Volume 678 Week 5 - Tuesday 6 March 2012 
Text is incorporated into the Bound Volume 
Volume 678 Week 5 - Tuesday 6 March 2012 
[Volume:678;Page:801] 
Tuesday 6 March 2012 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Questions to Ministers 
Government Financial Position—Financial Statements for 7 Months Ended 31 January 2012 
1. 
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister of Finance 
: What reports has he received on the Government’s financial position? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Treasury today issued the Government’s financial statements for the 7 months ended 31 January. They show core Crown tax revenue was $946 million below the pre-election update. Total revenue was $1.4 billion lower offset by lower core Crown expenses of $1.2 billion. This has led to the operating balance before gains and losses being about $470 million below forecast. These numbers include recognising the expenses of the severe earthquake in Christchurch on 23 December. 
David Bennett 
: What implications do the monthly accounts have for the Government’s commitment to get its finances back in shape and return to Budget surplus in 2014-15? 
Hon BILL ENGLISH 
: Generally monthly accounts do not make much difference because the numbers fluctuate often over timing issues. However the lower tax revenue in the last monthly accounts is consistent with probably collecting less tax in this financial year than was expected in the pre-election update. This reinforces the need for the Government to stay disciplined with its spending and to stick to its plan to get back to surplus by 2014-15 so we can start dealing with debt which will rise from net debt at the end of 2008 of about $8 billion to a peak in 3 years’ time of around $70 billion. 
David Bennett 
: Why is it important to get back into surplus and start repaying debt? 
Hon BILL ENGLISH 
: The Government has just got to follow the same processes as many households businesses and other organisations. Through the tougher times we had been running up debt. As the economy picks up and our outlook improves we need to tighten up to save more—as New Zealand households are—and to start repaying that debt. As we have been saying for some time that is going to be quite a challenge over the next few years particularly to keep delivering good public services and improving them at the same time as spending the same or less money. 
David Bennett 
: What steps has the Government taken to responsibly manage its finances and reduce the build-up in debt? 
Hon BILL ENGLISH 
: We have set aside the Canterbury Earthquake Recovery Fund of $5.5 billion to make sure that there is a strong commitment to the rebuilding of Christchurch but that there is not a blank cheque from the taxpayer for that rebuild. We have also over the last 3 years reprioritised about $9 billion of low priority spending to more important more effective services and we have prepared the Public Service to change the way that it delivers services over the next few years. We have also committed to selling minority stakes in some State-owned enterprises which will raise between $5 billion and $7 billion over the next 3 to 5 years which will avoid the need to go to overseas lenders and borrow even more money than we already are. 
Hon David Parker 
: Is the Minister more proud of the worsening Government deficit which at $12 billion for the year is worse than was predicted in the Pre-election Economic and Fiscal Update or the widening current account deficit which leads to more overseas debt and more asset sales to foreigners? 
Hon BILL ENGLISH 
: I am proud of the way that the John Key - led Government has found its way through some very difficult circumstances. We have not overreacted to the sharp recession we have maintained public services and support for New Zealand’s most vulnerable but at the same time we have put in place the plans to get on top of our fast-rising debt. As I said before net debt in 2008 was about $8 billion it is currently around $50 billion and it will rise by a further $20 billion over the next 3 or 4 years. That is fast enough. 
Hon David Parker 
: Which is the worst testament of his Government’s management of the economy: the increase in the Government deficit to $12 billion or the widening current account deficit which leads to more overseas debt and more asset sales to foreigners every year? 
Hon BILL ENGLISH 
: The worst testament would be if we had adopted some of that member’s policies on the way through but we did not. 
State-owned Energy Companies Sales—Mixed-ownership Model 
2. 
DAVID SHEARER (Leader of the Opposition) 
 to the  
Prime Minister 
: Does he stand by all his statements on the sale of State-owned assets? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 Yes and in particular I stand by my statement that opponents of the mixed-ownership model need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders. 
David Shearer 
: Which provisions in the Mixed Ownership Model Bill meet his commitment that “mum and dad will be at the front of the queue …”? 
Rt Hon JOHN KEY 
: That is not necessarily in the legislation because the Government has complete control of the book-building process. That has been the clear instruction to the investment bankers. I know why that member is asking that question. This is the reason: because he knows that it will be incredibly popular with— 
Mr SPEAKER 
: Order! The question was a perfectly fair question and did not deserve that last part of the answer. 
Chris Hipkins 
: He hasn’t answered it. 
Mr SPEAKER 
: Order! We will come back to that member’s leader—the Leader of the Opposition—for a supplementary question. 
David Shearer 
: I raise a point of order Mr Speaker. I actually asked which provisions in the bill meet his commitment about mum and dad investors. 
Mr SPEAKER 
: I think in fairness—[ 
Interruption 
] Goodness me. I do not think we need some of these interjections when I am on my feet. What the right honourable Prime Minister said in his answer was that in his view the legislation did not require such provisions because the Crown had control over certain events. That was the way he answered and it was a perfectly reasonable answer to the question I think. The last part of the question was what I was unhappy with because the question was a perfectly fair question and did not deserve that last part of the answer. 
David Shearer 
: Does he stand by his commitment in the Television New Zealand leaders’ debate last year that the mixed-ownership model would have “85 to 90 percent of the entire company owned by New Zealanders. That is my commitment to them tonight as Prime Minister.”? 
Rt Hon JOHN KEY 
: Yes that is my expectation. 
David Shearer 
: Which provision in the bill gives effect to his commitment as Prime Minister to New Zealanders that 80 to 90 percent of State-owned enterprises being sold would remain in New Zealand hands? 
Rt Hon JOHN KEY 
: As I said that is not required because the book build is the important process; that is how you determine who gets the shares or not. I would note that there is a great deal of scepticism from the Opposition that New Zealanders will want to buy these shares despite the fact that they are actually sitting on $100 billion in deposits at the moment. Interestingly enough Port of Tauranga back in April 2008 had 66.5 percent of its shares owned by New Zealanders; today it is 70 percent. 
David Shearer 
: Is it correct that under the current provisions of the bill half a dozen foreign investors could legally purchase all the listed shares? 
Rt Hon JOHN KEY 
: No because the limit is 10 percent 6 times 10 is 60 and the Government is keeping 51 percent. 
Mr SPEAKER 
: Dr Russel Norman. [ 
Interruption 
] Order! Please both front benches I have called Dr Russel Norman and I want to hear his question. 
Dr Russel Norman 
: Which provisions of the legislation to establish the partially privatised companies will prevent those companies from selling individual major electricity-generating assets? 
Rt Hon JOHN KEY 
: Well there are no provisions that do that but to the best of my knowledge the last time that happened was under a Labour Government when there was a company 100 percent owned by the Government. It was called Southern Hydro and Labour flogged it off. 
David Shearer 
: Why does he believe he has a mandate to sell our assets given his clear promise to New Zealanders before the election that 85 to 90 percent of the ownership would remain in New Zealand hands yet this bill that his Government has tabled contains no provisions for that? 
Rt Hon JOHN KEY 
: Unlike the previous Labour Government which was not always transparent a National Government— 
Grant Robertson 
: I raise a point of order Mr Speaker. Although that question had some political loading in it I do not believe that starting an answer in the way he did fits with the rulings that you have previously given. 
Mr SPEAKER 
: I think it is a fair point. It would be helpful if the Prime Minister did not start the answer that way. But I think the member has acknowledged that there was a bit of political loading in the question and so some political content in the answer can be expected. I ask the Prime Minister to maybe not start the answer that way please. 
Rt Hon JOHN KEY 
: In January of 2011 I gave a speech outlining clearly the Government’s intention in relation to the mixed-ownership model. We then went through the course of all of 2011 and the then Labour Opposition raised the question of a mixed-ownership model during that year. We then had an election where the entire Labour Party campaign was “Don’t sell assets” under Phil Goff. To the best of my knowledge the Labour Party campaigning against the mixed-ownership model delivered the worst result in Labour’s history. By the way votes for the National Party which campaigned for mixed ownership went up. 
Dr Russel Norman 
: Does the Prime Minister accept—[ 
Interruption 
] 
Mr SPEAKER 
: Order! I want to hear Dr Russel Norman’s question. 
Dr Russel Norman 
: Thank you Mr Speaker. Does the Prime Minister accept that election campaigns are fought on a multitude of issues that parties win or lose votes on a multitude of issues and that every poll done on this specific issue shows that the majority of New Zealanders do not support the plan to partially privatise the assets? 
Rt Hon JOHN KEY 
: I accept that voters’ votes are for a variety of different reasons. I think voters who voted for National in the last campaign did so because they knew that we could manage the economy better than Labour and the Greens they knew that we would have a better jobs programme than Labour and the Greens they knew that we would run the health system better than Labour and the Greens they knew that we would run the police force better than Labour and the Greens and they knew that we would look after education services and demand standards better than Labour and the Greens. So I accept that there is a multitude of reasons but you would have to say election 2011 was very much on the mixed-ownership model and on that basis more people voted for National than in the previous election. 
Rt Hon Winston Peters 
: If the Maori Party is against these sales and if the United Future party campaigned in its television and other advertising on water being sacrosanct and kept in the hands of the public where does he get his majority from? 
Rt Hon JOHN KEY 
: We get that from the parliamentary majority: 59 plus 1 plus 1 equals 61. But there have been a variety of times in our history when we have looked at selling assets under the mixed-ownership model. For instance in 1998 here is the prospectus for Auckland Airport signed off by the then Deputy Prime Minister and Treasurer the Rt Hon Winston Peters who sold Auckland Airport and who in 2008 campaigned— 
Mr SPEAKER 
: Order! 
Dr Russel Norman 
: Mr Speaker—[ 
Interruption 
] 
Mr SPEAKER 
: Order! I want to hear Dr Russel Norman’s question. 
Dr Russel Norman 
: Thank you Mr Speaker. Does the Prime Minister accept that the polls that have been done which show 60-plus percent opposition to his partial privatisation plans are accurate or does he believe that there is some mistake and he actually has a mandate for his privatisation plans? 
Rt Hon JOHN KEY 
: I think there is a difference between an electoral mandate and what a poll might say. I accept that on a variety of different issues there are strongly held views. I remember the Green Party being strongly in favour of changes to the smacking legislation in New Zealand and the polls being vehemently opposed to that change. 
Dr Russel Norman 
: Mr Speaker—[ 
Interruption 
] 
Mr SPEAKER 
: Order! I want to hear the supplementary question. 
Dr Russel Norman 
: Thank you Mr Speaker. Does he believe that it is short-sighted to deal with the Government’s current Budget issues—in part of the Government’s own making—by privatising assets that have been built up by generations of New Zealanders and that this Government is just a guardian of before passing them on to the next generation? 
Rt Hon JOHN KEY 
: No. The mixed-ownership model is there for a variety of extremely sound reasons. For a start-off it is to give New Zealanders an opportunity to have some quality assets to invest in. This is actually what opponents of the mixed-ownership model are saying: they are saying it is OK for the New Zealand Superannuation Fund to be the custodian of $17 billion worth of New Zealanders’ assets and to invest in just about every single Australian energy company but it is not to be allowed to invest in New Zealand energy companies with the exception of Contact Energy. Secondly the Government wants to expand the balance sheet not contract the balance sheet and in 5 years’ time we will have $22 billion more of assets. Thirdly I do not know whether the member watches TV but if he does he will see countries that are highly indebted like Greece and realise that that is not the right way to be going. 
Rt Hon Winston Peters 
: I seek to table two reports. One is to do with Auckland Airport which National sought to sell to foreigners and we forced— 
Mr SPEAKER 
: Order! The member will resume his seat for the moment. The member must identify the source of the document before describing what is in it. 
Rt Hon Winston Peters 
: Mr Speaker can I ask you: is it not the rule that you can before the close of day provide the evidence? And this evidence is the  
New Zealand Herald  
of that time. 
Mr SPEAKER 
: That is quite correct. The member would have until the close of today’s sitting day to table the documents if the House were to grant leave but before members describe the contents of a document they are to describe the source in case the source is not the kind of source of documents we put before the House. So the member is perfectly at liberty to seek leave but we must know the source of the document first. 
Rt Hon Winston Peters 
: The source of the document is the  
New Zealand Herald  
the day after the sale. 
Mr SPEAKER 
: No. We do not table newspaper clippings. 
Freshwater Management—Fresh Start for Fresh Water Funding 
3. 
JACQUI DEAN (National—Waitaki) 
 to the  
Minister for the Environment 
: How much funding has the Government committed to the Fresh Start for Fresh Water clean-up fund for the projects announced at the Bluegreens Forum at the weekend for the Manawatu River and the Wairarapa Wainono and Waituna Lagoons? 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 The Prime Minister announced funding on Saturday totalling nearly $8 million made up of $5.2 million for the Manawatu River $1 million for the Wairarapa lakes $800000 for the Wainono Lagoon in the member’s electorate and $785000 for the Waituna Lagoon clean-up in Southland. This brings clean-up funding for our first 4 years in Government to a total of $101 million as compared with $17 million for the preceding 4 years under the previous Government. That is a six-fold increase and it shows the level of commitment this Government has to clean water in New Zealand. 
Ian McKelvie 
: What reports has the Minister received on actual impacts on water quality arising from the Government’s clean-up programme? 
Hon Dr NICK SMITH 
: The most dramatic improvements we have seen have been in the Rotorua electorate with the Lake Rotoiti scheme. Its measured eutrophic levels have reduced— 
Hon David Cunliffe 
: Whose decision was that? Labour’s decision. 
Hon Dr NICK SMITH 
: Who provided the funding? That is what speaks I would say to the member who is interjecting and this Government has committed more money to freshwater clean-ups than in the history of New Zealand. We have seen stunning results with Lake Rotoiti being the cleanest it has been in decades and that is the sort of result we want to extend to the other seven programmes we have under way. 
Foreign Affairs and Trade Ministry—Job Cuts and Operational Savings 
4. 
DAVID SHEARER (Leader of the Opposition) 
 to the  
Prime Minister 
: Does he stand by all his recent statements? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 Yes especially the one I said to my wife when I told her I loved her. 
David Shearer 
: Supplementary—[ 
Interruption 
] 
Mr SPEAKER 
: Order! I want to hear the supplementary question. [ 
Interruption 
] Order! I am on my feet. Ministers would be wise to recollect that if they include material in their answers they can be questioned on it. 
David Shearer 
: Does he stand by his statement yesterday in relation to the disestablishment of a consul position in the New Zealand embassy in Cairo that no decisions have been made yet? 
Rt Hon JOHN KEY 
: Yes and that is why we are going through a consultation process. 
David Shearer 
: Does the new Ministry of Foreign Affairs and Trade structure disestablish the position of consul in the Cairo embassy? 
Rt Hon JOHN KEY 
: That is yet to be determined. 
David Shearer 
: I seek to table a document part of the Ministry of Foreign Affairs and Trade change document of 23 February this year which shows that the position in the Cairo embassy is now no longer there. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
David Shearer 
: Why is he not being upfront with New Zealanders and acknowledging that the role of consul in Cairo as with other similar positions overseas is being disestablished meaning that New Zealanders in difficulty will not have the guarantee of one of their own citizens protecting their interests? 
Rt Hon JOHN KEY 
: I think it is very important that the member understands what is happening. The Ministry of Foreign Affairs and Trade has put out there as he is well and truly or should be aware a document that looks at a proposed new structure. No final decisions have yet been made. The member knows that. 
David Shearer 
: Should there be a New Zealander on the ground in Cairo to perform consular duties currently undertaken by Barbara Welton or should New Zealanders be satisfied with an 0800 number patched through to Wellington? 
Rt Hon JOHN KEY 
: There will certainly be people on the ground in Cairo. For instance the ambassador will be there. We are not looking to close that operation. Secondly we do fly people in all the time. The member will be aware if one just looks at Africa for instance how sparsely we are represented there and we fly people around those environments. When it comes to 0800 numbers Australia and Canada use 0800 numbers. The reason for that is it is so much more convenient for people to be able to get one source from which support can then be dispatched. 
Rt Hon Winston Peters 
: Have the events in Algeria in recent days involving a trained skilled and courageous diplomat caused the Prime Minister to have any change of heart over making such diplomats redundant and in some cases replacing them with National Party hacks? 
Rt Hon JOHN KEY 
: I reject the latter part of the member’s question. In terms of the former the Ministry of Foreign Affairs and Trade is going through a consultation process at the moment. What is true is that there will be changes—we do not know what those changes are yet—but it is also true that there needs to be a modernisation of the Ministry of Foreign Affairs and Trade. 
David Shearer 
: Will the jobs currently performed by the consul in Cairo continue to be performed by a New Zealander as he said was his expectation yesterday? 
Rt Hon JOHN KEY 
: It is my expectation that the ambassador would be a New Zealander. 
David Shearer 
: I raise a point of order Mr Speaker. [ 
Interruption 
] 
Mr SPEAKER 
: Order! This is a point of order. 
David Shearer 
: That was a very straight question. I actually specifically asked whether the current jobs will be performed by the consul in Cairo not by the ambassador. 
Hon Gerry Brownlee 
: That is not the question you asked. 
Mr SPEAKER 
: Order! 
Hon Gerry Brownlee 
: That is not the question you asked. Straighten yourself up. 
Mr SPEAKER 
: Order! I say to the Leader of the House that the Speaker does not need to be straightening himself up. It is a point of order being considered. 
Hon Gerry Brownlee 
: You always look pristine. My apologies. 
Mr SPEAKER 
: Goodness me we had better try to—[ 
Interruption 
] What I will do is invite the member to repeat his question because there is some dispute over the question and I did not hear that bit of it clearly myself. 
David Shearer 
: Will the jobs currently performed by the consul in Cairo continue to be performed by a New Zealander as he said was his expectation yesterday? 
Rt Hon JOHN KEY 
: That is yet to be determined by the head of the Ministry of Foreign Affairs and Trade. But as I said yesterday it is my expectation that New Zealanders will get the representation that they need. 
Mining—Review of New Zealand Minerals Royalty Rates 
5. 
CATHERINE DELAHUNTY (Green) 
 to the  
Minister of Energy and Resources 
: Will the Review of New Zealand Minerals Royalty Rates ensure that royalties are paid on all mines in New Zealand? 
Hon PHIL HEATLEY (Minister of Energy and Resources) 
: 
 The review will make sure that the returns that apply to new permits for Crown-owned minerals will provide Kiwis with a fair financial return from the development of their minerals and will be internationally competitive. I expect that permits that have already been awarded will remain subject to the rates that applied to them when they were awarded. 
Catherine Delahunty 
: Just to clarify is he saying he will continue to allow our largest mine company OceanaGold to dig up over $300 million a year worth of Crown-owned gold from its Macraes Mine in Otago without paying any royalties? 
Hon PHIL HEATLEY 
: The original Macraes Mine now pays a royalty following the expiration of its old mining licence. 
Catherine Delahunty 
: Will he continue to allow mining company Newmont Waihi Gold to pay no royalties on New Zealand’s third-largest mining operation the Martha Hill mine? 
Hon PHIL HEATLEY 
: That zero-royalty rate was negotiated under the previous Labour Government in 1987. I have no idea what was going through its mind. 
Catherine Delahunty 
: Given that Newmont Waihi Gold has paid no royalties on its opencast mines since 1987 will the Government use the review to address this anomaly before the proposed Martha Hill mine expands and progresses? 
Hon PHIL HEATLEY 
: Should there be an expansion to the Martha Hill mine then there will be a renegotiation of royalty rates. In regard to the first part of the question she would have to ask the Labour Government of 1987. 
Catherine Delahunty 
: Will the review look at the extremely low level of clean-up bonds for our largest mines given their potential for huge environmental and economic damage? 
Hon PHIL HEATLEY 
: I expect that under the review of the Crown Minerals Act we will be looking at the environment health and safety requirements the royalty regime and other matters that will ensure severe improvement in the management of mines going forward. 
Catherine Delahunty 
: Does he agree that the tiny Tui Mine which is costing the country more than $16 million to clean up shows that bonds where they exist must be increased to cover all potential costs to the taxpayer? 
Hon PHIL HEATLEY 
: That is a matter that I wish to see discussed through the review of the Crown Minerals Act. We will take on board all sensible suggestions and I am sure we will go forward with them. 
Catherine Delahunty 
: Supplementary question—or have I run out? 
Mr SPEAKER 
: I believe the member has had five. 
Catherine Delahunty 
: I seek leave to table the 20 largest mines their bonds— 
Mr SPEAKER 
: Order! The Parliamentary Library is the source of this document? 
Catherine Delahunty 
: It is. 
Mr SPEAKER 
: I thank the member. And the document is? 
Catherine Delahunty 
: It is the largest mines in New Zealand currently operating and their royalties and bonds. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
Broadband Ultra-fast—Roll-out to Schools 
6. 
COLIN KING (National—Kaikoura) 
 to the  
Minister for Communications and Information Technology 
: What progress has been made to improve access to broadband in New Zealand schools? 
Hon AMY ADAMS (Minister for Communications and Information Technology) 
: 
 Yesterday the Prime Minister the Minister of Education and I announced the roll-out of ultra-fast broadband to a further 693 schools throughout the country. This means that by July next year 410000 students at 1500 schools across New Zealand will have access to fibre under the $1.35 billion Ultra-fast Broadband Initiative or the $300 million Rural Broadband Initiative. This progress in schools alongside that being made in hospitals businesses and homes will see New Zealand becoming one of the most connected countries in the world. 
Colin King 
: What further progress can be expected for students and schools in their access to better broadband? 
Hon AMY ADAMS 
: In just a few years by the end of 2015 97.7 percent of schools and 99.9 percent of students will receive ultra-fast broadband enabling speeds of 100 megabits per second. The remaining schools in the most remote locations of New Zealand will receive a high-speed wireless or satellite connection. This is a game-changer for New Zealand schools and will fundamentally improve the way our children learn. 
State-owned Energy Companies Shares—Prioritisation of Individual New Zealand Buyers 
7. 
Hon CLAYTON COSGROVE (Labour) 
 to the  
Minister for State Owned Enterprises 
: Why is there no provision in the Government’s asset sales legislation to ensure preferential treatment for individual New Zealand buyers despite the Prime Minister’s promise that “Kiwi mums and dads will be at the front of the queue”? 
Hon TONY RYALL (Minister for State Owned Enterprises) 
: 
 There is no need to include any such provision in the legislation because the Government controls which types of buyers will get the shares. During the share allocation process the Government will ensure widespread New Zealand ownership such that 85 to 90 percent of shares will be held by New Zealand investors. 
Hon Clayton Cosgrove 
: So is the Minister asking this Parliament to vote for legislation that does not include any guarantee that mum and dad investors will have the first crack at the shares and asking the public to simply trust the Government when there is no mechanism to ensure Kiwis will be at the front of the queue and the Minister knows it? 
Hon TONY RYALL 
: The people of New Zealand know that this Government is determined to ensure widespread public ownership of these companies and we will achieve that through the share allocation process. The Government has made it clear that retail investors will be at the front of the queue. 
Hon Clayton Cosgrove 
: What specific provisions are there in his legislation to limit the number of shares that could be owned by foreigners in light of his concession last week that up to 30 percent of the shares sold would end up in overseas ownership? 
Hon TONY RYALL 
: If I was to reflect on what the member is saying last week we indicated for the Government’s shareholding that we are expecting that maybe 10 to 15 percent of the ultimate ownership would be held by foreign investors. And we are determined to make sure that there is strong widespread New Zealand involvement in these share floats. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. I asked the Minister what specific provisions there are in the legislation to limit the number of shares etc. It was a specific straight question—what specific provisions—and I got some gobbledegook about percentages— 
Mr SPEAKER 
: Order! The member was doing reasonably well until that point but I am afraid the point of order ran totally off the rails there. The member has asked that and the Minister has already answered that there were no specific provisions to do that. Keeping asking I do not think is going to change the answer a great deal. Does the member have a further supplementary question? 
Hon Clayton Cosgrove 
: Has the Minister seen the comments by Mr Dennis Barnes Chief Executive of Contact Energy who was reported today as saying that the return on electricity industry assets was “at a level that commercial investors shouldn’t continue to invest in” and does this reinforce the view of the vast majority of New Zealanders that selling State-owned enterprises to the private sector will result in increased power prices in order to gain increased returns? 
Hon TONY RYALL 
: There is no self-interest whatsoever in that comment from the chief executive of Contact Energy. What I would reflect is that while these companies were under 100 percent Government ownership under that party opposite electricity prices went up by 72 percent in a few years. I think that is crocodile tears from that member opposite. 
Exclusive Economic Zone and Continental Shelf (Environmental Concerns) Bill—Iwi Concerns 
8. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
 to the  
Minister for the Environment 
: Have Iwi Maori raised any issues with him about the proposals in the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill; if so what? 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 The bill is currently before the Local Government and Environment Committee. Approximately 18 iwi have made submissions on the bill and I have seen those submissions. They are strongly supportive of the Government putting in place a proper regime for protecting the exclusive economic zone but they also set out improvements that they would like to see made to the bill in regard to things like Treaty provisions. The Government also has a relationship agreement with iwi specifically on this issue an initiative that has been taken in response to representations by the Maori Party. The iwi involved are discussing issues on both the bill and the regulations that will flow from it. 
Te Ururoa Flavell 
: How will customary interests for Maori in the exclusive economic zone be recognised and protected when the only considerations for the Environmental Protection Authority are economic and environmental factors? 
Hon Dr NICK SMITH 
: There are two quite specific provisions of the bill. The first of those is clause 26 which again is a provision that comes from the advocacy of the Maori Party. It provides for a Maori advisory committee and it requires the Environmental Protection Authority to be informed from a Maori perspective of any applications in the exclusive economic zone. There is also a provision in clause 46 of the bill that states that the Environmental Protection Authority is required to notify iwi authorities customary marine title groups and protected customary rights groups directly of any applications within the exclusive economic zone.  
Te Ururoa Flavell 
: How does the Minister plan to prevent the further erosion of Maori rights over our moana throughout the process of granting mostly large multinational companies consents in the exclusive economic zone and continental shelf? 
Hon Dr NICK SMITH 
: The first point I would make is that currently anybody doing an activity in the exclusive economic zone or extended continental shelf does not require any sort of consent so to argue that there is some erosion I think is incorrect. What this bill is going to do is to require a proper process for those. In respect of the point about the companies that may be involved in using resources this is a country that needs more jobs and more exports. Maori have a strong interest in the growing economy and in ensuring that New Zealand takes up these opportunities—albeit in a way that is respectful of Maori and of the quite legitimate environmental interests. 
Foreign Affairs and Trade Ministry—Job Cuts and Operational Savings 
9. 
Hon PHIL GOFF (Labour—Mt Roskill) 
 to the  
Minister of Foreign Affairs 
: Why is the Government requiring the Ministry of Foreign Affairs and Trade to find operating savings and make cuts of $40 million a year? 
Hon CHRISTOPHER FINLAYSON (Minister for Treaty of Waitangi Negotiations) 
 on behalf of the Minister of Foreign Affairs: It is not. 
Hon Phil Goff 
: I seek leave of the House to table a page from this document which is the briefing to the incoming Minister—the undeleted aspect of the document that the Minister released. That sets out that operating savings of $40 million a year are being required by the Government contrary to what the Minister answered. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Hon Phil Goff 
: When the Minister is requiring savage cuts from his ministry why is he intending this week to spend $26000 to fly his delegation from Bangkok to Burma when a commercial flight would take the whole of the delegation for $6000 and is this his idea of leadership by example? 
Hon CHRISTOPHER FINLAYSON 
: The Minister is acting on the advice of the New Zealand Ambassador. The ambassador has provided that advice based on his own experience travelling in Burma. The ambassador’s note to the Minister’s office outlines the reasons for taking this particular mode of transport. The underlying bottom line is clear: if he is not able to take the charter he should not bother going. 
Hon Phil Goff 
: Is the justification of safety being the reason for this extravagant spending sustainable when the ministry’s own travel advisory for the area that the Minister intends to go to is the same as for Fiji where thousands of New Zealanders go each year without the protection and assistance that the Minister will get? 
Hon CHRISTOPHER FINLAYSON 
: It is not extravagant spending for the reasons I outlined in the previous question. 
Hon Phil Goff 
: If sacking 300 employees—nearly one in four of the ministry’s staff—achieves only half the cuts that the Government requires what further cuts does he intend to make to find the other $20 million that National wants? 
Hon CHRISTOPHER FINLAYSON 
: The underlying premise of the question is wrong. The Minister is not sacking anyone. There is a document out for consultation. He is keeping a very close eye on it and in due course decisions will be made. It would be helpful if the member focused on the facts rather than hyperbole. 
Hon Phil Goff 
: Is it correct that the secret ministry document that has been released to staff shows that he intends under this proposal to halve the number of staff in Cairo; if so is it not true that Mihi Puriri if she had got into the trouble that she is facing now over custody of her children was dealing under the proposed regime would not get the assistance that she got from Barbara Welton; she would have got an 0800 number and an Algerian contractor? 
Hon CHRISTOPHER FINLAYSON 
: Again the underlying premise of the question was wrong. There is no secret document. A document has gone out for consultation and one of the issues that arises is the nature of the consular advice that will be able to be provided in Cairo after the consultation has taken place. 
Hon Phil Goff 
: I seek leave to table page 305 from the ministry document showing that the number of staff in Cairo is intended to be halved. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Hon Phil Goff 
: Does he agree with the cable that he has received from his High Commissioner in Singapore who asks whether the intended 40 percent cut in New Zealand’s effort in Singapore in the document is in line with the Government’s goal of enhanced engagement with Singapore and ASEAN and agree that the Government’s action according to the high commissioner “is equivalent to a major reduction in our foreign policy effort”? 
Hon CHRISTOPHER FINLAYSON 
: The Minister has not had an opportunity to read that cable. He will give it his considered view and then answer the member accordingly. 
Auckland Council—Financial Management 
10. 
Rt Hon WINSTON PETERS (Leader—NZ First) 
 to the  
Minister of Local Government 
: Does he have confidence in the financial management of the Auckland Council? 
Hon Dr NICK SMITH (Minister of Local Government) 
: 
 As I advised the member last Thursday financial management of the Auckland Council is the responsibility of its elected mayor and council. I would again invite the member if he has concerns to directly raise them with the council or if he is dissatisfied with that response then to lay a complaint with the Auditor-General. 
Rt Hon Winston Peters 
: Has he received any reports in respect of section 32A of the Local Government (Auckland Council) Act of 2009 which enables the Minister to exercise the power in section 254 of the Local Government Act 2002 and in particular sections 254(2)(b) and (c) which relate to identifiable mismanagement of resources and a significant and identifiable deficiency in the management or decision-making processes of that local authority? 
Hon Dr NICK SMITH 
: There are in the Auckland Council reform transitional provisions but they are there as a last resort. For instance the Government is giving consideration to a transitional provision around the rating transition that Auckland is working its way through. Those transitional provisions were never intended to be about the day-to-day running of the Auckland Council which rightly rests with the mayor and council. 
Rt Hon Winston Peters 
: Has the Minister in respect of the last question received any reports that Deloitte acting as both supplier of services and auditor of them is in breach of section 254 of the 2002 Local Government Act? 
Hon Dr NICK SMITH 
: No. 
Rt Hon Winston Peters 
: Has the Minister received had communicated to him or requested any reports that Deloitte a supplier of services to the Auckland Council and its auditor contrary to section 254 of the 2002 Act has provided free overseas travel and gifts to the council’s chief financial officer commonly called Deloitte McKenzie? 
Hon Dr NICK SMITH 
: The employment of both the chief executive of the Auckland Council and its chief financial officer is the responsibility of the Auckland mayor and council and if the member has got concerns that there has been any financial impropriety— 
Rt Hon Winston Peters 
: I raise a point of order Mr Speaker. As you so delicately pointed out last week he is being asked whether he has got any reports and last week he received that report and he has to bring himself up to date. 
Mr SPEAKER 
: Order! The Rt Hon Winston Peters is correct. The Minister was asked whether he has received any reports on a certain issue and it would be helpful if the answer were to address that point in the question. 
Hon Dr NICK SMITH 
: To my knowledge no I have not had any reports drawn to my attention in regard to the issues the member raises. 
Youth Unemployment Limited Service Volunteers—Auckland Work Experience Initiative 
11. 
MELISSA LEE (National) 
 to the  
Minister for Social Development 
: How is Government working with the Auckland Council and the Auckland Chamber of Commerce to support young Aucklanders into employment opportunities? 
Hon PAULA BENNETT (Minister for Social Development) 
: 
 I am pleased to announce a joint initiative between the Auckland Council the Auckland chamber of commerce and the Ministry of Social Development which are working together to place Work and Income Limited Service Volunteer graduates in positions within Auckland Council departments council-controlled organisations and local businesses. This initiative is one that I think just makes perfect sense. So you are combining those graduates from the Limited Service Volunteer programme a pre-employment programme where they have gained the motivation and some of the skills then sealing that really by putting them into work experience. 
Melissa Lee 
: How many young Limited Service Volunteer graduates benefited from this joint initiative? 
Hon PAULA BENNETT 
: There will be 230 available places this year with the goal of working towards all Auckland-based Limited Service Volunteer graduates from Hobsonville over the next few years. I understand that the Auckland Council already has plans for a dozen young people to start this month with 50 placements over the first 3 months and up to 230 work experience places over the next 12 months. I certainly want to thank the work of the Auckland Council the Auckland chamber of commerce and of course my own ministry. 
Police Resourcing—Job Cuts and Operational Savings 
12. 
KRIS FAAFOI (Labour—Mana) 
 to the  
Minister of Police 
: Is it correct that “Police bosses are considering laying off staff and closing some stations in an effort to save $360 million over the next three years” as reported in the  
NZ Herald 
? 
Hon ANNE TOLLEY (Minister of Police) 
: 
 There is no savings target. However it is my expectation that the New Zealand Police like all other State sector agencies will manage within its budget. I have been clear with police that to continue their good work reducing crime we want to see increased front-line services. I am advised that the commissioner has no intention of losing front-line staff but is considering consolidating functions like finance and human resources. However this is still subject to review processes and consultation with staff. I am also advised that the commissioner is considering a range of options where improved mobility of front-line staff could provide a better service to communities but no decisions have been made. 
Kris Faafoi 
: Has she seen a proposal outlining Budget savings in the order of $360 million over the next 3 years; and if so does that proposal recommend laying off front-line staff the closure of police stations and reducing resourcing to police? 
Hon ANNE TOLLEY 
: Budget decisions of course are always announced on Budget day but I can assure the House that this Government has put 600 extra police on the front line. We have reduced crime and we have set a further target of a reduction in crime of 13 percent. The police are making important changes through Policing Excellence which will increase front-line police hours with a much greater emphasis on preventing crime— 
Mr SPEAKER 
: Order! I think I let the Minister go on a reasonable length of time because she said at the start of her answer that she was not going to talk about Budget proposals and then went on to give quite a further lengthy answer. 
Kris Faafoi 
: I raise a point of order Mr Speaker. My question pretty much clearly asked whether or not she had seen a proposal outlining what I had said in that supplementary question and I do not think I have had— 
Mr SPEAKER 
: Order! The Minister in fairness said that she was not going to discuss the Budget proposal and that Budget proposals are announced on a certain date and she was not gong to go down that track. So I think that was a fair answer to the question. 
Kris Faafoi 
: Can she commit to ensuring that the number of front-line police staff will not fall and that current police stations will not close as a result of Budget cuts due to be announced? 
Hon ANNE TOLLEY 
: What I can commit to this House is part of this Government’s policy is that front-line policing hours will increase that crime will reduce in our communities and that there will be fewer victims of crime. 
Kris Faafoi 
: I raise a point of order Mr Speaker. My supplementary question referred to ensuring that the number of front-line police officers would not fall not to front-line hours. 
Mr SPEAKER 
: Order! I think that is probably—I am not sure I heard the Minister answer it correctly. I think she said the front-line services would not be reduced. 
Hon Members 
: Hours. 
Mr SPEAKER 
: It was hours was it? But I think in fairness that is a reasonable answer to the question because obviously individuals work hours. I think it is a reasonable answer to that question. 
Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill 
In Committee 
Debate resumed from 15 February. 
The CHAIRPERSON (H V Ross Robertson) 
: The House is in Committee. Kia ora tatou no reira e te Whare e nga iwi e nga reo e nga hau e wha tena koutou tena koutou tena koutou katoa. Good afternoon honourable members. The House is in Committee for further consideration of the Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill and consideration of the Building Amendment Bill (No 3). Members we move first to the Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill and when we last considered this bill the Minister of Customs had moved Supplementary Order Paper 194 dividing the bill. For the sake of clarification I call on the Minister to move that motion again now. 
Hon MAURICE WILLIAMSON (Minister of Customs) 
: 
 I move  
That the Committee divide the bill into the Customs and Excise Amendment Bill and the Biosecurity Amendment Bill  
 pursuant to Supplementary Order Paper 194 
. 
The CHAIRPERSON (H V Ross Robertson) 
: The question is that the motion be agreed to. I will report this bill without amendment and so divided presently. Members we now move to the Building Amendment Bill— 
Chris Hipkins 
: I raise a point of order Mr Chairperson. I think you might have neglected to put the vote on that matter. The custom is that you ask whether members are in favour of or opposed to a question before you put it. 
The CHAIRPERSON (H V Ross Robertson) 
: I did move that the motion be agreed to. [ 
Interruption 
] I am sorry; I will move it then. All those in favour please say Aye. 
Hon Gerry Brownlee 
: Hold on you can’t have bad process. They either know the rules or they don’t. 
The CHAIRPERSON (H V Ross Robertson) 
: Order! I am on my feet. I am going from the transcript here. I accept that I made a misjudgment an error because I just said that the question is that the motion be agreed to. I should have also said “All those in favour please say Aye to the contrary No.” and I did not. All those in favour please say Aye to the contrary No. The Ayes have it. I will report this bill without amendment and so divided presently. 
Motion agreed to. 
Bill to be reported without amendment presently. 
Building Amendment Bill (No 3) 
In Committee 
Part 1 Amendments to principal Act 
Hon MAURICE WILLIAMSON (Minister for Building and Construction) 
: 
 I want to take just a brief call to outline what the Building Amendment Bill (No 3) is about and to address some concerns that were raised during the second reading after the bill had been reported back from the Local Government and Environment Committee. 
I think the most valid of the concerns raised by Labour at the time was that this is only a piece of what is required and that a more comprehensive and fuller bill should have been brought to the House. Can I say in starting that I actually agree with that. I think a more extensive bill covering a lot more issues would have been preferable. However the decision finally was taken to at least get those things done that we could do now and to get those things that would take a little bit of a while longer put on to a slower track which we are going to call the Building Amendment Bill (No 4). It is waiting for its first reading—it has already been introduced into this House. Yet even more work which I think is quite problematic is going to be brought in in another piece of legislation. So yes indeed this bill is only—and I emphasise only—part of the total picture. The hardest part which I am very strongly of the belief needs to be dealt to is the liability regime which underpins the building and construction sector. I actually do not think there is sense in maintaining the joint and several liability and I would love to see us move to proportionate liability. That is way more problematic than I first thought and the Government has now passed that piece of work on to the Law Commission and asked it to report back to us how we could implement it. 
But this bill the No. 3 bill is a building block for the entire Building Act reform. What this bit is about in a nutshell is to do with risk-based consenting and a whole risk-based approach to the way we build buildings rather than one size fits all. Up until this bill we have treated every one of the buildings built in this country in the same way. They have to have the same level of inspections and they have to have the same level of scrutiny put on them. So if you are building a very simple single-storey timber-framed two-bedroom almost gottage-type building you are up for the same levels of inspections and consenting processes as you would be if you as a builder were building a multi-storey extensive building with unusual materials. So this bill is about saying let us reduce the necessary level of red tape for the buildings that are at the lower end of the risk curve but maintain that level of scrutiny for the buildings that are at the high end or at the very high end. 
But you cannot make that change unless you can do something to acknowledge the skills of the practitioners doing the work. I know I have said it as a joke a number of times but I stand by it: up until this week all that an individual needed to do to be a builder in New Zealand was to have a cellphone a dog and a ute and you could easily go out and build a house and people did it all the time. Well that changed on 1 March 5 days ago. I know that it was 1 March because today is my birthday and it was 5 days ago that the law changed. From 1 March a person needs to be a licensed building practitioner to do what we call restricted building work. That is brought into effect by this legislation. We say that restricted building work is building work that is critical to the structural integrity or the weathertightness capacity of the building. So a builder will still be able to move the kitchen cupboards around in a building without being a licensed practitioner and still be able to do some renovations to wardrobes or the bathroom or whatever. But when it comes to the restricted building work on a new building—that is the structural integrity and the weathertightness aspects of a building—the practitioner will need to be a licensed practitioner just as we ask people flying our 737s which bring us to Wellington all the time to be licensed pilots and just as we ask our brain surgeons who are operating on a brain tumour in our heads to be qualified surgeons. 
I will not take too much longer; I just want to go through what this bill is about. So we have a risk-based consenting regime and we have got a regime that brings into effect licensed building practitioners. The first concern that was raised with me as Minister was: “If you make it that only licensed building practitioners can build then you will take away the ability of the do-it-yourselfer to build their own property.” Well no. There is an exemption for a do-it-yourselfer in this legislation. So somebody who does not want to have a licensed practitioner do it or to be supervised by one can build under very unique conditions. They will be allowed to build only once every 3 years. That is because examples from other jurisdictions like South Australia showed that a do-it-yourself exemption meant that people just built and sold built and sold built and sold and of course you were not then a do-it-yourselfer; you were in the marketplace. So we put in place that exemption. It will also be recorded against the property so that any future buyer will know. Under the buyer-beware regime of this country a buyer will say: “Well I don’t mind. I know the guy who built it. He’s a fantastic carpenter”—or whatever—“and I can live with it.” or “Boy I’m a bit worried about this. For that reason alone I think it’s got to have a discount on its price.” 
I look forward to detailing any of the specifics of Part 1 of the bill but I repeat that it is only a part of the bigger Building Act review—a building block. To those members who have a criticism of it for being only that I fully accept that but there is more to come. As members know there is a No. 4 bill already on the Order Paper to be read a first time and there will be another bill later this year. It will become the No. 1 bill because we will go to the new numbering. Secondly what I want to say to members of this House is that if they have any concerns about the sector they should go out and ask people in the sector whether they are in favour of it. I have talked to just about everybody: master builders certified builders the Building Industry Federation the Construction Industry Council PlaceMakers to Mitre 10 to Bunnings—you name it. I cannot find people who are opposed to it. They think this is stuff that was started under Labour under the good auspices of Shane Jones and what he was trying to do to the Building Act—and I give him some credit for that. This bill is just taking that work and bringing it to fulfilment. I look forward to the debate. 
PHIL TWYFORD (Labour—Te Atatu) 
: 
 We on this side of the Chamber thought long and hard when the Local Government and Environment Committee was preparing to report back to the House about how we would vote. It is really more in sorrow than in anger that we reported back that we would not be voting for the second reading of this Building Amendment Bill (No 3) and our position remains the same. The reason I make that comment is that as the Minister for Building and Construction has acknowledged there has been a high degree of cross-party commitment to the Building Act review process going back to the mid-2000s. Like the Minister I want to acknowledge my colleague Shane Jones and the efforts he made as the Minister to build a broadly supported process of review that moved us on from the 2004 Act in the direction of a lighter and more finely tuned and targeted regulatory framework for our construction industry that would deliver the outcomes we all want: safe healthy durable buildings and particularly safe healthy and durable houses for New Zealanders to live in. 
So we listened very carefully to the submissions to the select committee. It may be true that the Minister has been to Bunnings and Mitre 10 and everywhere else around the country and has asked them what they think of the bill but the submitters one after another including all the major industry bodies came to the select committee and expressed major reservations not about the Building Act review but about this bill. One after the other said this was an ill-advised piecemeal approach that actually threatened greater risk to the industry and the consumer than needed to be the case. They said that what was required under the principles of the Building Act review was a root and branch reform that dealt with issues of not only risk-based consenting but liability and consumer protection and that to advance as this bill does with a couple of very specific aspects of the review without the accompanying measures dealing with liability and with consumer protection risked actually putting the consumer in a more vulnerable position. I do not think anybody in his or her right mind after the experience that this country has had with leaky buildings over the last 20 years wants to put the New Zealand consumer at more unnecessary risk. 
 The basic argument that we have heard tonight and I think we will tease it out in the course of this Committee stage is that one of the main things that this bill does is it sets out to more clearly define the responsibilities of the different players in a way that is basically a sort of guidance. But nevertheless it will undoubtedly be used as direction in future court cases as the law develops. This bill sets out to define the responsibilities of the builder of the consumer of the designer and of the building consent authorities. No one I think objects to that in itself. The thing is that what it does is circumscribe the current responsibilities and liabilities of the building consent authorities. Everybody knows that the defining feature of the construction industry in liability issues through the whole leaky homes saga has been that the councils which make up most of the building consent authorities are the only ones that have deep pockets and they have been left—and the ratepayer has been left—as the last man standing. In many many cases they have been the only source of any kind of redress or compensation for affected homeowners. 
The problem with scaling back the liability or responsibility of the councils as building consent authorities is who is left to step into the breach. Under the reallocation or the defining of responsibilities under new sections 14A to 14F in clause 10 of the bill there is no equivalent reapportionment of responsibility and liability to other partners. We heard a lot of considered opinion from submitters that the effect of sections 14A to 14F is to scale back the liability of the building consent authorities but there is no equivalent re-placement of responsibility and liability. Many of the industry bodies many of the practitioners and a lot of very wise heads in the industry came to us and said it was a mistake to go down this track of reducing the liability of the building consent authorities without properly embarking on consideration of a change from joint and several liability which is the legal status quo that we have in New Zealand. It means that a party can end up carrying the can for a much greater share of the liability than they would do if that liability was determined only by the share of their contribution to the actual construction project. And it is that principle that has meant that the last man standing whether it is a council or anyone else has often carried the can way in excess of their actual responsibility. A lot of people in the industry believe that and I was glad and interested to hear the Minister say that he would like to see the question of liability addressed and dealt with— 
Hon Maurice Williamson 
: No I wouldn’t. It is very hard. 
PHIL TWYFORD 
: —and to move away from joint and several. Well I heard the Minister say that he would like to see that happen. 
Hon Maurice Williamson 
: Yes I would; I just said it’s very hard. 
PHIL TWYFORD 
: He says it is very hard. Well that may be so but is it good lawmaking? Is it sensible stewardship of the New Zealand construction industry and the rights and the well-being of hundreds of thousands of New Zealanders who go down the track of building their own homes or having houses built? Is it right to subject them to a reduction in their protection and liability in the way that this bill does? That is what was meant by people who came to the committee and by us when we said with the Greens in our minority report that this bill is a piecemeal approach and the real risk is that it is the New Zealand consumer who will be disadvantaged. 
Labour is broadly in support of risk-based consenting. That is something that has been the subject of a great deal of discussion through this process and we will talk some more about that later in this debate. Enhancements to the licensed building practitioner scheme are welcome. But let me say this finally about the timing issue and the criticism that this bill is piecemeal: the reason that this bill is being rushed through the House right now in piecemeal form—the reason it is being rushed through—is that it has to be there because the licensed building practitioner scheme kicks in in March this year. 
Hon Clayton Cosgrove 
: Who put that through? 
PHIL TWYFORD 
: Who put that through? Who put that in place? Whose responsibility is that? This House is being asked to now pass a highly deficient piecemeal bill because of a time frame that was put in place by this Government. It would have been much much better to have a more comprehensive approach—perhaps staged with the process broken up into bigger chunks. But what we are seeing here is a really imperfect and unfortunate piece of legislation. 
CHRIS AUCHINVOLE (National) 
: 
 It is always a pleasure to carry on from Phil Twyford because he is normally very considered and a pleasant member in the House. He puts things forward in a sensible appropriate way. On this occasion I appreciate the comments he has made about the Building Amendment Bill (No 3) but his sense of timing is not quite right. I realise that towards the end of the last Government it was difficult for Labour members always to be at every select committee meeting and Phil you missed the last meeting of the Local Government and Environment Committee. Indeed as you say a lot of the submitters did express concern over the very points that you have come up with but I thought actually that the member was there when we arranged at their request for the Construction Industry Council to meet with officials. We asked them to discuss with one another outcomes that would satisfy and overcome the concerns and indeed they did that. They did that with considerable success. So the concerns that Mr Twyford expressed so eloquently were in fact overcome in the view of all the participants. It was something of an achievement I felt but the officials have said that it was a very cordial meeting and they were able to address the concerns. 
This bill is indeed a building block one of a suite of bills that is going forward to bring the 2004 legislation up to the required standard for today. The legislation is largely supported by the industry that it is designed to affect. There has been a very good level of consultation and if I may I will make a sort of gratuitous remark towards our Minister Mr Williamson and say that these amendment bills were always a pleasure to receive at the select committee because they were well considered well drafted with good dialogue on either side. This is an industry that employs 1100—1070; sorry 171100—employees. 
Hon Maurice Williamson 
: That’s easy for you to say! 
CHRIS AUCHINVOLE 
: Thank you. I remember speaking to the chief executive of the Registered Master Builders Federation who had conducted a series of meetings throughout the country with his members and he said it is astonishing to behold them as they come along to meetings. They are normally in groups of three or five. They wear shorts and they are hard men physically. They are keen-minded people and they want to get on with the job and do it professionally and they are very considered. They are serious people and they view this seriously as well. 
We acknowledge too the work that was done by the previous Minister Shane Jones. A lot of work was done and this bill to a large extent complements it and brings it forward closer to completion. There are several aspects of it particularly four key changes. There is clearer accountability for building practitioners building consent authorities and consumers and this is nowhere better summarised than in a frequently repeated statement to the select committee which was that people should draw up plans to the building code and then builders should build to that plan. The difficulty emerges where the builder looks at a plan and thinks that perhaps he can do a variation on it or perhaps that it does not quite work out the way it has been prepared and he does his own initiative. Then indeed when planners are doing the planning for the design they should take into account the code. As long as those three sequences are followed there will not be a problem. 
The new building consent system is risk based and the Minister has spoken about that which spares me having to detail it any further. The code of ethics for licensed building practitioners is to encourage professional behaviour. Occasionally we have gone through a very difficult period in building and it will be good to have the code of ethics established and to have recognised levels of professional skills. In terms of the do-it-yourselfer I recently attended the New Zealander of the Year and listened to an address from a previously elected New Zealander of the Year. He talked about building his own house and how it was one of the larger achievements of his life and said that he regretted that that was not a possibility for people nowadays. Well this bill goes some way to lift the exemptions from people doing that which will be useful. 
Hon ANNETTE KING (Labour—Rongotai) 
: 
 It is always a pleasure to follow the ex - member of Parliament for West Coast - Tasman. He talked today about this bill the Building Amendment Bill (No 3) being a building block and I have to say to the member that you cannot build a strong house when you have got a few blocks missing. In fact you are likely to have a weakened house. You are likely to have a house that is a bit suspect and you are likely to have one that will collapse at some stage in the future when the pressure comes on. That is one of the reasons why Labour will not support this bill from this point on. 
We did support its referral to the Local Government and Environment Committee. We of course were in broad agreement with the direction of the Building Act review because after all the Building Act review took place under a previous Labour Government. We put out a discussion document entitled  
Proposal for an 
owner builder exemption to the restricted building work regime 
. It was released in June 2008. We had submissions and it was closed in August 2008. I think a lot of this work was actually done by Clayton Cosgrove and Shane Jones in their time; they know a lot about it. 
But what we are worried about is that this bill as it comes back is not a comprehensive bill. It is a piecemeal higgledy-piggledy bill. It has certainly got some elements in it that we would support but it is not what was expected when the review took place. I often think of something that my mother used to say to me: “If you’re going to do something do it right first time.” Minister I know how much you do care about getting things right in the building industry. I have dealt with you over leaky buildings. I have dealt with the Minister for Building and Construction over leaky buildings and I know from conversations we had about my own constituents that the Minister was really keen to get it right in terms of trying to fix a problem that arose from the 1990s when we did not get it right in terms of the building code. I commend the Minister for that—for making a genuine effort to get it right. Having learnt our lessons from that time why not have a comprehensive bill that covers the issues that came out of that review rather than take parts of it? Of course it was from the submissions that my colleagues became very concerned that we were not taking the right approach. I follow on from Phil Twyford who said that what we really do want is to ensure that we have safe and healthy houses and we do not unnecessarily put consumers at risk again. 
We also think it is unwise Minister and risky at this time to have a piecemeal piece of legislation and measures when the industry is facing a surge in demand from the rebuilding of Christchurch the repair of leaky buildings the huge skills deficit we have and the uncertainty as to whether there will be sufficient builders even entering the new building scheme. I am sure Minister that like me you read the briefing to the incoming Government from the Construction Development Alliance. There was something that stood out to me in that briefing to the Government. It said: “Since the peak of the property boom there is as many as 25000 jobs have been lost in construction with over 750 of the sector’s workers leaving New Zealand for Australia and other countries in March 2011 year alone and there is strong fears that the sector is going to struggle to meet the construction of Canterbury alone.” So we believe it is risky at this stage and unwise to legislate in this piecemeal way. 
Minister we are saying you should relook at it. Send it back as the submitters said. Withdraw the bill. Bring it back to the House with a comprehensive package of reforms. I know that the Minister will be reluctant to do that but he does want to make progress. Of course many members in this House would want to make progress on this very important area but Minister get it right: do it once do it well and ensure that we get the best piece of legislation possible. By doing that we will not go through the errors that we made in the past with such legislation. We will not leave big loopholes and problems for the future. I think it is fair to say that no members of the House want to put consumers at risk. We do want the best possible legislation. As I said do it once do it right. If it is worth doing get it right. 
HOLLY WALKER (Green) 
: 
 Tena koe Mr Chair. Tena koutou e te Whare. I am pleased to take a call on Part 1 of the Building Amendment Bill (No 3). It is my first call as the Green Party spokesperson on housing and the first of many in this area I hope. I would just like to begin by addressing the context for Part 1 of this bill and it is fair to say that the context for this bill is that we have a crisis in housing in New Zealand. It is both a crisis in the affordability of housing and a crisis in the availability of housing. The amendments that this bill makes to the Building Act are relevant to how we are going to address that crisis of affordability and availability. 
On the affordability side I think we have a situation where homeownership and indeed the privilege of being able to build one’s own home is a distant dream for more and more New Zealanders particularly those New Zealanders of my generation who are starting families and looking for the security and stability that often comes along with homeownership but finding that it is out of their reach. We have a housing affordability crisis especially in Auckland. I note that new figures from Statistics New Zealand prepared for the Auckland Council show that up to 85000 households in Auckland are currently paying unaffordable rents. That is partly a consequence of the unaffordability of homeownership as well. So that is 85000 households who are in what we would describe as housing stress and that is when you are obliged to spend more than 30 percent of your income on your housing costs on your rent or your mortgage. Statistics New Zealand estimates that 45 percent of Auckland households are in this state of housing stress and pay more than 30 percent of their income on rent or mortgage. So it is extremely problematic. 
On the other side of the coin we have a crisis of housing availability. We have over 10000 people on the Housing New Zealand Corporation’s waiting list yet we have a narrowing of the priorities of who is considered for social housing. We have a Government talking the talk on expanding the social housing unit within the Department of Building and Housing but no action yet and some concern about the direction that that is going when we have an extreme need to increase the availability of social housing in New Zealand. We have the absurd decision of the Housing New Zealand Corporation not to see its clients in person any more despite this crisis of housing availability and the long waiting lists that they face. We have Housing New Zealand Corporation stock being demolished and not necessarily replaced to meet the needs of local communities. 
We have the Christchurch rebuild effort which we are facing. An estimated 10000 new homes need to be built and this legislation is very relevant to that effort. And we have an estimated 70000 homes required in Auckland in order to meet the housing availability crisis simply in Auckland alone. So I think it is fair to say that this bill and the context for the building of new homes that it sets is very important when we consider how we are going to deal with the crisis of affordability and availability in housing. 
Obviously building new dwellings is part of the solution to the crisis of affordability and availability and in that context the Green Party supported the Building Act review that was initiated by the last Labour Government. However like our colleagues from Labour we find that we cannot support this bill as a response to that Building Act review when it takes such a piecemeal approach. 
Our concern is that a major thrust of this bill is about loosening up regulation ostensibly to expedite the building of new dwellings but as we have learnt from the leaky homes crisis this is an extremely dangerous approach to take. I think it is important that in considering Part 1 of this bill and indeed the rest of the bill the Committee takes into account the conclusions of the Hunn report on leaky homes in 2002 which concluded that the deregulation of the building industry undertaken by the National Government in the 1990s represented a major systemic breakdown across the whole industry. Our view is very much that we must take an extremely cautious approach and ensure that this does not happen again. 
We note that there is another building amendment bill—the Building Amendment Bill (No 4)—on the Order Paper. I heard the Minister suggest that those recommendations from the Building Act review that are not covered in this bill will be covered in that one. So to that extent we tentatively support that and I understand that that bill will deal— 
Hon MAURICE WILLIAMSON (Minister for Building and Construction) 
: 
 Given this is a new Parliament and the first reading and subsequent select committee hearings were held under another Parliament there are a couple of points that I really think are worth making to members so they understand a little bit of the history. First of all it was a Labour Government in the late 1980s late 1989-90 that introduced the Building Act. It introduced it under Margaret Austin. She brought the bill into the Parliament. It went off to the select committee— 
Hon Lianne Dalziel 
: The Building Bill. 
Hon MAURICE WILLIAMSON 
: The Building Bill. Well the Building Bill became a Building Act. It was only short of its third reading by the time the 1990 election occurred. So straight after the 1990 election the National Government which had supported Labour’s bill put it through its third reading. So we need to be a little bit careful about blaming the National Government for that deregulation and the passing of that Act. It was a Labour bill introduced by a Labour Minister taken through a select committee while Labour was in Government brought back to the House and put through the Committee of the whole House under a Labour Government and only given its third reading by a National Government. 
So let us get that clear; and in fact I have got a number of great quotes from  
Hansard 
 where George Hawkins gets stuck into National MPs: “Don’t you try claiming credit for the Building Act—it was ours.” “It was ours” says George Hawkins; I have got the quotes if you want to see them. So George was on the rantan in the early 2000s claiming that that dreadful National Government had been trying to claim that the legislation had been its own. So I give acknowledgment to the Hon Margaret Austin and the Labour Government for bringing that bill in. 
The next one I have heard a number of members quite often refer to is the National Government’s decision to allow in untreated timber. So let us get that clear: the decision to allow kiln-dried timber and not make treated timber mandatory came nowhere near this building. It did not come to a Minister it did not come to a select committee it did not come to a member of Parliament. The decision was taken by an independent body called Standards New Zealand which a Minister has no direction over; and the two big timber companies Fletchers and Carters both lobbied Standards New Zealand for it to say that it would say that kiln-dried timber was an acceptable solution under the code that stood at the time. That is what it said— 
Hon Lianne Dalziel 
: Not for external walls. 
Hon MAURICE WILLIAMSON 
: Yes they did. That is what they asked for. If you read the report in 1995 the report is actually quite clear. It actually is all about borer and I find it amazing. If you want to have a read of it it is a really good read I say to Ms Dalziel; it will really inform your knowledge. It actually says: “Borer is no longer an issue and therefore we no longer need to treat this timber; kiln-dried timber will be an acceptable solution for all framing including exterior walls.” 
Hon Lianne Dalziel 
: No not for external walls. 
Hon MAURICE WILLIAMSON 
: Yes it does. So in 1995—I am happy to bet the member the best bottle of sauvignon blanc going on this one—kiln-dried timber became an acceptable solution under the building code for building buildings. It turned out that that was a disaster but I want members of this House to be very very careful of blaming any politician because I have heard it was Ministers that decided it I have heard it was the select committee that agreed to it and I have heard it was various MPs. I have even heard certain MPs who were not even related to the portfolio blamed for it me included who were not anything to do with the portfolio back then. But if you research history you will see Standards New Zealand had a subcommittee set up. That subcommittee in 1995 recommended that kiln-dried timber now be an acceptable solution under the building code and local authorities accepted that and from that point on we built buildings with kiln-dried timber—not always; some builders were a little bit more sort of— 
Hon Lianne Dalziel 
: Good builders didn’t do it. 
Hon MAURICE WILLIAMSON 
: Yes good builders I think made a decision they would not do that but others said they thought that because it was now acceptable under the building code as an acceptable solution they did it. We paid the price for a long time and there is going to be a huge bill for it but I just wanted to get members very clear on that. National did not pass the Building Bill it was a Labour bill and actually it was not any member of Parliament—anybody me included—who actually allowed kiln-dried timber as an acceptable solution. 
ANDREW WILLIAMS (NZ First) 
: 
 I rise on behalf of New Zealand First as the building and construction spokesman but can I just say that I have now seen probably the best half back in this House illustrate how you flick the ball on so quickly as not to take any responsibility for the appalling situation that occurred in the 1990s. All those who can recall the 1990s will know exactly what happened and in fact we could almost refer to the Minister as the “$20 Billion Man” because he was around in the 1990s as a Minister of Housing in those times when the start of the leaky housing— 
Hon Maurice Williamson 
: No I wasn’t. I was never a Minister of Housing. 
ANDREW WILLIAMS 
: Well you were a Minister of something at the time in a National Government when it was all approved—probably the Minister for Small Business. He started off as the “Minister of Large Business” but ended up as the Minister for Small Business. 
But it is an appalling situation that we are seeing the National Government basically walk away from its responsibilities. Again as the Minister just passed the ball it is trying to pass the ball on this bill as well this Building Amendment Bill (No 3). What it is trying to do is pass the responsibility and basically pass all care and no responsibility on to the building industry and the builders and on to the end consumers the homeowners and the people who will own the homes and basically take a lot of the responsibility away from the regulatory authorities—the local authorities the councils—and make sure that the builders are the ones who carry the can on everything. 
But as we know many of these builders might be a builder here today—they might be a registered company here today—but they might be worth only $100 and they could be in Queensland next month and gone or the building company might have closed down and reopened in 6 months’ time under a different name and disappeared. This is half the problem that has been going on with the leaky homes situation. So many of those builders from the 1990s and the early 2000s either simply do not exist any more as building entities or have disappeared and are no longer to be found. So as the honourable member Mr Twyford said earlier it was the councils who were the last man standing. They were the only ones who were left as entities with any money and they had to stand up and try to help solve the leaky building crisis created in the 1990s under a National Government. 
We have a situation now where under this bill we could have all sorts of jerry-builders being responsible for the end result. We could have a lowering of standards. Where do some of these builders come from? We do not know. In this country where are they actually coming from? Many of the builders of course were not necessarily brought up in our own building standards and compliance area of expertise. They may have undertaken their apprenticeships or their skills training in all sorts of environments of building. We do not know the answer to this question. The Minister is basically saying that whoever turns up and gets a licence to be a builder can just build it and take all responsibilities for these dwellings that are put up. But at the end of the day do we know where half of these builders come from? I have had alarming reports just in the last week or so from constituents in various parts of the country saying to me that they really do wonder where some of the builders that are popping up in some of our towns and cities around New Zealand today originate from in terms of their building skills. 
So are we going to see a  
Back to the Future 
 situation again? Are we going to see the repeat of the $20 billion leaky homes saga from the National Government in the 1990s? Are we going to see that all happen again in the next 5 to 10 years because this Minister said: “Oh we handled it all. We just put all the responsibility on to the builders. We put it all in their hands and into the hands of the end consumer because they were therefore going to be the ones who would sort out the whole industry and they would take responsibility.” only to find that in 5 years’ time half of those builders could well be putting their feet up on the beaches of Queensland or on the beaches of Fiji or any other place not to be found. Again who will be carrying the can? The taxpayers of New Zealand and the consumers of New Zealand. At the end of the day it will be the Government and local government in New Zealand that will again have to stump up for this situation. 
Hon SHANE JONES (Labour) 
: 
 It is with some disappointment that we are not able to fully support this Building Amendment Bill (No 3) but I want to give some credit to the Minister in the chair the Minister for Building and Construction. No. 1 he had both the vision and fortitude to carry on the work of the Hon Clayton Cosgrove and myself. But jokes aside this Minister did grasp the nettle of how we were going to meet the liabilities from the problem that lies beneath the text of this bill i.e. the problem in New Zealand of the production and completion of buildings largely for residential purposes that turned into aquariums. I would like to do something uncharacteristic and acknowledge that that Minister did some good work in that regard. 
 We have large issues confronting us in relation to Christchurch and the rebuilding of that area. So we are actually looking forward to learning what the additional regulations are that the construction sector is going to face in that particular rebuild quite apart from the necessity of it taking on board what is in this bill. What guided us was getting the balance between a suitable level of red tape and some liberty which is why my colleague Mr Cosgrove was adamant that we should not outlaw do-it-yourself building. He struck some difficulties in the minds of the officials at that time—but that is for another day and that is his story. 
One particular provision that is going to bedevil this House is what level of responsibility ought properly to lie with the consent authority given that the consent authorities have their own insurance woes? They have an insurance company known as Civic Assurance or words to that effect. They then are dealing with the fact that as I recall it when I was a Minister the global reinsurers of the world were unwilling to provide much more protection to the New Zealand building consent authorities and give them any more cover to deal with leaky building problems. So it is a balancing act. How much obligation should we leave with the consent authority; how much with me the owner; and how much with the builder the actual designer and the architect? I think as our minority report states we do not feel that the balance—and I must say I was not on the Local Government and Environment Committee at that stage—is appropriate. But there are other aspects simplifying the consent process. No. 2—ensuring that where a council dedicates a fair chunk of resource it is proportionate to the risk associated with the building that is being created. 
I would also say that a great deal of care and attention is going to be required in the development of the regulations because this piece of legislation actually sets up a new flow of obligations at a subsidiary level. I look forward to seeing those regulations which no doubt will come to the appropriate select committee because there is the ability in clause 42(1) for a building consent not to be required. 
I actually envisaged at some point in time as the licensed building practitioner cadre grew and their skills could be relied upon that for a growing amount of very simple work they could be treated like electricians—let us use electricians as an example—where you do not need to go to the super-city to get a permit to have an electrician come and fix your house. We have got to get somehow to a situation where we can treat a building practitioner or a carpenter in the same fashion. But the fears remain that such people could take us into a new phase of problems either in the rebuilding of Christchurch or a new phase of leaky homes etc. But I think that was the philosophy underlying what we thought we were doing in response to what was a significant problem although I would say we had a large number of building Ministers on this side of the House during the 9-year reign of our peerless leader Helen Clark. We look forward to such times returning at some point in the future—hopefully not too far away. 
The other thing I would point out is that there is an obligation on me the property owner. We have to get it right in so much of our economy: how do you set the obligation that rests with the State rests with the insurance industry and rests with the individual? 
JACQUI DEAN (National—Waitaki) 
: 
 Thank you Mr Chair— 
Hon Shane Jones 
: Who? 
JACQUI DEAN 
: Yes indeed that excellent member for Waitaki. 
Katrina Shanks 
: So modest. 
JACQUI DEAN 
: Yes and modest and also probably a little bit different from some of the members on the other side of the Chamber. I was dismayed by the previous two contributors Shane Jones and Andrew Williams who really showed the underlying ethic that runs through Labour certainly—well we are seeing it in the New Zealand First member too—which is that they do not actually value and trust builders. It is coming through quite clearly that they do not seem to believe that builders take pride in their work and in fact would respond to the provisions that this Government has brought forward in this Building Amendment Bill (No 3). I think that is a shame. I think that type of attitude that nobody knows any good except for the Government of the day prevailed very strongly during the term of the last Labour Government. In fact did not one Minister when Labour was putting through the real estate agents bill famously get up in the House and show how much high regard he had for real estate agents by calling them land sharks? 
Hon Clayton Cosgrove 
: It was me. Guilty guilty guilty! 
JACQUI DEAN 
: Clayton Cosgrove has just put his hand up and illustrated to the Committee once again that he is of that genre of MP who does not like business and cannot stand people who are self-employed. Speaking to the point of the bill I think what happens when you have 11—was it 11—Ministers for Building and Construction in how many years— 
Katrina Shanks 
: 9 years. 
JACQUI DEAN 
: Nine years. Well no wonder. No wonder the sector was in disarray. No wonder the regulations were all over the place. Nobody knew where they stood. How many members are there in the Chamber now? Not even 11. There would have been more people than that proudly calling themselves Minister for Building and Construction but at the same time running down builders whenever they could. If that is the flavour of the members opposite then long may Labour remain the Opposition. 
However this Government under this Minister has brought this excellent bill to the House—the Building Amendment Bill (No 3)—and there are some really good useful provisions in this bill. There are four key changes that are going to happen and I support them all because I think that what they do is provide clearer accountability for building practitioners a bit of certainty and the underlying idea that the building profession is a good profession. This bill will be responsible for building capability and capacity within the building profession. What is wrong with that? As a result of that it is certain that we will get construction that is built right first time. History shows us that when you do not value the building sector and you have 11 Ministers in 9 years everybody is all over the shop and does not know what is happening. So one of the major changes is that there will be very clear accountability for building practitioners for building consent authorities but also most important for consumers by making sure that work complies with the building code. What is wrong with that? Why can the Opposition not support that? It seems pretty clear and— 
Hon Amy Adams 
: Because they’re haters. 
JACQUI DEAN 
: Yes because Opposition members are haters. I know they are haters. They do not value builders they do not value real estate agents and they do not value many other people in society. They think they know best. The difference is this Government happens to think we should be empowering people to do a good job and that is what this bill intends to do. 
A new building consent system will be risk based in time. That means that the amount of checking and the amount of inspection is related to the risk of the work and to the complexity of the job and also of course related to the skills and capability of the people doing the work. One of the aspects of this bill that I particularly like relates to do-it-yourselfers—those people who enjoy getting out the tools on the weekend and knocking up a deck or a floor or something in the shed. This bill recognises that we are a nation of people who like to do do-it-yourself projects on the weekend. 
Katrina Shanks 
: It’s the Kiwi way of life. 
JACQUI DEAN 
: It is. Thank you to that member. It is the Kiwi way of life and there are a number of people who enjoy doing these projects. We do not want to stop that because a lot of people do good work. We do not want to stop it. They will be exempted from the restricted building work scheme. What that means is they will not have to employ licensed building practitioners to supervise their work or to carry out restricted building work. 
Hon CLAYTON COSGROVE (Labour) 
: 
 It is always I have got to say a pleasure following that member Jacqui Dean. Before I continue in the positive vein that my colleague and former Minister for Building and Construction Shane Jones led with can I just make a couple of comments about the member Jacqui Dean. That member’s policy which I am sure the Minister is aware of to solve the weathertightness problem was to ban—and this is in written form—hydrogen dioxide or H2O. That member’s claim to fame of course was to say things like: “We’re not borrowing to get the money; we’re just going to get it from overseas.” That is not actually relevant to the specifics of the Building Amendment Bill (No 3) but that shows you the level of intelligence we are dealing with over there. 
 Now to get to a person of substance in the Minister the Hon Maurice Williamson can I say this: the previous member made some comments about my stance about real estate agents and she is right. I believe as I think every member of the House believes that whatever occupation you are in you should stand by your work—OK? I think that when I was in the chair—and I think the member said there were 11 building and construction Ministers and counting; in fact I think the place is littered with the bodies and corpses of building and construction Ministers. Maurice Williamson said to me before that he thinks we should set up a parliamentary friendship group for ex - building and construction Ministers and I agree. We are a large alumni and a powerful lobby. But where this actually came from—and I do commend the Minister on the DIY issue—is that when I was in the chair— 
Jacqui Dean 
: Why did that member lose his seat? 
Hon CLAYTON COSGROVE 
: If the tumbleweed over there would just taihoa when I was in the chair as Minister—and I commend the Minister for what he did— 
Jacqui Dean 
: Mr Nasty. 
Hon CLAYTON COSGROVE 
: I am actually praising your Minister if you would just zip up. He has been waiting for weeks for me to say something nice about him. So the member should zip up and let me compliment the Minister. When I was in the chair—Mr Jones is right—when I was the Minister the officials at a very senior level I have to say took a view in my opinion that they wanted to cauterise all DIY work. But I took a view—and I am pleased that the Minister has found a way through it—that that was not going to happen. It was not going to happen and we threw out the anchors on it until there was a full and complete examination of this. We do support the tenure of this bill but we have had some comments about the piecemeal approach of it. Licensed building practitioners—that whole issue—stems back from a time when a certain Government abolished the Apprenticeship Act in 1995. 
Andrew Williams 
: What Government did that? 
Hon CLAYTON COSGROVE 
: That was not a Labour Government it was a National Government. I think the Minister in the chair at the time is now the Speaker. But putting that aside apprenticeships went and then the building industry was deregulated. The difficulty there—and I agree with Shane Jones and I think the Minister does—is that it would be nice to get to a point like with electricians where you could self-certify. I suspect the history of that—and Mr Williamson might be able to assist me—was that self-certification with tight regulations around that and the sort of visuality of that was because if you put the wire in the wrong hole you could get seriously dead bluntly whereas I think that in respect of building it is highly unlikely that a residential house unless it is built to such a disreputable standard will cause a fatality in that respect. I think actually if you look at the history of it that is where it came from. But I will go a step further. I recall saying to officials that it would be nice if once the transition through licensed building practitioners is complete you could get back to a time where you do not as a young person man or woman get entry into those trades unless you do an old-fashioned thing called an apprenticeship where you are trade-trained. 
I understand because I was part of bringing it in that there had to be a transitional period. Actually the builder who built my house who was third generation no trade certificate won building awards all over New Zealand. I would not want to see that guy go back and have to do an apprenticeship. He has proved himself through his work. He is the sort of old-fashioned guy who if your hinges are squeaking 5 years later he will come around at no charge with the oil can. I would not want to see that person going through a tirade of bureaucracy to prove what he has already that he is a competent builder. But I would like to see a time when we could go back as we have transitioned through that where if you as a young person want to get into the building trade or any trade you have to do an apprenticeship and we go back and make that compulsory. I would say that. 
I think it was a mistake to do away with apprenticeships and the resources around it. It was a mistake historically—and we have all made them—to say that anybody could pick up a tool belt even Jacqui Dean and call themselves a builder whip around to your house and say “I can build your home.” and then as a previous speaker said disappear to Queensland when it all goes wrong. So the regime that I think everybody wants is to allow DIY to progress in an orderly fashion but to say to people: “Look if you are outside your skill limit”—as I would be bluntly; I would not attempt half the stuff I would just get the trades guys around and get them to do it—“you should get licensed building practitioners in to do it.” but not to cauterise DIY. 
Debate interrupted. 
Voting 
Correction—Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill 
The CHAIRPERSON (H V Ross Robertson) 
: The last time the Committee considered the Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill the vote on the question on the provisions standing part was incorrectly announced as Ayes 119 and Noes 1. The correct result is Ayes 115 and Noes 1. The record will be corrected. 
Building Amendment Bill (No 3) 
In Committee 
Debate resumed. 
Part 1 Amendments to principal Act ( 
continued 
)  
HOLLY WALKER (Green) 
: 
 I will not take up much more of the Committee’s time. I just want to thank the Minister for Building and Construction for his clarification earlier and the history lesson about the deregulation of the building industry. We in the Green Party know that there was not much difference between National and Labour in those days but we would still echo the point I made earlier that it is important for this House to learn from the lesson of the leaky homes example and the experience of the former deregulation of the building industry no matter whose legislation it was. 
To finally conclude the remarks I was making earlier I was remarking that we recognise that there is another building amendment bill on the Order Paper—the Building Amendment Bill (No 4)—and acknowledge that that bill seeks to strengthen the consumer protections. We are tentatively encouraged by that and will be supporting that bill going to a select committee because we believe that consumer protections are very important in this industry. But I would like to comment that while it is important to protect consumers when things go wrong and to ensure that their rights are recognised if their builder does take off to Queensland and they are left with a faulty home it is even better to make sure that the regulations are sufficient to begin with and that safe long-lasting houses are built. For that reason after hearing the submissions in the select committee the Green Party found that we were unable to support this Building Amendment Bill (No 3)—Part 1 or any part. Thank you. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I too am grateful to the Minister for Building and Construction for traversing the history of the bill because of course he is absolutely correct. All of the preliminary work that led to the introduction of the Building Bill that passed as an Act in 1991 but which was a bill in 1990 was certainly done under a Labour Government. The reason that it came under the purview of the Minister of Internal Affairs was that in those days that was where our building industry regulatory framework sat. And that actually says a little bit about the history of where we came from and why we have got to the point we have got to today. I cannot find it in my heart of hearts to support this bill because it does not bring together some of the elements that others have talked about in terms of the need to take an overarching perspective on this legislation and not to regulate in this area in a piecemeal way because we have already paid a very very big price for doing that. 
I think what is also useful from the Minister’s comments is that he said that there were a number of people in this House who were not in the House when this bill had its first reading and was referred to the Local Government and Environment Committee which means that there is a lack of knowledge and understanding. I believe that that is actually quite widespread in this House and I want to urge this House to think very carefully about passing legislation in this area at the moment while today we have sitting in Christchurch the royal commission of inquiry into building. Today one of my own constituents was pleading for certain matters to be inquired into. At the end of the day I think it is really important that we learn the lessons that we are going to learn from that particular set of disasters and listen to some of the warnings that have been made year in year out ever since we did go down this track and we did go down this track together. 
I picked up the February version of the  
North and South 
 magazine and I assume that the Minister has read the article on the leaky building crisis. Although I was not a Minister for Building and Construction like everyone else on this side seems to have been I was the Minister of Commerce at the time we decided to rewrite the Building Act 1991 and I in fact was the Minister of Commerce at the time that we put a discussion document out to get feedback from the industry. Despite what some members of the Government have said we actually have respected the industry and worked with the industry in order to get a legislative framework that would actually meet the modern environment and the fact that a number of different products were coming on to the market without the adequate regulatory regime to support them. But where I disagree with the Minister is that it was not just the untreated timber that gave us the leaky building crisis and any builder worth his salt who understood about flashings and understood about the cavity systems that are required when putting monolithic cladding systems over the top of frames that were untreated will know that that was never the intention of the standard that was implemented at that time at the behest of the industry. And that is also a point that I think is worth noting—that the way standards have to essentially be paid for by the industry itself and that there is no public-good funding in order to get a standard established allowed a situation where monolithic cladding systems were able to be introduced into our country without an appropriate standard for their application. So there was a multiple layer of reasons that gave us this leaky building crisis but it is not the only crisis that they have given us. 
I just want to quote from an email that I got after an appearance on television a couple of weeks ago. He has been writing to Ministers year in year out for a number of years around the non-performance by territorial authorities over building control and the negligence and incompetence of practitioners within the discipline of building control—not the builders themselves but actually the supervision of the industry. He said: “The greatest of these tragedies has been the leaky house syndrome and now the devastation wreaked by ongoing earthquakes in Christchurch. Much smaller unreported yet no less tragic disasters are happening in people’s lives every day as a result of this culture that is endemic in our ‘she’ll be right’ nation. Every non-compliance that is left unrectified by a building inspector is a disaster waiting to happen in somebody’s life.” I think that is absolutely right. Every single non-compliance potentially can be the disaster that nobody expected to have. 
As I say I do not have the background in this that others have; I did not sit on the select committee. But when a bill says to me that we are shifting the responsibility a little bit away from the building consent authorities and a little bit towards the building owner I start to fear a mismatch of knowledge and a mismatch in terms of the responsibility. The major problem back in 1991 was that the market would essentially look after everyone but otherwise people would be able to look out for themselves. I do not know whether the Minister has read the  
North and South 
 article from February but it is an extremely worthwhile article and I would really recommend that he reads it. In fact I recommend that every member of this House reads this article because what it tells us is that we moved away from a more than adequate system of building regulation into something totally unknown. The fact that both National and Labour were guilty of moving into that unknown together does not make it any more right. 
I will quote from the article because it refers to Peter Mumford’s 2010 PhD thesis. He was the guy who was working within the Ministry of Economic Development on the building legislation the Building Act 2004 and he said: “Effectively New Zealand moved into an unknown future while burning its bridges to past practices.” And the article comments: “In other words the 1991 Building Act was a massive reckless nationwide social and economic experiment with a radically new and unproven building-control system for which the public will continue to pay dearly even though the public never asked for it.” We know that leaky buildings were still being built after the issues were exposed in the media and after we became the Government. It is actually only recently that some of the final issues have been closed off so that those buildings are not being built today. They go on to say that if the building code had been a building it would have been a leaker it was that full of holes and the biggest hole was the lack of accountability. That brings me directly on all fours to this bill—the shifting of accountability. If we are going to shift the accountability what price is somebody else going to pay for that decision sometime in the future? 
I actually am making a serious plea to the Minister that this bill ought to be deferred. There is time because there is another piece of legislation on the Order Paper that is going to go to a select committee and we will be happy as a caucus to support the Building Amendment Bill (No 4) going to a select committee. We would be more than happy to have these issues addressed within the context of that particular bill and I believe that as a result we would end up with stronger legislation. Because that royal commission is sitting in Christchurch right now and because we have paraded every day in our news media stories like that of an engineer breaking down in tears as he had to take responsibility for what he felt had led to the death of somebody we owe it to our constituents from one end of this country to the other to get building regulation right and that is why we are opposed to this bill. This bill is a piecemeal approach and bringing it back into the framework of the whole of the building review will go some way to give some assurance to the people of New Zealand who are looking to us for some leadership in this particular area. 
I do not like using the words “red tape” when I talk about this form of regulation. In fact sometimes the language actually takes away the real purpose. This is about protecting people’s health and safety and we have got to get it right. 
PHIL TWYFORD (Labour—Te Atatu) 
: 
 I want to go from the general to the specific and point interested listeners in the direction of sections 14B to 14F of the Building Amendment Bill (No 3) in clause 10 which set out the guidelines really. They are not “definitive and exhaustive” but “are for guidance only”. Nevertheless they are among the most relevant parts of the bill to many of the contributions we have heard this afternoon so far. 
I want to particularly draw attention to section 14F which sets out the responsibilities of a building consent authority. As we have been discussing this afternoon it is really the councils the building consent authorities that have carried the can for the giant lapses in responsibility and in quality that have afflicted the New Zealand building industry over the last couple of decades. What section 14F does is circumscribe the responsibilities of the building consent authorities. No longer are they directly and unambiguously responsible for code compliance. What the new provision does is set out a kind of two-step chain of responsibility. The building consent authorities will now be responsible for ensuring that “an application for a building consent complies with the building code”—so that the application complies—and secondly that the “building work has been carried out in accordance with the building consent …”. You could argue that there is indeed a chain of responsibility there but many commentators lawyers and industry professionals have said that this amounts to a significant circumscribing of the responsibility of the building consent authorities and will be seen that way by the courts as these cases are argued out. 
I want to read into the record some of the comments that were made by for example the Registered Master Builders Federation which on this question of the allocation of responsibilities told the select committee that other measures including warranties insurances and liability reform need to underpin the changes but they are not yet available or even certain to be available in future. It said the legislative push behind this bill “is getting too far ahead of the necessary regulations making it impossible to assess the system as a whole and its effects.” This was the Registered Master Builders Federation. It supported “the review of the current joint and several liability regime to investigate the introduction of some form of proportional liability accompanied by a warranty and surety scheme; this would ensure that any shift away from the council’s ‘deep pockets’ was balanced by the availability of recovery from the other liable parties.” That is the point we have been trying to make all afternoon expressed in a very persuasive way by the Registered Master Builders Federation. It also went on to say about the piecemeal quality of this bill that “Where one of the interdependent pieces such as the balancing of responsibilities is implemented without the others such as a warranty and surety scheme or proportionate liability the goals of the Building Act Review are in our view not likely to be achieved.” 
I also want to quote Bob de Leur who for my money is one of the wisest and most experienced guys around in this sector. He made what I thought was an excellent submission on behalf of the Auckland Council. He too expressed concern that this stage of the review does not include a move to a proportionate liability system. He said that “The continuation of a joint and several liability regime means that Councils will continue to be the ‘last man standing’ and carry the … risk …” in spite of the efforts of the bill to reallocate responsibility. He advocated that “A mandatory warranty system backed by insurance would ensure that other parties to the development would be held accountable to fix any defects.” 
Local Government New Zealand which represents almost all of the building consent authorities was strongly critical of the piecemeal nature of the reforms. It said that too much of the detail has been deferred for inclusion in regulation and it referred to the practical ineffectiveness of the provisions in the bill intended to signal a reallocation of accountabilities due to duty of care and hence residual liability across all consent categories and the penalty regime for low risk consents in particular. 
The last point I want to make is about the licensed building practitioner scheme about which I do not think there is a lot of controversy in the House. People accept that it is the right way to go. But the question that I am left with—and again many submitters raised this issue—is whether or not we will have sufficient numbers of appropriately skilled and experienced licensed building practitioners to implement what is expected of them under this bill. There have been real doubts about the whole process of certification of the licensed building practitioners over the last year or so. I ask the Minister for Building and Construction to take a call on this and say whether he is confident that given the demands on the New Zealand building industry and given the fact that the Christchurch rebuild is looming and everybody wants to get started on it we do in fact have sufficient numbers of licensed building practitioners for them to do what is expected of them. 
I want to finish by citing a letter from a builder a constituent of one of my colleagues who says that the wait time to process applications by people wanting to become licensed building practitioners is currently estimated at 9 weeks and increasing and that last week—this is in mid-February—there were 500 applications in 1 week to be licensed building practitioners. So there is clearly a pent-up demand. People are rushing to get in before the deadline hits. This person cites cases of someone submitting some incomplete information and ending up having to wait up to 3 months to have the application processed. So that is a question for the Minister. Have we got sufficient numbers of licensed building practitioners in the system to do what the industry needs them to do under this bill? Secondly is he confident that the Department of Building and Housing has run the process properly to ensure we get what we need? 
Hon MAURICE WILLIAMSON (Minister for Building and Construction) 
: 
 Let me deal with a couple of issues that Phil Twyford has raised because I think they are good questions that need to be answered. He first of all referred to section 14F in clause 10 and he said the bill fails to deal with liability—it circumscribes the liability of building consent authorities—and no one is to step into the gap. What I want to say to Phil Twyford is that none of this comes into effect until the regulations bring it into effect and I can give the member an absolute watertight assurance there are a couple of preconditions before that will happen. One of those preconditions is the No. 4 bill which has got all the consumer protection stuff in it that is needed—vitally needed—before we trigger this part. 
Also we do need to have a proper licensed building practitioner base because we do need the numbers. I am happy to report based on my officials’ report as at 8 February we had 12084 building practitioners through the licensing scheme already. That is just about exactly on track with the graph we had plotted. We thought we would need about 14000 by 1 March and we will be as near as damn it there with those numbers if that was the number back on 8 February. There is now a little bit of a bottleneck because unfortunately like a lot of people leaving their Christmas shopping until 24 December a lot of skilled practitioners did not put their application in until right near 1 March. But we are doing what I think are some practical things around that. 
Take for example a problem that has arisen with designers submitting their design but not yet being licensed as of 1 March. What we have found is that some local authorities are saying: “You are not a licensed designer so you cannot put a submission in for a consent.” What we are now asking the local authorities—and Auckland Council told me yesterday it was already doing it—to say is: “Look as long as you prove that you lodged your application to become a licensed practitioner and it is in the process of being dealt with then we will take your application for this consent. We will process it right through to the very end and issue it the moment you show that you have got your licence.” So it is actually going to get rid of that bottleneck. 
But I think the member is right and I think Shane Jones was right before: this scheme will not work until we have got a really good-sized pool of licensed practitioners. But what we will be able to then say to the consumer as we do to members when you are all—and I see you all on a Thursday night—getting on board a 737 is that there is not one of you not even Hone Harawira brave though he may be who would be getting on a 737 if you did not think that pilot up the front was licensed and it was shown that he was a skilled capable practitioner. It must be shown that he is a skilled capable practitioner and that is what we want to bring in. 
I want to refer to a couple of things that Andrew Williams raised because I think there is a bit of a dilemma here that all members are facing. First of all there seems to be a school of thought that while local authorities kept all the control and had all the powers they had previously that kept the industry working well. All I can say is that under all those strict rules that were in place we ended up with the leaky homes saga. So it was not the protection that people thought; in fact it did not provide anywhere near that protection. I feel a great deal of sympathy for a lot of local authorities because under a joint and several liability regime they ended up being the last man standing. They ended up being the ones that had to carry the can for what might have been shoddy practices across the design the construction or whatever. I actually would love to get back to holding local authorities accountable for only the bit that they do. If they do approve something that is not up to code they should be pinged but if they actually do not do anything wrong and it is the builder or it is the roofer or the person doing the flashings where the water leaked in the council should get away from that. 
But what I want to say to Mr Twyford is that section 14F does not change the liabilities of the building consent authority. It simply describes the status quo actually; exactly what is in the current Act—what building consent authorities are responsible for doing under the current Act. It says what they are responsible for—that is that an application for a building consent complies with the building code and then in section 14F(a)(ii) that “building work has been carried out in accordance with” it. 
I want to say that there is a good example for Lianne Dalziel to think about here. Back in 1987 the Christchurch City Council certified that the application seeking for the CTV Building to be built was up to code and then after it did its inspections it claimed the building was built to code. We now know after a very thorough and intensive investigation that the plans put forward were not up to the code of the day and that the building that was built was not up to code. 
So I want members to be very careful if they think that local authorities gave that total level of protection; they did not. And the Act— 
Phil Twyford 
: No one is saying that. 
Hon MAURICE WILLIAMSON 
: OK actually I have heard some people say that we are taking away the protections that local authorities gave us and they did not. [ 
Interruption 
] I am sorry Mr Twyford. I do get very grumpy at people saying local authorities have deep pockets. They have only ratepayers’ pockets to dip into. Local authorities do not have deep pockets at all. They do not even have pockets; they dip their hands into other people’s pockets. I want to give confirmation back to Mr Twyford that section 14F does not change the liabilities of the current Act. 
RAYMOND HUO (Labour) 
: 
 The Minister in the chair the Minister for Building and Construction made a very constructive contribution in particular in his admission about licensed pilots and airlines. That has prompted me to ask a question: when did it become a luxury for us to ask an airline pilot just to fly his or her plane safely? The Building Act review is nothing more than to address among other things safety issues. Naturally such legislation would concern three main parties: the consenting authorities the building practitioners and the end users i.e. the consumers. 
I pretty much enjoyed the contributions made by members on this side and the members opposite. I pretty much enjoyed in particular the contribution made by Ms Jacqui Dean. I would like to follow the good spirit of the Hon Shane Jones and do some uncharacteristic things by reading an email addressed to Ms Jacqui Dean and others and copied to me. That email was sent by one of the top structural engineers in this country Mr John Scarry. I will read it out: “Dear Ms Wagner Ms Barry Ms Dean and Mr Borrows Yesterday you all spoke”—that is a direct quote that is not you Mr Chair. “Yesterday you all spoke in Parliament in support of the Building Amendment Bill (No 3). If you were aware of the true state of the construction industry in New Zealand particularly with regard to structural accuracy as opposed to leaky buildings you would not have done so.” As explained in my second reading contribution last week I imagine that Mr John Scarry was responsible along with the O’Sullivan brothers for the redrafting of the building legislation but sadly we are in a worse position than 10 years ago. That email went on to say “The opponents to this bill are right. It does nothing to improve productivity or accountability it does not introduce compulsory contract insurance to cover long-term defects and it reduces the already poor protection new house owners have at present.” 
The Minister in the chair also mentioned the Building Amendment Bill (No 4). Even reading through the report of the Department of Building and Housing to the Local Government and Environment Committee we find it is all over the place with reference to the Government not intending to cover this particular issue and that issue will be likely covered in the Building Amendment Bill (No 4). According to the Order Paper the Building Amendment Bill (No 4) will be introduced probably tomorrow or later this week. We will look forward to debating that particular bill. 
Again in reply to Ms Jacqui Dean’s questioning why Labour is opposed to this bill the Hon Lianne Dalziel and the last Labour speaker—a very good spokesperson for building and construction—Mr Phil Twyford outlined our position very clearly and other positions have been outlined very accurately in the Labour and Green minority reports. I reiterate Labour did support the referral of this bill to the select committee and although we are in broad agreement with the direction of the Building Act review which began under the former Labour Government anyway we will not support this bill further because listening to submitters at the select committee and reflecting on this particular bill has led us to the view that it should not proceed. The aim of the Building Act review is to better allocate responsibility and accountability among regulatory authorities building professionals and end users i.e. the consumers but that will not be achieved by this bill because it is a piecemeal approach. It includes only some parts of the reform agenda that has been widely discussed with the industry over the last few years. Thank you. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I want to respond to something the Minister for Building and Construction said because I think he may have misunderstood my concern about the legislation. As I have said I am not an expert on this particular bill because as he has pointed out this bill went to the Local Government and Environment Committee which I was not a part of. So I have not had the opportunity like Phil Twyford has to hear all the submissions. I think he has given quite a good enunciation of the concerns that have been raised at the select committee. 
But nobody believes for one minute that the fact that the council has been overseeing the work that has been undertaken under a permit guarantees a particular outcome. In fact I started my contribution by quoting from an email that I had received. This guy previously was in the building control section of one of the district councils. I am not going to mention which one it is because I think it would be unfair to do so without obviously exciting some sort of response. What he reported is training sessions where they were taken out to see worksites that were in progress so that they could learn how to be control inspectors and their not pointing out to the person in charge of the building site that they were not complying with the code. This guy has obviously had a lot of experience—he has got a background in carpentry—and the people who were working with him in this particular district council had no previous experience in the building industry. They had no formal qualifications in the building industry. 
This is going back a wee way and things may have changed obviously since then. But the point that he was making was that he had no background in inspection but he did at least have a carpentry background and what he was finding out was that nobody was pointing out to people on the site obvious—obvious—breaches of the code and he realised it was because these people did not know they were breaching the code. It was rotten to the core just like our leaky buildings. He was making the point that basically he was seeing non-compliance being left unrectified by building inspectors on a day-by-day basis and he said that this was a disaster waiting to happen in somebody’s life no matter how small a disaster. That was that point that I was making. 
It is not that the supervision is in itself a guarantee of a particular outcome. I too have read the Department of Building and Housing’s report into the CTV Building collapse and I think that the inquiry when it comes up—I think it starts in June the CTV Building at the royal commission—is going to expose a lot of things that were wrong and perhaps may even go further than the Department of Building and Housing report given some of the stuff that I have seen. 
I should mention that I was the Minister of Commerce who received the original open letter from John Scarry when he expressed to all of Parliament the concern that he had about the industry: around the structural engineering profession and about the construction industry in New Zealand. I heard the Minister’s comments on television the other night saying that nobody agrees with John Scarry. Can I just say that I have got a copy of the Institution of Professional Engineers New Zealand report in response to John Scarry’s concerns and also I have a copy of the additional report that was done for the Department of Building and Housing at the time and there were genuine concerns that he raised. It was believed that the Building Act itself in 2004 would actually address the problems that he raised and what I am telling this Committee now is that it has not. The Building Act 2004 has not addressed the concerns that he raised in 2002 and there are some buildings in this city I would not walk into because of the concerns that I believe he is justifiably raising in terms of earthquake risk and what would happen in those buildings. 
I just want to make the point around the responsibilities of a designer and that is in section 14D in clause 10. It talks about a designer meaning “a person who prepares plans and specifications” and they have to be “responsible for ensuring that the plans and specifications or the advice in question are sufficient to result in the building work complying with the building code”. This was one of the issues that came up in the 2002 report—that is often in the circumstances there is no continuing oversight given. I think if we look at the Institution of Professional Engineers New Zealand report in response to the John Scarry concerns what it identifies is that there is a pushing down of the pricing to the extent that the real estate agent who sells the commercial building is likely to get after it is sold paid 20 times what the structural engineer will be paid. They are not paid to supervise. So the definition of the responsibilities of a designer is just to prepare the plans and specification to code and then ensure “that the plans and specifications … are sufficient to result in the building work complying with the building code if the building work were properly completed in accordance with those plans and specifications or that advice.” 
I think you will find that with the CTV Building and others the issue is actually the lack of capacity to go back and keep an eye on what they are actually doing because you can write the plans and then you will find that what they will do is actually order a different product than the one that was specified in the design and who is responsible for that? Actually it is nobody here as long as it is within the code. But it may well be that there are certain features that are not being complied with and as a result you end up with extremely dangerous buildings. These issues were raised with the standard 500E wire which I do not have the full details of but it is just an example. There are plenty of other examples of situations where you can write the plans and specifications for building work you can give advice on compliance of the building work with the building code you can be responsible for ensuring that this plan is sufficient to result in building work complying with the building code but you cannot actually know in fact what they do on the site and what they do off the site—because offsite inspections for some of the precast concrete solutions are not subject to the same supervision that an onsite arrangement would entail. 
There are so many issues in here that I am just very fearful that we may pass legislation without taking into account the need to make sure that we get this right. So many people are going to be relying on us and it is actually too late when the building collapses and people’s lives are lost. And then there are people essentially who have to front up to an inquiry to admit their culpability in that regard. I think the engineer who spoke at the building inquiry the other day and who broke down did much more for giving people confidence in the engineering profession than just about anyone else because I think the public reacted to the humanity of his response. What I am saying is that we are responsible as politicians to get the legislative framework right and we have all accepted that the 1991 framework was wrong. We have been told that there were problems before the 2004 Act came in we have now most recently been told by the same person who warned us in 2002 that the 2004 Act was not delivering—we are warned by him again that this legislation is part of a piecemeal package that will not deliver. I am worried that we are not listening to the right people. 
I want to end with this comment. There are lots of people out there who agree with John Scarry but not all of them have got the ability to speak out because some of their work is entirely dependent on their not speaking out. But I have spoken to engineers around this country who support what he says and we treat him lightly I believe to the great detriment of ourselves not only as representatives of the people but also as people with some responsibility for the quality of our buildings and the health and safety of those who use them. So I want to reiterate my plea to the Minister to hold back from this bill. 
ANDREW WILLIAMS (NZ First) 
: 
 I would like to rise again on behalf of New Zealand First to respond to some of the comments of the Minister for Building and Construction. He mentioned local authorities and councils and that the Building Amendment Bill (No 3) would move some of the responsibility off them and on to builders and the building industry and homeowners. He sort of implied that basically the councils and local authorities in a sense were not responsible and were not the ones that should oversee and make sure this was the case. Unfortunately I do not necessarily agree with that because we have had a situation here for the last 20-odd years in this country of ongoing systemic failure within the building industry. There has been a combination of a litany of errors over many many years which allowed for instance for the building code to be lowered. Standards New Zealand allowed a change of the standards of the building code. At the end of the day this Parliament and this House oversees all legislation all laws within this country so in a sense these bodies which are quasi-Government organisations still have to report back in terms of those standards in the building code and everything else. At the end of the day it is this House that determines the final legislation that covers them. 
Therefore it is disappointing to hear from the Minister who said that basically it was not the Government’s fault back in the 1990s or whatever; it was the fault of other bodies other quangos and other Government organisations. At the end of the day it is the legislators who determine on behalf of the people of New Zealand so I am very disappointed to hear that because I feel that we in this House have to ensure that what we bring through in this House is in the best interests of the people of New Zealand and does deliver to them safe housing housing and buildings that they can live in or work in and commercial buildings that they can feel safe to be in. 
We have heard some astonishing stories from the Royal Commission of Inquiry into Building Failure caused by the Canterbury Earthquakes in recent weeks and more and more comment coming through including from very learned expert witnesses saying that they had great concerns about some of the methods that had been undertaken in terms of some of the structures and buildings in Christchurch resulting in catastrophic failures in many cases. We must ensure that what we follow through on with this No. 3 bill and then with the subsequent No. 4 bill continues to provide the adequate protections for the people of New Zealand and for all our citizens and residents. 
The Minister mentioned that many of us would not get on a 737 and fly if we did not think there was a registered licensed pilot flying it. Well the same sort of people probably thought the same thing when they got on the  
Costa Concordia 
 for their cruise in the Mediterranean. They thought the captain was licensed and able to steer them safely through the Mediterranean waters. Sadly something like 20 to 30 people did not come back from that cruise. They worked on the basis that they thought that the regulators the legislators and the people controlling the waterways of the Mediterranean would be making sure that the standards were maintained and kept to to ensure that they were safe. Likewise we as a House and as a Parliament must ensure that what goes through this House ends up in very very good legislation to ensure that safety is the highest priority and that our building code is kept to the highest priority. 
The Minister also mentioned local authorities not really being responsible for signing off and seeing the final end result and that that was the responsibility of the builders. At the end of the day those local authorities were approving sign-off of buildings that were built in accordance with the building code. Those buildings were using air-dried untreated timber; they were using monolithic cladding in an unvented situation; and they were using sealants around windows to seal windows—in the old days you would put in decent flashing and decent overhangs—that after 7 or 8 years with our ultraviolet light in this country simply just break down and start allowing the water in. Those local authorities were approving on the basis of the standards that were set that were allowed for in the building code. Therefore although the local authorities were certainly mindful of approving building structures to that code they were not mindful of what the results would be from many of those products. With time with weather with ageing and with movement of the New Zealand types of soils—the hills the clay and all that sort of thing—they were not fully aware at that time of what the result would be from that. 
In closing I would just like to say that I think this is very much a shared responsibility. We cannot go from one extreme to another. We cannot go from the situation where it is only the council as the last man standing that has had to take the brunt of much of this to a situation where we are trying to put most of the onus on the building industry and the end consumer. If we go from one extreme to the other we could end up in a situation where we ask why we did that. Why did we take away a lot of the responsibility from the regulators and the people who were ensuring that there were codes of compliance and that the buildings did comply with the standards? Why did we put it on to an industry where as we have heard today there are a lot of concerns about how skilled some sections of our building industry are? Have they gone through the necessary licensing? Have they been approved? Are they still waiting in a queue to try to get a licence? And do we want to put so much pressure on that side of the industry that we could end up in a situation in years to come where we regret that we went too far too soon and too quickly? 
I am a bit concerned that there is a piecemeal situation to this bill and that we seem to be adding on. This is the No. 3 bill and the Minister has said that much of this will be addressed in the No. 4 bill. There seems to be a lot of legislation happening on the hoof here. We are seeing increasingly more and more of this coming through the House where we hear: “We’ll work on it with the next bill and we’ll get it right with the next bill.” Too often that is happening in this House. I think in this situation perhaps we need to take a breath. Having heard the results of the royal commission of inquiry from Christchurch having heard what has gone on in the likes of Pike River and having heard what has gone on in other disastrous situations around New Zealand do we want to push this through at such haste and find that we regret it later or do we just want to breathe the air and make sure we get it right? 
The question was put that the amendments set out on Supplementary Order Paper 11 in the name of the Hon Maurice Williamson to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Part 1 as amended agreed to. 
Part 2 Miscellaneous provisions 
The question was put that the amendments set out on Supplementary Order Paper 11 in the name of the Hon Maurice Williamson to Part 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 2 as amended be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Part 2 as amended agreed to. 
Schedule 
The question was put that the amendments set out on Supplementary Order Paper 11 in the name of the Hon Maurice Williamson to the schedule be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 64 
New Zealand National 59; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 57 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1. 
Amendments agreed to. 
Schedule as amended agreed to. 
Clause 1 agreed to.  
Clause 2 Commencement 
The question was put that the amendments set out on Supplementary Order Paper 11 in the name of the Hon Maurice Williamson to clause 2 be agreed to. 
Amendments agreed to. 
Clause 2 as amended agreed to. 
Clause 3 agreed to.  
House resumed. 
The Chairperson reported the Customs and Excise (Joint Border Management Information Sharing and Other Matters) Amendment Bill without amendment and that the Committee had divided it into two bills and the Building Amendment Bill (No 3) with amendment. 
Report adopted. 
Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill 
Second Reading 
Debate resumed from 1 March. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Members when we were last debating the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill Raymond Huo was speaking. He has 6 minutes and 30 seconds remaining should he wish to speak 
RAYMOND HUO (Labour) 
: 
 Thank you Mr Assistant Speaker. 
Hon Maurice Williamson 
: Oh no! Not 6 minutes. 
RAYMOND HUO 
: Thank you Minister. I say to the Minister responsible for this bill that New Zealand taxpayers will be short-changed and a select few farmers will benefit from a rent reduction even though they do not need it. This is just another Government bill that favours the 1 percent at the cost of the 99 percent. 
The Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill seeks to change the rules for setting rents for pastoral leases. If this bill passes then rents will be determined purely on the stock-carrying capacity— 
Jacqui Dean 
: And that’s a good thing. 
RAYMOND HUO 
: —and not on the value of the property or the non-pastoral values I say to Ms Jacqui Dean which these Crown-owned properties are increasingly purchased for. This means that farmers would be given a discount for their rent and the Crown’s rights will be given away to a few select farmers— 
Jacqui Dean 
: Oh stop it! That’s silly. 
RAYMOND HUO 
: —who purchased their leases knowing the rules—probably advised correctly by that member. Another serious consequence arises from the fact that many of these farms are going through a tenure review. 
Jacqui Dean 
: What is a tenure review? 
RAYMOND HUO 
: OK let me explain to Ms Jacqui Dean. Tenure review splits the land between the Crown as landlord and the farmers as lessees or tenants meaning that part of the land is converted into a freehold ownership and part of it is converted into public conservation land. After tenure review to gain freehold titles some of the properties are onsold for big profits by those tenants-turned-owners. 
Jacqui Dean 
: Name one. 
RAYMOND HUO 
: OK. If the past is anything to go by of the 77 runs that have completed their tenure review from 1992 to 2008 at least 28 new landholders have onsold 176 parcels of newly freehold land. Combined this land in which the tenant previously had the leasehold interests plus improvements with freehold property from the Crown for $6.9 million was onsold for $134 million. So I say to Ms Jacqui Dean and to the Minister responsible for this bill that the two figures are very vivid—$6.9 million paid to the Crown and onsold for $134 million. 
The current rent is already set at a low 2 percent of the land value. In addition to this there is a mechanism to reduce rents in cases of hardship. My good friend and Labour member for Palmerston North Iain Lees-Galloway asked a very good question in his first reading contribution. The question was: does any member know how many such tenants applied for the discount? The answer was and probably still is “zero”. So that mechanism does not apply to those tenants. So the land information Minister—my favourite Minister—Maurice Williamson knows or must have known that the low rent will be capitalised by the farmers in their sale price when they sell their interest and I think that has been covered quite thoroughly and comprehensively in the Clayton report produced in the 1980s. 
So I say to the Minister that all New Zealanders own the land and it is not right for his Government to just give away part of the Crown’s interest to a select group many of whom do not need it. This is really a case of the National Government ruling in the interests of the privileged few the 1 percent at the cost of the ordinary many the 99 percent of ordinary Kiwis. 
Hon DAVID CARTER (Minister for Primary Industries) 
: 
 It is a pleasure for me to take a very brief call on the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill in its second reading and it is a particular pleasure following the contribution by the Labour member whom I have just had to listen to. He spouts what we have heard from the Labour Party with regard to this legislation throughout its progress in the House. We have heard speeches full of jealousy and envy that are not focused at all on how best to look after what is perhaps the most fragile farming environment in this country. 
The history of this goes back to the vindictiveness of a former Labour Prime Minister Helen Clark who had it in for 300-odd high country families who are attempting to do their best to farm and live in the high country. She decided she would do everything she could to drive those families out of the high country because her ambition for that country was to make it a huge Department of Conservation estate. That would have meant further ecological damage to the high country and we have seen that with the likes of St James Station with Birchwood Station where the previous Labour Government paid millions. I think I am right in saying it paid $40 million for the St James Station and now it worries about how it can look after that property whereas previously it was farmed for generations by the Stevenson family who did a good job and paid a rent to the Government for the privilege of farming this country. 
What we saw immediately when we put the policy out there—and frankly it was another election promise of the National Government in the lead-up to the 2008 election—and announced we would be making a change to the rental basis for these high country leases was the Hon Damien O’Connor coming out and praising the National Government and saying that that is exactly what Labour would have done if it had been the Government from 2008 onward. We were surprised—Mr Williamson will recall the night we sat in here as we brought this bill into the House for the first reading and surprise surprise Damien O’Connor sat silently and David Parker took the first call. If any listener ever wants to see the most vindictive speech that has probably ever been delivered in this Parliament in recent decades they should look at that first reading speech by the Hon David Parker. 
That is what the Labour Party opposition to this is all about. They see these high country farming families as rich people who deserve to be got to by the Government. That is what it attempted to do by raising the rents not by 10 times but in some cases by 20 times to the extent we can quote farms today where the rents proposed by the Labour Government under its formula were higher than the gross income from the farming property. How practical would that ever have been? So it is with delight that we have had the ability to work with the Hon Maurice Williamson as Minister for Land Information to deliver back into Parliament rents that are based on what they should be based on and that is the income-earning capacity of that property. Because the income-earning capacity of the property then determines that the farmer has some money left at the end of the day to do the weed control and the pest control that is essential for the ecological protection of these properties and to make sure they actually make a profit. 
That is a dirty word on the other side of the House but I actually want to see these farmers making a profit. I know these people well and when they make money they pour it back into their property trying to raise productivity and trying to increase the amount of fine merino wool they send out of the country. We have this stupid situation developing in this country where Icebreaker which is an absolute success story is in danger of having to curtail its expansion as a company because it cannot get enough merino wool grown in the high country. So that is what happens when Helen Clark—and the current Labour Opposition—attempts to lock this country up take it out of production and make sure it is unavailable for the productive economy of this country. 
I am pleased to speak to this bill. What this is about is delivering some certainty back to those high country families who have put up with nothing but sheer hell for the 10 years that that Labour Government was in power. 
Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman) 
: 
 It is a shame that that member over there does not show a bit more leadership in agriculture. Everyone might be a little bit better off. 
I was in this House in the 1990s and I sat through two bills. One was the Crown Pastoral Land Bill which was passed in 1998. The other was the Maori Reserved Land Bill which was passed in 1997. The second bill righted an injustice that was occurring in the country where the owners of Maori land were unable to extract from the people leasing their land a fair rental. In fact they were locked into a situation of 21-year rents and perpetual right of renewal and the lessees on that land were paying over time—adjustments were made every 21 years—a nominal fee for the rental of that land be it commercial be it rural or be it residential. 
The National Government rectified that situation and good on it. The Government said it was completely unfair unjust and immoral that the owners of the land could not extract a rightful rental. It was established in law that the Maori landowners were entitled to 5.5 percent of the unimproved land value of that land on an annual basis—that being a fair return. What we are doing here today is challenging that precedent once again and in fact putting in place bad law. 
I have a passion for the high country and I have to say I have been fortunate to be the guest of a number of high country runholders. I have skied in the area. I love the place. It is iconic; it is what we portray as New Zealand: the Mackenzie Country Molesworth and right down through Otago. It is magic. We must protect it. And we must protect the people who have endured hardship and who live a long way from civilisation. The cost of living out there is high. They live lonely lives except they enjoy them because they make do with their own family. They are people to be applauded and looked up to. 
But the reality we were facing and have been facing is that the value of those properties has been going through the roof. The previous speaker the Minister for Primary Industries said that the Crown had to pay a lot of money for a couple of properties—acknowledged. But the value of that land had been driven up primarily by offshore people coming in— 
Jacqui Dean 
: Not true. 
Colin King 
: Not quite true. 
Hon DAMIEN O’CONNOR 
: I am afraid it is true initially. There are also New Zealanders who have purchased properties as well having to pay for what is quite a large amount of land. It is hard to make an economic return and I acknowledge that. However value is in the eye of the beholder. People purchase properties because they want somewhere to hide away; they want some of the most majestic scenery in the world at their back door. And who can blame them? 
The problem was that the value of the land exclusive of improvements or otherwise crept up. The dilemma facing the Crown or the Government as the landowner is what sort of rent should be expected from that land. Well in fact we have got now—through a Land Valuation Tribunal ruling of course—that 2 percent of the land valuation exclusive of improvements is the rightful rental. That may be fair. It is certainly less than the 5.5 percent the National Government put in place for Maori landowners which has been accepted. It is a lot less. So the question for a lot of taxpayers is whether we are getting a fair return or whether there is something funny going on here. Now it is actually not just that valuation but in fact an arbitrary valuation based on a subjective assessment of the productive capacity of the land—base productive capacity exclusive of improvements—and the value of the stock because it is based on the stocking rate. It is a bit like saying “How long is a piece of string?”. It is very very hard to establish. 
I am sure there will be negotiation and a value arrived at. However Parliament has the role of passing legislation that is fair. I want to see those families remain on this land. I do not want to see people speculate and make windfall profits; it has happened in the high country where there has been tenure review compensation paid land valued and then flicked off for a huge profit. I think the genuine farming families have not been easy with that process at all because they want to remain on the land farm it properly and protect the environmental values. I absolutely respect their management practice and what they have done over many years. 
The problem with passing a piece of legislation that is inherently unfair is that somewhere down the track another Government will rectify the problem. It will do so with moral authority because it will point out the unfairness of this be it to the taxpayer or to any other party. I went to a meeting and put Labour’s proposal on the table and said we would sit down provide the right incentives for farmers who were managing the land properly and ensure that they had affordable rents. But the establishment of the base value of the land and the base rental had to be consistent with most other commercial entities across the country. It must be otherwise there will be a stream of people knocking on our doors saying that they want to be like the other crew who might be getting a concession at 2 percent or at 3 percent or whatever when some people on fixed incomes are being forced from their homes because Maori landowners want 5.5 percent return on the valuation of a block of land in Motueka and those people cannot afford to pay it. People have been forced from their homes. 
There was talk and the Minister said that families were going to be forced off the high country. That is not what we want. In fact the whole concept of income-based rentals was developed by Labour for Housing New Zealand Corporation tenants. What did the National Party say about that? It said it was outrageous. What sort of hypocrisy did we see in this House when we suggested and implemented income-based rentals for Housing New Zealand Corporation tenants? Oh no those members said that was not right because they had been through the process of trying to sell off Housing New Zealand Corporation properties and make it harder for those people to remain in their homes. Now we have a National Government implementing a law that says that for high country lessees we should have income-based rentals. 
I am not absolutely opposed to that but we need to establish a fair system of how we do that. We should provide financial incentives as the Parliamentary Commissioner for the Environment said for people farming the land properly and upholding and sustaining the environmental and intrinsic values of that high country. It is spectacular and we must maintain those values and the farmers on most of those stations and properties have the knowledge and the experience to do that. We want to see them stay there but they must deep down know if they think they are getting a good deal now that someone in the future is going to knock on the door and say “We’ve got to make this fair guys and girls because the taxpayer is actually losing out here.” or “Can we sit down and work out another way of ensuring the taxpayer gets fair value?”. And the value could be in the protection of the values. We said that to them. It could be an enhancement of the environmental values. There should be a value put on that and we should acknowledge what those good farmers are doing. 
Unfortunately what we have here is a piece of legislation that is inherently unfair and unjust. It is unjust to the owners of the land and those are the taxpayers of this country. It is an arbitrary assessment of what is productive carrying capacity and it is an arbitrary assessment of what is stock value. Ultimately the final figure will be one established by negotiation but it may in hindsight not be considered fair. So I want to support the high country families in having a truly sustainable regime that is both affordable— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: I am sorry to interrupt the honourable member. His time has expired. 
EUGENIE SAGE (Green) 
: 
 It is with pleasure that I rise to speak on the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill because like the previous speaker Damien O’Connor I have enjoyed the hospitality of a number of pastoral lessees. I would like to pay tribute to the late John Aspinall for his contribution on walking access on biosecurity his passion for getting rid of wilding pines his stewardship in the high country and the generous recreational access he provided near Mount Aspiring National Park. 
The Green Party supported the introduction and referral of this bill to the select committee in order to hear submissions. I certainly agree with the sentiments expressed by Federated Farmers in their submission in that the legislation should provide certainty and be enduring and that it must be transparent and demonstrate fairness and equity to both parties namely the Crown and leaseholders. But this bill fails to do that. It introduces a system whereby pastoral lease rents are disconnected from the value of the land and potentially it advantages leaseholders at the expense of the Crown particularly during tenure review and it will potentially compromise the ability of the Crown to get a fair share and a fair rate of return on its high country assets. That is why the Green Party opposes this bill. It is because rental income helps determine the extent of the Crown’s interest and its equity in a lease and those valuations that are done as part of the whole tenure review process rely on that rental income so calculating rents on the basis of stock-carrying capacity does not take account of the full span of benefits that pastoral lessees enjoy. It will significantly increase the lessees’ interests in leases and that will be at the Crown’s expense. The bill will significantly increase the cost to the Crown of achieving tenure review settlements. 
The Crown will have to pay more to resume full ownership and protect lands with conservation and recreation values or “significant inherent value” in the language of the Crown Pastoral Land Act. So less land is likely to become part of the conservation estate and less high country land is likely to be available to the public as a result of tenure review. Just as the Government’s asset sales will benefit major corporates at the expense of our ability to influence New Zealand’s strategic direction this bill will benefit those wanting to privatise high country lands and it will make good tenure review outcomes much more difficult to obtain. 
There are around 230 pastoral leases that are part-way through or have yet to enter tenure review. They cover 1.6 million hectares. That is a significant chunk of the high country. The whole method of setting rents since 1979 has been based on a fixed percentage of the value of the land: 2.25 percent of the value of the land exclusive of improvements with a discount for prompt payment. Under that system the rent can take account of amenity values that are present on many leases—the views of lakes the views of sprawling mountains tawny tussock grasslands—and as the High Court has confirmed the lessees’ rights of exclusive occupation give them the exclusive use of those amenity values. For a recreational user to go on to the land they need the lessee’s permission. 
It is inequitable then that the Crown and through it the public can receive no benefit from the fact that the lessee has these rights of exclusive occupation. Those rights are clearly recognised in the high values that are paid for pastoral leases when the leases change hands on the private market. If rents are calculated on the basis of stock-carrying capacity you will not get that exclusive occupation benefit being taken into account. 
No private landowner would lease their lands commercially without taking account of location value so it is ridiculous for the Crown to be doing so in these circumstances. It is those location and lifestyle values rather than stock-carrying capacity that now comprise a substantial portion of the market value of pastoral leases. Shania Twain did not buy Motatapu Station because it was a good farm the US billionaire Julian Robertson did not buy Brooksdale Station near Porters Pass and Lake Lyndon because it was a good farm so the Crown should not have to subsidise through these rentals overseas celebrities or investors who are buying for capital gain. 
It was an economist Dr Basil Sharp in his 2007 paper on valuation issues relating to high country tenure review who said that the rent if it was based on stock-carrying capacity alone would not adequately reflect the Crown’s interests. Dr Basil Sharp said: “The exclusive right to occupy and enjoy amenity values has been attributed to increasing value in the market and this value should be included in the values assessed for the calculation of rent. … The rental stream deriving from the right to occupy might turn out to be a major component of the lessor’s interest omitting the market value of this stream of rent will result in the Crown’s interests being under valued and the lessee’s interest being overvalued.” In her analysis of tenure review Lincoln University’s Dr Ann Brower described it as “a massive transfer of … wealth from the public to a lucky few farmers.” This bill will exacerbate that. 
High country leaseholders have been the major beneficiaries of tenure review. Members opposite ask for some examples. Well on Hillend Station near Lake Wanaka the lessee paid the Crown $120000 to freehold 73 percent of Hillend Station and then was able to subdivide it into 36 smaller sections and onsell these for more than $26 million. If the Crown’s equity in pastoral leases is undervalued then past trends in tenure review are likely to continue or worsen. If amenity values are not included as part of the rental then the Crown’s assessment of development potential as an element of property valuation will be much lower. 
If the affordability of pastoral lease rentals was a genuine issue for some high country pastoral lessees then a better solution would be to do what the Royal Forest and Bird Protection Society suggested in its submission and that was to provide a reduced rental in return for practical benefits for the Crown. Some of those benefits might be increased public access more widespread control of biodiversity pests or implementing a farm management plan that promoted sustainability. Those options were available to the Government. It has not chosen to take them up. This bill will exacerbate the poor return that there has been for the Crown in tenure review in the past. That is why the Green Party opposes it. Thank you. 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 It is a pleasure to rise in support of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill. It has been interesting to listen to the speakers from the Opposition speak about why they think this is not a good idea. There is one thing that has not been discussed by those speakers however and it is this: if you apply an amenity value to the lease setting and the Crown pastoral lessee no longer can afford to profitably farm the land they make the call to leave and no other lessee can farm the land profitably then what happens? It returns to the Crown of course. That is what happens and the merinos go. If you extrapolate that across the whole of the 230 leases then you take off 6 million merinos. It has been stated in this debate that there is no value to the Crown of this activity. I understand that it is about $300 million of export earnings. 
It was commented on earlier by a previous speaker that we are in a ridiculous situation where one of our iconic brands Icebreaker can no longer meet the demand for the raw product that it needs from our own country and is looking to source that product from elsewhere. If you take 6 million merinos off the high country and you take out $300 million worth of export earnings then what happens? Now the Crown has a liability probably to the tune of a further $300 million to maintain that land because you see there is a bizarre and absolutely mind-numbingly stupid concept that has been put forward in this debate and that is that you can remove all human activity in the land and it will be fine. Just leave it alone; it will be fine. But in the same debate we have heard about wilding pines and we have heard about the control of other pests and weeds. Whose liability will that be now? What we have seen in the case of St James Station and Birchwood Station where the Crown did intervene decided that these were of substantial conservation value and paid five times—five times in one case—the actual livestock value of the property is that we have had massive increases in cost to the Crown balance sheet. 
So you see the debate is all very well in terms of what is a pure model. The Shania Twain example was used but Shania Twain did not buy a high country lease; they went and bought freehold properties and they paid the amenity value because that is what they wanted to do. If the Crown really wanted to extract the value and the proceeds that could be there because of amenity value then of course it would put the property on the market. That is not the suggestion put forward by those who would argue against this proposal. The suggestion put forward is that we must lock the whole lot up that the Department of Conservation will take on the extra liability and that the Crown will find the money somewhere. Of course it will not and a very poor job will be done as is in the example of a lot of other Crown land that is under the Department of Conservation. So it is a compromise. 
There are 230-odd of these lessees these high country farmers. They are—and I met a number of them during the submission process—hard-working genuine honest decent New Zealanders. And you could argue that they may have had something they were not entitled to if you wish but I would suggest that the amount that they contribute to society both through the communities they live in and the contribution they make to the wider economic benefit of New Zealand far outweighs any shallow vindictive and cheap argument that has been put up by our opponents to this bill about what they may be getting from the Crown for nothing or from transfer of wealth. I would like to see where that transfer of wealth is taking place because there is no pure model here. This is a unique circumstance. 
The irony of it all is that as the Crown has negotiated with these leaseholders over the years parts of these stations have been returned to the Crown and other sections of them have been freeholded what we have seen is an enormous conservation advantage. I know of several examples where the landowners as they have been able to freehold sections of what was originally Crown land have put in huge amounts of investment into conserving certain aspects of what are seen to be areas of high conservation value. That is private conservation. It is not Crown conservation it is not State intervention and it is not State investment. It is personal investment because they have a personal investment in the area. It is not true—it never has been and it cannot be found to be true anywhere in the world—that the Crown wherever that may be and whatever jurisdiction has the sole right and the sole ability in conservation. In fact what you will see when you go and look internationally and within New Zealand is that some of the best conservation work that is carried out in this country is carried out by the private sector or by private individuals. 
It is quite interesting to listen to the debate. I know it is an emotional one because when you start talking about land particularly Crown land people do get themselves worked into a bit of a frenzy. The circumstance that existed before was totally unsustainable and it was in decline. We had submitter after submitter who were leaseholders submit that to us. So the situation if it were allowed to continue would be that you would see a decline in the state of the conservation work on a lot of this land you would see the exodus of families from these high country stations and you would see the loss of that production that the State enjoys. It is an interesting concept that if the private sector is earning money paying taxes and spending that money domestically then there is no State benefit—that there is no State benefit from that. So you do away with business completely take all business out hand everything back to the State and the State will run it better. Well they have tried that in different parts of the world and it has failed. The experience has been that it does not work. So I suggest to those on the other side who have that view that they should go and actually have a look at the basics of some of this and decide where you strike that balance. 
I think that when you look at where the bill is headed and you look at what has gone into the construction of it you see that certainly the status quo was unsustainable. The proposition put forward is a compromise but it is the best that can be done in the circumstances that are unique to this particular issue. Thank you. 
TRACEY MARTIN (NZ First) 
: 
 I rise on behalf of New Zealand First to speak on the second reading of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill. New Zealand First opposes this bill but we bring a fresh perspective. We oppose this bill for a number of reasons. 
Firstly I want to reiterate what New Zealand First campaigned on and what was in my maiden speech—that we seek to be a positive and constructive Opposition. We provide informed commentary and useful suggestions. We will support good policy and good law regardless of who is its author. Unfortunately we cannot find any of that inside this bill. We believe that this bill is a dreadful piece of legislation which like far too much of this Government’s policy agenda is completely unnecessary. By attempting to address another problem that does not actually exist this bill will have the effect of making this situation worse rather than better. 
Due to our unplanned absence from this House through the term of the 49th Parliament New Zealand First has not had prior opportunity to comment on this particular bill. If we had we would have highlighted to the Government the farming community and the wider public the fundamental shortcoming of this bill’s approach to the setting of rentals for Crown leasehold land and the shortcomings of the ideology behind that approach. 
The present system bases rent on value of land excluding improvements. This is set at around 1.5 to 2 percent and it has worked well for more than a century. It could have worked far better for a good two-thirds of that time if the Crown had proved to be a better and more responsible landlord and if the Crown had invested in improvements that farmers were unable to fund for themselves because banks would not lend against leases that had no guaranteed right of renewal. 
In 1948 the Government sought to remedy this problem by granting leaseholders the right of renewal in perpetuity. Since then farming in the precarious and marginal environment of the high country has been able to continue with the reassurance that at least one vagary has been removed. However now that those leases which were first renewed in 1948 are coming due for their third renewal this Government appears to have decided that a new method for determining the rents is needed. It appears to be partly in response to the unsatisfactory situation created as a result of the previous administration’s high country 10-year review process and partly as an exercise in finding an excuse to put those rents up. 
 The Government’s reasoning and methodology for engineering this increase in rent differs from that of the Labour Opposition but its intent and the end results will be the same. The high country tenure review process came about because of a desire to create a national park of sorts across the roof of New Zealand stretching the length of the South Island. 
The previous Government regarded this environment as special and iconic and rightly so. That Government proclaimed a desire to remove this land from the care of the farmers who had nurtured and preserved it for well over 100 years and to make it available as a playground for the public at large. Although this stated intention may well have been honourable if somewhat idyllic it remains a reality in application if not in theory that such a wilderness would come to be the preserve of only a very few with the time and wherewithal by which to access it. 
It is the view of New Zealand First that that plan was an elitist one driven by ideology and created without regard to the realities of the environment in question. There was no adequate recognition of the input made by farmers and the control of plant and animal pests and no corresponding increase in resourcing for the Department of Conservation to allow the department to take over these duties where the leaseholders would be leaving off. 
There appeared to be little appreciation amongst some of the proponents of the high country tenure review process—those who wanted to take the land in question away from the farming estate in order to preserve its iconic appearance. There appeared to be a lack of appreciation that this very iconic appearance had itself been created and preserved by the actions of 150 years of farming. Gorse rabbits wilding pines deer goats and thistle were kept at bay only by the constant efforts of thousands of farmers shepherds musterers hunters spraying contractors and all those who worked the land and in doing so preserved its natural appeal. 
The unintended consequence of allowing farmers to freehold higher value lowland country in exchange for higher tracts of high country leasehold land was that some farmers found themselves in possession of prime lakefront and other very aesthetic property that was ripe for development. Naturally of course the elitists did not want them to have that either. They wanted to have their idealistic cake and to eat it too. 
As far as setting new rents is concerned if Labour’s desire to change farmers’ rent based on the amenity value of pleasing vistas—which they the farmers themselves had helped to mould—was not bad enough New Zealand First believes that the National Government’s proposal to charge them based on the value of the farming operation is actually even worse. The former proposal could be likened to letting a tenant redecorate his house at his own expense and then putting up the rent to reflect the fact that the house was now nicer to live in. The latter however is more like making a random assessment of how much turnover a business should be able to make and charging the owner a rent based on that. Whether his operation is capable of achieving it or sustaining it is not in play. 
The proposals in this bill do not constitute a formula for setting rent on marginal high country land. They are a tax on the operations of farming businesses plain and simple. New Zealand First does not believe that rents on high country leasehold land need to be increased at all. Indeed we agree in part with the findings of the 2005 Armstrong committee which found that in many cases they were actually too high already. 
If the farming value of land is to be used to determine the rent payable on it then in times of downturn farmers will reduce their maintenance of more marginal country allowing it to deteriorate and thus reducing the value further knowing that such will be reflected in the following annual review. If neither the farmers nor the Department of Conservation is looking after such land it will indeed cease to be iconic in very short order. 
New Zealand First believes that the farmers of the high country have proven themselves to be the best guardians over the past six generations and that the results of their efforts are to the benefit of the nation as a whole. We believe the tenure review process was and is a mistake in its entirety and that rentals should be returned to the formula that has been proven to work over a century and a half and which reflects the otherwise unpaid service that the farmers of the high country provide to the nation in preserving our national image and all the benefits that that brings. 
New Zealand First supports the farmers of this country and we oppose this unnecessary and undesirable bill and the unjustifiable regime of taxation that it imposes. Thank you. 
COLIN KING (National—Kaikoura) 
: 
 It is a pleasure to speak on this Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill. It is a bill whose time has come because it confronts an issue that is really at the heart of what New Zealand stands for. It is about partnership and that is the one comment that I have not heard in this debate apart from by members on this side of the House. It is about partnership. It is partnering the custodial aspects of the land between the Crown and those families who through history have been able to eke out an existence whether through trying times or good times. They have had to live in isolation. I just want to stress that point—that it is very much about partnership. This Government is very aware that there needs to be a balance around how this is approached. We have the Minaret case before the Land Valuation Tribunal and such things to base that on. 
I just want to take exception with the Labour speaker who spoke first about arbitrary figures. There is nothing arbitrary about the Economic Service team of Beef and Lamb New Zealand run by Rob Davison and the science that it applies to that system of working out what classes of land can produce and what stock values are worth. I would just like it put on record that Rob Davison is an authority with his team within the Economic Service of Beef and Lamb and I am quite confident that they will be able to give the Director-General of Lands some very good accurate information on what the carrying capacity should be on those properties and what the opportunity of economic generation will be. 
I would also like to just touch on the point of just how damaged that partnership became under the Labour Government. It was completely destroyed. I just want to point to one particular case. When we talk about these pastoral leases we are talking about a bundle of rights that the landowner or the lessee holds and the ownership of the Crown. At St James Station—you know if you have a willing seller and a willing buyer you have a good balanced market—the Labour Government drove the price up to $43 million to purchase a lessee right of residence and dwelling on a property that ran under the lease agreement only some 8000 stock units. That just highlights the hypocrisy that is surrounding this debate. What we are confronted with in St James is a property with great iconic values but which is becoming weed infested which will actually cost the taxpayer far more than we are hearing about from members on the other side of the House about transfer of wealth. We saw the same thing happening at Birchwood—stratospheric prices for a farm that was running a smaller number of stock units. Really what has happened here is ideology gone mad and we really do need to do our utmost to partner these families in these rural communities. We talk about high country. They have been surrendering the high country in these properties for years upon years until a stage now where it would be nearly an exaggeration to call these leases high country leases because they have had to surrender them. 
This is a bill that addresses a very emotional subject. In my area of Marlborough it is pretty hard to see any particular outstanding vistas. You have got rabbits you have got  
Hieracium 
 you have got remoteness and you have got access to and from your property at a very very substandard rate and here we are having a conversation about transferring wealth. 
 These people need to be congratulated. They are the backbone of a country that at present has got a fair amount of muscle. I am delighted to see that this Government has had the courage to address this situation; otherwise we would be bogged down with tribunal upon tribunal hearing the claims for rents that are set in relation to the income of the property. I am delighted to support this bill and I look forward to seeing those farmers being there for another 150 years. Thank you very much. 
Hon DAVID PARKER (Labour) 
: 
 I think the Minister for Primary Industries rather unkindly called my speech on the first reading of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill the politics of envy and other words that were stronger suggesting he disagreed with the contribution I gave in the first reading. Well I am pleased to disagree with the Minister on this because his position on this legislation is without principle. It is without principle. 
I was the Minister for Land Information for the last 3 years of the Labour Government and when I first met with a group of lessees the lessees came to my office and they said: “Don’t force us into tenure review please Minister. Please respect our contractual rights under the lease.” My response to that was “I will not force lessees into tenure review neither will I force the Crown into tenure review outcomes that the Crown does not want and I will respect your rights under the lease and I will enforce the Crown’s rights under the lease.” That is all that we did. All that Labour did was enforce the legal terms of the lease. Of course a lot of the high country farmers did not like that because they are used to National Party Ministers who when it comes round to their turn in power all they do is bow to the will of the lessee rather than protect the lessor’s interests under the lease which it is their duty to enforce. 
These leases were purchased by people who had legal advice. The terms of the leases have as a central tenet that the rent is 2 percent of the land value excluding improvements if paid on time; 2 percent not 10 percent—2 percent. It is 2 percent of the land value excluding improvements if paid on time. These farms have increased in value. Why have they increased in value? Because people do not purchase them only for the pastoral value. The high value properties are on the shores of Lakes Wakatipu Wanaka Ohau Pukaki and Tekapo. They are the highest value properties generally. They are the properties that you see on cake tin lids they are the properties that you see on calendars and they are the properties that you see in photographs promoting New Zealand overseas. When the leases of these properties are sold the purchasers of the leases do not get just the right of pastoralism; they get the right of exclusive occupation of the land. That means they can exclude trespassers which means they can exclude anyone from the land whom they do not want to be there. And they do because increasingly these properties are being purchased for not their pastoral values but their non-pastoral values which relate to exclusive occupation of the land. 
The farmers come along and ask why they should pay a higher rent for a property around Lake Wakatipu that is worth a lot more than a property in the Blenheim region that does not have the same iconic values. That is what they come along and say. The answer to that is why does someone pay more for a section in Remuera than in South Auckland or in Cashmere compared with one in the eastern suburbs. 
Shane Ardern 
: The presumption is the section is for sale. The presumption is it’s for sale. This is not for sale. 
Hon DAVID PARKER 
: OK I will come back to that argument. But there is a difference in the value of these different properties because some of them have more attributes than other properties and people are willing to pay more for those attributes and that is part of the land value excluding improvements. That is something that is intrinsic to the land. 
I was Minister when the Minaret Station 
case started and I was Minister at the time—actually I think the hearing of the case was while I was Minister but the decision came out at the time of the election or shortly thereafter. The Crown Law advice at the time and the Land Information New Zealand advice at the time was that the decision of the Land Valuation Tribunal was wrong and ought to be appealed because it set a wrong principle in law. It actually said if you use the comparison that I was using that Remuera land should for the purposes of rent be the same as South Auckland land which is a nonsense because they are of different worth. 
The rental of 2 percent of land value excluding improvements is affordable by some but not all tenants. We accept that some tenants—and Mr Ardern made the point quite fairly—some lessees are long-term holders and they do not want to sell. They only want to extract pastoral values from the land. They have not purchased it for tens of millions of dollars and they cannot afford a rent that is based on what they might sell it for. They need a rent that is lower than that. The law already allows for that. We do not need this change in the law to achieve that outcome. When I was Minister and enforcing the proper rent in accordance with the law the lessees rose up and said that somehow I was acting improperly in charging the rent of 2 percent of land value excluding improvements. They said it was terribly unfair. I was actually worried about some of those lessees because some of those lessees were under financial pressure and they found this changing of the rent stressful. I wrote to every one of them—every one of them—and not just once; I personally wrote to them twice. I said if there is a case of hardship please come to us and we will do a deal. Sometimes we will ask for something in return for a rent reduction. 
One of the examples I gave in the letter was some wilding pine control. At the moment it is a moot point as to whether wilding pine control has to be carried out by the lessees. Some lessees do not do it. Some lessees even prevent volunteers from going on the land to clear wilding pines. So I thought that that was something in the public interest that I as Minister could extract in return for a rent reduction—either the control of wilding pines or letting someone else do it. It seemed pretty reasonable to me. 
On occasions we have landlocked rivers and lakes. We have landlocked rivers and lakes. I do not have the time to go through why that is the case. Well actually I will digress a little. In respect of the central part of the South Island because the original tenure that was given to those farmers was non-renewable pastoral occupation licences—before we had pastoral leases—there were never proper surveys done of those areas and therefore the Queen’s Chain was never set off around those lakes and rivers. As a consequence of that when the pastoral occupation licences were changed to perpetually renewable leases that issue was never tidied up and it has never been tidied up properly since. Although it is in part being fixed in the renewals of pastoral leases at the moment we have a residual problem in respect of New Zealanders’ being able to have access to some of our rivers and lakes and that is wrong. I think I should be able to and every other New Zealander should be able to access our rivers and lakes. So one of the other things we said was that if you have rivers and lakes that people have not got access to and you want a rent reduction we will negotiate access through your property—not wandering at will but access ways through your property—to those lakes and rivers. The farmers decided that what they would do was get out their union book run the farming union and actually vote as a block and not one of them would take that offer of a rent discount. They decided to wait out the term of the Government—because we were obviously coming towards the end of our term in Government—and renegotiate with the National Government. And that is what they did. They stonewalled and then they came to the Government and they said: “We can never afford to pay this rent.” 
Do you know who the discounts are being given to? The discounts are being given to in some cases people who paid $10 million for their land knowing that the rent was 2 percent of the land value excluding improvements. Some of these people are good people. In fact all of these people to my knowledge are good people. But they do include people like the partner of Shania Twain—and I will not name him. He is doing some wonderful things to look after the land but he did not buy it on the basis that he should have a discount on his rent of 2 percent of the land value excluding improvements. He paid $10 million or $5 million for his farm knowing that the full rent was payable. This Government is giving that multimillionaire who paid that price for the land a rent discount when he did not ask for it and did not need it. This is ridiculous. And this is a Government that is running a $12 billion deficit. 
These decreases in rent are unprincipled. This has opened Pandora’s box. We have given the warning before that if you interfere in these contractual relations in this way a future Government can do the same and will—and will. I make the point that it will because it should. I will give you other examples. There is nothing wrong with fractionised ownership of these stations but increasingly these stations are owned by a wide range of people who are very wealthy people and they are effectively a time-share; that is what they effectively are. They are a giant time-share and those people get a rent discount too despite the fact that they have not asked for it and despite the fact that they do not need it. 
This is bad legislation. The rents should be 2 percent of the land value excluding improvements with discounts for those who cannot afford to pay. 
IAN McKELVIE (National—Rangitikei) 
: 
 I am pleased to take this opportunity to speak briefly to this enlightened piece of legislation the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill and I intend to bring it back to a practical basis. The legislation is designed to ensure that high country rents—and I refer to pastoral leases of course—are fair workable understandable easily interpreted and do not result in unnecessary disputes in the negotiation process and a large bit of the discussion in the last few minutes has been around that. There are a number of other matters for consideration that will possibly spin out of this legislation and further justify the changes proposed by it. Farmers throughout New Zealand have a huge interest in their environment and it is essential they are able to farm profitably as this enables them to make the contribution to environmental matters that is so necessary in this type of country. This bill will assist them by setting a rental that is based on their leased land’s productive potential allowing them to plan and better understand their future cash flows. 
Another consideration in this rental-setting process could well be the fact that we may set rentals at a level that does not drive production beyond the sustainable capacity of the land concerned. We have seen this happen all too often in New Zealand farming history and some of the subsidy schemes of 30-odd years ago certainly distorted the use of land and put pressure on the sustainability of that land in a manner that is still being paid for today. 
Including amenity value in the valuation process will inevitably put renewed pressure on the sustainable capacity of the land as livestock farming would have to subsidise. The so-called amenity value as returned from this source is not an option in the current or foreseeable future on many of these farms. 
My own electorate in the Rangitikei of course has a fair bit of what might be termed high country land. It is however highly productive and for the main part privately owned. Therefore the bill does not apply to us North Islanders and I guess to some extent we would regret that. This country is of course the home of the mighty merino one of our most valuable high-end luxurious and totally sustainable fashion products—and fashion icons really. I think that this Government must encourage the production of merino and its products through sound policy and this in my view is sound policy. There is no doubt that high country leases are the best way to both manage and protect this wonderful piece of New Zealand for future generations of our children. Thank you. 
STEFFAN BROWNING (Green) 
: 
 This bill the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill not only limits the Crown’s earning potential but currently misses the potential of ensuring environmental gains. The need to ensure best-practice farming management that may actually stock significantly less intensively than the stock-carrying capacities that are currently accepted is not actually enshrined in this rental-focused bill. It allows for it but does not enshrine best practice. Whatever mechanism is used to determine rentals it should necessitate the requirement that farming practices must be genuinely sustainable and that biodiversity protection targets are set and met. There are brilliant examples of good management within leaseholders and those best-practice—including certified organic—examples need replicating at every opportunity. 
This bill could allow a little bit more certainty about ensuring some of those aims. I know there are other provisions that should be treated a little more holistically than focusing on some carrying capacity methodology. The Commissioner of Crown Lands must take into account certain matters including ecosystems and values of indigenous plants and animals and landscapes and the like but the Greens think that this bill could actually enshrine some of those benefits that we actually look for. 
With 1.6 million hectares potentially being able to be truly sustainable while ensuring good biodiversity outcomes if the mechanism was correctly applied this could happen with a good formula. The Greens support farming families. We want to see more families on the land but not farming families that are not using genuinely environmentally sustainable practices. What is considered an efficient farmer as in some of the preliminary discussion on this bill has no certainty of genuine environmentally sustainable outcomes. 
I heard partnership mentioned before. I think partnership is fantastic. Partnership between leaseholders and the Crown can ensure very good outcomes but values around carrying capacity need to ensure the best environmental outcomes—not just adequate but the very best. The Greens oppose this bill but would support a mechanism that ensures the Crown a fair return on all values of this land while allowing genuine farming families an affordable rental while preserving biodiversity values and being committed to improving the land for future generations. 
JACQUI DEAN (National—Waitaki) 
: 
 It is nothing but pure eco-arrogance to assume and to put forward the notion that high country farmers do not and are not able to farm sustainably. I find those comments ignorant and offensive and they will certainly be offensive to those 300 high country farming families who for a number of generations have not only sustainably farmed their high country pastoral leases but also in the meantime have improved them to the extent where—well not now—the previous Labour Government turned its beady eye on to them and decided that “Yes we want them back now thanks very much.” So I completely condemn the comments of the previous Green Party speaker Steffan Browning. If that reflects the attitude of the Green Party in general then heaven help us because I just find that absolutely abhorrent. 
In fact it was the Parliamentary Commissioner for the Environment Dr Jan Wright in her report on the sustainable management of the high country of the South Island who acknowledged that management is not an either/or thing. Management is not either protection of the environment or exploitation for productive management; in fact the future of the high country in New Zealand is a combination of those plus many other things. 
I think that perhaps members of the Green Party should also cast their eye over what is happening now in the Mackenzie Basin which involves land that is not only in pastoral lease but also in freehold and the efforts that those farming communities and all stakeholders are coming to in order to find a sustainable vision for the Mackenzie high country. We will hear more of that in the months and years to come. 
So I think it is probably quite useful to remember what in fact the history is of Crown pastoral leases. Many many generations ago the high country was in dire danger of well literally blowing down off the alpine tops because weed was taking over. We were losing the value of that country so it was decided to offer that land to high country farmers by way of a perpetual lease. Thank you. 
A party vote was called for on the question  
That the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill be now read a second time. 
Ayes 63 
New Zealand National 59; Maori Party 3; ACT New Zealand 1. 
Noes 58 
New Zealand Labour 34; Green Party 14; New Zealand First 8; Mana 1; United Future 1. 
Bill read a second time. 
Defence Amendment Bill 
First Reading 
Hon Dr JONATHAN COLEMAN (Minister of Defence) 
: 
 I move  
That the Defence Amendment Bill be now read a first time. 
 I nominate the Foreign Affairs Defence and Trade Committee to consider the bill. Before outlining the details of this bill I would like to take this opportunity to pay tribute to the men and women of the New Zealand Defence Force. There are hundreds of New Zealand Defence Force personnel deployed overseas from Timor to the Solomons to the Sinai to Afghanistan and various places in between. These men and women and their families make tremendous personal sacrifices in the call of duty. I want to especially acknowledge those Defence Force personnel who in recent times have made the ultimate sacrifice in the service of their country. In particular I want to pay tribute to Corporal Ben Carson Flying Officer Dan Gregory Flight Lieutenant Hayden Madsen Lieutenant Tim O’Donnell Private Kirifi Mila Corporal Doug Grant Lance Corporal Leon Smith Flight Sergeant Andrew Forster and Squadron Leader Nick Cree. Their sacrifice is a sobering reminder of the risks that New Zealand Defence Force personnel run in the course of their daily work so that national security and international order might be maintained. I especially want to acknowledge the loved ones of these men who have lost so much. 
Turning now to the bill the bill amends the Defence Act 1990 and supports the Government’s commitment to making sure New Zealand has a strong and effective Defence Force fit to deliver against 21st century priorities. This bill implements Government policy set out in the  
Defence White Paper 2010 
. The development of the white paper was the first comprehensive direction-setting exercise for defence since that undertaken by the previous National-led Government in 1997. Before the 2008 general election a commitment was made to undertake a wide-ranging defence review and this has been subsequently honoured. An extensive programme of public consultation was undertaken around the country. Over 600 written submissions were received from individuals and organisations including the Royal New Zealand Returned and Services’ Association the Peace Movement Aotearoa / New Zealand and from within the Defence Force itself. An independent value-for-money review complemented the review process and the Government appointed an independent panel of experts to test key assumptions underpinning the review. 
The result of all this work was a thorough assessment of New Zealand’s security outlook defence priorities Defence Force tasks and the military capabilities and organisational structures required. The white paper drew together the recommendations of the review and its supporting exercises to set an overall direction for defence for the next 25 years. Two major steps have already been taken to put in place the outlined strategy. Firstly the Defence Capability Plan released last year set out a framework for acquiring the military capabilities that the Defence Force will need to perform its tasks. This plan sets out the path through to 2020 for equipping the Defence Force as an integrated and coherent joint force. 
Secondly there has been significant organisational reform within both the Defence Force and the Ministry of Defence. The value-for-money review identified the need for the middle and back areas of the Defence Force to match the efficiency and effectiveness of its front line. The New Zealand Defence Force has been making significant progress in improving its teeth-to-tail ratio to reflect white paper priorities and best practice building and empowering deployable resources. 
The means for acquiring military capabilities and managing them over their whole of life has also been significantly reformed. The Defence Amendment Bill gives the Defence Force and the Ministry of Defence the powers they need to meet the white paper goals. These changes will make both organisations more efficient and enable them to work together more effectively. 
In its first term the current Government inherited a host of defence acquisition decisions that were experiencing long delays and operational deficiencies. Independent reviews highlighted areas where improvements needed to be made. This bill addresses those deficiencies by clearly defining the responsibilities and accountabilities of the Secretary of Defence and the Chief of Defence Force. The roles of the secretary and the Chief of Defence Force are in particular redefined with regard to the management of military capability to ensure that their duties are undertaken in consultation with each other. The bill also supports this obligation to consult by providing for the sharing of and mutual access to information held by the Defence Force and the Ministry of Defence. The Ministry of Defence’s capacity to deliver advice that offers a comprehensive view of the links between policy on the one hand and military capability and funding on the other has also been recently strengthened. This strengthening of capability alongside the reforms in this bill means the Government will have done all that it can to put into practice what has been learnt from past acquisition projects. 
To enhance the management of the Defence Force overall the bill makes changes to the role of the Chief of Defence Force. The Chief of Defence Force will formally command the armed forces rather than doing so through the chiefs of the three services. This is vital to the one-force approach of the modern Defence Force and is key to ensuring that the three services work more effectively together as is required by the increasing sophistication of modern-day military operations. Providing the Chief of Defence Force with direct command of the armed forces will also allow greater clarity and accountability in undertaking the required organisational reform that has been set out in the white paper. The Chief of Defence Force will also be appointed and held accountable for his performance under more transparent arrangements. This bill provides for the State Services Commissioner to make recommendations for the appointment of the Chief of Defence Force. This is a practice that has developed over recent times and should be codified in legislation. 
The Minister of Defence will also be empowered to appoint the commissioner or another suitable person to review the Chief of Defence Force’s performance. The process for removing the Chief of Defence Force from office should this ever be necessary will also be clarified by the bill. To support the Chief of Defence Force’s role as direct commander of the armed forces this bill establishes the Vice Chief of Defence Force as the statutory deputy. The Vice Chief of Defence Force will be mandated to serve as acting Chief of Defence Force if required. The vice chief will also become a statutory member of the Chiefs of Service Committee and preside over that committee in the absences of the Chief of Defence Force. The bill provides for the Vice Chief of Defence Force to be appointed by warrant by the Governor-General in council whereas the chiefs of the services will in future be appointed by the Chief of Defence Force after consultation with the Minister. This development will reinforce the position of the Chief of Defence Force as direct commander of each of the services. 
To support improvements to the Defence Force’s front line the bill enables the Chief of Defence Force to redesignate a back-office military position as a civilian position. Former military personnel will be able to fill these new civilian roles. Redesignation of military roles to civilian ones is an important efficiency measure for the Defence Force. It enables military resources and personnel to be used for modern military purposes: national defence maritime patrol humanitarian relief and upholding New Zealand’s values at home and abroad. For roles where the impressive skill set of uniformed personnel is not required the extra costs of having military staff performing these jobs simply denies resources for the front line. 
Finally the bill also addresses confusion that has arisen around the duties of reserve forces and part-time forces. To clear up this confusion the terminology in the Act will be amended. The “active reserve” will refer to part-time members of the armed forces and the “inactive reserve” will refer to former members of the armed forces who have a residual obligation to serve if called upon. This bill advances the comprehensive plan for the future of the New Zealand Defence Force which was set out in the white paper. The bill provides the New Zealand Defence Force with the command structure and administrative capabilities it needs in order to build a 21st century Defence Force. I commend this bill to the House. 
Hon PHIL GOFF (Labour—Mt Roskill) 
: 
 If I can begin as the Minister of Defence did by acknowledging the work done by the men and women of the New Zealand Defence Force. As a Minister I had the privilege of working with them over 9 years in deployments in all parts of the world. I have the greatest respect for their efficiency for their courage for the way they carry out their operations and they do this all on a very tight budget. We are a small country and we made hard decisions when we were in Government about what we could sustain and what we could not. There is no talk in this Defence Amendment Bill about an air combat force for example. National made a lot of fuss about the abolition of it but it has never talked about bringing it back. 
I have the greatest respect for the Defence Force but you know the one word I did not hear in the Minister’s introduction of this bill was what the bill was really about—and that is a three-letter word called “cut” or “cuts” actually in the plural. Because what this bill is about is what we learn in the briefing to the incoming Minister of Defence Mr Coleman— 
Hon Dr Jonathan Coleman 
: “Dr Coleman” to you sonny. 
Hon PHIL GOFF 
: Dr if he prefers; if he stands on his title. 
Hon Clayton Cosgrove 
: “The Maestro”. 
Hon PHIL GOFF 
: “The Maestro” to some for his extraordinary performance in the Mt Albert by-election. Well I want to come back to what the Minister did not talk about—[ 
Interruption 
] 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! Interjections are not to be between members but at the speaker. We have two members here who are interjecting on each other. 
Hon PHIL GOFF 
: The briefing to the incoming Minister gives it away and I just want to read one sentence: “Cabinet has directed an annual recurring savings target for the New Zealand Defence Force of $350 million - $400 million by 2015.” What this bill is about and what the intention of the Government is is to cut $400 million a year from the Defence Force. And you cannot Minister talk out of both sides of your mouth by talking about respect for those in the Defence Force their sacrifice the risk they put themselves under and at the same time pull the rug out from under the Defence Force by slashing expenditure by $400 million a year. 
Elsewhere of course in this briefing for the incoming Minister it refers to the Territorial Force which is also included in this bill. And what does it say about that? They are going to cut it by one-third—cut the Territorial Force by one-third. Six hundred people are going to be down the road in the Territorial Force. Now I want to say this about that aspect to the Minister. Since 2000 more than 1000 of the Territorial Force have served this country overseas in war zones in deployments. But for the Territorial Force the regular force would have been under real pressure. Forget what this bill says about the Territorial Force; it is what the Government is doing to it that counts and it is gutting it by slashing it by one-third—one-third. 
Hon Dr Jonathan Coleman 
: I raise a point of order Mr Speaker. This is all very interesting Mr Goff’s opinions here but a first reading speech is meant to be about the content of the bill and we are not really hearing any of that. 
Hon Clayton Cosgrove 
: Point of order. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: No I do not need any help. The reality is that the member of course is entitled to have some form of rebuttal. He is coming to the end of that now and I am sure that he is coming to the point of the bill. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. With respect a major thrust of this bill is about a thing called capability management and I think everything that my colleague Mr Goff has said has been very germane to that theme. If the Minister does not know his own bill he should read it. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Thank you for your contribution. 
Hon PHIL GOFF 
: The bill is indeed about lifting the capacity and the capability of the Defence Force and what I am saying is that you have got meaningless clauses in this bill renaming the Territorial Force as the Reserve Force but what is really happening about capability and capacity is that National is gutting it by cutting it by one-third—600 people down the road. I want to ask the Minister what this bill does to sustain regular forces if we increase our deployments overseas when you need to call on Territorial forces to back it up. If he is going to cut the Territorial Force by one-third renaming it the Reserve Force is just an exercise in hypocrisy. It will not be there as the Reserve Force; one-third of them will be down the road. Interestingly it will be the areas of the country— 
Hon Dr Jonathan Coleman 
: I raise a point of order Mr Speaker. The member knows he cannot use the “h” word in here. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Actually I was about to raise that. The member is quite right. You cannot use the “h” word here. 
Hon PHIL GOFF 
: Speaking to the point of order Mr Speaker. I was not calling the Minister a hypocrite; I was saying that the bill was an exercise in hypocrisy and that is within the Standing Orders. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Well the thing is that as a Speaker one has to look at the content and the atmosphere in the House at the time. If it is going to lead to disorder then one has to be careful in the way in which one uses it. 
Hon PHIL GOFF 
: In everything about this bill every area that is covered in the bill the Government is taking retrogressive actions to damage the capability of the Defence Force. I have talked about the Territorial Force. I could talk about the military bands. You know it is going to save $900000 by slashing seven out of 10 of the military bands. That is the same amount that it was planning to spend on a flash swimming pool in Tokyo. I have got to say that it is far more important to me that on Anzac Day this year when we turn up at the parades the seven bands that will be disbanded will still be there but they will be playing for the last time. I ask the Minister why it is that his actions are going to lead to seven out of 10 of those military bands being disbanded. Who will be playing on Anzac Day? Who will be out there on Armistice Day? Who will be there at the commemorative ceremonies that are required for us to celebrate the Defence Force which he talks so much about and about their sacrifice? Who will be there to stand up and remember that by providing the military bands that accompany those parades? I say that is the wrong thing. 
Of course the bill is also about civilianisation. Well that is another word for redundancy. There are 500 redundancies that have occurred in the last year in the Defence Force and two-thirds of those are uniformed people. I ask the Minister this: in the process of civilianisation how is it that I hear of uniformed people in high positions who have been made redundant and end up in the same position with the same salary and back in uniform after they have got their redundancy money? I ask the Minister whether that is happening and what he is doing about that because that is a wastage of money when supposedly what the Government is trying to do is save money. 
You know the only people who have made money out of the defence review and the white paper are the expensive consultants whom the Minister has employed. Rod Deane the former Telecom chief was very well paid for his job but what does he know about the military? And there is some outfit called Pacific Road Corporate Finance which made a lot of money. But what this bill and what the Government’s actions have been about has been undermining the military by cutting the funding of it. I want to say that the then Chief of Defence Force—that is Lieutenant General Jerry Mateparae—described the outcome of the defence review as “challenging” and anybody who knows the Defence Force and the Civil Service knows that the word “challenging” is what public servants say when they think that the Government is halfway to la-la land. And that is what Jerry Mateparae said about it. 
What the Government has not done is actually make the cuts that should have been made. Why is the Minister spending $400 million to $700 million on upgrading the air defence missile systems when the only purpose of that is to allow the frigates to be up in the Gulf for maybe a month every 2 years and to perhaps please the United States? I say to this Minister instead of cutting the defence personnel and instead of undermining the morale of that organisation cut where you can afford to cut on the “nice-to-haves”. It is a reflection on this Government that in the latest defence review survey of opinion it shows Defence Force morale at the lowest level since the survey began—the lowest level since the survey began. Twelve hundred people have quit the Defence Force in the last 12 months—this in the midst of the Government’s recession. That shows you what the morale of the Defence Force is. And there is nothing in this bill that addresses that question. Having a good Defence Force is essential to New Zealand. Thank God for a Labour Government that put the money into capital acquisitions and building up the Defence Force. 
 This bill is about cutting. This bill is about reducing capacity. This bill is about a Government that talks big when it comes to the importance of defence but does not back it up with action and the funding to provide an effective Defence Force and the equipment that is capable of serving the people who represent this country so proudly. 
JOHN HAYES (National—Wairarapa) 
: 
 That was the “Minister of Profligate Spending”. That was the member who is complaining about 1200 people leaving the Ministry of Defence although more than 12000 people left the Labour Party before this last election. That was the member who used to be Minister of Defence and what value did you add to that process? 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! You mentioned me when you were addressing. Would you please refrain from bringing the Speaker into the debate. 
JOHN HAYES 
: This bill the Defence Amendment Bill comes from a process initiated by my very good friend Dr Wayne Mapp. 
Hon Clayton Cosgrove 
: Come on “Sir Les”. 
JOHN HAYES 
: He knew Mr Cosgrove when to leave this House and he did it when he was a member of Parliament not a list member of Parliament. During Dr Mapp’s tenure he initiated the first defence white paper in about 10 years. He was prepared to try to balance the Government’s policy objectives the strategic outlook with what we as a small country with a smaller population than Sydney can afford. 
In my previous life as a diplomat there were many occasions when I worked directly with the Ministry of Defence over many years. We worked with the army with the navy with the air force. We took goods to Bangladesh we took materials to the Solomon Islands I worked with them in Singapore and Malaysia and we worked with them during the conflict between Papua New Guinea and Bougainville and again on the Solomon Islands. I came to trust and value and highly regard our defence personnel and I am really proud that this National-led Government is absolutely committed to making sure that the New Zealand military is a strong and effective force. 
The white paper came from the perspective of ensuring that defence contributed to a safe and secure New Zealand—defence contributed to our safe and secure direction. The paper assumed we were operating in the environment of international order which respects international law and order. We assumed we would be able to work with a network of strong international linkages around a sound global economy surrounded by open trade routes. There have been occasions in our history when in a violent world the use of force is appropriate. Examples of those circumstances include a response—for example if we had a direct threat against New Zealand or our close ally Australia or towards a member of the Pacific Islands Forum or if requested or mandated by the United Nations to contribute to one of their exercises particularly in the Asia-Pacific region. I think that the next 25 years are likely to be much more challenging than the last and a rules-based international order is under pressure. International organisations are struggling to forge a consensus on a whole range of issues particularly on issues around boundaries. 
The other thing that is going on in this global world is that the balance of economies is changing. The threat of proliferation is growing. The South Pacific is a region of fragility. Tasks in and around New Zealand and the Pacific are the starting point for choosing the military capabilities of our military. 
This bill strengthens a one-force approach. It is key to ensuring that our three services—army navy and air force—work together under one leadership. 
We also need to keep in mind the independent value-for-money review done by Dr Roderick Deane. He has said we should look at savings that can be made in the back office and in the middle part of defence and bring resources to the front line. This bill is going to help reprioritise resources in that direction. We are going to put the right people in the right jobs. 
The bill is going to change the way in which the Secretary of Defence and the Chief of Defence Force can work together regarding procurement replacement repair and the disposal of assets. The bill is going to clarify the manner in which the Chief of Defence Force exercises command of the armed forces. It will enable the Ministry of Defence to advise the Minister on defence matters referred to it by the Minister when we set up a defence advisory board. 
I commend this bill to the House. It is a good bill and I look forward to its referral to the Foreign Affairs Defence and Trade Committee. Thank you. 
Hon CLAYTON COSGROVE (Labour) 
: 
 That was an interesting speech from that member who made quite a good contribution towards the end. He ran down a whole series of potential pressure points and if you will futuristic hot spots in our region. I turned to a colleague and I said— 
John Hayes 
: What’s your electorate? 
Hon CLAYTON COSGROVE 
: It is all right I am trying to praise you. I know this is difficult; nobody has in here but give me a go. He actually made a valid point. I know this is a unique thing in Mr Hayes’ existence. But would it not be nice—would it not be appropriate therefore—given all the illustration of the potential threats that our region may face that we had a viable Defence Force? Would not that be the case? 
I was reflecting on when I came into this place in 1999 and I made a speech along with others around the Defence Force. I recall the same sorts of issues coming up. If you look at the history of our country you see that bizarrely even though Labour was the party made up in its original times of the odd conscientious objector and what would perhaps now be called a peacenik or whatever it has always been throughout our history Labour Governments not those who pontificate and the conservatives on the other side that have put resources into our military. I know that is sort of a strange concept for Mr Hayes to reflect on but in 1999 for instance when we came to Government I recall speeches in this House about a Defence Force that we inherited. 
They served in Bosnia—M113 are the personnel carriers that were in Bosnia. The National Government had depleted the Defence Force budget so badly that we had the indignity of going to our allies the Australians—I think “Sir Les Patterson” was still in the Ministry of Foreign Affairs and Trade at that time—and asking the Australians whether we could borrow some armour-plate to weld it on to the personnel carriers which could not keep up with the British trucks they were supposed to defend in Bosnia. Then to cap it all off Mr Hayes’ Government had the indignity of cutting it off with oxyacetylene torches to give it back to the Australians. 
John Hayes 
: I raise a point of order Mr Speaker. Could you please clarify with the speaker whether Mr Hayes and Sir Les Patterson are the same person? 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: That is not a point of order; that is misusing a point of order to score a political point. 
John Hayes 
: I raise a point of order Mr Speaker. I am sorry it is a point of order because if it is the same person I am going to lay a complaint against him and ask him to withdraw. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: I call the Hon Clayton Cosgrove. 
Hon CLAYTON COSGROVE 
: Thank you Mr Assistant Speaker. I would invite Mr Hayes perhaps to watch a wee bit of contemporary television; he can draw his own conclusions. The other person I was thinking of in my mind was Captain Mainwaring but that was a different show. Mr Hayes of course does not like it; he likes to dish it out but when the old feet are put to the fire he does not like it. 
The thing that Mr Hayes has to realise about the history of his party as I was saying is that we had to borrow the armour-plate from the Aussies and weld it on. The personnel carriers could not keep up with the British trucks and then we had to cut the armour-plate off and give it back to the Aussies. We inherited a Defence Force whose radios were not interoperable. 
We inherited a navy where those geniuses in Mr Hayes’ Government—remember the  
Charles Upham 
? 
The ship I mean—not to be confused with the great man in case Mr Hayes is having a bit of a mind block. That was a great disaster from the National Government. It bought a ship with the great man’s name—his body resides in Papanui at the Papanui RSA—that ended up carrying oranges lemons or both around Spain. That is the history of the National Party which every time it comes into Government talks tough about the Defence Force: how patriotic it is how it stands by them. 
In this bill the Defence Amendment Bill you have a deficiency in capability and it is a National Government that comes in and makes the cuts. Mr Hayes made an interesting point. He used the old slogan: “We’re going to get rid of all these back-office flunkeys and we’re going to promote the front line—bolster up the front line.” Well here is Mr Hayes’ problem. Of the 495 people made redundant last year as my colleague Mr Goff said 295 were uniformed staff—soldiers. I say to Mr Hayes that not one person was cut from the back office the front office the basement or the attic of the Ministry of Defence headquarters—not one; not one of these so-called pen pushers these back-office people whom Mr Hayes talks about. 
So as usual this is the sort of bill that talks about capability talks about efficiency and talks about some lofty goals. But when the rubber hits the road Governments of course—it is Governments—send men and women out into harm’s way. Very rarely do we in this House get in harm’s way although judging by Mr Hayes’ demeanour I think he may have been in harm’s way quite recently. Governments send the men and women in our Defence Force into conflict zones. What those men and women ask is two things: that the cause is honourable and secondly that Governments that send them into harm’s way give them the men and women the equipment and resources they need to protect themselves to protect their comrades and to defend our country. 
I remember with other colleagues in 1999 making a speech very similar to this after we inherited a National Government’s cuts—slash and burn—and after it had underfunded and cut the military. I just invite Mr Hayes—he might want to take another call and his Minister might want to get up and make another contribution or have another speaker do it—to look at the redundancy plan. Not one person a so-called alleged pen-pusher from head office in the Ministry of Defence has been made redundant; it has been front-line capability. 
As for the Territorial Force I know as every member of this Parliament will know the greater difficulty that it is now for employers to put resource aside to allow their staff to engage in Territorial duties. I pay tribute to the armed forces who have put a hell of a lot of effort in the last number of years into promoting the Territorial Force working with employers explaining to employers the wonderful skills that those men and women if they are exposed to Territorial engagement will bring back to businesses to the entities and to the workplaces where they work. Now of course that is all up for grabs. 
I notice that the balloon across the way has popped and gone silent. So I invite Mr Hayes who does have some experience I believe in foreign affairs matters from when he was a diplomat as he outlined the potential and futuristic threats that our region may have to illustrate for us where these cuts are going to be extended to. 
National members of course use the term “savings”. They say it is savings. That sounds quite a positive term does it not? But what savings actually means is that you take resource from one part of an entity and redeploy it within that entity in another part. In this case they are taking resource directly out of the front-line staff the soldiers those whom they will send over to the conflict zones in the future to protect this country and to protect this country’s interests. 
So I invite Mr Hayes to reflect on that and I invite him to reflect on how he is going to get the $400 million cut—and let us call it what it is; it is not a saving—by 2015 and at the same time sustain morale such as it is. We have the lowest morale rating in the Defence Force survey as Mr Goff said since its inception. And it will go lower given that these resources are to be taken away. 
Then the question is this. How are we going to encourage other New Zealanders younger New Zealanders people who are thinking of making a commitment to the Defence Force in the future? They may be thinking of making such a commitment today especially given that we have extremely high unemployment but even putting that aside they may want to make a contribution to the Defence Force. They may want to sign up put the uniform on do the training and go out and protect our country and serve our country. If I was a young person looking at this bill I would be scratching my head and going “There ain’t no future here.” when the resources are being stripped away by that Minister Jonathan Coleman by Mr Hayes and by this Government. 
This Government of course talks in some sort of nationalistic patriotic way about supporting our defence forces and what it will do to create efficiencies but we know the real rubber that hits the road which is masked by this bill are the savage cuts that National makes in our Defence Force every time it gets in—every time. Look at the history from 1990 to 1999. They did it they cut it—they cut the Defence Force to the bone. Now National is back in again and history is repeating itself as it has throughout the period every time a National Government has been in here. 
It was a Labour Government that increased the capability of the Defence Force and yes we made hard decisions and yes we made some controversial decisions which some did not agree with. But by God we put resource into the navy we put resource into the air force and we put resource into the Territorial Force and we put resource into the regular force. We did not come into the Parliament waving around a bill that says “How great thou art.” at the same time as we were slashing and burning defence personnel capability at the same time as we were asking men and women to go and serve their country and put themselves in harm’s way. 
So I say to Mr Hayes that he is following a fine but tragic National tradition of slashing and burning the Defence Force and I invite him to examine very very closely where the cuts are coming from what their frequency is how they will be achieved and how they will be achieved in the future. I look forward to him celebrating the cuts in the Ministry of Defence headquarters when he makes them. 
Dr KENNEDY GRAHAM (Green) 
: 
 Let me first pay tribute on behalf of the Green Party to the armed forces personnel and particularly to the individuals cited by the Minister of Defence who have fallen in the line of duty. We pay tribute to those individuals and to the armed forces personnel generally. Notwithstanding any differences in policy we remain all united in support of them. 
The aim of this bill is to amend the Defence Act to implement Government policy as set out in the white paper of 2010. The bill addresses a number of administrative issues: redefining senior roles sharing information and strengthening ministerial advice. It also addresses a few issues of substance: terminating the Territorials and creating an effective active and inactive reserve force and transforming some military positions into civilian positions. These changes might appear on the surface to be essentially administrative. It is tempting perhaps to go with the flow and simply support them. But we are all obliged more so to understand the strategic trends that have underpinned these changes and that informed the white paper and the Hunn report of 2002 before it. 
The Hunn report noted that whether there should be two defence organisations or one depended on whether the then Government was prepared to amend and revise the Act. The problem said the report was cultural and attitudinal more than organisational and systemic. The report called for new cultural values to create a habit of mutual support and information sharing. It went as far as to recommend a single organisation. 
The white paper set out the overall strategic direction for New Zealand’s defence over the next 25 years. It describes our defence policy as contributing to four overarching national security interests and these are a secure New Zealand a rules-based international order a network of strong international linkages and a sound global economy as I think Mr Hayes identified in his speech. If that sounds like old 20th century diplomacy it is because it is. The Prime Minister in his elliptical and carefree way said that the white paper “looks at global security [and] the challenges New Zealand is likely to face” kind of kicking the tyres and it sets out the best approach to meet them. But having introduced the term “global security” he slipped back into international diplomacy thinking. 
The paper identifies the strategic outlook to 2035 concluding that the defence tasks over that period would remain much as they have been albeit with potentially intensified demands. The main tasks in New Zealand and the South Pacific should be the starting point the report said for choosing the military capabilities. The requirements were to upgrade our military capabilities develop a people-centred force engage in organisational reform and modernise the infrastructure while making all of this affordable. With an uncertain strategic outlook there would be a need for a Defence Force that is responsive versatile and professional. The bill before us aims to implement these recommendations of the white paper. In short it is a step closer to the reintegration of the New Zealand Defence Force and the Ministry of Defence in managing our defence capability. 
The Green Party endorses change to our defence structure in so far as it introduces greater efficiency and renders the force more effective in the pursuit of our overall strategic goals. But the problem arises with the identification of those strategic goals because the Green Party has a different strategic vision of New Zealand from that of this Government. When the white paper emerged in November 2010 we said at the time that the report was a missed opportunity to formulate an independent and positive defence policy for the 21st century. 
The paper explicitly stressed the benefits of New Zealand being a stalwart partner of the United States. It saw a need to lock into a defence relationship with Australia as “our principal defence and security partner.” The review failed to project further moves towards an independent defence policy in the wake of our strategic move away from the US and Australia since the 1980s and our termination of the air combat force. New Zealand does not need a formal alliance with other countries to undertake military cooperation with them. We should be politically prepared and militarily able to cooperate in the South Pacific not just with those two countries but with others: the Island States themselves and the larger powers in the Asia-Pacific region. 
Indeed the most far-reaching and positive thing New Zealand can do is develop a military capability operating through the United Nations. For the past 20 years the United Nations has been developing a coherent approach to global and regional stability. The seminal document  
An Agenda for Peace 
 developed a conceptual framework for conflict prevention peacemaking peacekeeping and peace-building. It called upon member States to provide it with a capability for a ready reaction force with rapid deployment capability. Some 10 years ago the Brahimi report took this a step further calling for explicit mandates from the Security Council clear operational mission objectives and advanced exit strategies that reflect a proper goal accomplishment. 
The UN Security Council resolved then to give peacekeeping and enforcement operations clear credible and achievable mandates. It recognised the critical importance of UN peacekeeping operations having a credible deterrent capability. Such operations needed to meet minimum conditions: a clear political objective practicability of designated tasks and compliance with international legal principles. The council called for a clear chain of UN military command for unity and cohesion of UN force structures for proper training and equipment including UN military helicopters for due risk-assessment capability and for clear rules of engagement. 
Over these last two decades the UN has developed significant capability and stabilisation force capability notwithstanding the difficulties it has encountered and the poor troop behaviour of a few contributing countries which incidentally falls short of the atrocious behaviour of some of our own political friends in Iraq and Afghanistan. The UN’s New Horizon 
initiative of 2009 for strengthening its military operational capacity is already making headway. 
More recently at the world summit of 2005 the UN General Assembly reiterated the importance of the multilateral process. Member States acknowledged that we are living in an interdependent and global world and that many of today’s threats know no national boundaries yet all reaffirmed that the charter remains able to address the full range of threats to peace and security. That is to say between the Hunn report and the white paper New Zealand reaffirmed that the UN charter is adequate to address all our security threats. So the focus cannot be on old-fashioned strategic alliance diplomacy. It needs to be on New Zealand’s contribution to both global missions through the UN and regional mission capability through the Pacific Islands Forum. Such a focus and capability would also be applied to resource protection in our exclusive economic zone in those of our Island neighbours and in the Southern Ocean and Antarctic waters. 
We should be concentrating our resources where we can make the most positive contribution: in UN peacekeeping and peacemaking in maritime surveillance and in disaster relief. The white paper and this bill which seeks to implement it reflect a wrong strategic orientation for this country and the bill sends the wrong political signals to our region and the world. 
It is a question of world view. The National Party world view is based on an anticipation of hostility between nation States as the natural order. It is based on a felt need to keep a military combat capability for what even it concedes is a remote prospect of direct attack. It is based on a felt need to succour to the more militarily powerful countries with which we have a passing cultural affinity. 
The Green Party world view is based on the need to cooperate with all nation States as a natural and realistic outlook in the 21st century. It looks to meet the needs beyond 19th and even 20th century alliances whether formal through ANZUS or informal through protestations of good friendship to the strengthening and the capacity of regional and global organisations. The white paper and this bill do not reflect that world view. They reflect a fundamentally different one which we judge to be obsolete and dangerously misguided. It is with a solemn sense of responsibility therefore that we shall oppose this bill. 
Hon TAU HENARE (National) 
: 
 Kia ora Mr Assistant Speaker Robertson. I also want to pay my respects to what I consider to be a No. 1 Defence Force not only here in New Zealand but around the world and our long long—if I can be so bold a warrior Defence Force. 
I will not speak too long. I think that the problem that we get into is there are too many so-called experts in the debate about what is needed for a Defence Force. 
Sue Moroney 
: Too many people who remember what National has always done. 
Hon TAU HENARE 
: That is a classic example of what I am talking about. The expert from down in the South Island—sorry Hamilton—has been all around the world and she knows everything! So we should just leave it to her. 
The fact is that this Government is committed to having a strong and effective Defence Force. It is a Government that wants to enhance that one-force approach. It is a Government that knows that the services have to work together and be responsible and accountable to their masters—I suppose their pay masters. Whoever is in Government whether it is them or us we rely on the Defence Force to do what I consider to be a very very good job. Ever since Johnny was a young boy in the militia days fighting in the new nation of New Zealand Defence Force personnel have borrowed have stolen and have begged for other materials from other people. I know that that will continue regardless of how much money we put aside for the equipment and how much money we put aside for the defence of this nation and our interests overseas. 
I have no qualms in commending the bill to the House. It is a new era. It is a new time and we must keep in step with the times. We must keep pace with the times. We can all laugh at Clayton Cosgrove talking about Les Patterson but the reality is that we can stand here and say that they did a bad job and we can sit here and hear them say that we did a bad job but at the end of the day the question is whether they will support this bill. If they do not support the bill then please come out with a figure—just a ballpark figure—of how much the spend— 
Hon Paula Bennett 
: You did say bald park. 
Hon TAU HENARE 
: The bald park? No the ballpark figure of how much the spend would be under a Labour Government. Everybody goes quiet. At the end of the day— 
Hon Phil Goff 
: It’s a case of priorities. 
Hon TAU HENARE 
: I have to say that if I was an alien and had come down to Earth and listened to the speech of the Hon Phil Goff I would think that with the great job they did they would be in Government. But it is not case. [ 
Interruption 
] Exactly. I would like to repeat the words of the Hon Phil Goff but I cannot. But that stuff does happen. 
Hon Phil Goff 
: It’s an old hippy saying. 
Hon TAU HENARE 
: I always thought it was—no. I have to say that we are the Government we took this process through under the Hon Wayne Mapp and now under my colleague the Hon Jonathan Coleman and it is about to get another airing in the Foreign Affairs Defence and Trade Committee so save your ammunition for then and make it count. Kia ora. 
ANDREW WILLIAMS (NZ First) 
: 
 I rise to speak on behalf of New Zealand First on this Defence Amendment Bill. We also are in agreement with all the other members in this House that New Zealand’s Defence Force has a very proud tradition of serving to protect our people our borders our values and our sovereignty of New Zealand. Our defence objectives are best achieved through a combination of factors however; it is not just about defence. It is also about trade it is also about diplomacy it is also about economic and technical aid it is also about continuing to support the United Nations and it is also about supporting our peacekeeping and peacemaking operations around the world. 
As we all know New Zealand is very much a maritime nation. In fact at the Local Government and Environment Committee at the moment where we are considering the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill we have been advised that we have the fifth-largest economic zone—out to the 200-mile limit—in the world. It is huge by any standard of any nation and therefore New Zealand is very much dependent on and must take notice of the fact that our maritime capabilities must be there. Indeed our maritime capabilities must also extend to assist our South Pacific neighbours and friends who perhaps do not all have sufficient capabilities to monitor some of their own areas of the Pacific as well. 
New Zealand First itself of course is committed to building and maintaining a professional and effective Defence Force and we always will be. We believe in a strong Defence Force and we believe in a strong army navy and air force. For our size of only 4.5 million people I think—and our party certainly feels—that we do very well and we punch above our weight. However we could do better and there are aspects of this bill that we do support. We do agree with certain sections of it such as being able to merge some of the operations and find economies of scale across the navy army and air force through cooperation between the various arms of our Defence Force and bringing some of those under one umbrella to find economies of scale. 
However this is not just about finding economics in our military. This is very much perhaps a  
Dad’s Army 
 bill in disguise. We see this as very much again the National Party wishing to privatise parts of our military. This is very much along the lines of National tactics in other areas such as our prisons wishing to privatise aspects of our prisons; charter schools with the ACT Party and National wishing to privatise parts of our education; and wishing through the Auckland Council to privatise many aspects of local government. This is just another part of the whole web of intrigue from the National Government: now trying to privatise parts of our military. Indeed it flows on very closely to the privatisation of our assets such as our power companies and Air New Zealand. It is just a continuous broken record of privatisation by the National Government of much of our heritage and much of what this country stands for. 
This bill also undermines our Territorial Force. Good people throughout New Zealand working in communities all over New Zealand spend time in the Territorial Force. Very important people give of their time to also make huge contributions when they are posted in overseas theatres of war and in peacekeeping efforts and also at home in emergencies such as the Christchurch earthquake national disasters—and I am not talking about the National Party; I am talking about national disasters—and civil defence emergencies. This bill goes as low as also wanting to scrap 17 Territorial bands around New Zealand leaving only three regular force bands for all the important occasions that New Zealand is so proud of. Many communities in New Zealand on Anzac Day next year will struggle to have a presence of a Territorial band at important ceremonies that they are undertaking or indeed throughout the year marking other important commemorations. 
This will also have a flow-on effect—this white paper and this defence bill—in terms of jobs. This Government keeps talking about creating more jobs and more employment. We must always remember that our military provides a huge amount of employment in this country. It is the basis of many of our apprenticeships of training and of getting young New Zealanders into a service and into a career giving them a leg-up getting them into the services and giving them an opportunity for a job in life. Many of them learn their trades in the military then go on out into the community once they leave the forces to be very very useful people with good trades training good skills training or good information technology communications and other training from the military. 
This Defence Amendment Bill very much is a  
Dad’s Army 
 bill. It is no wonder that Stratfor political analysts in the USA just a few days ago made the following comments: “When it comes to geopolitical importance it doesn’t get much … lower than New Zealand. I mean they barely have an air force …”; “What possible strategic use is that little part of the world to … anyone??!!”. This is from stratfor.com which is widely listened to by very very significant and important people in the United States and internationally. Those are the sorts of comments that were leaked on WikiLeaks about New Zealand. Imagine what the comments will be once we further cut our military and turn it into a privatised  
Dad’s Army 
. Imagine the future comments from the likes of stratfor.com. 
New Zealand First opposes this Defence Amendment Bill in its present form. It undermines our longstanding proud history of military service in this sovereign nation of ours. Many aspects of this bill will be offensive to our serving personnel will be offensive to our veterans and will be offensive to those who have given of their lives for this country. I look on the wall once again to my left at the Viet Nam crest on the wall and I wonder what my brother would be thinking today had he survived the Viet Nam War and not been killed in action on behalf of this country. What would he be thinking today at the privatisation of many aspects of our army navy and air force? I think people like my brother who have served this country and died for this country and many others whose names the Minister mentioned before would similarly be aghast to see that we are turning New Zealand very much into a  
Dad’s Army 
 and a privatised Defence Force in many respects which again will be for the benefit of those who support the National Government and can get the private contracts. New Zealand First does not support this but we do support the ongoing strength of our military in this country. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you for the opportunity to speak on this Defence Amendment Bill. Like the Hon Jonathan Coleman and the Hon Phil Goff I too pay tribute to the members of the Defence Force both past and present who have served New Zealand so extraordinarily well to the extent of being prepared to make the ultimate sacrifice. 
I also want to pay tribute to the work of the Hon Wayne Mapp who has ushered through the white paper that is very much behind the genesis of this bill and an incredibly thorough process of consultation. It concerns one when you hear New Zealand First speaking in such an absolutely uninformed way about the future of our armed forces when this white paper was put out for consultation right throughout New Zealand. Some of the finest minds in this area contributed to it resulting in this comprehensive statement of the Government’s defence objectives priorities strategies capability and funding for the next 20 years. 
 It was a little rich to hear the Hon Phil Goff saying that this bill was all about cuts. This was the leader of the Labour Party who campaigned about spending more borrowing more and taxing more and what actually happened? He cut his own party from 49 seats to 34 seats—an absolutely incredible result. It was totally rich to hear this former Leader of the Opposition suggesting that that was the element of this bill. Not for one moment did he deny that he was supporting it. I think almost certainly he will be supporting the bill. 
This bill is indeed about the National-led Government committing itself to making sure that New Zealand has a strong and effective Defence Force and strengthening the one-force approach of the modern Defence Force. The one-force approach is a key to ensuring that the three services work more effectively together as is required by the increasing sophistication of military operations. Far from it being a bill about cutting it is a bill that has been very carefully considered. I look forward to it being debated rigorously in the Foreign Affairs Defence and Trade Committee and I commend it to the House. 
IAIN LEES-GALLOWAY (Labour—Palmerston North) 
: 
 Like members who have spoken in the debate before me I would like to pay tribute to our Defence Force personnel who serve us so magnificently and represent us so well overseas in places like Afghanistan the Solomon Islands Timor 
- 
Leste and all around the world under UN-mandated missions and other missions. There is no doubt that our defence forces are highly regarded and highly respected and that that regard and respect reflect on New Zealand as a nation. I would like to pay particular tribute briefly to Flying Officer Dan Gregory Flight Lieutenant Hayden Madsen Corporal Ben Carson Corporal Doug Grant Lance Corporal Leon Smith and Lieutenant Tim O’Donnell and their families—those men all being lost to us in the last couple of years whilst serving in operations and carrying out tasks asked of them by their superiors and by the Government. 
I think it is important that parliamentarians and Government Ministers always acknowledge that we send our Defence Force personnel into harm’s way to do tasks that we ask of them and it is in that spirit that I want to talk about the Defence Amendment Bill. We are seeing quite a lot of dissatisfaction within the defence forces about what is happening under this National Government. In fact I think the Minister of Defence Jonathan Coleman is probably looking for some good news because the news has all been bad. The news has been about the lowest recorded morale within the defence forces since we started measuring morale—the lowest ebb ever has occurred under the watch of this Minister Jonathan Coleman. 
We also know that the defence forces are struggling to meet the expectations set upon them by this Government to find $350 million to $400 million worth of we will call them savings but some might call them cuts in order to meet the expectations that this Government has put upon them. Really the truth if we read the briefing to the incoming Minister is that the Defence Force—try as it might—is an awfully long way away from meeting those expectations. We have to ask whether we are going down the same path that we saw when National was in Government during the 1990s when our military forces were completely underfunded and under-resourced their equipment was not kept up to date and they found themselves in real strife when deployed overseas and unable literally to keep up with our allies. 
Dr Paul Hutchison 
: Is the member supporting the bill? Is the member supporting the bill? 
IAIN LEES-GALLOWAY 
: So I have no doubt that this Minister is looking forward to some good news and I have some good news for the Minister Dr Hutchison. That good news is that Labour will support this bill to the select committee. We do want to hear the debate we want to hear what people have to say about this bill and we do want to hear some of the issues— 
Dr Paul Hutchison 
: I don’t think Mr Goff is. 
IAIN LEES-GALLOWAY 
: Absolutely Dr Hutchison. Mr Goff is in support of this but Mr Goff absolutely rightly was pointing out the lacklustre leadership that we have seen from the National Party in the defence portfolio. You may not have— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! 
IAIN LEES-GALLOWAY 
: Dr Hutchison may not—my apologies Mr Assistant Speaker—have picked up on that in Mr Goff’s speech but I can assure you he is in support of seeing this bill go to select committee. We reserve our position after then because we want to hear the issues debated. We want to have the conversation—we want to have the conversation. 
Essentially this bill facilitates a number of things that have fallen out of the white paper and the value-for-money review exercise. I think it is important to point out that of all the initiatives that have been put in place following that value-for-money exercise not one of those initiatives has actually realised the savings that were anticipated in that value-for-money exercise. It always comes up short and that is why the Defence Force is struggling so much to meet those very extreme expectations that were placed upon them. 
I would like to touch on some of the main components of this bill and perhaps raise some of the issues that we would like to see debated at select committee. Firstly it is true that this bill vests an awful lot of responsibility and power in the Chief of Defence Force. A lot of responsibility that has been shared across a number of positions—the chiefs of the different services who jointly advise the Minister currently—is being concentrated in one person: the Chief of Defence Force. So we absolutely want to know that you have got that appointment right and we want to know that there are some checks and balances to ensure that that power is appropriately concentrated in the Chief of Defence Force. Under this legislation the Chief of Defence Force will now have the authority to appoint the chiefs of the army the navy and the air force whereas previously that was a role that the Government had. Now the Chief of Defence Force will have that role.  
The chiefs of services themselves lose their responsibility and the ability to advise the Minister. The sole adviser in that Defence Force management team is again the Chief of Defence Force so again there is a lot of concentration of the responsibility in the Chief of Defence Force. As has rightly been pointed out for the purpose of seeing more direct leadership of joint forces the Chief of Defence Force will now command the armed forces directly rather than through the service chiefs. There is considerable concentration of authority and responsibility in the Chief of Defence Force in those changes and we would like to hear some of the discussion around what possible issues may arise from that.  
As I pointed out currently the various chiefs of the three services as well as the Chief of Defence Force have a responsibility for advising the Minister and the head of each service has the responsibility for advising the Minister about matters relating to that service. That will no longer be the case and that group of advisers is going to be replaced by a Defence Advisory Board which will be appointed by the Minister himself. Again here we have some question marks. Who will be appointed to that board? What will be the qualifications for being appointed to that board? What is the mechanism for doing so?  
 I suppose there are some questions. Will the construction of this advisory board be a mechanism for future cuts for further cuts and for greater influence from outside the Defence Force to perhaps bring in a private sector view on the Defence Force a privatisation agenda into the Defence Force? Indeed I note that it is set out in the bill how these people are to be remunerated. One hopes that we will not see more political appointments like the types that we have seen in New Zealand On Air on the Defence Advisory Board. Again there is an issue there that we are interested in seeing borne out. 
As to the Territorials and reserve forces the Territorials will cease to exist. Instead of having Territorials and reserve forces what is now proposed in this legislation is active reserves and inactive reserves. Are those active reserves going to be used to replace regular force personnel? That is a very important question that we want to hear borne out and discussed in greater detail. And what will be the role of those inactive reserves? We have great concerns on this side of the House that full-time regular force personnel will have their role replaced by these so-called active reservists. How many reserves will there be? We have heard about how the Government plans to cut the number of Territorials but then it wants to introduce this reserve force. They seem to be sometimes contradicting their own views so we do want to hear more. 
I can see that my time is coming to an end. I just want to say finally that on the issue of civilianisation we are very happy to see that members of the armed forces if they are civilianised will be able to be moved directly into the Civil Service. That should have happened over a year ago before the civilianisation process began. On that we are happy to support this bill going to a select committee and we look forward to those issues being explored further. 
JACQUI DEAN (National—Waitaki) 
: 
 It is a shame that the Opposition—although it is wonderful that it is supporting the Defence Amendment Bill—seems to be bogged down in the minutiae of the bill about you know the officers yet— 
Iain Lees-Galloway 
: Just ignore the detail! 
JACQUI DEAN 
: Gosh they are very excitable tonight are they not. What is it? The Opposition is terribly excitable tonight. I think it is because those members have been caught out. I think that they have been caught out focusing on the tiny little itty-bitty details that indeed will be very important in the select committee consideration of this bill but actually what is important in a first reading speech is what does the bill mean for the Defence Force in New Zealand? I mean that is what we should be talking about in the first reading speech. What is it that we want our Defence Force to be doing for us on behalf of New Zealand? What are our responsibilities that our Defence Force should be looking at and how is it that the New Zealand Parliament through the most excellent Minister of Defence Jonathan Coleman can support it in doing that? Those are the questions that we should be asking in this first reading speech. 
I think the questions laid out in this bill indeed are worth asking. There is the fact that it has taken 3 years for the consultation on this white paper which was initiated by the Hon Wayne Mapp; there has been a white paper consideration of what does our Defence Force need to deliver. Do we need to refocus our efforts into the South Pacific? What are our responsibilities? In a budget-constrained environment how best do we deliver those services? 
So you see this bill looks outwards. This bill looks at how our New Zealand Defence Force can be focused not only on delivering on behalf of the Defence Force itself but also on delivering to us as New Zealanders and out into the wider Pacific and further on out in the world on behalf of us. The moment we start focusing on that then we will start having a good debate. Thank you. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: The next call is a split call between Labour and the Greens. 
KRIS FAAFOI (Labour—Mana) 
: 
 I like many speakers in this debate would like to begin by paying tribute to the men and women who serve in our Defence Force. I am sure that despite the passionate debate from around the House tonight all of us as a collective have much respect for our navy air force and army. Our Defence Force personnel when they are acting on our behalf both at home and abroad very much exceed the expectations from some of our allies especially when they are overseas. 
I am a bit disappointed that this is only a 5-minute call because after the last contribution from the National Party about the fact that we should just throw this thing away and not worry about the details of it I really am aghast. And to claim that on this side of the House we have been caught out and we are getting stuck in the weave and the detail of the Defence Amendment Bill really will wake people at home at quarter to 9. 
It is not us who have been caught out when we are debating the Defence Amendment Bill; it is actually the Government. Although it is looking at what we call “capability management” I think it is actually capability mismanagement. What is this bill about? I will answer the question of the member for Otago Jacqui Dean— 
Michael Woodhouse 
: Waitaki. 
KRIS FAAFOI 
: I am sorry the member for Waitaki—my apologies. I withdraw and apologise. 
Simon O’Connor 
: Details details. 
KRIS FAAFOI 
: We do not want to get caught in the details! For the member for Waitaki what does this bill do? In the explanatory note it says that capability management which is one of the things this bill sets out to achieve is “changing the way in which the Secretary of Defence and the Chief of Defence Force will work together regarding the procurement replacement repair and disposal of defence assets:”. The best-case scenario on that side of the House may be to spin that as efficiencies or savings but as many speakers on this side of the House have said this is not about efficiencies and savings; this is purely about cuts cuts and more cuts. As we have heard—again getting stuck in the detail—the Defence Force has been asked to find $350 million of efficiencies annually of savings annually or of cuts annually to make sure it can meet the targets that have been set by this Government. No one is safe in the Defence Force. Not even our proud members of the Defence Force bands are safe as we have heard time and time again from a number of speakers. Seven of the 10 bands that play for us at a number of public occasions are set for the chop saving the taxpayer the whopping amount of $900000! 
Iain Lees-Galloway 
: That’s about the price of a swimming pool isn’t it? 
KRIS FAAFOI 
: It is roughly about the price of a swimming pool in Tokyo. I go back to the figure of $350 million a year of savings because it is also roughly about the size of the reported efficiencies that the police are supposed to be looking for in the latest reports of a proposal that is before the Government at the moment. That will seriously affect the police. The changes that we are looking at here will seriously affect the front-line capabilities of the Defence Force. 
Cuts cuts and more cuts and what will this do to the credibility and the reputation of our Defence Force staff? I spoke earlier in my contribution about the high regard in which they are held. If we are going to look seriously at major cuts to the Defence Force budget our ability to act in the way that we have and our proud reputation overseas will be seriously seriously affected. As my colleague Iain Lees-Galloway has said the cuts that are happening already in the Defence Force are starting to have a serious effect on morale within our troops—excuse the pun. The New Zealand Defence Force outgoing attitude survey completed last year showed that our Defence Force morale has fallen to its lowest point in 8 years and that the number of people wanting to leave the military is higher than it was 2 years ago. 
That leads me to the point of how we attract our young Kiwis to serve in the Defence Force at a time of pretty high unemployment. You know you think that the Defence Force might be a career option for many of our youngsters who cannot find work or training; I think there are 64000 of them at the moment—a very large number. At the moment you would think that the Defence Force might be one of the ways that they could do something meaningful but when you are making cuts of this nature it is not going to be very easy to attract younger people to the Defence Force. 
We will be recommending that this bill goes to a select committee. There are a number of issues that we have pointed out that are worthy of debate worthy of seeing what the public has said and we commend this bill to the next stage. 
GARETH HUGHES (Green) 
: 
 Kia ora Mr Assistant Speaker Tisch. Nga mihi nui ki a koutou. Kia ora. I would like to share the practice in this House of acknowledging our troops in and out of uniform. I would like to acknowledge the families and loved ones of those Kiwis who have died overseas in service. As you look around the room you see reminders of the places where Kiwis have served with distinction over the decades. 
I am very happy to take a call on the Defence Amendment Bill because I come from a naval family. Mum and dad met in the New Zealand Navy. Despite what they probably wanted I went off and joined the hippy navy sailing on the  
Rainbow Warrior 
. In fact my first touch of the Defence Force was actually being assaulted on the network news when the Labour Government got rid of the Skyhawks and I went to protest about the ditching of the Skyhawks. That was a tough decision that Labour took. It was under a lot of pressure and we should be learning the lessons because what we need in 2012 is an independent defence force fit for purpose. Our fear in the Green Party and throughout New Zealand is that our defence forces are not fit for purpose; they are fit to be a key cog in the United States and other Western military processes. 
When we look around this room and at reminders of those Kiwis who have lost their lives we want to make sure they are doing it in the interests of justice internationally and in the interests of democracy. The Green Party approach to this issue is that we support an independent foreign policy. We support a non-violent diplomatic approach to conflict. We do not want to be tied into those old alliances of the past. We do not want to be going into illegal wars such as Iraq. We do not want to be going into illegal wars like Iraq under false pretences like we see in New Zealand and saw in Nicky Hager’s book  
Other People’s Wars 
. 
This bill the Defence Amendment Bill makes a number of smaller changes looking at the increased collaboration between the New Zealand Defence Force and the Ministry of Defence. It gives the Chief of Defence Force more authority to directly manage the navy army and air force. We believe that the bill is in fact a step towards the reintegration of the New Zealand Defence Force and the Ministry of Defence as recommended in the Hunn report reversing this process we have seen in the last two decades—the separation of civilian and military systems. 
This bill is about cuts. This bill is about increasing civilianisation and changes to the Territorial Force. We have seen over the last term and a half this Government’s economic plan. We know the plan. We have seen the “drill it” part of it; we have seen the “mine it” part of it; we are seeing the “sell it” part of it right now; and here we are graphic evidence of the “cut it” part of it. This bill is going to see cuts in the order of $400 million a year from the defence forces we are going to be cutting the Territorials by a third we are cutting seven out of 10 military bands and we are seeing hundreds and hundreds of uniform jobs going to civilians. 
This bill is about cuts to go with the “drill it” “mine it” cut it” and “sell it”. It comes from the white paper—the Hunn report from 2002. The white paper looked at our strategic environment and looked at threats over the next 25 years. It said it is going to be a more challenging strategic environment over the next 25 years and highlighted threats such as the fragility of the Pacific and terrorism as a continuing threat. It also highlighted a particular threat to us down at the bottom of the world in the South Pacific: illegal migration. 
A point missing from the defence report the Hunn report of course was the role of climate change. We are likely to see literally hundreds of millions of climate refugees from those delta regions from around the world and the way our defence forces are set up they are not fit for purpose. We have got these floating white elephants these more than $600 million worth—I wonder what the cost is now—of frigates. It costs $400 million a year to run these two frigates. So while we are looking at cuts let us look at more appropriate ways we could be saving the New Zealand taxpayer money. What we would rather see is cuts to those frigates those floating white elephants not to the military bands and not increasing civilianisation. We have got $600 million for new air defences the frigates and the $900 million for new helicopters. If we had an independent foreign policy if we were trying to design our defence forces to be fit for purpose we would be making different decisions. 
It is disappointing to see Labour supporting this bill because the Greens will be opposing it. We are going to take a constructive approach in the Foreign Affairs Defence and Trade Committee but ultimately all in all what we want to see is a promotion of independence from New Zealand. What we see and this is in the white paper is that this bill is all about being a stalwart ally of the United States as outlined so blatantly in the Hunn report. Kia ora. 
LOUISE UPSTON (National—Taupo) 
: 
 There has been a significant contribution from this side of the House so I am not going to say anything further but to commend the Minister of Defence Dr Jonathan Coleman for this fantastic piece of legislation the Defence Amendment Bill. I support it in its first reading. 
A party vote was called for on the question  
That the Defence Amendment Bill be now read a first time. 
Ayes 98 
New Zealand National 59; New Zealand Labour 34; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 23 
Green Party 14; New Zealand First 8; Mana 1. 
Bill read a first time. 
Bill referred to the Foreign Affairs Defence and Trade Committee. 
Financial Markets Conduct Bill 
First Reading 
Hon CRAIG FOSS (Minister of Commerce) 
: 
 I move  
That the Financial Markets Conduct Bill be now read a first time. 
 At the appropriate time I intend to move that the Financial Markets Conduct Bill be considered by the Commerce Committee. This bill is a significant piece of law reform in the commercial sector. Its main purposes are to promote the confident and informed participation of businesses investors and consumers in the financial markets and to promote and facilitate the development of fair efficient and transparent financial markets. These are crucial objectives that we must promote in order to achieve long-term growth in our economy. 
A number of events have informed the content of this bill. The global financial crisis and the collapse of finance companies have had a traumatic effect on the lives of many New Zealanders and impaired the confidence of investors in our financial markets. I note in this regard the recent report of the Commerce Committee in relation to its inquiry into finance company failures which highlights regulatory issues in this sector. This bill will play a key role in restoring investor confidence by improving the regulation of those who offer financial products to the public. 
It is essential that the regulation of financial markets operates in a way that facilitates the raising of capital by businesses. The Capital Market Development Taskforce which reported in December 2009 identified the central role that vibrant capital markets play in business development and economic growth. Local businesses will find it easier to develop expand and be internationally competitive if they have ready access to domestically sourced capital. For this reason reform in this sector is an integral part of the Government’s economic growth agenda. The task force provided a number of recommendations for legislative reform. I thank the task force for its work and am pleased that this bill implements many of its recommendations. 
This bill largely completes the comprehensive programme of reforms in the financial sector that this Government has implemented over the past few years. These reforms include the introduction of the financial advisers regime the licensing of trustees and statutory supervisors and the establishment of the Financial Markets Authority. Taken together the effect of these changes will be considerable and will provide a solid foundation for the efficient functioning of the financial markets for years to come. They will also ensure that New Zealand remains an attractive destination for international investment. 
The bill will replace a number of pieces of legislation including the Securities Act 1978 the Securities Markets Act 1988 the Unit Trusts Act 1960 the Superannuation Schemes Act 1989 and aspects of the KiwiSaver Act 2006. Some of these laws are over a generation old and there will be considerable benefits in having all of the law easily accessible in a single piece of legislation. 
 The bill improves on existing laws in many respects. One of its fundamental reforms is that it improves the definitions of different categories of financial products. It also gives the Financial Markets Authority the flexibility to reclassify products within these categories or to declare that products fall in or out of the bill’s regime. This flexibility is crucial to ensure that the regulator has the ability to keep up with the challenges of market innovation. Another key feature of the bill is its definition of the offers of financial products that will be exempt from disclosure requirements. These are generally offers that are not aimed at retail investors. The bill provides improved guidance for businesses and investors through brightline tests for assessing who is exempt. Defining who is in and who is out is an important issue and I will be interested in the submissions that the select committee receives on this matter. 
Part 3 of the bill introduces a new regime for the disclosure that those raising capital must provide to investors who are not exempt. The current requirement for issuers to prepare a prospectus and investment statement will be replaced with a requirement to prepare a single product disclosure statement and include additional information on an internet-based register. The detailed content requirements for product disclosure statements will be set out in regulations but the bill makes it clear that they must be tailored to the needs of retail investors. These changes will make disclosure of more use to investors when they make investment decisions while reducing compliance costs for business. 
Another significant change in the bill is the regulation of managed investment schemes which include KiwiSaver schemes. Currently the requirements for managed investment schemes vary depending on their legal form and the type of scheme that they are. Part 4 of the bill provides consistency in the legal requirements for these schemes and enhances the standards of governance expected of them. For example managers of these schemes will have to be licensed by the Financial Markets Authority and comply with general duties including acting in the best interests of scheme participants. This will provide greater confidence for investors by ensuring that those who manage their hard-earned money are up to the task. 
The bill makes an important change to the regulation of financial product markets. It picks up one of the recommendations of the Capital Market Development Taskforce by providing for the establishment of stepping stone markets. The task force noted that one way to provide opportunities for smaller companies to raise capital and enable them to attract the governance capability they need is to create tiered markets to pull firms through different stages of their growth. It can be a big step to list straight away on the NZX for small companies due to the extra disclosure requirements and other rules that come with listing. The bill allows the creation of markets that can have rules tailored to the nature of the issuers that list on them and investors. 
One final issue that I wish to touch on is the liability regime in the bill. This is a matter of great importance as it provides incentives for the kind of behaviour that we expect from financial markets participants. It also dictates the punishments for contraventions and the remedies that affected people may claim. The regime in this bill places an increased emphasis on civil liability for contraventions of the law including the ability for the Financial Markets Authority to take civil pecuniary penalty proceedings in a wide variety of circumstances. The bill contains a general prohibition on misleading or deceptive conduct similar to that found in the Fair Trading Act. It also contains serious criminal offences for egregious violations of the law such as where there is intentional or reckless misconduct. This is a significant part of the bill and is another area that I invite the select committee to pay close attention to during its deliberations. 
This is a bill of considerable technical complexity. An exposure draft of the bill was released for consultation in August and many extensive submissions were received at that time. These submissions have helped shape the bill that is currently before us. I would like to thank all those who submitted during this process for their constructive engagement and I hope that they interact during the select committee proceedings in a similar manner. 
Regulations under the bill will also provide greater alignment with Australia and help achieve the single economic market objective of ensuring that investors in financial products in Australia and New Zealand receive comparable disclosures. 
In conclusion this bill is a significant piece of law reform in the commercial sector. It is a crucial step towards rebuilding investor confidence and strengthening New Zealand’s financial markets. I commend the bill to the House. 
Hon CLAYTON COSGROVE (Labour) 
: 
 The Labour Party is generally supportive of this bill the Financial Markets Conduct Bill as I believe most parties in the House are but we reserve the right as we go through the select committee process to review our support based on information provided by submitters as is the normal process. This is a substantial bill—over 500 pages. I thought I had seen the largest bill that was put through a Commonwealth Parliament I think in this Parliament when I chaired the Finance and Expenditure Committee. It was the tax simplification legislation which was in two volumes that were about a foot high. This bill is bordering on that but I mean no disrespect to the legislation. It is necessary and we support that. 
I echo the Minister of Commerce’s comments about the environment that we see ourselves in. If you look at the last 4 years the evidence shows us that there have been 61 finance companies that have failed over the last 4 years the latest of which we know was South Canterbury Finance which was bailed out to the tune of $1.6 billion of taxpayers’ funds. We know that those depositors will get their money back given the governance scheme of arrangement that was put in place originally by the previous Government but other depositors in other situations similar to that may not be so lucky. What this tells us is that there is no way you can zero-risk an investment. What I would like to ask the Government to look at as it goes through not just this but other legislation is that it does not matter how much regulation and legislation you put through; people will take investment risks. 
What is lacking—and I know it is not appropriate in this bill—is some financial literacy education and support for our communities to raise their financial literacy and to become far more au fait with the levels of risk that they embark on when they invest their dollar. We can have all the rules in my view we like to ensure that people act appropriately when giving advice and when putting financial products on the market and to ensure that company directors act appropriately but if people do not have the confidence because they do not have the basic education—if “confidence” is the right word—to assess investments then that is a gap in our system that no legislation will actually take care of. It becomes the ambulance at the top of the cliff if people have the confidence to assess risk and as I say no legislation can zero-risk any investment or proposition. 
I am not going to go into the great detail of this bill; I think the Minister has covered it. But I just note in passing—and I think my colleague Lianne Dalziel may have made these comments recently—that the Government as an adjunct to this bill might also want to look at the criminal penalties and sentencing arrangements in respect of so-called white-collar criminals. The evidence is reasonably clear I think and my colleague made the point recently that if you are a burglar you are often treated far more harshly by the courts. Having no disrespect and not to downplay the emotional impact of a burglary but it is generally localised to a small group of individuals compared with the massive emotional impact that a white-collar criminal who engages in fraud or embezzlement or misrepresentation can have as we have seen throughout our communities. So it is another issue I suppose adjunct to this bill that I might invite the Minister to take up with his colleague the Minister of Justice in respect of the penalties around white-collar crime. 
The bill I note also provides for regulations to be made that will prevent products being structured to avoid regulation. It seems self-evident. This happened of course in the infamous Mark Bryers Blue Chip case. Because that investment scheme offered interests in land it was exempt from the Securities Act to the significant detriment of investors. I welcome the fact that those issues are going to be catered for in this bill. 
It will be interesting to see—it always worries me when I see bills of this size—what officials have come up with. It will be very interesting to see the various financial stakeholders in the financial and securities sector and various other submitters with expertise—the Law Society the Institute of Chartered Accountants and others—who presumably will come before the select committee and render their view on it. One would hope that this legislation will not wrap people in undue red tape. Although I accept absolutely that the safeguards are incredibly necessary and this reform provides a one-stop shop as I say you cannot regulate for zero-risk investment. So it will be interesting to see whether the Government through the select committee process where submitters come up with productive and positive ideas around this and perhaps ways to do things better than officials may have thought of—whether that will be taken on board by the Government. As I say we reserve our right to review our level of support based on that response. 
I just note in passing that the Minister made reference to the Capital Market Development Taskforce. I would just note that the previous Government and the previous Minister in 2008 Lianne Dalziel established that task force as a blueprint an action plan for the development of New Zealand’s financial systems. 
Hon Ruth Dyson 
: That was a good Minister. 
Hon CLAYTON COSGROVE 
: A very good Minister; a very good action. We are pleased to see that the Government—it reported to this Government as our Government acquiesced as it were—is now taking on some of those recommendations. 
It is appropriate that we have legislation like this given as the Minister said the global financial crisis the failure of finance companies and the general lack of confidence by ordinary New Zealanders in those who provide advice and who provide products in the financial sector for investors. An economy can thrive only where there is investor confidence where people are prepared to lay a dollar down and risk it knowing there is an appropriate level playing field and an appropriate regulatory framework whereby everybody adheres to the rules and people get a fair shake. That does not of course guarantee that you will make a profit or a substantial profit but it means that certain assessments can be made in respect of levels of risk and that people can do that in an open and transparent way. 
So the Labour Party will support this bill through the select committee process. I note the cooperative nature with which the Commerce Committee acts and the chair has set a high benchmark and a high example in that respect. I do think there is not a heck of a lot of politics in this apart from trying to get the best possible outcome. I would hope and I am sure it will happen at the select committee that submitters are given a wide opportunity to work through the massive detail that resides in this weighty tome and also that the Minister is open in a bipartisan way to suggestions from all parties based on advice from submitters where deficiencies in this piece of legislation may be identified and where this legislation can be improved. 
I note that the Minister has extended the branch of cooperation and we look forward to that being maintained because I think for all of us this particular piece of legislation cuts to the quick with most of our constituents. There would not be an electorate in this country that has not been touched or visited upon by undue financial loss as the result of the nefarious activity of some. This will bring as I say a one-stop shop together. This should combat a lot of that and give people the confidence to invest in businesses and make sound investment decisions. So we look forward to the scrutiny. We believe this bill will take some time to scrutinise and we should be given a due time period to go through the detail given its length and breadth. We look forward to working with submitters and we look forward to a positive outcome for our investment community. 
TODD McCLAY (National—Rotorua) 
: 
 It gives me pleasure to rise and speak on the Financial Markets Conduct Bill. Can I thank the Minister of Commerce for his speech to the House and the direction he has led. This is a phone book full of certainty for New Zealand investors. There are 561 pages in it and I very much look forward to it arriving at our Commerce Committee and to our starting our work. 
Can I recognise and agree with much of what the Hon Clayton Cosgrave said earlier. Can I thank him for the career-limiting comments he made about me and can I say that I am sure that the committee will work together to the greatest degree possible to make sure we do the best job we can on behalf of New Zealanders. 
What is this piece of law this significant piece of law reform about? Well it is about ensuring that investors are provided with understandable and accurate information to guide their decision making. That is extremely important. All of us in this House will have had constituents approach us over the last 3 years email us and write letters to us and bring forward some very sad stories about the way that they have invested and what has happened to their investments and about how this has called into question some of their future retirement plans and otherwise. I know that all members of the House want to do whatever they can to work through this and to provide much more certainty ensuring the governance arrangements in respect of financial products available to the public are robust and minimising unnecessary compliance costs for those raising capital and promoting innovation and effective competition. Very clearly I think it is important that this bill focuses on some of the difficulties that have been experienced by New Zealanders in the past. 
I want to recognise that over the last 3 years a significant change in this area—the FMA or the Financial Markets Authority—came into effect. One of the first things the Financial Markets Authority did when it came into law was to act upon somebody who had been acting unscrupulously and trying to promote products and sell things to New Zealanders where they were not able to back that up and it is good to see that it was able to provide greater information to New Zealanders around that. In fact Mr Cosgrove is correct: it is not possible to legislate a zero-risk environment in this respect but what is important is that all New Zealanders are given the opportunity to have full confidence in the regulations and to go out and seek information themselves so that they can make an educated decision around their investment and where they seek this information they can rely upon it. 
I do not want speak for much longer because I am quite keen for this to get to the committee and for it to get out to the public for wider consultation and submissions. But I will just say that a couple of parts of the bill that I think will be important will be introducing civil pecuniary penalties of up to $1 million for individuals or up to $5 million for companies—that is going to be important there—extending the maximum period for prohibition by the Financial Markets Authority or the Registrar of Companies on a person managing companies from 5 to 10 years where they have not acted appropriately establishing licensing regimes for specific financial sector participants introducing stricter requirements for management of investment schemes and introducing a new system to regulate the securities exchanges. As I said it is a very important piece of legislation. Well done to the Minister for being able to have this bill promoted up the Order Paper. We of course will do our job diligently when it gets to the committee. Thank you. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 The Financial Markets Conduct Bill is a substantial bill and I certainly am very pleased to finally see it being debated here in Parliament. I think the fact that it is such a substantial bill does show that it has been through an amazing process. I congratulate the Government on taking the step of putting out a draft exposure bill and getting that feedback after two sets of discussion documents over a significant period of time—in fact over two Governments—and then responding to the recommendations of the Capital Market Development Taskforce which I was very pleased to be part of introducing. 
There are some issues that I think we need to have on the table as we debate this bill because there is a line in the regulatory impact statement that just worries me a little bit and I want to put it on the table because I no longer sit on the Commerce Committee and I would like the select committee to look at it very very carefully. The regulatory impact statement sets out the objectives which is always a very good idea in a regulatory impact statement—to actually decide what it is that you are trying to achieve from the outset. It lists the objectives as follows: “Providing information well targeted to serve investors’ decisions and their abilities to understand the information provided;” which I think was a point that the Minister made and I think that is a very good objective. 
 It goes on to say: “Reducing costs to issuers by providing sufficient certainty around their obligations and removing unwarranted obligations;”—and there may be some issues with that which I will come back to later—“Ensuring that products have adequate governance arrangements to allow for effective monitoring and reduce governance risks;” That is very good. It goes on: “Effective enforcement of breaches of duties to provide incentives for issuers to play by the rules while giving investors a degree of assurance that they can rely on the rules being enforced (particularly where large numbers of retail investors are involved);”. Again a good objective. 
And then finally this one which is the one I am just a little bit worried about and it is one that has actually been mentioned by the Minister in his contribution and also by the chair of the select committee: “Ensuring that the regulations allow an appropriate level of innovation and flexibility in the market.” That word “innovation” when I think of the global financial crisis is actually not a word that I necessarily find great comfort in and that is something that the select committee is going to have to look at very carefully. 
So the regulatory impact statement does acknowledge the conflicting nature of some of these and in particular that is one that stands out from the other objectives and I think it is something that is worthy of consideration. There is a balancing act that the regulatory impact statement says needs to be applied. But what I am concerned about is that the balance must not be at the expense of those who would not describe themselves as sophisticated investors. 
I use those words “sophisticated investors” deliberately because the last time I used the words “unsophisticated investors” in Parliament I received a very angry email from somebody whom I am not going to name and I just want to read you an extract from what she said. She said: “Dear Ms Dalziel. I am one of your ‘unsophisticated investors’ who fell victim to Lombard Investments. I hold”—and I am not going to talk about her degree but she has substantial qualifications she has worked in a range of fields and I am not going to say what they are because it may identify her. She was completing an additional degree and working in another professional area. “My partner another of your ‘unsophisticated investors’ who fell victim to Lombard Investments is a highly qualified scientist. This Ms Dalziel is called specialisation—the way most successful societies are run. Calling us unsophisticated is adding insult to injury. We are highly specialised in our fields of expertise and expected the finance industry to be the same. More to the point we expected our country’s laws regarding finance to be made and upheld by specialised experts including you. Politicians have failed us in this and now you call us unsophisticated investors. I think you should publicly apologise for this insult and state that in a society of specialisation we all have our fields of expertise and rightly expect the finance industry and law surrounding it also to be run by experts instead of thieves. Regards”. 
I wrote back to her and I put on the record the apology that I gave her by email. On the record here I had no intention of offending this individual. In fact the reason that we have this law in front of us today is because of people like her and her husband who got caught out. So I started off by saying: “I’m sorry that you and your husband fell victim to one of the finance company failures. I would be very interested to know what attracted you both to invest in Lombard particularly their marketing or rate of return and whether you used a financial adviser or planner to help you assess the risk of your investment. The Government is completing the work of the review of financial products and providers with a new Financial Markets Conduct Bill”—here we have that today—“to take over from the existing securities laws and this is going to be a big feature of the new regime—defining who needs to be told what. 
“This leads on to my use of the phrase ‘unsophisticated investors’. I am truly sorry that you have been offended by the use of the phrase. I have used it many times and will reflect on how I might better describe the opposite of a sophisticated investor which is what I intended. The phrase ‘sophisticated investor’ is used in legislation all around the world and I took the definition of a ‘sophisticated investor’ off an American website to show how truly international that was. It was the type of investor who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity and then for certain purposes net worth and income restrictions must be met before a person can be classified as a sophisticated investor and then it goes through some particular examples. 
“And the website goes on to say: ‘sophisticated investors are the dream clients of most financial services firms as they generate much higher fees than retail investors. Certain assumptions are made about sophisticated investors—they can hold their investments indefinitely the funds do not need to be liquidated for cash needs and they can assume a total loss of investment principal without causing severe damage to their overall net worth.’ ” 
I went on to say to her: “In using the phrase ‘unsophisticated investors’ I was thinking about people who did not have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity or who could not assume a total loss of investment principal without causing severe damage to their overall net worth. I am qualified to practise law but I would regard myself as an unsophisticated investor on both of these tests. It simply did not occur to me that someone hearing me use the phrase ‘unsophisticated investors’ would think I was in any way describing them personally as unsophisticated. Again my apologies for this unintended hurt.” 
And she came back to me to explain why she invested in Lombard. She said: “I can see that I certainly don’t fit that definition of ‘sophisticated investor’ and apologise for misunderstanding the term. We chose Lombard because the interest rates were attractive though not extreme as we thought the ‘secured option’ was indeed properly secured. Also the money seemed to go into sensible housing developments. But the main encouragement was that Sir Douglas Graham promoted the company and we perhaps wrongly assumed he knew what he was doing. We did not have a financial adviser instead falsely assuming that the law covered secured investments adequately. 
“It was very painful to recently see that the development we lost savings over was sold at a very low price to a couple of developers who only need to finish six nearly complete houses to cover the cheap cost they paid for the unfinished Brooklyn Rise project. Under the circumstances we would have been quite satisfied to wait a year or two without interest while the project finished if at least we could have got our money back. Instead the lawyers in charge decided on receivership and that we should settle for a few cents per dollar. But it looks as though their decision was wrong since the new developers seem to think the project will be worthwhile. 
“So we have basically given a couple of smug bargain hunters a good slice of our retirement savings. So I hope the new regime forces lawyers in charge of that kind of situation to really give investors full alternatives such as waiting for the property market to improve. I wish you best success with improving investments in the future and restoring investor confidence.” 
This is not about innovation. This is about good practice best practice principles that underpin ethical practices in our financial markets and the law does not deliver ethics— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: I am sorry to interrupt the honourable member. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the Financial Markets Conduct Bill on behalf of the Greens. I think we probably should start this with a bit of an apology on behalf of the New Zealand Parliament to all those people who invested in finance companies. This Parliament failed you; it is a simple fact. We did not regulate the finance companies and we should have. 
A lot of people—retail investors—invested in finance companies and lost vast amounts of money and this Parliament over many years let that happen. This Parliament failed to regulate the finance companies in a way that it should have and the result is that many many New Zealanders have lost their retirement savings and many New Zealanders worked day and night for decades in jobs saving money for no purpose in the end. It is as if we took away a chunk of their lives by not regulating the finance companies properly which is our job because we are legislators. So day and night people worked in jobs put money aside in finance companies because they thought they were saving for the future and they assumed that this Parliament was doing its job—that is to regulate the finance companies so that investors would not lose all their money. But this Parliament was not doing its job and that is the sad truth. So this bill is a response—in some respects but it is more than that—to that failure by the New Zealand Parliament. 
 I think there is a lot to like in this bill in terms of the attempt to establish a kind of comprehensive framework around financial services and financial markets particularly obviously protection for retail investors but not only retail investors. But there are some questions around it that I think really come to the surface when we are looking at what we are proposing to do in this bill. The fundamental one is that we are essentially weakening the penalties around directors of finance companies. It is hard to believe that this bill weakens the penalties applied to the directors of finance companies if they mislead investors but that is actually what the bill does. Currently we have a strict liability regime. If you put out a product disclosure statement that misleads investors you can end up in court under a strict liability. It is not about intent; it is just that you end up in court and get convicted of that. 
In this bill we are proposing to replace a strict liability regime with one where essentially you come under the criminal provisions of this bill only if it can be proved that you were deliberate in misleading people or that you were reckless. So we have moved from a situation where as we have seen with some of the recent prosecutions the directors of companies that put out misleading prospectuses and misled investors—resulting in the loss of retirement savings of many many millions of dollars for many tens of thousands of New Zealanders—had strict liability for their actions if they signed off misleading prospectuses. Under this bill they will have only civil liability—that is they will not go to jail. They will not face jail time unless it can be proven that what they did was deliberate or reckless in signing off a misleading prospectus or a product disclosure statement as it is called. The question we have to ask is whether that is right. Is that good policy? 
Is it right that we should say that to tens of thousands of people? They have essentially lost great chunks of their lives where they worked for hour and hour on end in order to put nest eggs together to save money. Basically they gave that money to a finance company based on someone whom they respected signing off the statement saying that it was true. They gave the money to a finance company and then all of that time and all of that work that that person put in was essentially taken from them. It was taken from them when those finance companies went belly up. We took a whole bunch of their time and a whole bunch of their work has just gone up in smoke. Hour after hour they worked late maybe doing overtime—however it was that they got their money together—for their retirement nest egg and we have just burnt it and the directors of the company who signed off that misleading prospectus effectively took that time away from those people. 
We are saying OK if you signed off on that statement and you took the time from those people’s lives—time that they could have been spending with their kids doing something they liked maybe instead of working—you are not going to suffer any criminal time. There is not going to be any time taken from you. You are not going to go to jail because we are now changing the law so that there are no longer criminal provisions just civil ones unless we can prove that it was deliberate or reckless. We are saying that you can take that time from those people—essentially remove the time that they have—but under this bill unless we can show that it was deliberate or reckless you are not going to suffer any jail time. There is just civil liability and civil provisions. Is that right? Is that ethically right? I think that is the question we have to ask in addressing this bill. 
For that reason the Green Party will not be supporting the first reading of this bill because we are not convinced that it is right. We are interested in having the debate at the Commerce Committee and we recognise there is a lot of good stuff in this bill—no question about it. But on that basic ethical question—is it right what Parliament is proposing to do with this bill—I think we have to say at the moment that we are not convinced that it is and we are pretty sure it probably is not. That change from a criminal strict liability to a civil liability—unless you can show it is reckless or you can show that it was deliberate—we think is a very very important change and we are not convinced that it is the right change to make. 
The other question is whether it will help the capital markets. There is no question that systematising the regulation of these markets is valuable and so we can see that the bill does make a contribution. But if a key part of the capital markets is the retail investors who together add up to quite a lot of money does this give the retail investors the confidence they need to re-enter the retail investment market? When they see—when they come to understand and eventually they will—that what we are proposing to do is actually weaken the penalties for directors of finance companies I do not believe that their confidence in the retail investment sector will be improved. 
Part of it is understandable: people want to punish someone. You could argue that these people these retail investors are behaving in an emotional way because they want to send people to jail and strip their knighthoods and all that kind of stuff. And OK that is fair enough but it is also true that if a system is to have teeth—if the system is to have real teeth—and to make sure that it actually has the effects that we want that is the reason why we put jail time in bills. There are all sorts of bills where you can end up in jail. If you steal from someone relatively small amounts of money as a burglar then you can end up in jail. If you steal from people many many millions of dollars because you sign off on a misleading prospectus so that a whole bunch of retail investors lose their life savings and many millions of dollars we are now saying you will not go to jail unless we can prove that it was deliberate or reckless. 
There is actually some commentary in the media about whether in the most recent cases actually that test would have been met and I am not going to speculate on whether it would have or not. But if we are saying to retail investors as a Parliament that we are now weakening the penalties for those who take your money by offering misleading prospectuses I am not convinced that that really does help our capital markets in terms of encouraging small retail investors to get involved. This same kind of test and the provisions around this test also apply to insider trading and the penalties around insider trading. Are there criminal penalties? Well it depends. You have to be able to prove that it was deliberate or it was reckless. Market manipulation is the same. So the same kinds of tests are being applied in a similar way right across the different kinds of provisions of the bill and I think that makes sense to apply them in a consistent way. The question is whether it is the right test that we should be applying to those who are doing these things. 
The other part of it I think that is interesting is around the compensation. There are some good aspects around trying to actually enable compensation in this bill. The thing is that often when it came to the finance company collapses there actually was not a lot of compensation to be offered. Although this bill may result in better ability for people to get compensation out of the system after the collapse of something like a finance company whether that really helps the retail investors at all is another question. Often the money is not there or there is not very much money there; it is all gone. So although the compensation provisions are good whether they will really help retail investors I do not know—it is not so clear. 
So from the Green Party’s point of view those are our concerns about the bill. We will not be supporting it at the first reading. We will be engaging with it at the select committee because I think that those questions go to the heart of this bill and the heart of the confidence that people have when they invest their money with companies like the finance companies. Thank you. 
KANWALJIT SINGH BAKSHI (National) 
: 
 I stand to speak on the Financial Markets Conduct Bill on its first reading. The main purpose of the bill is to promote the confident and informed participation of businesses investors and consumers in the financial market and to facilitate the development of fair efficient and transparent financial markets. When National became the Government the country was reeling under the collapse of financial companies. National intends to restore investors’ confidence by rewriting our security laws. A strong capital market provides a vital source of finance to help our businesses to grow and create jobs. This bill provides a vital role by providing better information and most important protection for mum and dad investors. National will repair the confidence that was shaken by the collapse. This will be done by setting clearer guidance for the companies looking forward to raise capital. The Financial Markets Conduct Bill will provide information to encourage people to manage their investment and capitalise towards creating jobs and building a stronger economy. I congratulate the Minister the Hon Craig Foss on bringing forward this legislation and I commend this bill to the House. 
ANDREW WILLIAMS (NZ First) 
: 
 I rise to speak on behalf of New Zealand First in relation to the Financial Markets Conduct Bill. I think it is very appropriate that the word “conduct” is in this bill because this is all about how our financial markets conduct themselves in the future. New Zealand First of all parties in this House is well known for exposing many indiscretions in the past in terms of the financial markets and those of us who are old enough will remember the likes of the wine-box inquiry and other dealings around the world. I know that some of the National people are smirking from the other side of the House because they were a little bit young at the time and do not recall it but had they been old enough to be around when the likes of the wine-box inquiry was on when the Rt Hon Winston Peters was exposing much of the sorts of shenanigans that were going on in terms of some of our financial markets and our taxation system and various other things around the world in terms of doing New Zealand itself out of its own taxes then this certainly does reflect well in terms of this bill. 
It is very appropriate also that the National Government would be bringing this bill forward to sort out those financial markets because it is very very well aware of the shenanigans that went on in the past in relation to many of the financial dealings around the world. Therefore it is more than appropriate that the National Government is now rectifying many of those wrongs of the past and putting the financial markets in correct order as they should have been—and then we would not have had half of the shenanigans that went on in the 1980s and 1990s. 
The Financial Markets Conduct Bill replaces a number of former Acts such as the Securities Markets Act 1988 and the Securities Transfer Act 1991 and it also replaces Part 2 of the Securities Act 1978. So this bill is replacing quite a lot of old legislation and brings it up into the new millennium. It also allows New Zealand to align itself more with Australia and other markets and therefore will certainly assist in terms of this Government’s and this nation’s dealings in international finances and it will help corporate New Zealand and “Kiwi Incorporated” to perform. 
I am particularly delighted to look at parts of the bill particularly in reference to dealing in financial products on markets. The bill mentions in the explanatory note that Subpart 2 of Part 5 deals with insider trading particularly the derivatives market and insider trading on the derivatives market. Certainly New Zealand First would support this. The last thing we would want to see is some of the insider trading that has been known to occur in terms of the derivatives trading. We do not want the likes of people who are working out of various money markets around the world manipulating the New Zealand market and taking New Zealand for granted in terms of what we are doing in trying to run a strong stable financial market here in this country. 
I am particularly pleased to read the explanatory note under “Subpart 3—Market manipulation” which states: “This subpart prohibits market manipulation. This prohibition takes the following 3 forms: prohibiting a person from engaging in conduct that is misleading or deceptive or likely to mislead or deceive in relation to any dealings in quoted financial products. This new provision applies whether or not the dealings are in trade: prohibiting a person from making a materially false or misleading statement that is likely to induce a person to trade in quoted financial products or have the effect of increasing reducing maintaining or stabilising the price for trading in those financial products. …” and it goes on. 
There are penalties involved in this too and I see that the penalties for those sorts of offences can be a term of imprisonment not exceeding 5 years or fine not exceeding $500000 for an individual or a fine not exceeding $2.5 million. This is the sort of thing that we want to see in this Parliament—coming down on some of the shonky trading and coming down on some of the financial institutions that have done good New Zealanders out of their savings and out of their investments. 
New Zealand First very strongly supports this very voluminous edition. A number of trees have obviously been chopped down for it to be published. We welcome this bill because we think it is overdue. It is overdue in terms of bringing New Zealand into the First World financial market and not allowing it to be a cowboy financial market as it operated in the past which saw New Zealand being seen as a bit of an out-west South Pacific trading nation in the financial markets area and where there have certainly been some less than desirable activities going on. We have seen so many financial companies go under in the last 3 or 4 years. We have seen so much in the way of questionable activities by some of those involved in the financial markets. Therefore to have a Financial Markets Conduct Bill certainly is the right direction to go to bring New Zealand into a First World financial markets situation. We certainly support this. We think this is the right direction to go. We think it is overdue however. New Zealand First will be supporting this bill through its first reading. 
Peseta SAM LOTU-IIGA (National—Maungakiekie) 
: 
 It is an honour to talk to this the Financial Markets Conduct Bill. I support many of the comments that have been made here tonight in that this is an overdue reform. Thirty-three years ago the Securities Act was enacted and certainly this bill is part of a package of reforms that this National Government has undertaken in its second term. It really is about our priorities of building a more competitive and a productive economy one that will create jobs and one that will create opportunities not only for our businesses to grow but also for people to work and provide for their families. It really is about encouraging confidence and trust in our financial sector. When we came into power in 2008 we were really rocked by a number of collapses. To this day we are seeing it in the news the effect of these collapses and not only the effect of what has been quite immoral behaviour but also the lack of regulation. We acknowledge that and that is why this bill is on the Order Paper today. 
I also believe that the process with which this bill was presented to the House is a good process. We have had an exposure draft that was released to stakeholders in our sector and in the industry. We have had a number of discussion documents and now 500-odd pages later we have a bill before us that our Commerce Committee will run. It is part of the regulatory reform. In the last term of Government we enacted the Financial Markets Authority. We introduced regulations around auditors and the licensing of trustees and statutory supervisors. This bill adds to what has already been done by this Government. 
There is just one part of the bill that I want to talk about quickly. It is about breaches liabilities and regulations around enforcing liabilities on those who commit breaches. Penalties will be up to 10 years’ imprisonment. That is welcomed certainly by the National Government. I support this bill and look forward to it in the select committee. Thank you. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is a pleasure to rise in support of this Financial Markets Conduct Bill and to note that Labour will be supporting it to the select committee. It is good to see a bill that has the largely multipartisan support of the House. The lifetime of the bill so far has encompassed several Governments. That is no surprise because it is a veritable telephone book of economic justice as it were. 
There is common ground philosophically behind the need for this bill. It is common ground that markets and in particular firms are the drivers of our economy. It is common ground as evidenced by this bill that for markets to work appropriately and properly and for the public’s interest to be safeguarded there have to be rules of conduct. That is why it is called the Financial Markets Conduct Bill. I think it is bipartisan as well that in the recent history of this country there has been far too much misconduct and that that has cost far too many New Zealanders far too much in terms of their life-savings. The hall of shame is well known to all of us. The names are writ into our history and they are writ into the personal histories of the families whose retirements have been prejudiced by those actions: Lombard Blue Chip Hanover and of course the largest corporate collapse in New Zealand history and the most expensive to the New Zealand taxpayer South Canterbury Finance. What do those finance company failures have in common and what have we learnt from them in respect of the legislation that is being brought to the House? 
Before I go on to that may I state the obvious which is that in 500 pages of legal detail I do not think any member in this Chamber at the moment with the possible exception of former Minister of Commerce the Hon Lianne Dalziel and the current Minister of Commerce would be equipped to comment in great detail about many of the clauses. But that is why we have a select committee process and why we all in good faith are going to engage with submitters and wrestle with the detail of this bill. It raises secondarily the important point that we are exceedingly dependent upon officials on matters such as this because of the arcane and technical legal detail in the bill and because it is a subject matter that is in itself inherently complex—for example the market for financial derivatives: advanced mathematics and very very opaque financial instruments. Regulators have to be on their toes to see through some of the structures. 
The consequences of not doing that adequately are weighing us all down to this day. The overhyped financial bubble of the last decade which burst in 2008 worldwide was in large part driven by the kind of conduct that this bill seeks to outlaw in New Zealand: the inappropriate disguising of risk the transferring of that risk to unsuspecting investors without due notice or information and the inability of the investor to make prudent decisions because others have been deliberately or perhaps innocently skewing the information that they receive and clothing it in a cloak of secrecy or dissembling. 
It is I think universally—well almost universally because I think the Greens are reserving their position until they see some more detail—agreed that the general intent of this bill is important. What is particularly important is that for a very small country like New Zealand where we are quite dependent upon for better or for worse foreign investment to fuel our economy it is even more important that the conduct of our market gives investors both domestic and foreign confidence that their investments are safe that the behaviour in the market will be appropriate and that therefore they can stand or fall on the prudence and smartness of their investment but they do not need to worry about criminal or quasi-criminal behaviour on the part of the companies they are investing in or through. That is why the very detailed prescriptive nature of this regulation is designed to pre-empt malintent or lack of clarity on the part of the companies and thus to protect the investors themselves. 
That of course touches on an important philosophical point and one that I would expect members opposite would agree with us on. The law in commerce has to provide for the fact that the business of business is to make profit; that if unrestrained sometimes that profit is made in the short term at the expense of others and sometimes by the cutting of corners; and that therefore we have a public duty to ensure that the conduct of markets is appropriate. I see nodding of heads and I think it is a motherhood statement. 
But let us reflect then on the narrative that is being played out in the wake of the recession and in public politics terms here. I think it was the Minister for Economic Development Mr Joyce who described the Labour Party as the party of “can’t-do” and tried to say his Government was the party of “can-do”. Here is a bill being brought down by that Government that is 500 pages of “can’t-do” and I say congratulations. That is right; that is appropriate. Let us get beyond this oversimplified over-polarised view that all regulation is bad. Here are 500 pages of regulation—without prejudice to submissions and without prejudice to the ability to improve them—that should have a beneficial effect on markets that should increase the level of investment in the New Zealand market and the quality of that investment and that should contribute in some meaningful way to more jobs higher growth and higher incomes if we are doing our work well because it will provide a safe and hopefully relatively level playing field for the conduct of business activity. To put it in more historic terms if you like capitalism is great at earning a crust but left to its own devices it often falls in on itself and that is why the dynamic tension between Government and market is essential for the market itself. 
Today in summary we are celebrating at the sending on of this very detailed piece of legislation to the Commerce Committee. We are celebrating what unites us in this Chamber: a desire to do the best for all New Zealanders. We are recognising our limitations as politicians—that the detail in here is enormous—and we are all pledging in good faith to work through that detail with the help of public submissions. This is what democracy should be about: Parliament working together to advance the public interest and to foreshorten the ability of markets on their own to act against that interest. The converse has been seen writ large in the lives of far too many people and we hope that this bill will help to put an end to financial markets misconduct. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 It is a sad thing but it is known by many people that the best most mature and most developed legislation comes out of how things have gone wrong. We know that through the last 5 or 6 years we have seen hundreds and thousands of New Zealanders suffer tremendous loss and through the ashes of that we see legislation emerging that is bringing great solidarity certainty strength and stability out of times that have devastated and disappointed many New Zealanders. The Financial Markets Conduct Bill with a tremendous amount of detail in it is to bring back that surety and that strength which as was said across the House are important not just for New Zealanders but also for overseas investors. I talk to people in my neck of the woods who invest hundreds of millions of dollars into New Zealand and having certainty is one of the key factors why they feel confident to invest here because of the regulation and the stability of Government. 
It is good to see the Financial Markets Conduct Bill come to the House. I look forward to seeing it in the Commerce Committee and I believe that it will bring some great confidence and strength into our markets. Thank you. 
MARK MITCHELL (National—Rodney) 
: 
 It is a great honour for me too to be able to take a call on the Financial Markets Conduct Bill as—I cannot say the youngest—probably the most junior member of the Commerce Committee. 
I would just like to finish by maybe taking a bit of a human approach on this. In my electorate—actually prior to it becoming my electorate—when I was out doorknocking I knocked on a door and an elderly lady answered. We began talking and she told me the story that her husband who had been diagnosed with dementia had recently had to go into a special care retirement facility. She had the house on the market because they had lost basically all of their life-savings to a dodgy finance company. We spoke for probably half an hour and at the end of it she looked me in the eye and she said: “At the end of the day there’s actually nothing you politicians can do for me and my husband anyway.” The great thing about this bill is that I think it is going to go a long way to addressing what happened to her and her husband and to instilling some confidence back in the people of New Zealand and us in this Parliament in being able to make sure that we do the best that we can to stop that from happening again. Thank you. 
DAVID CLENDON (Green) 
: 
 I am glad to take a very brief call on the Financial Markets Conduct Bill. I think Mr Cunliffe called it right when he pointed out that the Greens have come down on the side of opposing this bill despite accepting the need for some changes—some quite fundamental changes—and regulation around finance markets. 
We clearly need finance markets in the current economic context. One does not need to speak to many business people before discovering that there is a need for capital out there. Our businesses need capital in order to trade in order to grow and in order to innovate and create new opportunities for employment and for export. We need reliable finance markets that we know are going to work. 
People are looking for places to put their capital. We want to pull money out of the property market and put it into areas of a more productive nature than simply tying it up in homes and rental properties and the like. We have seen too much of that. We have seen the negative effect of that. It is not particularly helpful for that to continue. 
We need a return of confidence. Twenty-odd years ago we saw a complete collapse of the sharemarket. 
Debate interrupted. 
The House adjourned at 10 p.m.