maori who will come back and say they are entitled to more. 
I take the opportunity to correct yet again the Minister who claimed that there was unfinished business associated with the 1992 fisheries settlement. The select committee sought proof of this unfinished business but was unable to obtain any proof of it at all yet the Minister came to the House today and again said that Doug Kidd had forbidden the inclusion of aquaculture in the discussions. That is not so. That has been proven and that information was given to the select committee. What Doug Kidd was not prepared to do was to allow discussion on aquaculture coming into the quota management system. Treasury had a report at the time proposing that aquaculture come into the quota management system and Doug Kidd said that no that was not on the agenda. 
Hon David Benson-Pope 
: He took it off. 
Hon DAVID CARTER 
: He certainly took that off the agenda. He said that aquaculture would not come into the quota management system. But David Benson-Pope came to the House and misinformed us saying that Doug Kidd would not allow aquaculture to be discussed. That is absolutely untrue and what is more the member knows it. 
Part of the documentation that was presented to the select committee was the Gardiner and Parata report that I referred to earlier. I will read today the comments of Sir Tipene O’Regan. I respect his words. He negotiated fairly and honestly on the Ngai Tahu settlement. He was asked in 2002 about his recollection of whether aquaculture had been deliberately included in or excluded from the 1992 settlement. In answer to that question he said: “The settlement was about commercial fisheries rights. Such rights include aquaculture.” That is the National Party’s stand in the House today. The 1992 settlement was full and final it was signed by Maori as full and final yet the Government is undoing that work today with the passing of the aquaculture reform legislation. We are extending the grievance industry for generations; Maori will want another bite of the cherry and that is wrong. 
If there had been any truth to this folklore around unfinished business then there would have been a paper trail. A large number of people were involved in the discussions around the 1992 settlement. To its credit Te Puni Kokiri went back and interviewed those people. It asked them about their recollections of this unfinished business and collectively to a person they reported to Gardiner and Parata that there had been no mention of aquaculture. It certainly had not been put to one side as incorrectly stated by the Minister of Fisheries. There is no unfinished business. 
We are seeing today legislation that is designed entirely and manipulatively to rid the Government of its huge embarrassment around the seabed and foreshore legislation. I am saddened to see that not only Labour is pushing this legislation through; it is doing it with the support of New Zealand First the Green Party and United Future. Those parties were all represented at the select committee. Those members were there when National members asked the hard questions about the unfinished business. They were there when the information promised to us simply evaporated. Yet they are prepared to contribute to this folklore and to pass legislation today that hugely extends the Treaty of Waitangi grievance industry. 
This legislation will not be good for aquaculture. We know that the proper process established by the legislation will not work and that Maori will be given bits and pieces all around the coastline that are of little value to them. We know that the legislation has been poorly thought out. Other members of the select committee said that to National members around the select committee table yet they have come into the House today and are being whipped into line to vote for legislation that I do not believe they sincerely believe in. 
JANET MACKEY (Labour—East Coast) 
: 
 The chairperson of the Primary Production Committee keeps referring to the lack of a paper trail regarding the inclusion in this settlement of Maori’s 20 percent. All that he needs to do is to read the Waitangi Tribunal report and if he wants a paper trail I am happy to table that report at the end of my speech. Doug Kidd thought that Treasury wanted to bring aquaculture into the quota management system and he personally forbade Treasury officials from mentioning the matter during discussions of the deed of settlement because it would have confused an already complex set of negotiations. As Mike Moore always said: “If they don’t hear it the first time say it another 99 times and it may get through.” I think that is very good evidence on the record in the Waitangi Tribunal report that this matter was not considered at the time of the fisheries deed of settlement. 
I am very surprised at the voting patterns of parties in the House today. I will probably exclude ACT from that because we all know there is no rhyme nor reason to the way ACT votes. I am very fond of Gerrard Eckhoff and I think he is a very fine member of the select committee but ACT is entirely in another ether when it comes to logical decisions about the best way to vote and what is good for people. 
I had a phone call this morning from one of the people from the industry who worked very hard with the committee. He said to me: “Janet can you tell me why National is voting against this legislation? We came to the select committee with a wish list and the select committee the Minister and the officials have delivered what we asked for. This legislation is good for the industry so why is National voting against it?”. I said to that person: “I think it is a cunning political strategy on behalf of the National Party. It was probably engineered by Don Brash and I think it is probably going to have the same result as every other decision that Don Brash has made!”. I told him: “I think you need to ask the National Party why it is not supporting it.” He said: “You know what? I don’t think I’ll bother.” 
I have been very disappointed in the debate that has carried on over the course of yesterday and today and I have been very disappointed to hear the select committee chairman deliberately I believe misrepresent the facts when it comes to the 20 percent for Maori. Let us be quite clear that at the end of the day Maori will get 20 percent of the aquaculture. They will not get 40 percent. It may be that in order to address what has already been allocated they will need to get 40 percent of new applications in some areas. But to pretend to people listening or to people in the gallery that the Labour Government is giving Maori more than they should ever get is simply the Orewa speech all over again. It has been done and it failed. I suggest to National members that they look at this legislation for what it is: an honest attempt to include all New Zealanders in the opportunity that this new fishery provides for us. 
One of the most interesting votes in the House has been that of Tariana Turia. I hope her supporters around the country are listening to her cast her vote with ACT and National. I think that is a very good portent of what the future would hold for Maoridom if Tariana Turia was returned to this House. That a member of the Maori Party can cast her vote with parties that are continually scratching the sore in the hope they will benefit from it at the next election says to me that Maori Party activists or supporters around the country should be very very scared. I have no idea why that member is voting against this legislation which is good legislation for Maori. But I was never too sure just what bee Tariana Turia had in her bonnet on a certain day and I have no idea what has possessed her this time. But I say to Maori around the country who as a result of this legislation will be able to participate in aquaculture in the future that their interests have been well-served by Labour by the Progressives by New Zealand First and by the Greens. Maori should take note. 
R DOUG WOOLERTON (NZ First) 
: 
 I have listened with interest to the speakers who preceded me and I do not want to be mean-spirited but to thank and congratulate the chairperson of the Primary Production Committee the Hon David Carter because I think that as the chairperson he did an excellent job. I want to thank my colleagues who worked diligently alongside me. I do not know how they would have got on without me but we got there in the end. But since the select committee hearing I have been disappointed with David Carter’s comments and I think that in many ways as Janet Mackey said he has become a victim of his own success. In fact all that was required to be delivered by this legislation was delivered and David Carter introduced to the select committee a very innovative way of dealing with problems that—and this is sincere praise—I appreciate and applaud. That is the ability to bring in people who are involved commercially in an industry to work directly with officials. That works very very well. So it is no surprise that as chairperson David Carter has been able through some changes and with the assistance of officials to achieve legislation that is accepted by the aquaculture industry and the players within that industry. With due respect it is legislation they are very happy with. I just wish that Mr Carter would accept the praise that I am sure others are happy to give to him and would not make mean-spirited speeches that first he does not believe in and second are not worthy of him. 
The aquaculture industry is indeed an exciting industry. We have heard Mr Eckhoff talk about how although it could earn many billions of dollars into the future that will not happen. I am sure that it will happen as time goes on but the industry has not reached the first billion yet. I am sure it will do so and this legislation will not stop it from doing that. It is absolutely outrageous to suggest that an industry that takes up public space for private profit—and profit is not a bad word; we believe in profits and we say we have to have profits and we have to have this industry—should according to the ACT party have hardly any regulation at all. It is demeaning to our hard-working bureaucrats or advisers—call them what we will—that such a situation could exist. I want to praise those people for the minefield they have worked through in order to bring this legislation to fruition. There are multiple uses for the space that marine farms will occupy—not the least being its use by the public of New Zealand for swimming fishing or whatever else. All of those things had to be taken into account and the advisers have done that. 
It is interesting that throughout the submission process people talked about moving to Australia Argentina or somewhere else around the world because New Zealand was far too restrictive on the aquaculture industry. On further questioning and on talking privately to people one usually finds that a very interesting thing happens which New Zealand First actually applauds—that is that those people are going out and increasing their holdings in aquaculture farms throughout the world. They are not selling up their assets in New Zealand and moving to another country; they are retaining their assets in New Zealand and using the expertise they have gained here to increase their holdings in other countries. New Zealand First says that that is fantastic. It is what we encourage people to do. It is what our entrepreneurs in New Zealand should do and we applaud it. We just hope and trust—and I am sure it is so—that they bring the profits earned from overseas countries back to New Zealand and increase the living standards of us all. 
Clayton Cosgrove 
: What does Winston say? 
R DOUG WOOLERTON 
: He has not had much to say on this legislation as a matter of fact. He rang me a wee while ago just to make sure that what I was saying was OK but he has not had much to say himself. 
I want to talk briefly about the business of giving 20 percent of the aquaculture space to Maori. We have stated many times—and this is that last time I will do it—that it is based on a precedent set in the fisheries legislation in 1992 which was pushed through the House by the previous National Government and which my leader Winston Peters voted against. Having set that precedent it is inconceivable that this industry could go ahead without a 20 percent allocation of space—not of aquaculture but of space—to Maori. If that were done Maori would immediately challenge that in the courts and they would win. So New Zealand First says that we accept that and that these things have to go forward in a sensible manner. We applaud the Government for accepting reality and moving on the issue. I know my ACT colleagues have said in a somewhat derogatory way that I have said we are trying to get away from a fight. Well it is not a case of getting away from a fight in a cowardly way; it is about foreseeing a potential problem and overcoming it. I think that the Government—in fact any Government—should be applauded for doing that. I say hallelujah and there should be more of it. It is not a matter of running away from a fight; it is about foreseeing and acting on a problem. 
It is also a fact that when I have talked about these situations on behalf of New Zealand First I have been accused of perpetuating the problem of treaty grievance. New Zealand First rejects that totally and we want to say quite clearly now that it is settlements like this that will avoid problems in the treaty process. This legislation is a sensible recognition of the facts of life in New Zealand in the 21st century. We do not want to go back to the dark old days when almost everything that was done caused problems with our fellow New Zealanders particularly with those who are Maori. So I reject the notion that New Zealand First is running away from some sort of a fight. We are not known for doing that. We commend the Government for the sensible inclusion in this legislation of things that are inevitable. 
GERRARD ECKHOFF (ACT) 
: 
 Before I get into my speech I have to say that after listening to Mr Woolerton’s speech which I thoroughly enjoyed I think he is almost overcome by the spirit of Christmas with his charitable rendition of what the Government is doing. His normally dogged nature and criticisms did not come forth. However we are all somewhat different from one another. I never really thought that in my time in this House I would debate a bill that had an entire part dedicated to fixing up the other parts. Part 6 of the Aquaculture Reform Bill was totally dedicated to fixing up the other six parts—there were seven parts in that bill. I find that to be absolutely extraordinary. That bill may I remind the House was titled the Aquaculture Reform Bill. So if it was about reform why have we put into legislation a whole part that is dedicated to the future fixing up of the mess that we are tragically just about to pass? 
Let me make it very clear that both I and the ACT party which I am proud to serve are absolutely in favour of the wonderful aquaculture industry—that fledgling creative industry. It reminds me very much of the agricultural industry in its very very early days when somebody decided to take to the skies with stuff called superphosphate. It had never been done anywhere else but someone decided to try something that was interesting innovative and creative. I do not really even have to tell Mr Cosgrove how successful that industry was. But in the agricultural industry that initiative did not come about as a result of constraints controls and plans; it came about because innovative creative people decided that that was for them and away they went. 
The Primary Production Committee met some of the people involved in the aquaculture industry—and I must say that the select committee did a great job going out and actually talking with the participants in the industry as distinct from the Minister who stayed in Wellington. We met some wonderful people and we could see the enthusiasm and the dedication that they had for the industry. Rather sadly we also heard from those people that in Blenheim I think it was at least five people from this rather small industry have left New Zealand to go overseas. That was just in one area. How many other people how much expertise and how much capital have left New Zealand to go to Australia and Chile where the industry is absolutely burgeoning? Anybody can go to Chile and buy space. Yes people can buy it—the very thing I have been advocating. They can buy space. It is not given away; one can purchase space just like anybody can purchase land. Why is the logic of doing that so difficult for this Government to grasp? 
Hon David Benson-Pope 
: ACT selling off something else. 
GERRARD ECKHOFF 
: It actually works I say to the Minister. He should try it. He should try doing something about understanding the realities of life in other countries that have shown us the way forward by showing us that security of tenure absolutely guarantees a successful industry. 
Sadly we now have a situation in New Zealand where in 20 years’ time people will not know whether they can continue in the aquaculture industry. Those of us who have been in industry for a long time—in my case for about 35 years—know that 20 years is a very very short passage of time. Mr Samuels knows that. He has been a fisher and he has owned motels and so on. He knows that 20 years of development goes by very very quickly. After only 20 years the participants who have started off in the aquaculture industry will have to go cap in hand to a regional council and ask whether they can please continue. A council that knows by and large nothing about the industry will say that yes the marine farmer can continue in it but the council will specify the rules and the regulations that he or she must abide by. A council will impose certain cost structures on marine farmers believing that because they are in business they must therefore be wealthy. Well what utter nonsense that is! Most people in industry—and it does not matter which particular industry it is—struggle. They struggle to pay the wages. We heard my new colleague Kenneth Wang talk about having to go without paying himself wages. That is so typical of businesses. Many many people in industry in this country do not make a lot of money. 
I do not notice terribly many marine farmers or aquaculturalists out there who drive around in Rolls-Royces and have huge amounts of property elsewhere. Aquaculture is a very difficult industry to survive in. In Australia it is rocketing away and in Chile and elsewhere in South America it is doing extremely well. But New Zealand has decided to tie up the industry in red tape and make it even more difficult for the people of this country who want to get involved in that excellent industry. 
One of the great problems that the aquaculture industry even now is recognising is the role of the Department of Conservation which is known commonly throughout New Zealand as the “neighbour from hell”. The Department of Conservation will totally dominate the industry because it has been given veto rights. The department has been given the right to say to a regional council when a company or an individual wants some space that it will have a look at the space first and determine whether it wants that space for conservation purposes. The applicant may then get whatever space the department does not want. It is well known of course right throughout New Zealand that the department is controlled by the Royal Forest and Bird Protection Society and that the society’s former chief executive Kevin Smith now runs the Minister’s office. The department’s fingerprints are all over this legislation. It gets the first and second bites of the cherry. I have absolutely no problem with the department being involved in the management of marine reserves. But let us give the industry an equal chance to get established and show that it can do a wonderful job. 
I am not joking when I say that potentially the aquaculture industry could be an $8 billion to $10 billion industry. The feral fishery is in huge decline; everybody knows that. So if we want to eat seafood—and we do; we all know how good it is for us—we will have to look differently at the way we do things out on the ocean just as we had to look differently at the way we did things on the land when we first came to this country. If we had to apply every 20 years for a right to farm on land in this country nobody would bother to do so. That will happen I suspect in this fledgling industry as I call it. I certainly wish the aquaculture industry every success and the ACT party wishes it every success. I had hoped that this bill would set the industry on a path to the future so that it can invest with real confidence not just in the water but in the infrastructure on shore and in developments overseas as it finds its markets. I suspect with regret that that will not happen following the passage of this legislation through the House today. 
IAN EWEN-STREET (Green) 
: 
 The aquaculture regulations up until this point have been a source of enormous frustration for marine farmers. In greenshell mussels they have a unique species that is endemic to New Zealand. It is found nowhere else in the world. It has fantastic market opportunities. But those opportunities have been frustrated by a mixture of regulations and other things. We have had a gold rush. As soon as people realised the potential for aquaculture there was a gold rush mentality for water space. We had moratoriums and we had regulations imposed by the regional councils and by the Ministry of Fisheries. The mixture of regulations controls and moratoriums has led to confusion and delays and it has led to frustration. Many people in the aquaculture game have looked overseas. I have colleagues who have gone to South Australia to look for opportunities and they have been welcomed with open arms. They have gone there and found that instead of facing barriers they have been confronted with a Government that has said: “Look we have already done the science. We have allocated spaces that we believe are good for aquaculture. Please come and develop aquaculture here.” They have welcomed Kiwi ingenuity. 
I know of one group that successfully applied for 300 hectares of sheltered water space. It is absolutely unknown in this country. They also got a land-based facility for virtually no cost. This is extraordinary. What is it that Australia Chile and other countries can do that we cannot? I would have to say that the first draft of this legislation certainly was not the answer to that question. Submitters came to us and said that they would rather have the existing situation than the scenario outlined in the first draft of this legislation. So it is very gratifying to see reports in the newspapers from marine farmers now saying that this is very good legislation and thanking the Government and the Primary Production Committee for changing the legislation from being unworkable into something that is now seen to be quite good. 
I think we can all take pride in the fact that submitters have had a profound impact on the legislation. This is democracy in action. This is people who are affected by the legislation coming to where the decisions are made and being able to have an impact on that legislation which in turn affects them. I think it has been a very very good process. 
I would like to take the opportunity to thank my colleagues on the Primary Production Committee and particularly the chair David Carter who I think did an excellent job. I believe that we treated this problem in a non-partisan way. We accepted the problems as they were presented to us and I think we worked in a very collegial manner with the committee staff and the officials to come up with a non-partisan resolution to the problems. Obviously we put on our party political hats when we come into the House and maybe that is unfortunate but that is the way politics goes. 
I also would particularly like to thank the officials a number of whom are here today. They have all worked extremely diligently under very tight time constraints and I think they have done a very good job. I say the same to the committee clerks who did an excellent job. 
This bill addresses quite a number of different needs—a lot of which we have heard about during the debate. But not least of these needs have been those of the wider community and of the environment itself. People are concerned about the ecological sustainability of marine farming. These people have legitimate concerns. Marine farming is not a panacea; it is a very good use of water space but it is not the only use of water space. There are competing needs. We have recreational users boaties and people like that. We also have the environment itself. What happens to the plankton on which the filter-feeders feed? There are visual impacts and a whole range of things. 
Up until now—before this legislation comes into play—the regulations have meant that anybody who has objected to a marine farm has had to oppose an application on a case by case basis because it is a resource consent process. Individuals who oppose a marine farm have had to turn up at their local council offices day after day opposing different applications and they are suffering from burnout. But they have had legitimate concerns. The good thing about this legislation is that it puts all those concerns into one big hearing. It says: “Let’s get an area—we will call it an aquaculture management area or an AMA—in which people can apply for space for farming and outside of which they cannot apply.” They can change the coastal management plan but that is a much longer term process. It is a higher hurdle to jump over. But what this legislation is doing is giving people certainty—not just the marine farmers but the community as well. We have the science upfront. 
People who have an established farm also get a degree of certainty from this legislation. It is one of the things they really wanted. But what they wanted was a right of renewal in perpetuity. Of course with public open space with the commons we simply cannot do that. But I think what we have done is to give them a degree of certainty that is fair. We have said: “You get a coastal occupation lease or right and that allows you to farm that space for 20 years. At the end of that 20 years if you have been a good corporate citizen—in other words you haven’t breached the conditions of your permit—then you go to the front of the queue. You get your permit renewal application heard first. If you are successful you get another 20 years. If you are not successful obviously the space you have been occupying goes to tender.” The only other way that space can be lost is if the community through the regional council says: “We no longer want that to be used for marine farming.” 
It also gives marine farmers a message that they are using that space only by the grace of the community. It is commons and what we have done is introduce the idea of resource rentals. People occupying public open space pay for the privilege. We have also said that they have had to be good corporate citizens during their incumbency. 
Probably the most contentious issue surrounding the legislation has been the 20 percent to iwi Maori. I have discussed that issue a number of occasions during the debate and I do not want to go into it further although I do reiterate the problem I see with the Government trying to legislate for a full and final settlement without having had full consultation with iwi Maori. There is also the problem that the 1992 deed of settlement stated that of new species going into the quota management system 20 percent will go to Maori. These are not species going into the quota management system. It is not a trigger for that. 
Three practical problems remain to be resolved. One is the patchwork quilt effect the second is the Te Ohu Kai Moana Trustee and the third is the representative space. 
I conclude by wishing my colleagues the officials and the select committee people the very happiest of Christmases. To you personally Mr Speaker as this is your last Christmas in this House after approximately 100 years I think I wish you all the best in your new job. I wish you well. 
Mr SPEAKER 
: Thank you. The member was doing very well right up until that phrase! 
BERNIE OGILVY (United Future) 
: 
 I rise to speak on behalf of United Future on the third reading of this legislation. When I look back on the day when I first walked into the Primary Production Committee to look at this legislation and then to where I am today I see a tremendous transformation in a piece of work that originally gave no possibility to an industry. It has been transformed. I wish to put on record today that we are very pleased with the progress that has taken place. As I see it this legislation is enabling legislation and it has brought certainty for now and the future. The legislation has brought clarity to a whole range of issues and for that we can be extremely thankful that it is going through the House today. 
The legislation is based on reform and it reforms the administrative parts as we have heard and seen in the debate on it. It does not so much reform the industry but rather the mechanisms needed when the moratorium is lifted in a few days’ time. If I recall correctly it was United Future with the Government that extended the moratorium to 31 December to ensure that time was made for this legislatio to be written. 
As a test of how satisfactory legislation is one has to ask whether all the players who are mentioned and for whom the legislation is set up are contented happy and looking forward to its passage through Parliament. As I see it virtually everybody is contented and of a mind that this is good legislation. 
When we look at the farmers they see this as far better than anything else they could have imagined. In fact when the expert witnesses were before us they said: “Look we will accept this as it is.” and since that day until this day there have been many modifications of greater gain for them. The industry is bringing forth hundreds of millions of dollars to the economy and I can see as can a lot of people that it will raise itself to be a flourishing industry. We salute the industry now that it has the legislation on its side and encourage it to go for it to make heavy investments and to show not only to us as New Zealanders but also to the world what it can do. 
I do not believe that the present farmers will be damaged in any way. Their space as they have it will be deemed to be aquaculture management areas so they will immediately continue in business for the next 20 years. If they remain good farmers then they will continue and will remain good farmers. They will automatically be asked to carry on in their applications. 
The new farmers from when the legislation is passed will have plenty of room to manoeuvre. They can apply privately to do whatever they wish as well as wait for the regional councils to lead them into aquaculture management areas. 
Regional councils are another group that we cannot take out of the equation. We have to ask whether they are satisfied by this legislation and the answer to that is a resounding yes. It gives them the wherewithal and the mechanisms to ensure that they satisfy both the people around them in terms of their constituents and the places in which they live as well as the farmers. They now have a set of rules that they can work out and apply. I believe that the regional councils will be able to say—and have already said publicly—that this bill is good for them. It allows them to get on with developing their regions which is a vital issue. 
For instance when we were visiting down in Havelock I heard the comment that Havelock now has the lowest rate of unemployment in New Zealand. I am not sure whether that is fact but at least someone down there told us that. It was based entirely around this industry flourishing in that town. I am sure others in the House would want to compete with that but that is what we were told. 
We have to ask ourselves whether this is good legislation for the fishers and for the public. The answer to that is also yes. Commercial fishers are not losing out anything here. Their views are totally at the centre of this legislation. Customary fishers have their rights to be looked after and they will be listened to. Likewise for recreational fishers and those who are into recreation of various types—all of those people are being satisfied. Are Maori and iwi satisfied by this legislation? United Future believes that the answer is yes. Their settlement will help to support a healthy aquaculture industry in this land. I believe that by settling with them we then advance the entire business into the many billions of dollars that it will develop. 
I want to end on a note of thanking the chair of the Primary Production Committee. I was a stranger to that committee when I arrived. I got to know some very good people on the committee and it was a pleasure to work with each and every one of them. I met the officials for the first time either on a boat at sea or in the select committee room. It was great to work with them. They worked tirelessly and I wish them in particular a very good Christmas because they need a break after all of this. United Future is really pleased that this legislation will pass into law today. 
CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 I want to begin by picking up from where the previous speaker left off and to thank the ministry officials and our clerks. I thank them for the work they did under great pressure of time. I also thank them for enduring—and I am sure they know what I mean when I say this—the Primary Production Committee especially the lengthy dissertations from Mr Woolerton. At various times of the evening he regaled us with various theses he had on various issues particularly to do with salsa and seafood. 
The third reading debate has been very interesting. I have listened to the Opposition speakers and they have spent their time criticising Government members for not taking calls. Well on this side we actually wanted to listen to and analyse what was being said over there and to progress the Government’s business. What did we get? The Opposition rolled out the big guns. We heard from Phil Heatley. The Opposition dredged up Sandra Goudie from the bottom of the sea—the orange roughy. 
Mr SPEAKER 
: Order! No— 
CLAYTON COSGROVE 
: I withdraw and apologise. And what did the Opposition have to say on this legislation? I commend Mr David Carter for his leadership of the select committee but I have to say that some of his comments were right around the edges. He knows as well as I do—and all the select committee members do—that the 20 percent to Maori which was one of the two major issues is unfinished business. It is unfinished business from and progresses the spirit of the 1992 deed. He knows that. He knows what his former Minister of fisheries and Maori affairs was on about; the Waitangi Tribunal referred to that. He also knows that the other major issue was security of tenure and that that has been dealt with. Now as the Green member has said we have security of tenure for 20 years with options and rights of renewal for our marine farmers. 
I thank my colleagues who I know are enjoying my speech. I thank the members of the select committee because this bill demonstrates again as I think Mr Woolerton said that the Primary Production Committee acts in a collegial way. We actually get on with the business. I commend the bills to the House. 
PHIL HEATLEY (National—Whangarei) 
: 
 I too would like to extend my thanks to the officials from the Ministry for the Environment. I have certainly appreciated their input and their sincere response to the many questions that we have asked. As may be seen some of those questions came out of left field but all arose from genuine concerns. The officials always responded freely frankly and with a lot of consideration. We thank them for taking our ideas back to their Ministers and their ministry and thinking them through. 
I also thank the Ministry of Fisheries officials. The Ministry of Fisheries has had a big year. We know that because the Primary Production Committee which considered this legislation has dealt with five significant fisheries matters this year the Aquaculture Reform Bill being the last. The Ministry of Fisheries officials also went away and thought through some of the ideas of the select committee members and came back with resolutions. We appreciate that. 
And of course I thank the Department of Conservation officials who probably got the most flak from committee members because of the concern obviously about how much say the Department of Conservation wanted in the whole process. We as a committee were generally very wary about that. But the officials stood up for their points of view and we appreciate that. So I thank those officials. 
I also thank all the submitters both those from the commercial-fishing sector and those from the marine-farming sector who put forward their views to the select committee as we travelled across the country. I acknowledge them. 
I acknowledge my colleagues on the committee. I would like of course to commend those on my own side—the Opposition members—but on the Government side I would particularly like to commend Jacket Mackey. I have enjoyed working with her particularly over the— 
Government Members 
: Ooh! 
PHIL HEATLEY 
: Yes and I will be asking her out to dinner at some later date. I would like to commend her for her very rational and pragmatic approach to the problems that often we raised. Although a member of an opposing party she was willing to hear us out. She did not agree with all our points every time but she certainly took them into account understood them and took them back to her Minister and we saw changes in many many cases. I acknowledge her for that and I thank her for her pragmatic approach. 
The National Party as a team drove through significant changes to this legislation because when it was first introduced—as everyone knows now—it was seriously and fatally flawed. People from the industry who came to us were very concerned that this legislation would affect their businesses and that they would have to lay off staff and shift overseas. They begged for changes. We acknowledge that the select committee process has seen significant changes in this legislation and when it is enacted we will be glad that those changes are now part of it. But we still oppose this legislation because of outstanding issues that in our view have not been resolved. 
The issue of horse-trading with Maori on the seabed and foreshore legislation is a prime example. The Government is giving aquaculture space for free to iwi to buy their support for the seabed and foreshore legislation. In the future up to 40 percent of new marine-farming space will be set aside for Maori to address what is referred to as the unfinished business of the 1992 fisheries settlement. We called for historical documentary evidence that proves there was such unfinished business but we still have not received any despite assurances that such evidence exists. With the reforms in this legislation marine-farming applications that have been put on hold for 2 years and 9 months—it will be close to 3 years—by the moratorium are to be used by the Crown to settle contemporary Maori claims. The National Party feels that the fact that an applicant’s space can be reallocated to someone else is unfair and that a settlement of one grievance should not generate and create another grievance which is exactly what is happening here. 
Most Maori submitters do not acknowledge this action as a settlement at all. They do not want to be played off against others in the industry. There was no negotiation and with this legislation—unlike the 1992 fisheries settlement—there is no deed of settlement to point to. Many Maori who came to the select committee were dissatisfied. They foresee themselves receiving space they would not have chosen they see themselves receiving random patches of space of no economic value and they see themselves being played off against the industry and in their view it is not over yet. 
National sees the treaty settlement approach taken with Ngai Tahu Ngati Tama Ngati Awa Ngati Ruanui and Nga Rauru Kitahi which gave preferential tendering rights for aquaculture space as a satisfactory full and final way to address aquaculture claims that have merit. We do not see the broad blanket approach of a 20 percent give-away right across the country as a way to address a genuine claim. Genuine settlements with iwi should be addressed on a case by case basis should be solely between the Crown and Maori and should not involve or interfere with the operations of current or future marine farmers. That is where the National Party sits on this quid pro quo horse-trading deal with Maori that the Labour Government is pushing through. 
We still have some unanswered questions on how aquacultural interests will be balanced with commercial-fishing interests. We support interaction between those two sectors and we want to give them a timely fully transparent and cost-effective process to follow. We do not know how the regional councils will be able to quantify and qualify aquaculture’s effects on fishing when they look at things such as the effect on spawning and stock development. We believe that problems may arise in the future and we will be watching that with interest. 
Probably the biggest win for National Party MPs on the committee was getting the right of first refusal for incumbent marine farmers. We are glad we got that win. We are concerned that there are still a couple of fishhooks in the legislation whereby the incumbents to gain renewal have to manage their farms according to what the Government calls industry-good practice—a term that it has not defined that is vague and subjective and that will change as technology changes. We are also concerned that the Government has a fishhook whereby regional councils may re-tender occupied space out from underneath an incumbent marine farmer if they deem it “necessary”. We are not sure what “necessary” means there but we do know that it is subject to Government policy changes. 
National supports this industry. We wish that aquaculture would grow. It is good for New Zealand and there is no doubt about that. We do not want New Zealand marine farmers shifting overseas and taking their business elsewhere. We want them in this country. We wish them well. We will be watching the way that these reforms affect their industry into the future and when we are in Government after the election next year we will be more than prepared to make changes to this legislation if we see aquaculture continuing to struggle under this new legislative environment. 
JOHN TAMIHERE (Labour—Tamaki Makaurau) 
: 
 I commend the bills’ third readings to the House and in so doing I will make three or four quick observations. 
The first is that once again we have legislation that is a litmus test in terms of the difference between this Government and the Opposition. We have provided once again all the deliverables and once again we are unleashing the latent economic potential and prowess of Kiwis—regardless of community regardless of colour and regardless of stakeholdership—and I commend the bills to the House accordingly. 
The second point I want to make is that a couple of members opposite continue to get up and bang on about race. The Hon Nick Smith will always talk about race because he understands colour bars but he does not understand rights. The reality is that this is rights-based legislation. It is bonded right into the heartland of the constitution of this country and it should be adhered to and accepted accordingly. If Dr Smith wants to bang on about race—as usual—and to play divide and rule I say to him that it is a very very dangerous game to be playing. This Government is the only Government that can bring this country together because it actually represents the face of this country. It actually understands tolerates and respects everyone in it. 
The reason why the Maori Party is voting against this legislation I alert members is that 20 percent is not good enough. That party says it has got to be 100 percent and it should have been done yesterday! We should have put Phil Heatley on the endangered species list as well. But Tariana Turia was not able to move those amendments. A vote for the Maori Party as a consequence is a vote for a great past; a vote for the Maori members of the Labour Party is a vote for a great future. 
I commend the bills to the House. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 This an awful bill that represents all that is bad about the treaty gravy train that this Government is determined to continue. It is nothing more than a crude attempt to buy back Maori support after the fiasco of the foreshore and seabed issue. 
I represent a constituency of which aquaculture is one of the most important industries. It has one of the greatest amounts of opportunity for future wealth creation not just for Nelson but also for New Zealand. I ask members opposite why the 1 percent of the Nelson population—numbering 916 people at the last census—who happen to affiliate to local iwi should get a preferential right and why they should get 20 percent of any future aquaculture space in the Nelson region. I ask members opposite how they can pretend that we have a single standard of citizenship when 1 percent of the people in my region will get 20 percent of the economic opportunities from aquaculture. That is wrong and that is why this Labour Government will be turfed out next year. 
The story of the aquaculture industry is one of lost opportunity under this Government. In the 1990s there was huge and exciting growth within that sector. That industry grew from just $20 million in 1990 to over $300 million but over the last 5 years the industry has been quite static. There has been no growth because of the moratorium that has been imposed by this Government. The reason for that moratorium is quite simply that this Government has not been able to get its act together and have a clear set of rules for the industry. 
I must also reinforce the very intelligent contribution that has been made by National’s fisheries spokesperson Phil Heatley. The point he has made has not been responded to by any Labour member and I would also challenge New Zealand First which is supporting this legislation in that regard. If we are to have full and final settlements they must be just that. In 1992 the Sealord’s deal was full and final settlement for all fisheries claims. If we look through the  
Hansard 
 and through all the paper record nowhere—anywhere—did anybody say that the settlement did not include aquaculture. If we look at the legal provisions of that settlement Act it defined commercial fisheries as those activities that would require a fishing permit. Government members know that aquaculture does require a fisheries permit and that it was included in that settlement. In 1992 the taxpayer forked out $160 million for full and final settlement of that claim but now the Labour Government is backtracking on that and writing out another huge cheque. 
We do not know the value of the aquaculture space that Labour is giving in this bill preferentially to Maori only. I would estimate though that it is worth over $200 million at least. Let us be quite clear. What this bill is doing is transferring $200 million of preferential opportunity for Maori and I simply ask why. We all know that the crude political reason is that Labour is terrified it will lose its grip on those Maori seats to Tariana Turia and the Maori Party so it is prepared to throw away all principle and all good government in a simple crude attempt to buy back Maori votes. Members on this side of the Chamber say that is wrong. We say that if the treaty settlement process is to successfully see New Zealand through to fruition then full and final settlement must mean just that. 
The last point I wish to comment on is the changes that were made to this bill by the Primary Production Committee. I compliment David Carter and Phil Heatley on the good work they have done for the Kiwi battlers who make up the aquaculture industry. They are pioneers. Those people went out and created a new industry for this country. They created an industry that is a world leader but this Government was prepared to undermine their rights by not allowing them to have security of tenure in terms of the future. I say to David Carter and to all members of the select committee that at least they understand and rolled the Minister on that point because if they had not then the industry’s future would have been seriously at risk. 
This is a bill that differentiates Labour from National. Labour is a party that is prepared to sell out its principles to not seek full and final settlement and to get out the chequebook of preferential rights for Maori. Those of us from National and ACT would rather say that all New Zealanders need to be treated equally with regard to an important industry like fishing. We oppose this bill. It demonstrates every reason why there needs to be a change of Government in New Zealand next year. 
Hon DAVID CARTER (National) 
: 
 I seek leave to table a document that I referred to. It is the Gardiner and Parata report dated 20 May 2002. 
Document by leave laid on the Table of the House. 
Sitting suspended from 1 p.m. to 2 p.m. 
A party vote was called for on the question  
That the Resource Management Amendment Bill (No 4) be now read a third time 
. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Fisheries Amendment Bill (No 5) be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Conservation Amendment Bill (No 2) be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Biosecurity Amendment Bill (No 3) be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Maori Commercial Aquaculture Claims Settlement Bill be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Te Ture Whenua Maori Amendment Bill (No 3) be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Aquaculture Reform (Repeals and Transitional Provisions) Bill be now read a third time. 
Ayes 83 
New Zealand Labour 51; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 36 
New Zealand National 27; ACT New Zealand 8; Maori Party 1. 
Bill read a third time. 
Subordinate Legislation (Confirmation and Validation) Bill (No 3) 
Second Reading 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 I move  
That the Subordinate Legislation (Confirmation and Validation) Bill (No 3) be now read a second time 
. The bill was referred by the House to the Regulations Review Committee on 7 October. The select committee presented its report on 3 December recommending that the bill be passed with amendments supported unanimously by its members. The committee called for explanations from the six departments administering the 14 orders to be confirmed or to be confirmed and validated by the bill as introduced. The committee was satisfied with the responses. 
At the Government’s request the Regulations Review Committee considered two matters not addressed in the bill as introduced. The first of these was confirmation of the Deer Industry New Zealand Regulations 2004. These regulations were being made just as the bill was introduced so necessarily missed inclusion. They replace the venerable Game Industry Board Regulations 1985 reflecting the reform of the industry in more recent years. They lapse unless confirmed by the end of the Parliament and this of course is the last scheduled confirmation and validation bill in the meantime as an election must be held by the end of September. The select committee was satisfied that the regulations should be confirmed. 
The second matter concerns amendments that would validate payments made under levy notices issued under the Alcohol Advisory Council Act 1976. The payments were made under notices issued between 1983 and 2004 so it can be said that National started it Labour continued it National continued it National - New Zealand First continued it further National and various odds and sods continued it further still and the Labour-led Government has continued it still down to 2004. So the guilt is reasonably evenly spread around the Chamber and indeed into the heavens above I think one can say at this point. The select committee’s commentary summarises on page 2 the types of deficiencies in the notices. The select committee sought comments on the proposed amendments from key industry groups and established that there was no opposition to them so the committee accepted unanimously that it is appropriate to validate the payments made under the effective notices. 
The commentary notes that two submitters called for changes to the actual principal Act the Alcohol Advisory Council Act but that of course is outside the scope of this particular bill. The select committee invited the Minister of Health at an appropriate time to consider the matters nominated by the Distilled Spirits Association. 
I am grateful to Dr Richard Worth as chair of the Regulations Review Committee and to the members of the committee for their work on the bill. In particular I am pleased that the committee has supported the amendments dealing with the deer industry and Alcohol Advisory Council matters. 
Dr RICHARD WORTH (National—Epsom) 
: 
 For some the Subordinate Legislation (Confirmation and Validation) Bill (No 3) might not be a bowel-gripping topic but for others Dr Cullen included it provides I guess a heady topic of infinite fascination. I am certainly looking forward to taking multiple calls in the context of the Committee stage of the bill when there will be an opportunity to tease out some of the more challenging issues that arise in connection with this legislation. 
Of course it has been reported from the Regulations Review Committee that the structure of the legislation is simple—simple I would say in every respect. Apart from the title and commencement provisions there are only two parts: Part 1 dealing with general and technical provisions; and Part 2 in two subparts the first dealing with confirmation and validation and the second dealing with a more particular form of validation. 
So it is that we are looking at confirmation of instruments made in accordance with the Animal Products Act the Animal Welfare Act the Biosecurity Act the Commodity Levies Act the Customs and Excise Act the Gambling Act the New Zealand Superannuation Act the Social Security Act the Primary Products Marketing Act the War Pensions Act and the Alcohol Advisory Council Act—all of course heady provisions in daily use by significant members of the commercial community. 
An interesting question to ask would be why we have legislation of this particular quality. Would it not be better to have sunset provisions in legislation of this type rather than to have the process that the Regulations Review Committee determinedly embarks upon each year to make studied judgments on whether particular pieces of legislation should be confirmed and/or validated? In this particular case after an exhausting and harrowing process the Regulations Review Committee determined that it was appropriate for this bill to be passed albeit with a number of amendments. So it is that the purpose of this bill is to confirm and validate subordinate legislation made under various Acts. 
This is not one of those cases where whether what we are talking about are regulations in the strict sense of that term is a matter that arises for detailed consideration. Dr Cullen will be aware certainly from his reading that there are issues that are both intensely academic but also very practical as to how regulations within the purview of the Regulations Review Committee’s jurisdiction should be properly looked at. So we see here in effect not regulations—or not so limited certainly in that way—but a series of orders. I need refer only to the Biosecurity (American Foulbrood - Apiary and Beekeeper Levy Order) 2003—usefully reprinted in statutory regulation 2003/283—to make that point. 
We asked the Government departments responsible for administering the subordinate legislation their views on these particular pieces of delegated legislation. We asked the Ministry of Agriculture and Forestry the Department of Internal Affairs the Ministry of Social Development the New Zealand Food Safety Authority and the New Zealand Customs Service and our final port of call was Veterans Affairs New Zealand whether as departments responsible for administering the legislation they considered that there should be the appropriate confirmation and validation orders. Surprise surprise they gave proper explanations and indicated their view that confirmation or validation was appropriate. 
Dr Cullen has referred to the fact that the bill includes—properly—a request from the Ministry of Agriculture and Forestry in connection with amendments that would confirm the Deer Industry New Zealand Regulations. The reason for that request was simply that the regulations were not included in the bill as they were made only 2 days before the bill’s introduction. So there was an explanation from the ministry as to why that had occurred which the committee found acceptable. 
I shall not take up the time of the House at this stage to talk about issues that arose in the context of the submission made by the Distilled Spirits Association of New Zealand. But there are significant issues of substance there and it would be a good outcome if in the Committee stage the Minister indicated what his position was in respect of those questions of anomaly and I do not put it higher than that. 
Dr Cullen’s opening comments in this second reading referred to amendments to validate the Alcohol Advisory Council levies and so he should properly do so. There has been a history of error-ridden lawmaking relating to those notices. The story really starts with the notices issued in the years 1983 to 1987 and again of course in 1989 with the unauthorised setting of levies by litre of alcohol. [ 
Interruption 
] Mr Power reminds me that he was still at school at that time and I certainly remember him as a very promising schoolboy in a high-profile school. He has gone on from there to prove himself in this Parliament as a person certainly worthy of recognition and advancement. 
Mr SPEAKER 
: Could the member come back to the bill. 
Dr RICHARD WORTH 
: I would like to come back to the notices if I might because they were issued as I said in the years 1983 to 1987 then again in 1989. We are talking about the unauthorised setting of levies by litre of alcohol rather than by what is called in the trade proof litre which was the correct unit at that time. That was the first problem. The second was perhaps more serious and it related to the unauthorised setting of differential rates for spirits depending on their alcohol content with a further unauthorised rating on the basis of litre of beverage instead of litre of alcohol in the case of spirits with a lower alcoholic content. The third error related to notices issued in the years 1989 to 2004 where there was a questionable indication of goods and services tax payable on the levies. The final problem with the notices issued in 2003 and 2004 was a failure to follow the statutory formula for calculating the levies. 
Dr Cullen in his comments indicated that he thought the blame might reasonably be spread between the former National Government and the present Labour Government but I trust that that recitation is sufficient to show that the errors have been substantially of this Government’s making and of its advisers. Certainly that is what my catalogue of events indicates. 
So what has happened is that this bill has a new subpart 2 of Part 2. That includes clause 15 “Payments made in accordance with levy notices to be taken to comply with relevant enactments”. For those members of the House and I guess members of the public who have access to this material I tell them that listed in clause 17 are those levy notices lettered respectively from (a) to (u) that are the subject of remedial work in the bill. 
Hon DAVID CUNLIFFE (Minister of State) 
: 
 It is a great pleasure to take a very short call on the Subordinate Legislation (Confirmation and Validation) Bill (No 3). A bill sufficient to overshadow the Budget? A bill sufficient to wake up Ron Mark? This bill is none of those things. However the public can sleep easier in their beds knowing that Richard Worth is alive well and leading the Regulations Review Committee through its intrepid journey to ensure that none of those amendments or regulations are outside the Standing Orders. This is a process that we go through every year where we do not delay from doing the little tinkering and fixing jobs that occasionally the law requires. On that basis I am happy to support the bill. 
DAIL JONES (NZ First) 
: 
 It is a great pleasure to speak on this bill reminding me once again that even the sins of 1983 and 1984 have come back to haunt me. That is when these errors commenced when I was a member of Parliament in 1983 and 1984. It is totally unfair to blame anyone including myself of course for those defaults. The member at the time the former Speaker Sir Richard Harrison was a staunch supporter of the then Alcoholic Liquor Advisory Council from day one and after the royal commission from 1976 onwards and he would find a great deal of amusement in knowing that this problem had occurred. 
As I understand it in the discussions I have had the problem arose because the officials asked parliamentary counsel to draft an amendment to the procedure. Parliamentary counsel said: “Hang on a minute. The procedure you want us to amend hasn’t yet been approved by Parliament.” and someone discovered they had been unwittingly using that procedure since about 1983. So things finally do get caught up with in this place even if it does take about 21 years to work it all out. But this is New Zealand. New Zealand First is not going to make a song and dance of this issue. It is unfortunate and that is what this bill is all about. 
May I say that I was delighted to speak with the Distilled Spirits Association representative who makes calls on us regularly and keeps us up to date with the industry and makes sure that members of Parliament know what is going on. The question raised by the Alcohol Advisory Council is of great concern and I do hope the Minister of Finance who is in charge of this bill will do something to remedy the problem raised. He gives me a nod and perhaps in due course that will be remedied as well. New Zealand First supports this bill. It does not intend to filibuster. It is a simple bill which should go through promptly. 
HEATHER ROY (ACT) 
: 
 It was interesting to hear Mr Cunliffe say that every year the Government does a little tinkering and fixing of legislation in which drafting mistakes have been made. I think that should be a bit of a lesson to us. 
Hon Dr Michael Cullen 
: No. 
HEATHER ROY 
: Dr Cullen does not agree but Mr Cunliffe is worried about the tinkering and fixing so that is important. We should think very carefully about the legislation that we push through the House particularly under urgency. If we did we might not have to look at it again or do as much tinkering and fixing as we are doing under this period of urgency. Of course there is always subordinate legislation that quite rightly fixes mistakes in legislation but I note that further down the Order Paper we have the Gambling Amendment Bill to amend legislation that was passed only last year. 
In terms of subordinate legislation I am particularly interested in the validation of the Alcoholic Liquor Advisory Council levies. The National Party member gave us a very thorough look at the problems that have existed. Of course Dr Cullen quite magnanimously admitted the cross-party fault that has existed with the levy notices that were issued in 1983 through to 1987 and again in 1989. They do quite rightly require fixing. The industry could quite rightly have sought some form of compensation for levies that have been paid but perhaps were not actually necessary. The industry itself although it is keen to see these problems rectified was well aware of the authority that it could have exercised in dealing with these in quite a different way. 
I notice in the commentary on the bill that the Distilled Spirits Association when it gave its submission to the Regulations Review Committee put forward some proposals that have been ruled out as being outside the scope of this bill but I agree with the member when he says the proposals put forward by the association do need a good deal of consideration. I too hope these will be discussed during the Committee stage. In brief the association proposes a new model of product classification in bands based on alcohol content and suggests a requirement that information— 
Mr SPEAKER 
: That is not part of this bill. 
HEATHER ROY 
: Sorry Mr Speaker but I do hope these will be discussed because they are very important points which were raised when the Distilled Spirits Association was asked for comment on this bill. 
Mr SPEAKER 
: That does not make them in order now. 
HEATHER ROY 
: The bill addresses two matters with regard to the validation of Alcoholic Liquor Advisory Council levies: firstly the unauthorised setting of levies in the notices issued from 1983 to 1987 and again in 1989; secondly the unauthorised setting of differential rates according to alcohol content. 
This speech will be very brief because ACT New Zealand is supporting the bill but I want to sound a warning that it is very important that we look carefully at legislation when it is first introduced to the House not when we have to tinker and fix things as Mr Cunliffe has pointed out further down the track. It is very important that the select committee process is respected and that people are able to make submissions at the correct times and they are listened to very carefully when people have very valid concerns about the legislation that is being put forward. ACT New Zealand will support this legislation but we would like to sound this cautionary warning. 
GORDON COPELAND (United Future) 
: 
 United Future did not have a member on the Regulations Review Committee which considered the Subordinate Legislation (Confirmation and Validation) Bill (No 3) but I have great confidence in the people who were on the committee which was chaired I am sure very well by Richard Worth of National and comprised members from the Labour Party the ACT party and the New Zealand First Party. I have read the committee’s report. I note it expresses itself to be very satisfied indeed that the bill is taking the appropriate action in terms of confirmation and validation and therefore I am happy to signal United Future’s support for this reading of the bill and all its remaining stages. 
JOHN KEY (National—Helensville) 
: 
 I rise on behalf of National to support the Subordinate Legislation (Confirmation and Validation) Bill (No 3) but just before we rush this bill through its second reading and remaining stages the House should take a moment to reflect— 
Darren Hughes 
: Before National changes its mind on it. 
JOHN KEY 
: I say to Mr Hughes that there are a whole number of things we would love to discuss but I will try to keep my comments to the subordinate legislation. I want to make a comment about the validation of the Alcohol Advisory Council levies which go back to 1983. I make the point that in reading the commentary on the bill—and I was not a member of the Regulations Review Committee— 
Darren Hughes 
: You can’t get everything right! 
JOHN KEY 
: Lucky I was not. In reading the commentary it seems that it could be debatable whether the levies issued during that period were legal. The errors include for instance “for the notices issued in the years from 1983 to 1987 and 1989 the unauthorised setting of levies by litre of alcohol rather than by ‘proof litre’” and “the unauthorised setting of differential rates for spirits depending on their alcoholic content” and so on. That raises the quite interesting issue whereby people who paid that levy may now feel they were not legally required to do so. Here we are under urgency in the dead of the afternoon and with the Government rushing through a work programme that is sketchy at the best of times having to validate some levies that are at best debatable. I think the House should reflect on that and when we get to the Committee stage National members will be taking the opportunity to have a very good look at those levies just to make sure. 
I do not want to dwell too much on the errors of Parliament back then. I want to address another part of the subordinate legislation before us. I turn to clause 12 which validates the Social Security (Rates of Benefits and Allowances) Order. As Parliament will know those rates are annually confirmed through Order in Council and if through this subordinate legislation Parliament was not to reconfirm them they would lapse. Today we are putting those through and that is the reason in part that National is supporting this legislation. But I want to draw to the House’s attention the likely changes that will take place to some of those social security benefits and in particular to give some idea of what the situation looks like for those New Zealanders who currently have a war pension payable under the War Pension Act of 1954. 
Although it is difficult from the legislation to see exactly which particular people we are talking about I want to give the House some idea. Their current allowance is $159.76 and that will rise to $162.24. I think it is quite interesting that here we are in this Chamber—a war memorial itself—recognising this issue but I want to make the point that that is roughly a $3 increase for those in receipt of war pensions under the Act of 1954. National supports that in the sense that at least those people are getting something but I see the Minister of Finance scrunching up his face and well he might. Those New Zealanders receiving that pension have over the last 5 or 6 years had to go through significant cost increases passed on by a Government that does not care about New Zealanders on fixed incomes. New Zealanders who pay rates bills have found that they have gone up by about 10.2 percent per year because this Government passed the Local Government Act which allows local government bodies to carry out any crazy idea that comes into their head. 
I was delighted if I may say so that the Minister of Finance who also chairs the infrastructure committee chose not to proceed with the Whenuapai commercial airport because that would have dumped a whole lot of costs on the ratepayers of Waitakere. That was a very wise decision if I may say so. My point is that the costs were the costs— 
Simon Power 
: You shouldn’t say so. 
JOHN KEY 
: I should not say so; OK I will say so in the papers. But the point is that the Government is quite happy to say to the pensioners of New Zealand that here are some additional costs—that here is a 10.2 percent increase in their rates bills. Similarly early on in the year the Government passed the indexation of petrol. Many fixed-income New Zealanders will have noticed when they go to fill up their cars that the price of petrol has gone up. It will go up every year because the Government has passed enabling legislation to allow petrol to be indexed. 
We also saw the Associate Minister of Health Jim Anderton introduce a bill to provide a sherry tax—a bill that was passed under urgency I might add. Many of us remember that the Minister came to the Chamber and told the people of New Zealand that he was doing that to stop young New Zealanders from drinking. But not too many young New Zealanders drink sherry. It is not too cool to turn up on Saturday night with a flagon of sherry tucked under one’s arm. So what he did was rob dollars and cents from the pension books of New Zealand. Pensioners sitting at home are unable to afford their sherry. That is why in my electorate two major sherry producers are now having financial difficulties. They cannot sell it. [ 
Interruption 
] 
I say to Mr Hughes that he is a young man and he does not go out on Saturday night with a flagon of sherry tucked under his arm. I am slightly older than he is and I do not drink sherry either but I will tell him that the cost has gone up by about $14.50 because of that tax increase. That is the additional cost. Many older New Zealanders who like a sherry on a Friday or Saturday night cannot afford it because Jim Anderton decided he did not want 16-year-olds to drink it. He has robbed them of their sherry on a Saturday night. 
My point is that we are here in the dead of the afternoon forcing through a subordinate legislation bill. Why are we doing that? Because without it New Zealanders getting a war pension will not get an extra $3. At the same time we have a Government that is very happy to have rates go up by 10.2 percent very happy to have petrol indexed— 
Darren Hughes 
: How will National stop that? 
JOHN KEY 
: If you want a discussion on how National would fix things I am very happy to have it. 
Mr SPEAKER 
: Order! 
JOHN KEY 
: Sorry I was referring to the junior Labour whip who was encouraging me. 
Mr SPEAKER 
: Yes. The junior whip will keep quiet. 
JOHN KEY 
: I think so. The junior whip was getting excited. He wanted me to give the National Party manifesto. I would have been more than happy to take a 20-minute speech on that because New Zealanders want to hear that sort of information. They do not want to hear the drivel of the member for Otaki. 
I go back to my point about the bill which is that we have a Government that is happy to pass on costs to fixed-income New Zealanders across a range of activities whether it is rates petrol sherry—you name it the Government taxes it—as the Government has done 30 times this year. I note that the Minister of Finance had no answer to that on  
Morning Report 
 this morning. He has raised levies and taxes 30 times this year and under this Subordinate Legislation (Confirmation and Validation) Bill (No 3) the poor old war pensioners get three bucks—a $3 increase. We look forward to engaging with the Government on this matter in the Committee stage because we think fixed-income New Zealanders deserve more. 
LINDSAY TISCH (National—Piako) 
: 
 I want to draw attention to Part 2. Rather than talking about it during the Committee stage I want to speak about it now. Clause 11 relates to the Gambling Act. There are two parts in that Act that I want to draw the House’s attention to. National will certainly support the Subordinate Legislation (Confirmation and Validation) Bill (No 3) but I want to look at the Gambling Act and the Gambling (Problem Gambling Levy) Regulations and the value of the weightings given to W1 and W2 in the levy formula. 
The recommendations to Cabinet a couple of years ago suggested that the weighting should be 0.8 based on presentations and 0.2 based on player expenditure. There is not any substantive information around in terms of presentations; many figures are pulled out of the air to justify the weightings based on people who are fronting up for problem-gambling assistance. That is why the Cabinet policy committee back in 2001 suggested those figures. But the regulations state that 0.9 or 90 percent of the levy will be based on presentations and 0.1 or 10 percent on expenditure. It is certainly National’s view that those figures are unrealistic. They cannot be substantiated in any way. Probably a more realistic figure would be 0.7 or 70 percent for presentations and 0.3 or 30 percent based on expenditure or turnover. Those would be fairly conservative estimates but certainly more realistic than what we see in the regulations now. 
The second point I draw the House’s attention to is the levy that has been set. It has been interesting to note that according to the answers to a number of parliamentary questions I have asked the levies have gone up substantially over the last few years. In the 2002-03 year the sum was $9.8 million; in 2003-04 it was $12 million; and in a Department of Internal Affairs document the figure for the 2004-07 period comes out at about $54.5 million. That is a substantial increase in the gambling levy on gaming operators given that they are also required to have harm minimisation programmes and given the increased compliance costs like electronic monitoring and the reduced site rentals. When we look at the combination of all the increased compliance costs and the lack of money going back into the industry we see that the people who lose out are the charities that are dependent on these funds to fund their operations. 
While National accepts that there needs to be a problem gambling levy we submit that the levy is not based on factual material. The Ministry of Health which will take over the handling of the problem gambling levy has not been able to supply me with substantive information on what the figure of $54.5 million over the next 3 years has been based on. Just as with the harm minimisation programmes a programme that is currently available in Australia and that could be used extensively in New Zealand has been overlooked and we are finding that exorbitant consultancy are fees being charged. In fact I am told that the charitable clubs in New Zealand will probably spend about $1 million on their harm minimisation programmes whereas programmes can be bought off the shelf in Australia for less than $10000. 
The point I am making is that there are huge costs that gaming operators are having to contend with. At the end of the day the losers are those organisations out in the community that are dependent on charitable funding to run their operations. 
Bill read a second time. 
Instruction to Committee 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 I move  
That it be an instruction to the Committee of the whole House on the Subordinate Legislation (Confirmation and Validation) Bill (No 3) that it take the bill part by part. 
Motion agreed to. 
In Committee 
Part 1 General and technical provisions 
Dr RICHARD WORTH (National—Epsom) 
: 
 Tena koutou to members and Mr Chairperson as we gather for the important Committee stage of the Subordinate Legislation (Confirmation and Validation) Bill (No 3). I hope the opportunity will exist to take multiple calls not only on this part but also on Part 2 which is very important. Part 1 is primarily concerned with general and technical provisions. It raises a number of questions that I would like to put to the Minister in the chair Michael Cullen that do not seem to be sufficiently answered by reference to the predecessor legislation. I refer to the provision contained in clause 5 that the Subordinate Legislation (Confirmation and Validation) Act of 2003 is to be repealed. 
The starting point for these issues is really clause 3 which seems superficially to be straightforward. It sets out the purpose of the respective parts of the legislation. It deals firstly with Subpart 1 of Part 2 and simply notes as it properly should that the purpose of the part is to confirm and validate certain subordinate legislation made under certain statutes that would otherwise lapse unless confirmed or validated. Clause 3(2) then deals with validations affected by two provisions: the provision in clause 12 relating to the New Zealand Superannuation Act and the Social Security Act and the provision in clause 13 relating to the War Pensions Act. It is not completely clear whether that validation would also be relevant to new clause 12A inserted by the Regulations Review Committee. As a matter of statutory interpretation it may very well be intended that clause 12A is to be subsumed into clause 12. If that is the case I can see that some complicating problems may well arise. 
The real point in connection with clause 3(2) is expressed in the paragraphs of that clause. The validations do not do these things: “(a) express an intention to give legislative force to the provisions of those enactments; or (b) apply to any reason for invalidating any of those enactments; or (c) override any presumption that would otherwise apply to any of those enactments.” The paragraphs that I have read out are a replication of what is in the Act that is now proposed to be repealed. But their exact scope was not clear to the Regulations Review Committee—although in the result we took no real account of that. I ask the Minister why those provisions have been carried forward and what the legislative purpose is of having those provisions. It seems to me that they have been carried forward simply as a matter of routine as the predecessor legislation has been enacted year by year. 
What is contemplated for example by a validation not expressing an intention to give legislative force to the provision of the enactment? There is no doubt that those validations have a legislative quality. It may be a legislative quality that is more associated with delegated legislation than with legislation that has a primary purpose but the bill does not state that. 
Hon Dr Michael Cullen 
: It is in there. 
Dr RICHARD WORTH 
: The Minister is saying that the primary legislation has those matters in it. That is not the point though. I am asking what is intended by the scope of that paragraph. 
Then there is the second saving which is concerned with the application of reasons for invalidating those enactments. Will that preserve intact the possibility that despite the confirmation and validation procedure that we are being asked to undertake there is nevertheless the prospect of the invalidation of those regulations? If it does we are faced with the situation whereby it may be that some of those pieces of subordinate legislation are not regulations. 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 To give an answer the matter is quite complex. I understand that there was a court decision some years ago that confirmation by bill could rule out any other form of challenge. In this case this legislation is intended to make sure that it does not extend as far as that. It is purely and narrowly confined to the confirmation of the actual orders to lift the rates of New Zealand superannuation and benefits etc. 
Part 1 agreed to. 
Part 2 Confirmations and validations 
Dr RICHARD WORTH (National—Epsom) 
: 
 I hope that other members of the Committee like Mr Copeland and perhaps Dail Jones will feel constrained to make some comment on the very important Part 2. I will deal with one aspect which touches clause 9. That clause refers to the Commodity Levies Act in which curiously perhaps “commodity” is defined as meaning “any agricultural farmed forestry horticultural mineral or wild product:”. That legislation provides the basis for those levies to be imposed annually. 
Only four levies have been picked out here: the Commodity Levies (Tamarillos) Order the Commodity Levies (Meat) Order the Commodity Levies (Wool) Order and the Commodity Levies (Winegrapes) Order. All those orders except for the first are from 2004. Of course there are a host of commodity levies that go back to the period generally commencing from 2000. I ask the Minister in the chair Michael Cullen what has happened to the Commodity Levies (Arable Crops) Order the Commodity Levies (Asparagus) Order the Commodity Levies (Avocados) Order and the Commodity Levies (Bee Products) Order. Only three orders are directly picked up as I said. The Commodity Levies (Winegrapes) Order of 2004 does not appear in the predecessor orders except under a different name: the Commodity Levies (Winemaking Grapes) Order the statutory reference of which is 1998/349. 
What we see in the structure of the Commodity Levies Act as it is reflected in Part 2 of this bill and in the orders made in terms of clause 9 is the confirmation of orders following a statutory process. That statutory process is in many respects quite unusual. I just flag for example section 8 of that Act which deals with the issue of conscientious objection. It is very refreshing to see that there may be an ability to refuse to pay a levy for a reason relating to conscientious or religious grounds. That is what section 8 of that Act provides. It states: “Every levy order shall make special provision for the payment of amounts of levy by persons who object on conscientious or religious grounds to paying it in the manner otherwise provided for in the order.” We do not know yet whether challenges will be made to this legislation by people who for conscientious or religious grounds do not want to pay levies in respect of tamarillos meat wool or wine grapes. But that possibility cannot be ruled out. Certainly National is interested to know how the Government would approach a conscientious objector’s claim. Either the levy would be paid or it would not. How is it intended that there would be an adjustment that would reflect in a conscientious way the very purposive provisions of section 8 of the Act? 
Of course Subpart 1 of Part 2 of the bill is much wider than simply a reference to the Commodity Levies Act because it deals with legislation such as the Animal Products Act the Animal Welfare Act the Biosecurity Act the Customs and Excise Act the Gambling Act—which my friend Mr Tisch has spoken on—the New Zealand Superannuation Act the Primary Products Marketing Act and the War Pensions Act. 
It is also in Subpart 2 that the issue of “Validation of payments under levy notices under Alcohol Advisory Council Act” arises. I briefly referred to what seems to be an area that requires clear remedial legislative intervention. The Distilled Spirits Association made it very clear to us that it was not opposed to the supplementary audit of this bill that inserted Subpart 2. 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 I say just briefly that in terms of clause 9 levies have to be confirmed within that Parliament or they lapse. Once confirmed they do not need to be reconfirmed later. In terms of the other matter I refer the member to clause 15(2) which validates the fact that in effect the levies have been properly collected and therefore are due. Of course if this bill were not passed then the member would be quite correct to raise the issue. There would then be a case to argue that the levies were invalid and therefore should be refunded. 
LINDSAY TISCH (National—Piako) 
: 
 I would like the Minister to explain the weightings in the levy formula if he can. I know that it is a technical matter but I did mention it in the second reading debate. When recommendations were first made—and I have the figures from a Cabinet policy paper—the presentation figures were 0.8 or 80 percent and the expenditure items were 20 percent based on turnover. In the Gambling (Problem Gambling Levy) Regulations of 2004 why do we find that the presentation figures are at 0.9 or 90 percent and the expenditure or turnover figures are at 0.1 or 10 percent? The point I am making is that there is no substantive information in changing the recommendation that was made some time ago to justify why the weightings between W1 and W2 were changed in the problem gambling levy formula. I think that is significant because when we remember that these levies have been set now for 3 years we know there will be a distortion within the industry as to what those weightings will mean in 3 years’ time. I am thinking 3 years ahead to 2007 when we will see major distortions in my view as to what the weightings actually mean. 
All the research that has been done and certainly that I have had access to would indicate a weighting even lower than the Cabinet paper states—even as low as 70 percent—for presentation. I will explain what presentation means. It is the incidence of someone coming along and saying that he or she has a problem. That is what that 0.9 figure has been based on not on whether the person has been assessed as having a problem. It is just a matter of someone coming along and saying he or she has a gambling problem; that is where the presentation and the 0.9 figure comes from. There is no clinical analysis and no one sits down and analyses whether the person does actually have a problem and what sort of help may be needed. If we take that into account then the figure here in this bill of 0.9 or 90 percent is far too high. It cannot be justified by the Ministry of Health and it cannot be justified by the treatment providers whose job it is to be at the forefront of trying to work this problem through. So I question the Minister about that figure. I see him throw his hands up in horror but he should be aware that we are supporting this bill. I just want to be given some clarification of that figure. Maybe the advisers could come back to me at a later time because I know the Minister will discuss the issue with them. I think that when statistics have been used and figures have been taken out of national statistics then there certainly can be some room for error. That is the first point and I am happy if I can have an answer on that at a later date. 
The second point I want to raise concerns the actual percentage of the problem gambling levy. When we look at what the levy states which is in the schedule under problem gambling levy rates we see that the casino operator will pay 0.51 percent the gaming machine operator 1.11 percent the Lotteries Commission 0.14 percent and the New Zealand Racing Board 0.57 percent. That is fine; I have no difficulty with that at all. But I also ask the same question of the Minister about another memo that has different figures for the 3-year period. The figures in the bill are actually lower than those so that is fine—I am happy with that. But I want to know why the figures are lower now than those in the earlier recommendations when the levy calculations were being worked out for the proposed problem gambling levy. We agree that they should be lower for some of the reasons that I mentioned before but once again there has been no justification given in replies to questions I have asked as to how those figures have been worked through. 
When the proposed problem gambling levy was mooted the requirement was for a sum of up to about $56 million over a 3-year period and that figure has come back to $54.5 million. We are comfortable with that. Although as I said earlier there is no justification for the huge increases at least the percentage has come down. In terms of gaming operators whether they be the Lotteries Commission the Lottery Grants Board of which I am a member the Racing Board casinos or non-casino operators huge compliance costs have been put on them. The figures have not been justified; they have been just plucked out of the air. No doubt members are being inundated at the moment by groups especially those in the charitable cultural and sporting areas that are being told by the major gaming operators that less funding will be available to them for their purposes and that they will have to budget accordingly. When we look at where the proceeds of the levy go in terms of funding for organisations we see that it is just another huge compliance cost that adds to the burdens and woes of those groups. The organisations that need to be helped in the community will be the losers from that. 
HEATHER ROY (ACT) 
: 
 I rise to speak to Part 2 and in particular I wish to refer to subpart 2 “Validation of payments under levy notices under Alcohol Advisory Council Act 1976”. I would like to go back to the beginning of the process when the Minister of Health wrote a letter to each of the parties asking for their support for this part. She said: “It has recently become apparent that even though the aggregate Alcohol Advisory Council levy has been assessed in accordance with the Act the levy is not and in fact is unable to be apportioned to the classes of liquor in accordance with the Act. As a result the annual levy notices that fix the levy rates for each class of liquor including the present 2004-05 notice have not set the levy rates in accordance with the Act.” 
It is interesting that we have got to this point 21 years down the track that we have had those notices in place for all that time and that in fact the levies have not been applied appropriately. When looking into this first proposal I spoke to several of the people involved in the industry and asked them what they thought of it. They said that it had really only just been brought to their attention but it seemed they were in general agreement that these loopholes should be fixed. But they were really quite within their rights. It would seem that the law has not been administered legally so they were quite within their rights to have made quite a fuss about this and perhaps to have even sought reimbursement for inappropriate levying. 
There were several problems. The formula to calculate the proportion of the levy rate for spirits requires the use of the quantity of proof litres for spirits but in fact the calculations were made in various different ways and in some cases were made according to the amount of alcohol content particularly in liquor. 
However the industry was keen that these loopholes were rectified and it acted I felt in a very cooperative way. But when the industry was invited to submit to the Regulations Review Committee the Distilled Spirits Association of New Zealand raised some other very valid points. The Regulations Review Committee determined that in fact these issues were beyond the scope of the bill but these are still very relevant points and I invite the Minister in the chair Dr Cullen to perhaps give some indication to this Committee and to the industry itself—particularly the Distilled Spirits Association—as to where the Government might go or whether it will in fact address these other points relating to levies that the association has raised. 
There were three in particular and they are summed up very well in the commentary on the bill. The first issue is the proposal of a new model of product classification in bands based on alcohol content. Secondly it suggested a requirement that information about how levy rates are determined are provided to interested parties. Thirdly there is a suggestion that requirements for officials to consult with and provide advance notice of levies to the industry should be addressed. I would ask the Minister in the chair to give an indication of where he thinks the Government might go and whether it is prepared to take these into account. I realise that it is beyond the scope of this particular piece of legislation but it was this legislation that raised these issues and brought the distillers before the select committee and I invite the Minister to comment. 
ACT will be supporting this bill. We feel that this is a loophole that is long overdue to be fixed and it is very good of both sides of the House I think to say that these issues should have been addressed previously. But I would welcome some comment from the Minister on those points. 
GORDON COPELAND (United Future) 
: 
 I too would like to make a brief comment on clause 17 “Levy notices”. As the Minister in the chair Dr Cullen has pointed out it is an amazing situation in that from Prime Minister Rob Muldoon in 1983 right through to Prime Minister Helen Clark in 2004 these levies have been consistently miscalculated. Since that is a span of some 21 years I think the Government would be wise to figure out exactly how that sort of situation can be avoided in the future. I wonder for example whether the auditors of the Alcohol Advisory Council should have a specific function every year to check to make sure that the levies are being calculated correctly. Although the amounts are relatively small it is in principle a fairly serious matter if a miscalculation continues for 21 years under a number of different regimes. 
The only other thing I noticed in clause 17—and the Minister in the chair may be able to tell me about this—is that the references in the Act are to the Alcohol Advisory Council Act of 1976 but the actual levy notices from 1983 to year 2000 refer to the Alcoholic Liquor Advisory Council levy notice before they then revert back to using the word “Alcohol”. So I am not sure whether that signifies some change in the status of the personnel of the council but it is just a curious fact that we also decided to call something the Alcoholic Liquor Advisory Council levy for all those years and then switch back to something that seems a bit more reasonable. 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 I will briefly respond. I understand that that name of the principal Act changed subsequently to use the word “Alcoholic”. On the points raised by Heather Roy and indeed Mr Copeland I can advise that the Associate Minister of Health is looking at those issues particularly those raised by the Distilled Spirits Association; we do expect some change in process over the coming year. To Mr Tisch I say that I will get an undertaking from the Minister of Internal Affairs to come back to him with a response to the questions he has raised. I have to confess that I cannot remember what the reasoning was at this distance of time. 
Part 2 agreed to. 
Clause 1 agreed to.  
Clause 2 agreed to.  
Bill reported without amendment. 
Report adopted. 
Third Reading 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 I move  
That the Subordinate Legislation (Confirmation and Validation) Bill (No 3) be now read a third time 
. There were just two issues I think raised during the Committee stage that I would like to refer to at this point. Mr Tisch raised some questions about the nature of the gambling levy and the reasons for some changes in policy and on those issues I have undertaken to get the Minister of Internal Affairs to come back to him. Heather Roy and Gordon Copeland and others raised issues around the Alcohol Advisory Council levy confirmation and I gave an undertaking that the Associate Minister of Health was looking at the issues raised in relation to that particularly to the issues raised by the Distilled Spirits Association. 
Dr RICHARD WORTH (National—Epsom) 
: 
 We move to the final stage the third reading debate of the Subordinate Legislation (Confirmation and Validation) Bill (No 3) which National along with other parties in this Parliament supports. I would like to deal with two issues against the background of the fact that it is a great outcome—the bill has survived the Committee stage without amendment. It is clearly a testimony to the hard work of the Regulations Review Committee in seeing that this legislation was afforded an appropriate and appropriately close degree of scrutiny. 
I would like to pick up the point that Dr Cullen has made in connection with these problem gambling issues. Although assurances have been offered those assurances are not delivered on in a timely way. The position is really quite simple in connection with problem gambling. We have two indicators: W1 which is concerned with presentation issues and W2 with expenditure or turnover issues and an arbitrary weighting has been assigned. So the W1 weighting carries with it a 90 percent loading and the W2 the expenditure or turnover indicator carries a 10 percent weighting. The problem is of course that in looking at that first weighting—the 90 percent issue—there is an immediate problem as to how that class is to be properly defined. The possibility cannot be ruled out that in the calculation of the levy it may very well be the case that included in that problem gambling group is also a substantial group that is affected by the curse of alcohol. 
So not only is there an issue as to how the class is defined—the arbitrary nature of the class—but also there is the uncertainty of scope. I have noted what the Minister has said in connection with the assurance he has given but I hope there will be a response and a responsive response within narrow time frames. That is the first point I wish to make. 
The second point deals with issues arising under Subpart 2 and the validation of these payments. As other speakers have said the situation has arisen where but for this validation the Government might have been in the position of having to make very substantial repayments. So we spent a significant part of parliamentary time—perhaps not today in the context of urgency but in the context of the process of this bill—having to correct a major administrative blunder by patching work done by the Alcohol Advisory Council of New Zealand. That quite clearly underscores and highlights the need to re-examine and overhaul the primary legislation in its entirety especially in areas relating to the levy. 
From the perspective of entities such as the Distilled Spirits Association of New Zealand the bill raises an important concern relating to ongoing poor internal processes monitoring and advice tendered by Government officials on aspects of the levy and the rates including the Alcohol Advisory Council the New Zealand Customs Service and the Ministry of Health. It is a pity that it was not possible to meet the needs of the Distilled Spirits Association of New Zealand by dealing in a substantive way with issues that it raised which fall outside the scope of the bill. 
A changeover from measuring the alcohol content of domestically manufactured and imported spirits by way of proof litres to litres of alcohol has not been authorised by the Act; neither has the splitting of spirits as a category into spirits over 23 percent alcohol by volume and spirits with less than 23 percent alcohol by volume. What is happening here is that as a result of the slowness to reflect the concerns of entities such as the Distilled Spirits Association the sector has been “unnecessarily” paying out around $2 million per annum in levies since 1986. That would amount to a total of approximately $36 million. It is a substantial sum. I also note the clear stated commitment of Minister Cullen to have these issues promptly addressed by the relevant Minister in his Government. 
As I have said National is supportive of this legislation. It is legislation that comes before Parliament each year. I simply note that it is appropriate from the perspective of the National Party that this legislation be enacted as soon as possible. 
Bill read a third time. 
Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill 
In Committee 
Debate resumed from 1 December. 
Part 5 Amendments to Income Tax Act 2004 ( 
continued 
) 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 Part 5 is the decisive part of this bill because it includes United Future’s amendments to change the thresholds for setting out the taxation rates. Of course there will be a test for the United Future members when we get to the end of this stage. They are proposing to vote for their amendments which we understand will be lost because the Greens are voting with Labour on them. But then the United Future members will vote for the bill even though the issue of the taxation rates is one of United Future’s main campaigning tools over the next couple of months. Generally if a party puts up amendments to a bill and they are lost it votes against the bill. The most critical issue in this bill which is the setting of the taxation rates will be resolved in an unsatisfactory way for United Future. 
PANSY WONG (National) 
: 
 Firstly I want to follow my colleague the Hon Bill English in urging the Minister to look at and support Supplementary Order Paper 284 in the name of Gordon Copeland of United Future. After all United Future has been very cooperative with this minority Labour Government. It has now brought in a Supplementary Order Paper to ensure that the taxation threshold will be indexed to inflation every year in order to relieve hard-working New Zealanders from paying too much tax. After all yesterday the Minister in the chair Dr Michael Cullen announced another record forecast surplus of $6.5 billion. There is no reason why New Zealanders should not get tax relief. But more than that Dr Cullen has also introduced a bill providing for a 5c per litre petrol tax increase that is subject to indexation. So I hope the Minister will take a call and explain to the public why it is that when the Government is gathering revenue it is acceptable to increase the rate annually according to the movement in the consumer price index but when it comes to providing relief for hard-working New Zealanders then the Government will not support that. 
I challenge United Future not to support this bill in its entirety if the Government does not agree to what is the single most important opportunity for United Future to demonstrate that it has come into Parliament to campaign vigorously for hard-working New Zealanders. All eyes will be on United Future. 
I also want the Minister in the chair to take a call to answer a question that I will pose to him. One of the provisions in this part allows people who have applied for the grant of a resource consent under the Resource Management Act and been refused consent or who withdraw the application to claim a tax deduction for the expenditure they have incurred. I want to know whether that particular provision has been introduced for the benefit of the State-owned enterprise Meridian Energy. When it called off Project Aqua the company wrote off over $1 million of costs relating to that very ambitious project so I want to know whether that provision was introduced to benefit that State-owned enterprise. 
I also want to point out that interestingly now we see a taxation provision that grants relief to people who apply unsuccessfully or withdraw their application under the Resource Management Act. It seems to me that the root of that problem is the difficulty people have in getting applications through under that Act. The Labour Government instead of looking to simplify the Act in order to enable people to have their applications decided swiftly and effectively is introducing relief by means of a taxation deduction if an application fails or the person withdraws it. That is another example of the Labour Party instead of treating the real cause of the problem tending to look at the symptoms. I think lots of people would not look forward to simply deducting expenditure incurred on an application for resource management consent. They would rather have their application approved or understand that the law will be applied consistently or will be simplified. 
I look forward to the Minister taking a call to tell us whether that provision has been introduced because of the failure of Project Aqua by the State-owned enterprise Meridian Energy. 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 We have at last discovered the National Party’s taxation policy after some five attempts. It is to adopt the proposal by my good friend Gordon Copeland to index the rates on an annual basis. Let me say first of all that United Future—I can speak on its behalf on this occasion—has put up amendments which will be vetoed. Then given that United Future has a binding agreement with the Government it will be voting for the bill because United Future unlike National keeps its word on matters. It does not sign a document and then break its word because it is convenient to do so in a political context. Let me say to Ms Wong what indexation would actually mean in an average year. For the vast majority of taxpayers in relation to the great National Party tax cuts the alternative is 22c a week. On average for most taxpayers 22c a week is what would occur as a result of indexation. For the great majority of the rest the princely reduction in the demands of the Government—the lifting of the great yoke of the State which the National Party wants to see—would be $1.77 a week. That will not win an election. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 The United Future amendments set out on Supplementary Order Paper 284 deserve much more intellectual honesty than the Minister of Revenue gave them in that 30-second burst. We are not debating an average year here. United Future has not proposed indexation on some mythical average that the Minister’s minions have calculated; it has proposed quite specific changes in the thresholds. For instance it has proposed moving the low-income rebate threshold from $9500 to $10750. That will make a great deal more difference than 22c a week. In proposed new clause 229A United Future wants to shift the threshold from $38000 to $43000. At the rate of 30c in the dollar at $5000 that is about $1600 a year not 22c a week. 
What permeates the relationship between Labour and United Future is an agreement to mislead shall we say. They play these fancy little games. United Future has put up a serious proposition in the light of the circumstances that my colleague Pansy Wong has pointed out. The Government has collected $34 billion more tax over the last 4 years. Yesterday it projected the largest surpluses ever. Taxation revenue is going up faster than ever and it will become one of the biggest issues of election year. Why should working people not get the benefit of a growing economy? Why should it all go to Dr Cullen and to his colleagues’ favourite political projects? It is just the sheer unfairness of it. The Government reaps all the benefits yet the people who do the work do not reap the benefits of a growing economy. 
United Future will go through the charade of putting up its nice little proposition then turning round and voting for the Government against what it has proposed. It will continue its track record of keeping in Government a Government that does all of the things its voters are opposed to. There is not a single United Future voter who wanted to support a Government that passed the Civil Union Bill. There is not a single United Future voter who wanted to support a Government that collected record levels of tax then had record levels of Government spending with record levels of recklessness in that Government spending. That is not what United Future voters put Peter Dunne and Mr Copeland into Parliament to do. 
I compliment United Future on having before the Committee today a set of amendments that are directly relevant to what will be one of the biggest issues in election year—whether the Government is collecting too much tax. We agree with United Future that the Government is collecting far too much tax—much more than it expected but worse than that much more than it can effectively spend. The Government is now reduced to throwing good money after bad at categories of spending just to get rid of it just so that it can say it will not reduce taxes. I say to United Future members that it is time they stood by some of their principles. We are not asking them to stand by all the principles their voters voted for but let us say just one or two. If United Future members vote for these amendments—and we will vote with them on these amendments because they are good amendments that will reduce the burden of taxation on working people—then if they are serious about any of this they will have to follow through on it and vote against the Government by voting against the whole bill. These amendments relate to what is by far the most important and critical part of the bill. 
I also found the Minister’s comments on the indexation of petrol tax quite specious. Why will the Government index those tax mechanisms when it suits it by automatically increasing the revenue even if it is only by a small amount? I am sure that the indexation of petrol is worth less than 22c a week per person. 
RODNEY HIDE (Leader—ACT) 
: 
 ACT also supports United Future’s amendments but if they do not go through we will be voting against this bill—unlike United Future. We actually believe that we should vote according to our principles not according to political expedience. I know that a United Future member fasted for 21 days in order to stop the Civil Union Bill then got a message from God about a 59:59 vote on a taxation bill. United Future could have sunk the Civil Union Bill with one vote. But what did it do? Its members walked in like ducks to the slaughter and voted for it. Here we have the United Future members supporting a Government that has taxed and spent like none other. They have come down to the Chamber with amendments to this bill the Government will veto yet they will turn round and vote for the bill. 
Pansy Wong 
: Oh shocking. 
RODNEY HIDE 
: It is shocking and I just do not understand it. But Mr Copeland does have a point and it is this: last week in the House the Hon Dr Michael Cullen admitted that after 5 long years of Labour’s great administration the average household after tax— 
Clayton Cosgrove 
: That’s right. 
RODNEY HIDE 
: I see that Mr Cosgrove agrees with this point. After 5 years of economic growth the average household after tax is no better off in real terms. What else did Michael Cullen admit to the House last week? He admitted that that same average household is having to give an extra $2910 in real terms which is an increase of $3000 in 5 years to the Government. That is the trouble with this taxation bill. Hard-working New Zealanders are worse off under Labour because they are paying so much more tax. We have “Scrooge McCullen” sitting there awash in their tax dollars—he is swimming in their tax dollars—so why does he not for Christmas provide a bit of tax relief? 
United Future and Mr Copeland are going about it in the wrong way. When members turn up to Parliament they do not just promise their votes to a Government no matter what. 
Hon Bill English 
: Yes you do. 
RODNEY HIDE 
: No one does not and I say to Bill English that the ACT party will not be doing that next year with the National Party. We will not be promising support to the new Government no matter what. There will be a price. But United Future comes along and joins the anti-Christian high-tax and high-spend Labour Party. It says: “Take us for granted for the next 3 years and we will go down to the House and talk about things but never deliver.” I say to Mr Copeland that when people vote us into this great Parliament of ours they expect a bit more than “poodle power” when we get here. They actually want members to stand up here and say what they believe and to vote accordingly—not vote for the opposite of what they talk about. 
I say to Mr Copeland that there is a fallacy in the whole idea of indexing thresholds and indeed income splitting. It is this: why do we have a progressive tax rate to begin with? Why does someone who earns twice as much pay three four or five times more tax than he or she otherwise would? What is fair about that? That is why the ACT party stands for a flattening of the tax rate—so that someone who earns twice as much pays twice as much tax not three times as much. I say to Mr Copeland that if we did that we would not need to worry about indexing the rates because we would have a tax rate system that was fair efficient and good for the economy. One simple rate would also overcome any concern about income splitting between a man and his wife and all the attendant problems of such income splitting. 
GORDON COPELAND (United Future) 
: 
 The fact is—speaking to my Supplementary Order Paper—that if the tax brackets are not adjusted for inflation taxes are increasing in real terms. I will give members an example. A person earning $38000 in the year 2000 now needs $43000 just to stand still in terms of purchasing power. However the tax rate on the last $5000 has moved from 19.5c to 33c an increase of 13.5c $675 per annum or $56.25 per month. In real terms people are now less well off than they were in the year 2000. I contrast that with the commitment made by Helen Clark in 1999. She said that there would be no rise in income tax for the 95 percent of taxpayers earning under $60000 a year and no increases in GST or company tax. The Minister was good enough to say a few moments ago that United Future was a party that kept its word. I challenge the Labour Party today as to whether it is a party that keeps its word. Because how is that commitment made by Helen Clark in 1999 to be understood? Is it to be understood as meaning that the current rates will remain unchanged in the long term? If not when will they be changed? Does it literally mean that there will be no rise in income tax etc.? If that is the case then the Government has clearly broken its promise and its commitment to the people of New Zealand. 
What about the fact that only 78 percent of New Zealanders now earn under $60000 a year? What about the missing 17 percent? Do they not matter? Let us look at the facts. The number of taxpayers paying the 19.5c rate has dropped by 144000 the number of taxpayers paying tax at 33c has increased by 106000 and the number of people paying tax at 39c has increased by 150000. How can that be squared with the statement and the commitment that there would be no rise in income tax? 
Why will the Government not move on this matter? Is it because the estimated $714 million per annum cost is unaffordable? That is hardly likely in view of the extra $4.5 billion over and above the Budget that has been collected in the last 3 years alone. Is it not about time to share some of that surplus with the people of this country? 
Believe it or not a couple of parties in this Parliament—I refer to the Labour Party and the Green Party—believe that the reasonable proposal in my Supplementary Order Paper to index tax brackets for inflation is no more than a tax cut for the rich. In response I say that under the proposal put forward by United Future every taxpayer in New Zealand earning more than $9500 a year would receive a tax cut. That is the first point. 
The second point is that if Green Party and Labour Party members believe that say a single-income person supporting a wife and three kids and earning 60 grand a year is rich my response is that those members should get real. That person is far from rich; he is struggling and is going more deeply into debt each day as we speak. 
Members also have to face the fact that the United States of America the United Kingdom and Canada have all adopted bracket creep legislation—an automatic adjustment to the brackets in a progressive taxation system when inflation moves beyond a certain level. If it happens in those countries why for goodness’ sake does it not happen here? 
I want to say very very clearly indeed that it is time for taxes in New Zealand to be cut to be reduced. There is no reason at all—economically fiscally socially and particularly in terms of social justice—to continue to take more money out of people’s pockets than the Government really needs. In fact Michael Cullen himself said in yesterday’s press release on the Budget Policy Statement that the Government is going to bank some of it and spend the rest. There is a great great future for the New Zealand taxpayer: “You pay more tax; we’ll bank some of it and spend the rest.”! 
JOHN KEY (National—Helensville) 
: 
 I am happy to engage in the Committee stage debate on Part 5. This legislation really cuts to the heart of the problem with the Labour Government. This is a Government that believes that it can spend taxpayers’ money better than they can themselves—a Government that thinks that if it spends money it has no impact on monetary policy but if taxpayers go out there and spend money themselves it has an impact on monetary policy. 
Yesterday we saw a classic moment in voodoo economics from Michael Cullen. It was unbelievable. He was out there telling the business community of New Zealand he was going to give them some indirect tax cuts—because he does not believe in direct tax cuts—but what he did not quite tell them was that he will introduce his carbon tax credit on one hand but he will tax them with his carbon tax on the other hand; he will get that money and give it to businesses on the other side. That is right—I see that Darren Hughes has finally woken up to realise that the infamous indirect tax cut is not a tax cut at all; it is just another tax being added to the other 30 tax increases we have had this year. 
National will support United Future’s Supplementary Order Paper on indexation. We will proudly support this proposal which is a lot better than what the Government did with its plans to index petrol. Darren Hughes is looking equally confused. He needs to get with the programme and find out what is actually going on in the economic department of his own Government. The Government decided that it was going to index petrol in New Zealand. That is a very significant event. It is going to allow the Minister of Finance every year to increase petrol tax at the rate of inflation without coming to Parliament. 
And guess what the Minister of Finance did with that little piece of information? He forgot to tell the people of New Zealand. He left it off the press release. In February 2 months afterwards we pointed out to him that he had forgotten to tell the people of New Zealand that he was introducing an indexation of petrol taxes. At exactly the same time with his coalition partner over there—his confidence and supply partner—he did not want to have a bar of indexation when it came to income tax. 
There is a very good reason why income bands in New Zealand need to be adjusted. When Labour came into office it told New Zealanders that 5 percent of all New Zealand workers would pay the top personal tax rate. 
Rodney Hide 
: It wasn’t true back then! 
JOHN KEY 
: Mr Hide is quite right. 
Rodney Hide 
: It was 7 percent. 
JOHN KEY 
: It was 7 per cent back then. Interestingly enough the Government did not quite mention the number of full-time taxpayers the top rate would apply to. Back in 1999 the figure was about 10 percent—one in 10 full-time taxpayers paid the top rate of taxation in New Zealand. They were the elite rich of New Zealand and they paid the top rate of personal taxation because they were lucky enough to earn income of over $60000—one in 10 of them. Interestingly enough when we look around today the number has risen from one in 10. I see Mr Cosgrove is holding up a sign saying that it must be 11 percent I hear the Hon George Hawkins is saying that it has to be 12 percent and Darren Hughes always thinks big so that might be 15 percent. No it is not 15 percent 11 percent or 12 percent. Think big—that was a good idea back in the old days—22 percent of New Zealanders now pay the top rate of taxation. That is one in four. 
Rodney Hide 
: No 22 percent of full-time workers. 
JOHN KEY 
: Twenty-two percent of full-time workers pay the top rate of taxation. One in four secondary school teachers in New Zealand pay the top rate of taxation. One in four secondary school teachers—they are the elite rich of New Zealand! They are schoolteachers—one in four of them which is 22 percent. Well yesterday when Dr Cullen was swiftly telling the country how he has so much more tax revenue but he does not have anything to give back to anybody else he forgot to tell the good people of New Zealand that he does not change the income brackets where tax rates cut in in New Zealand. That will take until about 2009 when one in three full-time workers in New Zealanders will be paying the top rate of taxation—one in three. They are the elite rich are they? 
Darren Hughes 
: Give us a detailed alternative. 
JOHN KEY 
: Well why do we not look at what the OECD said to Australia when it criticised that country for having the top personal rate of tax that cut in at A$80000? 
Darren Hughes 
: Name it. 
JOHN KEY 
: The OECD—it is a Paris-based organisation. Darren Hughes may have heard of it. That Paris-based organisation criticised Australia for doing that. This is a disgrace. This Government wants to take hard-earned taxpayer dollars from New Zealanders but it does not want to give anything back to those people. It does not want to do that slightly but in a big way. 
KENNETH WANG (ACT) 
: 
 It is quite ironic that members all sit here at the end of the year talking about tax while the Government sits on a record high tax revenue under its feet. I am probably in a unique position in talking about this issue because I am the newest MP coming from the bottom end of this society as I regard myself as a hard-working New Zealander. We are talking about a tax bill that applies to every New Zealander who has an income. It is ironic that we are talking about a high tax rate of 39c in the dollar applying to everyone earning above $60000 a year in income. We regard that as a high income but I regard it as a petty income because by international standards that is not high. Compared with our neighbour NZ$60000 by the exchange rate would probably go down to about $50000. If any of us relied on that income to support the average family of four to pay for everything from household costs power water rental costs kids’ school costs food and clothes we would know that what was regarded as the high salary level was really a petty amount. 
From my personal experience I know how hard every dad and mum works to support the family household. I know how hard it is. I know they desperately need their reward back in their own hands rather than having to wait until the Government hands it out. I know that having the Government handing it out has its own criteria. When those people desperately need a handout they have to apply for it. Well would they get anything? That would be determined by the Government’s agenda. That is a political agenda and it is according to the Government’s own wish which is to buy the vote during the term and hope that it will win another term. 
I have kids. I have a family and particularly I know my staff and I know my neighbour. My neighbour is a typical working-class Indian. He is working full time supporting his family. He has an income of very little. He told me that he wished he could earn more and keep more but it is out of his hands. 
Perhaps members still remember one of the stories that I quoted in my maiden speech. A taxi driver was working 12 hours a day and 60 hours a week and his words were: “Where’s the money? The Government is sitting on a big pot of money and it’s not in my pocket.” His request was: “Please don’t take it away. Let me keep it.” Well I am the person coming fresh from this society and from every working family in our society. I bring their request to this Chamber directly to all of the MPs who will vote on this bill. I congratulate United Future. Good on you for standing on your feet to speak on your amendment but I do have a question for you. If your amendment does not go through will you still support this bill? 
The CHAIRPERSON (Hon Clem Simich) 
: The member must not refer to the Chair. 
KENNETH WANG 
: I would say that the ACT party’s flat tax or universal tax cut to both company and personal income tax is the remedy to really resolve this whole issue. 
PANSY WONG (National) 
: 
 The Hon Michael Cullen who was the Minister in the chair earlier was good enough to take a call to answer some of the issues that I raised. I challenge the current Minister in the chair the Hon David Cunliffe to also take a call. 
John Key 
: Who? 
PANSY WONG 
: I have problems explaining to my colleagues just who the Hon David Cunliffe is. I am afraid he might have to make more visits in Auckland. I think his biggest problem is that he campaigns in west Auckland but lives in central Auckland. That may be causing the confusion. 
The Hon Michael Cullen was good enough to take a call laugh off United Future’s Supplementary Order Paper 284 and say that United Future’s Supplementary Order Paper’s indexation would give back to a household only about a dollar a week. But that same Minister when he introduced the bill to index the petrol tax increase gave the same reason. He said that it would cost the household about a dollar a week and that it was no big deal. So it seems to me that if the Minister of Finance thought that it was no big deal why not reward that amount to hard-working New Zealanders? We in National believe that is a very small step but it would be a step in the right direction. 
A Minister cannot laugh off the petrol tax indexation as no big deal then not support United Future’s Supplementary Order Paper to index the rate of income. But as my learned colleague the Hon Bill English pointed out that was a misleading statement anyway because United Future brought to the Committee a very sensible Supplementary Order Paper on adjusting the tax threshold. The only problem is that United Future is not committed to see it through. Now that party campaigned on integrity and on battling for its supporters but I am afraid that it will not see this bill through by voting against it because every other party apart from Labour and I think the Progressives is against this bill. United Future has the single opportunity to make a difference in its 3-year term in this Parliament by showing that it is serious about representing the hard-working middle New Zealanders. So all eyes will be on United Future members to take their fight to the end and to challenge the minority Labour Government to show its respect for United Future by supporting this Supplementary Order Paper because in the words of Dr Michael Cullen: “This indexation is no big deal.” 
I look forward to the Minister in the chair taking a call to explain to his good friends United Future members why the Government would not support their Supplementary Order Paper. It certainly would make a hole in the $6.5 billion tax surplus that was announced yesterday. It is obscene for the Government to tax New Zealanders to the extent that it has brought in an additional $34 billion in tax. 
Lynne Pillay 
: Good Government! 
PANSY WONG 
: Oh a good Government! That is wonderful to hear. Now we know that the Labour member’s idea of a good Government is to rip off hard-working New Zealanders. We can see that is just what Labour MPs believe. I think the electorates will have something else to say in the election year to show Labour MPs that a good Government is one that is considerate and compassionate to hard-working New Zealanders and would not tax them so it can waste that money on community education in polytechnics! 
LYNNE PILLAY (Labour—Waitakere) 
: 
 I move  
That the question be now put 
. 
RODNEY HIDE (Leader—ACT) 
: 
 The mistake we are making in this debate is that we are concentrating a lot on the surplus and not enough on Government expenditure. It is not just the surplus that should be returned to New Zealanders but also a whole lot of Government spending that this Government has overseen which is a disgrace. Just last week we learnt that hard-working Kiwis are being squeezed so they are no better off that they are paying more in tax than they have ever done in their lives and that Jim Anderton is taking money so he can spray it around multinational companies and their multimillion-dollar chief executives. Then we discovered that when the Auditor-General went in there to have a squiz the officials did not even know whom they had been giving it to. 
John Key 
: Did they know who Jim Anderton was? 
RODNEY HIDE 
: They did not even know where Jim Anderton was. They could not find where that taxpayers’ money was going. They said it was spent last year and they did not have records on it because they had been “updating our systems ”. 
John Key 
: Was it a few thousand? 
RODNEY HIDE 
: It was a few million. Jim Anderton said that there had been some problems because the officials had not been dotting every “i” and crossing every “t” and they were not into very much red tape. 
Here is another thing that the Auditor-General found out about how this Government spends taxpayers’ money. He found that New Zealand Trade and Enterprise—which Helen Clark used to talk about once and which Jim Anderton used to want to get on TV and on radio to talk about at every opportunity and then suddenly he was nowhere to be seen—that great department was spending money without regard to Cabinet criteria. So the Government which Mr Copeland will vote to support in terms of this bill was taking taxpayers’ money and spending it contrary to the intent of Parliament and Cabinet. That is what it was doing. Does this Government care about that? No. 
What else did we find out from the Auditor-General’s report? We found that the money was being taken off hard-working taxpayers and spent and there was no monitoring or follow-up. I would like to know what Mr David Cunliffe thinks about that. 
John Key 
: He is happy with it. 
RODNEY HIDE 
: Mr Cunliffe is over the moon about it. 
John Key 
: He’s ecstatic! 
RODNEY HIDE 
: He is ecstatic over it. 
John Key 
: Business as normal! 
RODNEY HIDE 
: Well it is not his money; why would he worry? Mr Cunliffe is sitting over an administration that first does not know where some of the money has been spent second spent money not according to the criteria that Cabinet has laid down and third spent it without any monitoring. Do members know what Jim Anderton’s response was? He said that the Auditor-General did not find that it was not effective spending. 
John Key 
: He did not know who Jim Anderton was. 
RODNEY HIDE 
: Well actually there is a reason for that: the Auditor-General could not find the spending. He could not find where the money was being spent let alone determine whether it was effective spending. 
This Government has no comprehension of what it is to work hard pay one’s taxes have nothing left at the end of the week and watch a socialist greedy Government—headed up by Michael Cullen sitting in that chair by David Cunliffe—that is awash with taxpayers’ cash spend it like there is no tomorrow. The Government is piling up surpluses like some giant Scrooge McDuck swimming in cash and telling New Zealanders that they can go and eat cake. 
I just say this to the United Future party. The United Future party is right about the need for lower taxes. Its amendments to this bill are right. All that the United Future party members need to do is to vote according to their principles vote according to what they have said in this Committee they stand for and vote according to what they told the New Zealand people they were going to Parliament to do. They should stop criticising the Government and just vote against this dopey bill. That is all that United Future needs to do. 
Hon GEORGE HAWKINS (Minister of Police) 
: 
 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 CHAIRPERSON (Hon Clem Simich) 
: There were a number of amendments proposed to Part 5 by Gordon Copeland. They were vetoed. The relevant certificate has been sitting on the Table. 
The question was put that the amendment set out on Supplementary Order Paper 287 in the name of the Hon Dr Michael Cullen to insert new clause 236 be agreed to. 
A party vote was called for on the question  
That the amendment 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. 
Amendment agreed to. 
A party vote was called for on the question  
That Part 5 as amended 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. 
Part 5 as amended agreed to. 
Schedule 
A party vote was called for on the question  
That the schedule be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Maori Party 1. 
Schedule agreed to. 
The CHAIRPERSON (Hon Clem Simich) 
: A new schedule 2 has been proposed by Rod Donald as set out on Supplementary Order Paper 295 in his name. That amendment is inconsistent with the decision of the Committee on Part 1 which confirmed the rates of taxation set out in schedule 1 of the Income Tax Act 1994. The amendment is therefore out of order. 
Clauses 1 and 2 
JOHN KEY (National—Helensville) 
: 
 The Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill is pretty important legislation going through Parliament at the moment. I want to raise if I can what is so wrong not just with the education policies of the Minister of Education—that is until he gets the flick or whatever will happen to him on Monday in the Cabinet reshuffle because if Margaret Wilson is to be the Speaker goodness only knows where Trevor Mallard will go! Anyway we will assume that he will be the Minister of Customs on Monday. 
This is what is so wrong with annual rates being confirmed in this legislation. This is about a Government that came into office and told the people of New Zealand that 5 percent of all taxpayers would pay the top personal rate—and that was wrong. It was wrong then it is wrong now and the number of people paying the top personal rate is progressively getting larger and larger. However the Government says that it does not want to give anything back to the people who actually make income in New Zealand irrespective of whether they pay the top middle or bottom rate. It does not want to give anything back to the people who contribute to our society and work very hard. Dr Michael Cullen wants to keep the money so that he can go on a bit of a vote-buying exercise. The tragedy of that position is that so many New Zealanders at this time of year will be feeling the pinch. They will look at their credit card bill and rising mortgage and they will wish that they had a little bit of extra money. 
The Reserve Bank made an interesting observation. It noted for the Finance and Expenditure Committee just recently that household debt in New Zealand has moved in the last 5 years from being 100 percent of average household income to 130 percent. At a time when the economy has been doing pretty well when the growth rate has been on average about 3.7 percent for the last 10 years not just the last 5 years—through nothing of this Government’s doing—at a time when it has been lucky enough to babysit one of the largest surpluses in New Zealand’s history New Zealanders up and down the country are being overtaxed and having to raise money on their own mortgage to make ends meet. That is what is happening out there. 
It is OK for Dr Cullen to improve the Crown’s financial balance sheet OK for Dr Cullen to have plenty of money to spend on anything and everything in the weird and wacky file but it is not OK for New Zealanders who are struggling to make ends meet to have a little more. 
I want to refer to just how large that spending programme has been funded on the back of those annual rates. Yesterday we had the Budget Policy Statement—the 6-months stocktake if one likes. Basically Dr Cullen did not have quite enough courage to tell the people of New Zealand that there would not be a tax cut. He sort of tried to meander around that issue. He did not quite say whether there would be or would not be one but essentially in his press release he said there was no room for tax cuts. When he was asked a hard question at the press conference he did not quite want to answer it because he knows that the case for tax cuts is now irrefutable. 
He knows that because he has looked at the numbers just as the National Party has looked at the numbers. The Government is telling the very New Zealanders who are being told there is no room for tax cuts that next year after the Government has paid its entire operating surplus—everything it does to run the country—and after it has paid its entire capital budget everything it wants to spend in funds on student loans the New Zealand Superannuation Fund roads in Auckland and anything else it might want to spend money on after it has paid for all of that it will have $1.5 billion in cash hanging around. 
That is absolutely unbelievable. The Government is so flush with cash that it cancelled the 2005 January bond tender. It does not need it. At a time when household debt is going through the roof because New Zealanders are being squeezed and it is OK for them to have three credit cards it is OK for New Zealanders to work hard on two or three jobs to pay the bills the Government has $1.5 billion of surplus cash. It is a disgrace. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I have a brief comment on clause 1 the title. This bill as the title reflects—the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill—does fix the annual rates for another year. It does contain provisions that will assist the promotion of venture capital in New Zealand by non-residents. It contains a number of miscellaneous provisions such as preventing the sale and lease-back of intangibles and thus the fiscal risk attached to that the early payment of rebates of income tax provisions around horticultural plants dispute procedures Australian unit trusts and so on. In many ways it is a mechanical bill. It is part of the good governance that is required to ensure the security of the fiscal base. 
In this short call I wish to make two points on the issue of taxation rates. The first is that we have heard a number of arguments from the Opposition that the Government has money in the coffers and why does it not spend it. Whether it is spent by giving tax cuts or expenditure increases is essentially an accounting identity. It does not make any difference to the fiscal balance. However the Opposition members are Keynesians in reverse. They are not prepared to spend when we are down on the cycle and thus they make it worse. They want us to spend when we are at the top of the cycle causing an overheat. 
I have two words for the Opposition—“Allan Bollard”. Why those two words? If we increase spending or give tax cuts now by more than we can afford that will have the effect of raising interest rates and in turn raising the exchange rate. The Opposition’s argument that the Government is flush with tax implies that Opposition members have not even read the December economic forecast. If they had they would know that the Government will be in a cash-negative situation by 2006 with about a $700 million cash borrowing requirement and about a $1.5 billion cash borrowing requirement the following year. So this rhetoric about “rolling in dough” is simply that—just rhetoric. This Government is committed to good prudent fiscal management and that is what this bill delivers. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 The previous speech demonstrates that the Minister may like to give the impression that he knows a lot but he just has no judgment. Because the issues involved in this— 
Rodney Hide 
: He went to Harvard! 
Hon BILL ENGLISH 
: What a waste of money that was! He may as well have done one of Steve Maharey’s dodgy community education courses because it has made no difference. The issue involved here is a matter of judgment. This bill sets out tax rates and the question the Minister needs to answer is this: under what conditions does he think the Government would have enough money to reduce taxes? Because the conditions the Government enjoys now were never imagined in my adult lifetime. In 40 years of government in New Zealand going right back to 1960 there has never been anything like this. Fortunately on the way through there have been Governments that have had the judgment to say that they have enough money to reduce taxes so the workers who go to work every day and earn an income can keep a bigger share of what they work for. This Government is unable to exercise that judgment because it does not have any judgment. 
He is right: the Government regards this bill as mechanical. The business of raising taxes is purely mechanical. It is like getting in one’s combine harvester and just driving into the paddock and going until it stops because then the fun bit is how one spends it. That is what Labour has always been about. It has no interest in the incentives that people face no interest in their aspirations no interest in a reasonable balance between what the Government takes from economic growth and what the people keep who actually create that economic growth. It is purely the mechanical business of raising as much tax as possible and then getting on with the party of spending. And oh what a party! 
The leader of ACT is quite right: the biggest issue actually is what is happening to this money. If we are going to raise so much what are we going to do with it? I raised questions yesterday in the House just in my portfolio about Steve Maharey the Minister for tertiary education having in the last 4 years spent $1.5 billion on certificate and diploma courses that were never finished. He has spent $1.5 billon on New Zealanders who never finished the courses they started. I have found that that figure is so big no one believes it. If he had spent that $1.5 billion only on the people who completed the courses every working family in New Zealand could have a tax cut of about $50 or $60 a week. He regards that as just a minor issue and he does not quite believe the figures himself—yet. That is just one example. 
This bill is giving permission to Ministers to do more and more of that kind of reckless spending. That is how Ministers see this. They see it as a licence not to print money but to spend the money that other people make. There is no restraint. Dr Cullen has decided to pitch himself as a fiscal conservative who is tight with the spending and his Ministers unfortunately seem to think that he is tight with spending. That is how distorted this Government’s view has become. They think they are being tight with spending when over the next 3 or 4 years they plan to spend $13 billion from the last Budget and in the December Economic and Fiscal Update yesterday they put it up to a total of $23 billion over the next 4 years. 
They are huge amounts of money and as my colleague Mr Key has pointed out household debt is going up. So the Government is improving its situation dramatically at the expense of households that are borrowing short term and long term—short term at high interest rates—in order to meet their requirements whereas the Government is keeping more than it should. That is why United Future should take the courage of its convictions in its own hands and vote against the bill. Because United Future voters are opposed to an endlessly taxing Government and an endlessly spending Government. United Future should vote against it. 
RODNEY HIDE (Leader—ACT) 
: 
 It was marvellous to see David Cunliffe stand up and explain this bill but did he talk about the annual tax rates? No he did not. He was prepared only to stand up and debate the title to explain it to the listening public and to have that recorded in  
Hansard. 
 One of the problems with Dr Cullen’s history degree and with Mr David Cunliffe’s studying away at Harvard—[ 
Interruption 
]—and they have worked at this—[ 
Interruption 
] 
The CHAIRPERSON (Hon Clem Simich) 
: Order! Twice was enough. 
RODNEY HIDE 
: The trouble with Mr David Cunliffe and Dr Michael Cullen is that although they have done all that studying they have not worked out a couple of basic things that every household in the country can grasp. The first is that Michael Cullen thinks there is something magical about a dollar that he takes from a working person and spends. He says: “When I spend the money it’s not inflationary.” But then he comes out with this Labour Party doublespeak that if he lets the poor worker keep the dollar in the first place that is called spending. When this Government talks about tax cuts it says they are like spending money. They are not like spending money; a tax cut is just letting people keep what they earn. I would like David Cunliffe to reflect on that and explain how a tax cut can be spending money. It is not spending money; it is letting people keep what they earn. If I as a Government take a dollar from someone and spend it as Michael Cullen does it is called tax and spend and I understand that. If I let the worker keep that dollar it is called letting him keep it—it is not spending the money. 
Another thing that Michael Cullen and David Cunliffe cannot understand but everyone else can is that tax does matter. 
John Key 
: That’s right. 
RODNEY HIDE 
: Tax does matter. Michael Cullen has stood in this Chamber time and time again and said that it does not matter how much tax we take from people—that they will work just as hard they will invest just as much and they will be just as entrepreneurial no matter what. That defies all experience all logic all common sense. When he reaches around for an example to illustrate his great economic insight he draws upon the experience of MPs and he says that Labour Party MPs would not work any harder or any less whether or not they had a tax cut. Well I have to explain to Mr Cunliffe and to Dr Michael Cullen that tax does matter and people are not stupid. They are not going to work their guts out and they are not going to invest their dollars in a country where the Government comes along and takes the money from them—takes away any reward that they get. That is what this Government is doing. We are in a situation now where working people face an effective tax rate of 91c in the dollar. If people double the number of hours they work they find that for every extra dollar they earn they get to keep only 9c. 
Well I do not think David Cunliffe would do that. I do not think Michael Cullen would do that. Yet they stand up here and pretend that tax rates do not matter. Well Mr Cunliffe is absolutely wrong. He should be taking this money and returning it to New Zealanders as part of a Christmas bonus. I say to Mr Copeland that he is well on the way with his proposal to increase the thresholds but would it not be better to drop the tax rates and actually drop Government expenditure? It seems quite simple to me when one sees how Trevor Mallard Steve Maharey Parekura Horomia and Jim Anderton spend money— 
Jill Pettis 
: When you see how Donna spends money. 
RODNEY HIDE 
: Jill Pettis raises a good point. Where did Donna Awatere Huata get the money from? The Labour Government! The Labour Government gave it to her. Trevor Mallard gave the money out. It is very very simple. Trevor Mallard gave the money out so Donna Awatere Huata spent it. That is the trouble with our taxation. We would not see that I say to Mr Mallard if people were spending their own money that they had earned—not that member spending other people’s money. 
CRAIG McNAIR (NZ First) 
: 
 We are debating clause 1 the title. I believe that the bill should be called the “Taxation (Still Putting Foreign Investors First and Miscellaneous Provisions) Bill”. Why should it be called that? I am obviously referring to the venture capital provisions. I have always said in speaking to this bill that I disagree with giving certain non-residents a tax advantage on profits from the sale of shares in unlisted New Zealand companies. That disadvantages New Zealand - resident venture capital investors. Even proponents of those provisions say they will not attract the appropriate capital that is needed—the purpose and reason for creating them. 
I will show Labour Governments’ track record of putting foreign investors not New Zealand investors and not New Zealanders first. Between 1984 and 1990 a Labour Government sold to foreign investors New Zealand Steel Petrocorp Health Computing Services the Development Finance Corporation PostBank the Shipping Corporation Air New Zealand Landcorp Financial Instruments the Rural Bank the Government Printing Office the National Film Unit Communicate New Zealand the State Insurance Office the Tourist Hotel Corporation New Zealand Liquid Fuel Investment Maui Gas Telecom and forestry - cutting rights—to the tune of $10.1 billion. That is right—$10.1 billion. I thought that when this Labour Government came in in 1999 it promised to stop putting foreign investors first and to start putting New Zealanders first but it did not do that. We can see the fruition of its policy in the venture capital provisions of this bill. 
Unfortunately and very sadly National was not much better as far as putting foreign investors first goes. That is probably one of the reasons National members are supporting the venture capital provisions in this bill. National sold $6.36 billion worth of State-owned assets to foreign-owned companies: the Export Guarantee Office the Government Supply Brokerage Corporation mortgages held by the Housing Corporation of New Zealand Taranaki petroleum-mining licences the Bank of New Zealand—yes we do remember the Bank of New Zealand—New Zealand Rail Wrightson rights Fletcher Challenge Ltd shares the Maori Development Corporation the Radio Company Ltd the Forestry Corporation the Ministry of Works’ civil construction arm and New Zealand Timberlands. 
Pita Paraone 
: A headache. 
CRAIG McNAIR 
: That is right. My colleague says one gets a headache listening to it because it is so sad. It is so sad because the foreign investors of the global market have taken advantage of New Zealanders and the previous Labour Government and successive National Governments have allowed them to do that. I think that has been devastating for the country and we are still paying for the consequences of those actions years and years later. Another name for the bill could be the “Taxation”— 
Clayton Cosgrove 
: Drum roll. 
CRAIG McNAIR 
: Even the Labour member over there the chairman of the Finance and Expenditure Committee is getting all excited about the next title. It could be called the “Taxation (We Don’t Care What You Think and Miscellaneous Provisions) Bill” because the Government time and time again has proven that it does not care what the average Kiwi thinks. 
Hon Trevor Mallard 
: This is a very average speech. 
CRAIG McNAIR 
: It is. It will get angrier. The Minister will start to hear me get more and more angry and get wound up because what this Government has done in the past few years while it has been in power has been very devastating. The reason why I say the bill should be called the “Taxation (We Don’t Care What The People Think and Miscellaneous Provisions) Bill” is that it provides high income-tax rates high business compliance costs and a whole bunch of compliance costs which the average New Zealand taxpayer has to foot and that is because of this Government. 
JILL PETTIS (Senior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
PANSY WONG (National) 
: 
 This is more than a bill about mechanics. We in the National Party would like to take many more calls because we want to invite the Minister in the chair David Cunliffe to explain further why he describes the bill as pure mechanics. If he had read the bill he would know that it introduces issues that are a lot more substantial that that. 
My colleagues have talked a lot on the taxation rates so I will leave those provisions aside and come back to the other parts of the title. The title contains the phrases “Annual Rates” and “Venture Capital”. Submitter after submitter from the venture capital sector told the Finance and Expenditure Committee that the bill will not work. It will not introduce any more venture capital investors into New Zealand because they like a limited-liability partnership mechanism. Also the list of countries that the provisions apply to in terms of relief of taxation on capital distribution is too restrictive for it to be effective. The provisions in the bill relating to venture capital are nothing more than further Labour Government feel-good legislation. Once again what the Government introduces sounds good and looks good but does nothing. Why should Parliament continue to spend time debating legislation that is without substance? 
I also want to touch on another provision which is hidden under the miscellaneous provisions and that allows individuals to deduct expenditure relating to applications under the Resource Management Act that fail or are withdrawn. Recently we have seen Meridian Energy withdraw its large Project Aqua. Members should guess how much was written off by that State-owned enterprise. The amount was $38.7 million—because the Labour Government refused to simplify and make substantial amendments to the Resource Management Act. It is not good enough simply to allow people to deduct expenditure without tackling the core problem relating to applications under the Act. 
The miscellaneous provisions also include a provision introduced to close off the loophole relating to Australian unit trusts. While supporting the provision National wishes to point out that investors will continue to look for overseas investments that give them a tax advantage. It is not very effective for this Government to continue to introduce legislation to close off loopholes while the tax rate remains high because that is the main incentive that drives investment consultants or investors to look for loopholes. At the same time as the Inland Revenue Department is busy chasing investors in order to close those loopholes these high tax rates continue to give investors the incentive to look for overseas or internal mechanisms. The most effective way for the Labour Government to address these issues is to bring down both the company and the personal tax rates so that the Inland Revenue Department does not have to continue to chase individuals or entities and to spend a lot of time and energy closing off loopholes. 
I will come back to the issue of the high tax rate which continues to bring in high amounts of taxes to feed the Labour Government’s appetite for spending. 
Hon TREVOR MALLARD (Minister of Education) 
: 
 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 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Maori Party 1. 
Motion agreed to. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Maori Party 1. 
Clause 1 agreed to. 
A party vote was called for on the question  
That clause 2 be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Maori Party 1. 
Clause 2 agreed to. 
LINDSAY TISCH (Junior Whip—National) 
: 
 I raise a point of order Mr Chairperson. I might have missed this. I know that earlier on you said that Gordon Copeland’s Supplementary Order Paper amendments were vetoed. Does that relate to his amendments to clause 2 on Supplementary Order Paper 284? I do not know that you covered that clause. You talked about Part 5 and now we are talking about clause 2. I am interested to know whether the veto covered those amendments as well. If not we should be voting on them. 
The CHAIRPERSON (Hon Clem Simich) 
: When we commenced Part 5 I read out the information that the veto also applied to his amendments to clause 2. I thank the member for raising that. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I move  
That the Committee divide the bill into the Taxation (Venture Capital and Miscellaneous Provisions) Bill and the Taxation (Annual Rates of Income Tax 2004-05) Bill 
 pursuant to Supplementary Order Paper 288 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 70 
New Zealand Labour 51; Green Party 9; United Future 8; Progressive 2. 
Noes 50 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Maori Party 1. 
Motion agreed to. 
House resumed. 
Procedure 
Bill reported with amendment. 
Report adopted. 
Taxation (Venture Capital and Miscellaneous Provisions) Bill 
Taxation (Annual Rates of Income Tax 2004-05) Bill 
Third Readings 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
 on behalf of the  
Minister of Revenue 
: I move  
That the Taxation (Venture Capital and Miscellaneous Provisions) Bill and the Taxation (Annual Rates of Income Tax 2004-05) Bill be now read a third time 
. The wide-ranging Taxation (Venture Capital and Miscellaneous Provisions) Bill reflects many of the main themes of the Government’s taxation policy work programme with measures to promote growth and innovation to simplify taxation where possible especially for small businesses to reduce tax-related compliance costs and to protect the revenue base. The bill removes a taxation obstacle to unlisted New Zealand companies gaining access to private foreign equity including venture capital. It introduces venture capital rules that are similar to Australia’s which should help New Zealanders to compete effectively with that country for venture capital. 
As a measure that is designed to help small businesses the bill introduces a tax discount for self-employed people who make voluntary payments of income tax at any point during their first year of business. The point of the change is to help to relieve the financial strain that some individuals face in their first couple of years in business. The bill also introduces changes to the legislative framework that governs the resolution of disputes between taxpayers and the Inland Revenue Department to improve and simplify the process for both parties.  
The bill allows the costs associated with patent and resource management consent applications that are withdrawn or not granted to be tax-deductible. It makes the taxation treatment of replacement plantings of fruit trees more flexible which will encourage the use of the most commercially desirable varieties of orchard plants. In order to prevent a potential revenue loss the bill closes a loophole involving the sale and leaseback of intangibles such as trademarks and newspaper mastheads. 
Another revenue protection measure deals with a technical problem in the way that New Zealand dividend rules operate. It closes a loophole through which New Zealand residents can receive income from Australian unit trusts that is taxed neither in New Zealand nor in Australia. As well as dealing with technical taxation issues that arose from the severe floods in February and July this year the bill also provides the Inland Revenue Department with more flexibility when responding to taxpayers who are severely affected by that type of event. 
Finally the Taxation (Annual Rates of Income Tax 2004-05) Bill confirms the income tax rates that will apply for the 2004-05 income year. On behalf of the Minister I say I am pleased that the legislation has reached its third reading. I would like to thank all those who contributed to it: the individuals and organisations who made submissions the taxation policy officials who have worked hard on it and supported its many parts through their passage and the Finance and Expenditure Committee for its careful consideration of the legislation. I commend the two bills to the House. 
JOHN KEY (National—Helensville) 
: 
 There is much in this taxation legislation but I am duty-bound to say there is not much that is any good. That is the honest-to-goodness truth about this legislation. The Government could not even get the simple bits right. Let us start with some of the really easy stuff. But just before I make my comments on why this is such hopeless legislation and why all New Zealanders should reject it let us think about the Government’s own partners in confidence and supply: the Progressives. What was their response to this legislation? They did not even turn up to vote in the second reading and the vote was tied at 59 all. The Minister of Finance had to go grovelling to the media to tell the people of New Zealand that if the Progressive party pulled that stunt again and forgot to show up this time it would be all over for Parliament—not just for this year of 2004 but all over red rover. “We will go to the polls!”. That is what the Minister said. He went grovelling to the media and said that the Government’s own partner the partner that Labour was in a relationship with had not even bothered to front up to vote for this legislation. 
Now let us turn to the other partner that Labour has for matters of confidence and supply—to United Future—to see what that party thinks of the legislation. If a certain journalist Vernon Small was writing about this legislation he would use a word I probably cannot use in the House. It is the same word he used to describe Dr Cullen’s surplus. I cannot use the word but I will tell members that it sort of rhymes with “locks” and it has a “bol” in front of it. That is what he would think of it. This is what United Future the party that supports the Government on matters of confidence and supply thinks of this legislation: the United Future members think it sucks. They think it is so bad they have had to put forward their own Supplementary Order Paper 284 in the name of Gordon Copeland—and my mother would not necessarily like that but she would not like this legislation one little bit. 
United Future has had to put forward its own Supplementary Order Paper and what has been the Government’s response to it? A veto. It does not want to give one dollar away. Yesterday in the Budget Policy Statement the Government went out and told the people of New Zealand that there was no room for tax cuts. It told people not to worry about tax cuts because there was not a spare dollar to return to them in tax cuts. It does not matter that household debt is going through the roof from 100 percent on average of household income in 1999 to 130 percent now. That is right—every New Zealander on average owes 130 percent of the average household income. But Government members do not care about that because they are OK. 
I want to turn for a moment to the issues around the venture capital legislation because it has not had a lot of discussion in this debate. The Government could not even get that bit right. It somehow seems to think that it can just redraft the legislation by going out there and presenting rules that no other country follows and that somehow miraculously offshore funds will come into New Zealand and be invested. Well I have news for the rather non-commercial elements of the Labour Party: “It ain’t gonna happen that way!” It is easier to go to Australia or the United Kingdom both of which understand limited partnerships or to go to hundreds of other countries that understand limited partnerships than to invest here. Somehow New Zealand does not understand that concept and still believes miraculously that people will come here. What did venture capital societies say about this legislation? Well they said it was a step in the right direction—yeah right. It is a baby step in the right direction but once again when presented with an opportunity to get some real capital into small companies that could become the backbone of the New Zealand economy in going forward and that could really create jobs and opportunities and provide enterprise for young New Zealanders the answer is that the Government cannot get past its ideology. It is just dishing something up to make it look as though it knows what it is doing but really it does not know anything at all. That has been the response in the venture capital area. 
Then we move to the Australian unit trust issue which is another very interesting issue. There the financial markets were reasonably creative and they found ways of getting New Zealand residents to invest in New Zealand Government stock through Australian unit trusts and then to be paid dividends in the form of bonus stock issues. That meant effectively that those New Zealanders received those dividends tax-free because there is no capital gains tax in New Zealand. We were supportive of closing that loophole down but what did the Government do? It went into the cupboard pulled out the sledgehammer and managed to belt everything over the head in relation to Australian unit trusts—equities and everything else. When the Government was doing the job and as it was about to do a Texas chainsaw massacre on unit trusts one would think it would get that right. But the Government did not get even that bit right because it forgot about England—yikes! It forgot about the product coming out of the United Kingdom and so it just did a hit job on the things that come out of Australia. Well that is hopeless—absolutely hopeless. 
When we go through this bill we cannot find anything that is good about it. But I want to spend the bulk of my time if I may in talking about the annual rates of taxation and about the fact that the annual rates are being confirmed in this bill with no change. At a time when New Zealanders are having inflation rob them of any gains they get in their income when they are working harder than ever and when they are looking to get the right incentives from the Government they get none whatsoever. Michael Cullen does not seem to think that incentives make any difference at all when one is earning money. He thinks they make a huge amount of difference in other areas but when one is making money they do not make any difference whatsoever. So he is quite happy for New Zealanders to face an effective marginal taxation rate of 91 percent. 
Michael Cullen is quite happy for a young family in Auckland to be working hard earning $38000 and raising two kids on that. He is quite happy for the couple to go out and get an education—maybe to get a student loan—or maybe to work harder to work two jobs to work longer or to work overtime. In doing so the couple will miss seeing the kids at Saturday morning sport and will miss what the rest of the family is doing. But if the couple puts in the hard yards and earn $70000 it will get to keep $2000 from the $22000 extra that it earns—and that is meant to be fair! Well I do not know what is fair about that and I would just love the Minister to get on his feet and tell the people of New Zealand who are out there working day in and day out how that is somehow fair. It is so far from being fair that it is not funny. 
Hon Matt Robson 
: Come on John be fair to the Government. It’s doing a good job. 
JOHN KEY 
: It is not doing a good job I am afraid I have to tell Mr Robson. I am delighted but not as delighted as Michael Cullen will be that that member is actually in the House. I guess that that means that he can vote so we are not to go to the elections just yet in January. I have no doubt that Helen Clark and Michael Cullen were ringing Mr Robson’s office frantically to make sure that he managed to pop in to the House from whichever Ahmed Zaoui soirée he had been to this afternoon. Ahmed Zaoui has only just got out of jail but I bet the member has been down at the welfare office to check out his eligibility for the emergency benefit for him. 
I will tell members something. Ahmed Zaoui has been out of jail for only a couple of days and even he emailed my office to tell me that this legislation was no good! That is what Ahmed Zaoui thought of it. 
What will happen to the millions and millions of dollars that are to be raised under the annual taxation rates set out in this legislation—and $46 billion will come into the Government’s coffers this year? That is 53 percent more than the Government raised in 1999 when it came into office. If this Government keeps on going by 2008 10 years after it first came into office—if goodness forsaken it is in office for as long as that—it will be earning 80 percent more than it did in 1999 yet there is no room for an adjustment to the taxation rates. We picked up the Budget Policy Statement yesterday and saw that the Government after it has paid for its entire operating surplus and its entire capital surplus will have $1.5 billion worth of cash in the hand but there is no room for an operating surplus. The quality of spending has already started to deteriorate miserably and it will get worse and worse. Things are coming out of the weird and wacky file that every Minister on the Government side of the House has and we will be funding all sorts of unbelievable projects—because when the Government spends money that is fine but when individual taxpayers in New Zealand spend money it is not. 
On Sunday afternoon as I sat in my home I wrote a press release about why the Government should give up just 1 week of the additional revenue—just 1 week—as a Christmas present. If the Government gave that up it could send every New Zealander young and old a cheque for $75. That would mean that the average household in New Zealand would get $300 and people could have a few presents under the Christmas tree a turkey on the table and some trimmings. But the Government will not do that because the turkeys in this scenario are Michael Cullen the Government and this legislation—and what a disgrace this legislation is! 
CRAIG McNAIR (NZ First) 
: 
 New Zealand First opposes this legislation. The Government would have us believe that we have an economic boom going on in this country. We are now taxing individuals at up to 39c in the dollar on income of $60000 a year and over the company tax rate is 33c in the dollar and we have no tax incentives or concessions for our exporters our good old Kiwi battlers. Especially when the exchange rate of the New Zealand dollar is US70c I say that that is disgraceful. There is no economic boom as this Government would have us believe. That is what I honestly feel. 
The Minister of Finance and other Ministers including the Associate Minister of Revenue who spoke earlier jump up and down in this House and tell us how great everything is when they know that is a load of hogwash. Our dollar is worth US70c which is hurting our exporters. Young people and first home buyers cannot afford to buy houses. Our interest rates are among the highest in the OECD. They are nearly 7 percent here in New Zealand but the official cash rate in the United States is around 2 percent. I say that is disgraceful. Some journalists just take Michael Cullen’s word about the situation and they do not tell real New Zealanders the real facts of the matter—that is what I strongly feel today. We are continually sliding down the OECD rankings. Australia is way ahead of us. The average Australian earns about $120 a week more than the average Kiwi. I note that Matt Robson comes from Australia and if he had stayed over there and had not been part of this Government he could be earning on average an extra $120 a week. That I say has every relevance to this legislation because if the average New Zealander earns $120 a week less than the average Australian both the Government and individuals here in New Zealand are worse off. 
The Associate Minister of Revenue said about half an hour ago that this legislation would simplify taxation. Well I say this bill will complicate it. Earlier this year we saw the Income Tax Bill which was 2411 pages long go through the House. The Government said that that bill would simplify taxation. I say that that legislation complicated taxation and that is what the Government is doing today in this legislation—it is complicating tax not simplifying it. 
A little while ago Dr Cullen congratulated himself and the Government on the great things they have been doing as he always does. He pulled out his list of great things that the Government has been doing and indulged in some self-congratulation on the things he has been successfully—so-called—dishing out to the New Zealand public. I read an editorial about 2 weeks ago in the  
New Zealand Herald 
. It was about Dr Cullen’s long list and about the Government constantly telling the country what great things the Government is doing. This is what the editorial had to say: “Conveniently absent from his list were high export prices and the twin mountains of household and country debt …”. This country has a current account deficit crisis the like of which we have never seen before. It is badly in debt. We have a major major problem and it needs to be addressed by the Government in bills such as these—supported by the Progressive Coalition and supported by the United Future party. 
Edwin Perry 
: Poodle power! 
CRAIG McNAIR 
: That is right—poodle power. That is what the United Future members say when they are trying to get enough courage to vote for the Government. They just say: “Poodle power!” and they vote for the Government. 
A few weeks ago when we were voting on this very legislation—the Taxation (Annual Rates Venture Capital and Miscellaneous Provisions) Bill as it was then—in the Committee stage the vote was tied at 59 to 59. That night United Future could have taken this Government down. United Future could have stopped the Government from putting through the Civil Union Bill. This Government would not listen to New Zealand First when we said that issue should go to a referendum so that the people of this nation could decide on it. That is what United Future did: it let this Government ram that bill through. It could have taken this Government down when the vote was drawn at 59 to 59. 
Rodney Hide 
: So could New Zealand First. 
CRAIG McNAIR 
: No no. We do not have a carte blanche agreement with this Government; we do not have an agreement with it. I also remind that member that he has sometimes supported the Government on certain pieces of legislation. 
Rodney Hide 
: Say that outside the House! 
CRAIG McNAIR 
: I may just try to do that. Earlier when I spoke in the title debate on this legislation I said the bill should have been called the “Taxation (We Don’t Care What You Think Miscellaneous Provisions) Bill but unfortunately I was cut off by the bell. The reason I said that is that the Government does not care about what is going on for average New Zealand households when it relates to income income tax personal tax company tax small business compliance costs social issues—or whatever else. The Government does not care about those things. That is why I say that this legislation should have been called the Taxation (We Don’t Care What You Think Miscellaneous Provisions) Bill. That is what it is. Yet the United Future party which supports the Government could have taken the Government down on that night when the vote result was 59 to 59. 
In closing I want to refer the House quickly to the part of this legislation that concerns Maori authorities. When that legislation was first introduced a couple of years ago I put forward on behalf of New Zealand First a Supplementary Order Paper to allow that rate to be afforded to all organisations no matter what race was involved. Sadly that was voted down. We did not have a problem with Maori authorities getting a tax advantage—not at all—but we wanted all New Zealanders to get that tax advantage. That is what New Zealand First stands for. New Zealand First stands for people for representing all New Zealanders and for putting New Zealand first and foremost. 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 This debate has broadened into a wider debate about taxation and spending. We now have the benefit of the Government’s Budget Policy Statement and the December Economic and Fiscal Update that was published yesterday. This official Government document reinforces many times over the arguments that were made throughout the debate on this legislation about the levels of taxation and spending. I might say at this stage that there are a number of detailed changes in this legislation related to taxation policy and in so far as any members of this Chamber understand them there seems to be broad agreement on them. However the part of the legislation that sets our tax rates and threshold has been substantively debated particularly today since the December Economic and Fiscal Update came out. 
United Future proposed some amendments relating to shifting tax thresholds. It is our view that the Government should have proposed its own amendments. I will give one piece of information as to why. There is a table on page 42 of the December Economic and Fiscal Update that shows the change in tax revenue since the Budget back in May. The change in tax revenue since the Budget for the year ending 2005 is $1.5 billion and for the year ending 2006 it is $1.7 billion. That is how much extra tax the Government now believes it will collect compared with 6 months ago. That in itself is a good enough reason why this legislation should have and could have included changes in the tax thresholds. That is income the Government did not expect to get as recently as 6 months ago. Now sure as anything it will get it. It is coming from households whose net incomes are not rising anything like as fast as Government tax revenue is. It is extra tax revenue coming to a Government that is having real trouble spending the money effectively that it already gets. 
We are not talking about a few hundred million dollars that could disappear in the rounding or that might blow away in some little economic wind that crops up in the next few months. We are talking about $1.5 billion and $1.7 billion. That is of course going to be spent. 
One of the reasons this Government ought to have changed the taxation rates and thresholds and it is the same reason that United Future ought to take itself seriously for a change—because then other people might—and vote to change these thresholds is that a good proportion of that money will simply be wasted. 
I want to give the House one small example of very large numbers that no one has paid any attention to but that show where this Government’s spending track is going. In this year’s Budget the Government had a forecast of how much it would be spending in next year’s Budget. That is part of what is required by our legislation. In the 2004 Budget the Government forecast that in the next Budget it would spend $1.6 billion extra in 2005 and that money of course is being spent in subsequent years as well. The document that turned up yesterday has a new spending forecast for the 2005 Budget being election year. 
We all thought that $1.6 billion was a lolly scramble. Here was a Government desperate to try to win a third term with a lot of money in the bank going into an election year Budget with an enormous amount of cash to spend. Yesterday the Government cranked that up by another half a billion dollars. So the forecast spend for the election year Budget has gone from $1.6 billion to $2.1 billion—$500 million just like that. 
And it gets worse. The previous forecast said $1.6 billion per year and the new forecast starts at $2.1 billion and rises to $2.8 billion over the next 3 or 4 years. The Government will be spending an enormous amount more money in the next Budget than we thought just 6 months ago. So there is absolutely no doubt about the Government’s fiscal strategy which is to get in all the tax it can possibly get away with and then find as many ways as possible to spend it. 
Why is it doing that? I had a look through the fiscal outlook document and I have to say I am greatly concerned about the quality of Treasury’s production of this document. Page 46 has fiscal indicators and the use of the operating surplus. Treasury has produced an interesting graph; it just does not have any dates on it. So that is what I call a moving feast. It has these nice little waves of shortfalls and operating balance including revaluations and accounting changes which are all calculated on the year ended 30 June. We have no idea just what year it is. 
Craig McNair 
: It looks smart. 
Hon BILL ENGLISH 
: It looks good and no doubt Dr Cullen will produce it any year that he feels like because it has no dates on it at all. I wonder who produced this graph. But it does ask the right question on this page. It asks: “Why does Government run an operating surplus? Why is it not ‘available’ for more spending or tax cuts?”. I say to Treasury that if it thinks the Government does not regard this extra tax revenue as available for spending then it is wrong. I have just shown how the forecast for the next Budget has gone up half a billion dollars. So it is absolutely incorrect for Treasury to imply that it is not available for spending. Its own document shows that it is. And it is absolutely incorrect for Dr Cullen to say that he is some kind of fiscal conservative; everyone else wants to spend spend spend; he did not put out a press release telling the country that he is increasing Government spending in the next Budget for 2005 by half a billion dollars. That is what I call spend spend spend. 
Treasury asks why it is not available and then comes up with the right answer: the answer to these questions is the Government’s fiscal strategy. So the truth is we are collecting a lot more tax than the Government needs because the Government wants to. It is the Government’s fiscal strategy. It is not some natural product of the global economic system that it cannot help. It is because in this legislation today the Government chooses to collect that much tax just as it chooses to waste large amounts of money in its spending. 
The Government’s judgment on spending has to be questioned because even if we think it should spend a lot how is it that we end up with our schools selling raffle tickets to employ teachers and schools and communities raising half a billion dollars per year over and above what the Government gives them to operate our schools— 
Brent Catchpole 
: And that doesn’t include volunteers either. 
Hon BILL ENGLISH 
: —and that does not include voluntary time—at the same time even just within education as the Government is hosing away hundreds of millions of dollars on courses that no one wants and no one is finishing? In the end fiscal policy is about judgment it is not about some automatic machine that forces one to do everything and there are no choices. This Government has made choices and that is to fatten its own waist at the expense of the working families of New Zealand and then to try to fatten its own voting catch by spending that money in as many unwise and ill-judged ways that it can think of in the next 8 months before an election. 
RODNEY HIDE (Leader—ACT) 
: 
 Just on 5 years ago this Parliament was plunged into urgency by the new Government. The Government said that it needed more money—so its first act in this Parliament was to bring in legislation under urgency to put up the top rate of tax to 39c. Why? Because it had done its sums and it decided that it needed an extra $400 million. Opposition parties explained that it would be counterproductive that it would not work that it would drive people overseas that it would make people less entrepreneurial and that it would cause less investment. But not only that we also pointed out that the Government did not need this $400 million and that it had been an election campaign as my friend the Hon David Carter says simply to punish the successful people of New Zealand. 
The Labour Party was able to go around and promise all sorts of good things and when questioned as to who would pay it it said: “Don’t worry the rich people are going to pay for it.” In actual fact everyone has paid for that tax because there has been that much less investment and that much less entrepreneurship. What did we discover? I remember this: there was a pledge card. Nothing was true about that pledge card. From the photograph down everything was a fraud and a phoney. Helen Clark’s airbrushed teeth-straightened picture was on the card and she stated that the tax increase would affect only 5 percent of taxpayers. What do we now discover? Eleven percent of all taxpayers are paying that top rate. As the National Party pointed out 22 percent of all workers are now paying that top rate of tax. So that promise has proved to be like so much of the Labour Government a lie. We have also discovered that the Government never needed that money. I ask Mr Copeland how much the surplus is now. 
Gordon Copeland 
: $7.5 billion. 
RODNEY HIDE 
: It is $7.5 billion yet the Government put up the top rate of tax to raise $400 million—less than half a billion dollars. So Mr Copeland who has loyally supported the Labour Party has come down here with a very modest proposal simply to hold Labour to account for its election pledge. He is simply saying: “We’ve said we would keep our word and support the Labour Government in power. Why don’t you keep your word and hold it to 5 percent? Here is how you do it.” Not only has Mr Copeland set out how it could be done he has drafted the Supplementary Order Paper. He has brought it down to Parliament. If one were supporting the Government one would expect the Government to consider it and to take it on board if it was a good idea. And if it did not think it was a good idea it could come down to this great Parliament of ours and put it to the vote. 
But Michael Cullen would not allow this to go to the vote so Mr Copeland’s Supplementary Order Paper was vetoed and we as elected members of Parliament do not even get to vote on it. So Mr Copeland who has been honest with his support of the Labour Party is now supporting a dishonest Government with his honesty. I think that at some point he has to ask why he is honestly supporting a dishonest Government. I think that the honest thing for Mr Copeland to do would be to put his vote where his principles are rather than putting his vote to where there are no principles which is Helen Clark’s airbrushed picture. 
Gordon Copeland 
: The principle is to tax and spend. 
RODNEY HIDE 
: Mr Copeland is saying that the Labour Government’s principle is to tax and spend. I have to say on behalf of the ACT party that I agree with him. I know that New Zealand First agrees with him. I know that Mr David Carter agrees with him on behalf of the National Party. Let us do a quick sum. [ 
Interruption 
] I know that the United Future party does not agree with the Greens and I know that it disagrees with the Labour Party; the only thing I am perplexed about is why it keeps voting with the Greens and with the Labour Party. That is the bit I just cannot get my head around. 
Rod Donald 
: We can’t figure it out either. 
RODNEY HIDE 
: The Greens cannot figure it out and the truth of it is that neither can Mr Copeland. He cannot figure out why he is doing it either. If he did he would get up and explain it all to us. Let us just put aside where we are in each party and think about the poor voters and in particular the poor taxpayer and remind ourselves what Michael Cullen told this House. He told us that yes the gross income for the average household had gone up but when one takes off the increase in direct tax and one then allows for inflation we discover—and this is not allowing for the indirect taxes or GST—that those people are no better off. That is why people are saying: “Well hang on this economy is going so well how come I am not feeling it?”. People are not feeling it because it has been completely eroded by extra taxes and as Mr Copeland has put out what is technically called fiscal drag. 
The money has been devalued by higher inflation. Sure people are getting a bit more because of growth but they are finding themselves in a higher and higher tax bracket and they are going backwards under this Government. They then discover that households have stood still in net terms—in real terms—but the Government is taking an extra $3000 off each household. So the entire gain has gone to Dr Michael Cullen. When it is suggested to him by the United Future party the ACT party New Zealand First the National Party and I should say the Green Party because they believe in lower income tax—they say “Let’s get income taxes lower and put taxes on other things”; I think I am representing their position fairly— 
Hon David Carter 
: I didn’t know that. 
RODNEY HIDE 
: The member has to stay awake. Let us just work this out. The National Party is for lower income tax. Am I correct that New Zealand First is for lower income tax? 
Craig McNair 
: Yes. 
RODNEY HIDE 
: They say “Yes”. The Green Party is in favour of lower income tax albeit with some extra taxes elsewhere. The ACT party is for lower taxes full stop. United Future is for lower taxes and bugger me Jim Anderton is for lower taxes on businesses. Let us just do the numbers. If all members in this Parliament voted according to what they believed in and what they expound publicly we would have lower taxes. 
Rod Donald 
: 68 votes. 
RODNEY HIDE 
: As Rod Donald says—he is much better at arithmetic than I am—that is 68 votes. 
Gordon Copeland 
: I think the Maori Party might be for lower taxes. 
RODNEY HIDE 
: If we included the Maori Party that would be 69 votes. Mr Copeland is getting excited. The only trouble is that he will stand up and vote for this bill which keeps taxes exactly where they are. 
Gordon Copeland 
: I can explain why. 
RODNEY HIDE 
: He is going to explain why. I can understand the Greens because they say they are in favour of lower income taxes only if there are other taxes to make up the difference. 
Hon David Carter 
: They voted for the 39c tax rate. That doesn’t make sense. 
RODNEY HIDE 
: Look we have to admit that we have all made mistakes in this House and the Greens made a big one. Here is the other astonishing fact in all of this. We have a Minister of Finance who thinks he has a magical touch that he can spend all this money that the Government spends better than the poor working people who earned it. He thinks that somehow when he spends $1 billion it has been to good effect compared with a worker spending $10. 
He thinks that somehow this Government—and I ask members to picture it with Parekura Horomia Steve Maharey Jim Anderton and Trevor Mallard sitting around the Cabinet table and spending billions—can spend it to better effect than each working person just spending an extra $10 or $20 a week. We actually know how little the Government cares for working people. Helen Clark says her salary is just petty cash because her comparison is with someone who earns $800000 not with the average working person whom she is supposed to represent to whom her salary is far more than petty cash. We also have a Minister of Finance Dr Michael Cullen who thinks that if we lower people’s tax it makes no difference. I have a message for Michael Cullen: it makes a huge difference. It makes a huge difference to the weekly pay packets of working people to keep more money. I am not surprised that there are 68 votes in this House not counting the Maori Party for lower income tax because members can see the logic of it. The Greens can see logic in it too. They say that if we lower income tax people will earn more and get more. 
Hon MARK BURTON (Minister of Defence) 
: 
 We have just had a flood of crocodile tears from the party that would give everything away or sell everything off in support of the failed National Party. I am proud to support this legislation and I am proud to be part of this Government. 
ROD DONALD (Co-Leader—Green) 
: 
 On the one hand I thank Mark Burton for such a brutally short speech because it enables me to give mine now then do some more preparation for the next legislation which we are just as concerned about as we are about these bills. On the other hand I criticise the Government for not standing up and defending its own tax policies. I think it is extraordinary that the Government is actually doing some good things when it comes to income tax with targeted tax policies that will start to take effect next April and will give some significant benefits to families but its members are not actually prepared to get on their feet and promote those policies. Every party in this House is talking about tax cuts except for the Government yet ironically the Government is about to deliver the most significant tax cuts for quite some time and what is more the cuts are targeted towards the people who need them most—poor families. 
Our issue with those policies is that they are not being brought in quickly enough and the cuts are not large enough. We have made that clear during the debates on those tax policies. With the December Economic and Fiscal Update that came out yesterday showing an absolutely massive Government surplus—whichever way we look at that surplus whether in paper terms or in cash terms—I think it is a major embarrassment for the Labour Government that it not only is waiting until April to deliver the first tax cuts for struggling families but also is going to keep people waiting for another year for the second tranche of those tax cuts. Meanwhile kids in this country are growing up in poverty. I challenge Dr Cullen to bring the full package forward to 2005 instead of waiting until the out-years for those policies to take effect. 
The second point I would like to make—it is not the reason why we are opposing this legislation but I think the point needs to be made—is that annual taxation rates legislation should not be forced through under urgency. The original bill was 212 pages long. Not only was it 212 pages long; it was also amended during the Committee stage but we do not have a bar 3 version of it in front of us for this third reading debate. I think that is bad parliamentary process for legislation that is not genuinely urgent. I criticise the Government for that. 
On the other hand I congratulate the Government on some of the features of this legislation. It is good to see for example the changes to provisional tax. It is good to see the sale and leaseback provisions on intangibles. It is good to see disputes resolution coming in. Those are all positive features. But our big sticking point with the legislation and the reason why we are voting against it is the changes to venture capital. We do not believe that foreign venture capitalists should get a tax advantage on their investments in New Zealand—an advantage that is not extended to New Zealand venture capitalists. I know that the excuse has been that we should have a regime equivalent to Australia’s and that somehow we are short of venture capital. Well Dr Cullen is actually the biggest venture capitalist in the country. He gambles $2 billion a year through his beloved New Zealand Superannuation Fund and in turn the New Zealand Superannuation Fund puts over 60 percent of that on foreign share markets. So I say to Dr Cullen and his Government that if there is a shortage of venture capital in New Zealand—and there clearly is—then let us bring home the money that is going on foreign share markets and boosting other people’s economies so that they can compete more effectively against New Zealand and let us see that money invested in New Zealand. 
I hasten to add in case some people think the Greens support the New Zealand Superannuation Fund taking a greater stake in the New Zealand share market that we do not support that. We simply say that that money belongs to the Government because it is the people’s money and that on behalf of the people the Government should be putting it into strategic infrastructure in New Zealand. We could give the Government a very long list of what that strategic infrastructure consists of but let us start with double-tracking the North Island’s main trunk line and electrifying it. Let us put a solar water heater on every home in this country. Let us build some more wind farms. I could run through a whole raft of sustainable infrastructure that New Zealand will need in very short order. 
But before I leave this part of the legislation let us also look at the most important capital base that we need to be building and that is our human capital. We say to the Government that it does not really have a massive surplus or a high net worth because our young people are paying the price. Our young people are paying the price in having to borrow to fund their tertiary education. That tertiary education should be taxpayer funded and that is the main investment the Government is ignoring. That is what the Government should be spending more of its surplus on—ensuring that our young people get a universal student allowance for their studies and ensuring that student debt is progressively written off over a period of time for those young people who remain committed to New Zealand. That is one challenge we put to the Government. 
The next challenge we put to the Government is to get on with introducing the carbon tax. I hear Dr Cullen talking about it more and more of late. That is a good thing; it means that it is not too far off. We also agree with the Government’s position that the carbon tax should be revenue neutral. In that context I say to Mr Hide that that is why the Green Party does support tax cuts—we want to cut tax on personal incomes and on companies because we want to encourage work and enterprise. But the balance point there—because we are fiscally responsible—is that we would bring in a suite of eco-taxes. Those eco-taxes are not only about collecting revenue but also of course about discouraging resource depletion waste and pollution. We are happy to talk with the Government any day about bringing those tax plans forward because we believe that there needs to be a fundamental shift in the way we tax both companies that operate in New Zealand and individuals so that we encourage work and enterprise and discourage waste pollution and resource depletion. 
In relation to cutting tax I say for Mr Carter’s benefit—because I think it was a figment of his imagination that we would cut the top tax rate—that we certainly would not cut the top rate; we would cut the bottom tax rate by making the first $5000 of income tax-free. That would put $750 into the pocket of every worker and every beneficiary in this country. That is significantly different from what the so-called family-friendly party is offering. United Future claims that it is family-friendly but the families who are most in need of a friend would get the cold shoulder from United Future because its policy to lift tax thresholds would deliver only $75 a year to people earning less than $38000. That is far less than they need and far less than what the Government is already planning to deliver with its Working for Families package. 
But people need more than that; they need some incentive to save for their retirement. That remains the big hole. I keep pestering the Government about the 6 percent differential that only we in this House get on our retirement savings. At least the Government has got rid of the penalties but that 6 percent differential should be spread to everyone saving for his or her retirement. It might help to reverse the extraordinarily bad trend we see of fewer and fewer people saving for their retirement through registered superannuation funds. But I think it is time for the Government to go further than that and to look at shifting the “t’s” and the “e’s”. I hope the Minister is thoroughly investigating making contributions to registered superannuation funds tax-free—in other words coming off gross income—and is looking at a grandparenting strategy which would need to be phased in over a period of time to make the payments taxable. That would give the Government the income when it most needs it which is in 20 to 50 years’ time. 
Meanwhile the Government does need to sort out the issue that was raised in the Monetary Policy Statement that next year the Reserve Bank is projecting minus 11 percent household savings. That suggests to me that we have a bubble and that bubble if it does not burst at the very best will deflate. When the property bubble does start to deflate then I think this economy is in for a very rough ride. It is time for the Government to face up to that fact and shift the tax base in the right direction by looking at our eco-tax policies by not getting rid of capital gains tax on superannuation funds but instead looking at implementing a capital gains tax right across the board. It will need that revenue in the years to come to address the structural problems with our economy—problems that the National Party is not even prepared to acknowledge. 
I hope Mr Key has read page 30 of the December Economic and Fiscal Update because it at least acknowledges that the equilibrium price of petrol will be $35. I think it will be higher than that but it will certainly be a lot higher than the $19 that the Minister said it would be back on 27 May when his Budget came out. Let us face some reality about petrol: petrol will only increase in price the demand is only growing and the reserves will only become more scarce. Until this Labour Government faces up to that fact and until National acknowledges that the problem even exists we are in for a rough ride. 
GORDON COPELAND (United Future) 
: 
 There will be no Christmas bonus for the taxpayers of New Zealand. There will be no good news for the taxpayers of this country and it did not need to be that way. I brought to this House a perfectly reasonable Supplementary Order Paper that would have put in place some good news for New Zealand taxpayers and would have delivered additional money into the hands of every taxpayer in the country who earns more than $9500 a year which is the vast majority of them as from 1 April next year. As others have mentioned that Supplementary Order Paper 284 was vetoed by the Government but I would like to put on the record exactly what that Supplementary Order Paper would have done and what it intended to do. It would have shifted the tax brackets from 1 April 2005. The 15c in the dollar rate would have moved from $9500 to $10750; the 19.5c rate from $38000 to $43000; the 33c rate from $60000 to $68000; and the 39c rate from income over $60000 to income over $68000. 
So why was the United Future Supplementary Order Paper to make that change vetoed by the Government? I would like to record tonight how the voting on that Supplementary Order Paper would have gone if the Government had had the courage to put it to the vote. It would have looked like this. Those in favour: National with 27 votes New Zealand First with 13 votes ACT with 9 votes and United Future with 8 votes—a total of 57 votes. Those parties would have voted in favour. But the other parties in the House would have voted against it: Labour with 52 votes Progressive with 2 votes and the Greens with 9 votes—a total of 63 votes. So unfortunately my Supplementary Order Paper was destined not to be approved by Parliament in any event. Let me make it clear; I will explain it to members so that they do not have to figure it out. The reason that my Supplementary Order Paper cannot become the law of New Zealand is the Green Party. If members look at the figures I have just given they will see that I am right. 
I asked the Green Party members why they were not voting for my Supplementary Order Paper and this was their response. They said to me: “We’re not going to vote for your Supplementary Order Paper because we are quite happy to see inflation affect the tax brackets and to see the Government’s revenue coffers bring in more money so that we can redistribute more money and spend more money.” At least the Green Party has the courage to come out and say upfront that that is its policy and its position. Dr Michael Cullen on the other hand has never said that. He has never come into the House and said: “My party’s policy is to collect as much tax as we can so that we can distribute as much money as we can and spend as much money as we can.” However I want to say to Dr Michael Cullen tonight that even though he has not said the words at the end of the day actions speak louder than words and New Zealanders fully understand that that is the ideology that drives this Government. 
I wanted to mention the reality that my Supplementary Order Paper would not have succeeded because the Greens were against it because of the false claims that have been made in this Chamber tonight by ACT New Zealand First and National that United Future should renege on its deal with the Government and that that somehow would reduce taxes. Well it would not and I will explain why. If United Future broke its word and walked away from its support role on taxes and the Budget that role would be immediately assumed by the Green Party. Would that be good for New Zealand? No it would not. The shallow National ACT and New Zealand First analysis overlooks that reality and a very grim reality it would be. Imagine if the Greens in this Parliament were in the position of United Future and supporting this Government! That would be grim for business grim for international traders grim for road users and grim for families. Quite frankly it would be thoroughly bad—bad for New Zealand. 
The New Zealand economy has been booming in the last several years. The Government is collecting tax like never before. In the last 3 years alone the Government has collected $4.5 billion over and above its own annual Budget estimates. In yesterday’s Budget Policy Statement there is a table that shows that over the next 4 years the Government will collect another $5.7 billion over and above the estimate in this year’s Budget which was announced in May. I say to the Green Party and to Rod Donald that that is after it has paid for the Working for Families package which we supported. Over a 7-year period that is a total of $10.2 billion over and above the Government’s own estimates. Yet still according to Dr Cullen there is no room for tax cuts. 
Well yesterday in this House the Prime Minister in commenting on Judy Bailey’s salary increase said that TVNZ had “a culture of extravagance” but I tell the House tonight that TVNZ is a babe in the woods compared with this Government. Here is this Government with an extra $10.2 billion coming into the coffers and what does it intend to do with it? It intends basically to blow the lot on extravagant extra expenditure on God only knows what. We will have to wait to find out. United Future members will certainly not be going along with that but—as I have explained before—it will happen because of the presence of the Greens in this Parliament and the reality that those members’ votes will carry the day. 
So what has Dr Michael Cullen said he will do with that extra $5.7 billion over the next 4 years? Well I will tell members. Yesterday he said that he planned to bank some of the windfall and to direct the rest of it into new spending initiatives. That is quite unacceptable in the circumstances. He continues to tell the country that there is no room for tax cuts. Well I am sorry but I do not buy it. Our economy might be booming the Government might have repaid debt and the Government might have a fabulous balance sheet at the moment but it is a very different reality for New Zealand families. New Zealand families in fact are feeling the pinch. Household borrowings are at an all-time high and New Zealanders are basically living at the moment by drawing down on their own capital base. The Finance and Expenditure Committee which considered this legislation has talked to Dr Alan Bollard for the past 2 years about this. Every year New Zealanders are spending more than they earn and every year they are going deeper into debt. Currently New Zealanders are spending 11 percent more each year than they are actually earning. We see the result in massive credit card debt and massive additional mortgages. 
Dr Cullen seems to be unable to see what is plain to the rest of us. He is busy hoarding our money—money that belongs to taxpayers—in the bank while people are being forced to borrow to stay alive to keep body and soul together. New Zealanders should assess these realities carefully in deciding how they vote next year. Would they like to be able to keep more of their earnings through tax cuts and begin to pay down their debts or are they content to allow Dr Cullen to increase their taxes so that he can bank and spend? 
Let me say that United Future would adopt a completely different approach. It would include tax reductions by income splitting for couples adjusting the tax brackets for inflation and reducing the corporate tax rate coupled with reining in the Government’s extravagant spending habits. That would be good for families that would be fair and that would be just. It is thoroughly reasonable the case is compelling and I continue to express the hope—even at this late date—that the Government will act to give Kiwis a tax cut as part of next year’s Budget. I very much doubt though whether those hopes of mine will be fulfilled. I suspect I will be hoping in vain I am sad to say. 
Hon RUTH DYSON (Minister for ACC) 
: 
 It gives me a huge amount of pleasure to contribute to this debate on this taxation legislation which was introduced to the House I think at the end of March of this year. The contributions from the members of the Finance and Expenditure Committee of which I used to be a member have been very interesting. They obviously put a lot of time energy and effort into consideration of this legislation. Considering tax bills is always a hard job because they are very detailed. The devil as we know is always in the detail. So I commend the members of the select committee who have contributed to the debate this afternoon for the work that they have obviously put into this legislation. 
The legislation is a major reflection of several important significant themes of our Government’s tax policy work programme: firstly measures to promote growth and innovation which is a fundamental platform of the Labour-Progressive Government; simplification of the tax system particularly for small businesses to ensure that their compliance costs continue to be reduced; and obviously something that is a core responsibility of any Government and that is protection of the revenue base. It also as an added side benefit will help New Zealand to compete more effectively with Australia for venture capital. It aligns our venture capital tax rules more closely with those of Australia and it assists in promoting venture capital investment in our country by non-residents. Those are significant contributors to supporting continued economic growth better employment figures and lower unemployment figures. 
While I am on that subject it is an absolute delight to every member of this Government and hopefully even to members of the Opposition to record that we now have the lowest unemployment rate in New Zealand for nearly two decades. One of the biggest pressures facing employers in the country is an inability to attract staff because of the low number of unemployed that we have. Obviously our focus in the future will be on offering even more improved support to people who are currently in part-time work or are unemployed and who would be able to make a more significant contribution to our economy if they were in the paid workforce. 
The legislation also introduces a rebate of income tax for small-business taxpayers who pay tax on their self-employed or partnership income during their first year. Self-employed people have been calling for this measure for a long time and it is really great to see it introduced at this time. 
The legislation amends the framework governing the resolution of disputes between taxpayers and the Inland Revenue Department to improve the process for both parties. Again that will be a significant contributor to reducing compliance costs for taxpayers. Having that legislative process available will be of great assistance for them. 
Finally it sets the income tax rates that will apply for 2004-05. It is fantastic legislation and it is my pleasure to support its further progress. 
PANSY WONG (National) 
: 
 I guess the only excuse one can give the Hon Ruth Dyson for saying that the venture capital provision in this legislation will make New Zealand more compatible or competitive compared with Australia is that she is not even remotely connected to the revenue portfolio—and New Zealanders should be grateful for that. This venture capital provision does nothing to make New Zealand competitive compared with Australia. At least Australia is further down the track with provision of a limited partnership mechanism that would enable it to work. 
But I want the United Future Party members to reflect on what message they are delivering to the public. United Future Party members are denying hard-working New Zealanders a well-earned tax cut. That is what New Zealanders would get if United Future members stuck to their principles and opposed this legislation. They say they cannot do that because they are worried that Labour will start to favour the Greens over United Future. Hard-working New Zealanders will suffer because United Future wants to be in the good books of the Labour Government. 
As for Gordon Copeland’s logic I think he has not quite worked it out. He said that his Supplementary Order Paper was not put to the vote because the Labour Government was worried about the Greens. But we have just done a numbers check and if the Green Party supported the Government then I am sure the Hon Dr Michael Cullen would have been very comfortable and happy to accept Gordon Copeland’s Supplementary Order Paper amendments that proposed a taxation threshold adjustment to benefit hard-working New Zealanders. Today in about 15 minutes’ time a vote will be taken and I think United Future members will have to take responsibility for denying hard-working New Zealanders a well-deserved tax cut. 
After that United Future went on to say— 
Gordon Copeland 
: We support tax cuts for crying out loud. 
PANSY WONG 
: Oh United Future supports tax cuts but it would not support that move by voting against this legislation which supports high tax rates. I am so glad to hear that United Future member yelling out to the public that his party supports tax cuts. Well it is simple to demonstrate that. In 15 minutes’ time we shall all watch the way that United Future members cast their votes. 
Hon David Carter 
: It must be tough being a doormat! 
PANSY WONG 
: I presume day in and day out United Future members are just waiting for somebody to walk all over them. 
The Hon Dr Michael Cullen must be smiling in his dreams. He has been successful. His spin is that he is a fiscally responsible Minister that he is very tight in his spending and that he somehow is very responsible. It works very well on only the Labour MPs. After we had pointed out that the Labour Government is rolling in a surplus of $6.7 billion and is raking in $34 billion from tax Lynne Pillay said: “That’s what makes a good Government.”—taxing people in order to be rolling in a surplus. Then the Hon David Cunliffe told us that this legislation was no big deal that it was only a mechanism to enable more money to roll in for this tax-and-spend Labour Government. The Hon Dr Michael Cullen has obviously been very successful in conning his own caucus colleagues. 
The other thing I wanted to point out about the Green Party is that Rod Donald complained that the Labour Government’s Working for Families package was not being promoted. I do not know where he has been. Can members guess how many millions of dollars in the Budget will be spent on promoting the Working for Families package? 
Hon David Carter 
: $21 million. 
PANSY WONG 
: My colleague got it in one go. I also want to share with the public that I found out that the Inland Revenue Department has $8 million in its budget for promotion. When I asked the department how it would spend that money it said that it did not have much idea of how to spend it that it did not know where to target the money—whether on print media radio or whatever. It did not have a clue. The Inland Revenue Department was just handed $8 million. That is the department that tells people not to worry and that it is there to look after taxpayers. The department has $8 million that it does not know how to spend. I am sure the advertising consultancies will be queuing up in front of it to get their hands on that money. 
National is totally opposed to this legislation not only because it confirms the high tax rates which are not fair but because the Hon Dr Michael Cullen continues to refuse to tell the public when will be the right time to cut tax rates. He raised expectations by saying that he would not rule out a tax cut when the timing was right. He continues to say that the economy is doing well—despite may I remind the public this Labour Government—yet it still is not the right time. When will Labour ever find that the time is right to reduce tax rates for hard-working New Zealanders? 
We are also against the legislation because Labour has brought in a lot of provisions that fall into the category of feel-good provisions but have no substance. Once again we would like to point out that the venture capital mechanism is nothing but words on paper. Submitter after submitter said to the select committee that it would not work until work had been done on allowing a limited partnership mechanism and that the New Zealand Parliament needed to recognise that further amendments needed to be brought in to allow investors from countries other than those on the “grey list” to have the same advantage in terms of the distribution of capital profit not being taxable. 
The third part is to do with closing loopholes such as the Australian unit trusts. I pointed out in the Committee stage that getting Inland Revenue Department officials to go on a witch-hunt to close loopholes was a waste of time when the problem was glaring us in the face. When the Labour Government continues to hold up high tax rates investors and tax consultants will continue to look for mechanisms for loopholes to gain an advantage for themselves or their clients. If the Labour Government simply did the sensible thing and brought down both personal and company tax rates it would find that Government departments such as the Inland Revenue Department and Treasury could spend time on more constructive areas and could really reflect the statements that continue to be made by Labour about it encouraging growth and enterprise. 
JANET MACKEY (Labour—East Coast) 
: 
 Hearing National Party members talk about hard-working New Zealand families sort of sends a shiver down one’s spine. It is a little bit like hearing the Grinch talk about Christmas especially as those members are from a party whose leader within hours of being elected leader of the National Party announced on television that his personal commitment was to reduce the tax burden on high-income New Zealanders. This is another excellent piece of legislation from this Government. It is targeted at reducing compliance costs for business in New Zealand and at making business easier for those people who are keeping our economy ticking over. I am very happy to support it. 
JILL PETTIS (Labour—Whanganui) 
: 
 One of the rich ironies of the debate this afternoon is that the Opposition right-wing parties of National and ACT have been going on for years and years about how they are the party that is friendly towards business. This bill is very business friendly and very helpful towards business in a wide range of ways. I am very pleased to support this bill. This Government is very supportive of large small and medium-sized businesses. This is a good bill that will help them. 
A party vote was called for on the question  
That the Taxation (Venture Capital and Miscellaneous Provisions) Bill be now read a third time. 
Ayes 61 
New Zealand Labour 51; United Future 8; Progressive 2. 
Noes 59 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Green Party 9; Maori Party 1. 
Bill read a third time. 
A party vote was called for on the question  
That the Taxation (Annual Rates of Income Tax 2004-05) be now read a third time. 
Ayes 61 
New Zealand Labour 51; United Future 8; Progressive 2. 
Noes 59 
New Zealand National 27; New Zealand First 13; ACT New Zealand 9; Green Party 9; Maori Party 1. 
Bill read a third time. 
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. 
Sitting suspended from 12 midnight to 9 a.m. (Thursday)