KiwiSaver Bill — In Committee 
KiwiSaver Bill — In Committee 
[Volume:633;Page:4901] 
KiwiSaver Bill 
In Committee 
Part 1 Preliminary provisions 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 It is wonderful to have an opportunity to take a call at the beginning of the Committee stage of what is a very important piece of legislation to the Government to Parliament as a whole and indeed to this country. The KiwiSaver Bill marks a really important moment in our history as we address a serious problem that this country faces in respect of savings in New Zealand. This is set out in the purpose clause which leads Part 1 of the bill. Clause 3(1) states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence particularly in retirement and to provide retirement benefits.” Clause 3(2) states: “To that end this Act enables the establishment of schemes to facilitate individuals’ savings principally through the workplace.” 
There has been a demand for this type of legislation for many many years now. In fact I recall quite clearly in 1975 saying to my parents as a young 15-year-old: “Why is the National Party using this extraordinary advertising in the election campaign?” as Cossacks were dancing across the screen. As a 15-year-old I thought: “Why is the National Party using this type of advertising with these Cossacks dancing across the screen?”. I said to my parents: “What is that ad about mother and father?”. Because of course at age 15 I could not vote. 
Hon Judith Tizard 
: Who paid for that? 
Hon LIANNE DALZIEL 
: It would be very interesting to see who paid for those ads all those years ago. But when I was 15 years old I could not understand what that was all about. They said it was to get rid of a workplace savings scheme. We have had a workplace savings scheme in this country before and it was started in 1974 and was destroyed in 1975 as a result of one Sir Robert Muldoon now deceased. But of course that party sits in this House and it did not even take a call on a question that was put to the Minister of Finance on the KiwiSaver Bill as we heard today—not even a call on that particular question. 
Darren Hughes 
: Why not? 
Hon LIANNE DALZIEL 
: I do not know why not. I think those members are ashamed of themselves—ashamed that all these years later finally we are back in this House with legislation that will bring about workplace-based savings. This is not the scheme that existed in 1974. We have had to modernise our thinking for a new century since we had the previous scheme. But I am really proud to be part of a Government that is once more encouraging long-term savings in this country through a workplace scheme the KiwiSaver scheme. 
Apart from setting out the purpose clause this part also sets out the interpretation clause and also states whom the bill applies to. I think it is important to acknowledge that not only does this bill apply to New Zealand citizens but also it applies to those who are permanent residents in this country and any people who are able to hold permanent residence in this country be they Australian citizens or New Zealand citizens. I think that this bill is an important step forward and I think it is an incredibly important moment in this country’s history as we start to debate the Committee stage of one of the flagship programmes of this Government. 
JOHN KEY (National—Helensville) 
: 
 That was Lianne Dalziel one of 50 members of the Labour Party who stole $882000 of taxpayers’ money in order to buy an election. It is no wonder she hangs her head in shame and those members were pretty down in the mouth when it came to question time today. She said in her remarks that this is not the same scheme as that in 1974. That was when she was taking a trip down memory lane to the time when she was 15. But what was interesting was that she was quite right. This scheme is not actually the scheme that the Finance and Expenditure Committee looked at for weeks when it heard submissions. Why? Because Michael Cullen and Helen Clark stole $882000 worth of taxpayers’ money. They propped up a member of Parliament who frankly was a disgrace to this House and the  
Sunday 
 television programme rightly highlighted that. 
Two weeks ago after we had heard 71 submissions on the KiwiSaver Bill Michael Cullen and Helen Clark were so desperate to get themselves off the front page of the paper regarding the disgraceful antics of the Labour Party when it stole $882000 that Michael Cullen would have been prepared to listen to anything. That happened to be Gordon Copeland who wandered into his office with some mad idea about mortgage diversion. That is actually why we have seen that change to the bill. Gordon is laughing— 
The CHAIRPERSON (H V Ross Robertson) 
: The member will use the member’s full name. 
JOHN KEY 
: I understand that the honourable member Mr Gordon Copeland supported mortgage diversion. But Michael Cullen did not know anything about it and neither did the officials. 
It is interesting to look at Part 1 of the bill. Clause 3 “Purpose” states: “(1) The purpose of this Act is to encourage a long-term savings habit …”. That is quite interesting actually. That is the purpose of the Act—to encourage long-term savings. Maybe the Minister in the chair the Hon Lianne Dalziel would like to take another call; she looks as though she is in a happy mood this afternoon and will be happy to take a call. She should explain to the people of New Zealand just this: when is a savings scheme not a savings scheme? It is like one of the riddles that my 11-year-old son reads out to me when I am driving the car. When is a savings scheme not a savings scheme? The answer son is when we can put money in and whip it out immediately to pay for a first home. The answer son is when we can have our weekly contribution put in and whipped out to pay for the mortgage. The answer son is when we can actually save zero of our own money—zero. That is a savings scheme under Labour and that apparently will encourage long-term savings. 
Interestingly enough when Michael Cullen was answering the question for oral answer about this—it is in my little box here but I can say this off the top of my head—he had the problem that he was so rushed while talking about Gordon Copeland’s mortgage diversion scheme that he forgot to match his answer up with the question. He was asked one of those really tough patsy questions that no Minister wants to get and that needs preparation from many Treasury and Inland Revenue Department officials so as to be ready with the answer. The question to the Minister was why he would not accept a 2 percent contribution rate for the KiwiSaver scheme. That is a good question—the New Zealand Council of Trade Unions has asked it and various other unions have too. The answer was that it would leave many small accounts that would not be large enough to warrant serviceability—oh and by the way also that it would not do much for an individual’s retirement savings. 
So maybe the Hon Dr Michael Cullen would like to wander along take a call and explain this to me. If we have a 4 percent contribution—2 percent made up from an individual’s own savings and 2 percent from the employer’s contribution—and if we take out 2 percent and put it into a mortgage diversion so it flushes from the savings account through to a cheque account then what is four minus two? The answer is 2 percent. [ 
Interruption 
] Thank you Parekura—Parekura was just working that out. 
The CHAIRPERSON (H V Ross Robertson) 
: Order! That is the second time now. 
JOHN KEY 
: The honourable Minister was working that out for us while he was on his feet. The answer is that we have 2 percent left in the account. Michael Cullen in his answer to the question today said he thought that was a really bad idea so I wonder whether he can tell us why he accepted mortgage diversion. When the officials came to the table and we discussed mortgage diversion in the select committee they said they did not have time to work on it and did not think it would work. They were unanimous on that. Labour members also looked at the idea and said it was not a good one for a savings scheme. 
I have had a good look at some savings schemes. When I went to Singapore in March—it was a wonderfully successful trip; I have written a number of speeches about it—I had a look at the Central Provident Fund model. The Central Provident Fund is quite interesting. It takes 25 percent contributions—I am not talking about 2 percent—and money can be put into three accounts. The first account is a health savings account—Singaporeans save for their health in that manner—the second is an ordinary savings account and the third is a capital account. I asked about the ordinary account and was told that it could be used for mortgage diversion. Singaporeans can take money out of it and pay for their mortgage—they put in 25 percent of their income. I asked what the balance was like in the ordinary accounts which were available for mortgage diversion. Does Mr Hughes know what the answer was? 
Darren Hughes 
: They said: “Oh what?”. 
JOHN KEY 
: They said: “Oh Mr Key it is funny that you should ask us that question.” The answer was zip—zero; nothing there. There was no one home—a bit like the Springboks were on Saturday night. There was no one home and not a single thing—not a dollar—in those accounts. It was a so-called savings account robbed by mortgage diversion. Yet Michael Cullen whose express purpose here is to encourage long-term savings thinks it is a great idea to raid the KiwiSaver account. 
We are in the middle of a great debate about rates in New Zealand at the moment. That was another little issue for the Government to try to work its way through; it has now called for an inquiry into rates. Here is my prediction: the next thing that one will be able to take money out of KiwiSaver for will ultimately be rates. Then it will be to pay the lawnmower man the guy who comes to cut the hedges the gardener the housekeeper the pool boy and anybody else who comes to work anywhere around the house. There will be an army of people—an army of Cossacks will be able to come along. That is the idea of savings under KiwiSaver. 
 The second little point is this. 
Hon Judith Tizard 
: It’s like  
Desperate Housewives 
—the National Party MPs’ version. 
JOHN KEY 
: Sorry what was that? I did not realise the member was back from Auckland. 
Hon Judith Tizard 
: Who has a pool boy? 
JOHN KEY 
: Dozens of people have pool boys I am sure. They have a pool boy. There are dozens of them. 
The CHAIRPERSON (H V Ross Robertson) 
: The member will come back to the debate. 
JOHN KEY 
: The second little point is this. What will happen when people make a contribution—put in 2 percent of their salary—and take it out immediately from KiwiSaver for their diversion and the employer puts in 2 percent and the money lasts in that account for 2 years at which time the employees move down the road to substantially better paid jobs with employers who make no contribution and do not operate a KiwiSaver scheme so the employees say they will just take the increased cash? What will happen to those accounts? They will have 2 percent in them. The employees will take a mortgage holiday or a savings holiday for 5 years and then extend that for another 5 years if they want to. There will be no savings. 
This is the interesting question: if this scheme is going to be so successful why then when I asked the Minister of Revenue some months ago how much the Government collected under the withholding tax paid on employer contributions—specified superannuation contribution withholding tax—did he tell me it raises $550 million for the Government yet with KiwiSaver the impact will be $35 million? Either KiwiSaver will not be terribly successful or it will be fiscally a lot more expensive than Michael Cullen thinks—one of the two answers. I suspect that the right answer will be the first one: the scheme will not be very successful at all. We do not even have to get past page 11 of the bill to realise that. We can go about 30 words into this bill. If we go past the title clause and the commencement clause—and by the way that date has already moved twice since the Government decided to introduce this bill—we get to the purpose clause. The purpose is to encourage long-term savings by allowing people to put their money into an account and in the same afternoon to take it out. If that is Labour’s idea of saving all I can say is that it is no wonder it has had to make some changes to the bill in the last couple of weeks because the scheme was doomed to fail when it first started. It was never going to be successful when it had no inducements at all and now it has even fewer. 
Interestingly enough one of the arguments that has been put up is that KiwiSaver will somehow because of the changes to the specified superannuation contribution withholding tax encourage employers— 
R DOUG WOOLERTON (NZ First) 
: 
 New Zealand First supports Part 1 of the KiwiSaver Bill. I must say that it comes as a revelation to hear the National Party leadership contender John Key talk in this Chamber because he talks of a different world. I suspect that he actually inhabits a different world from that of most people. I am sure it is a wonderful world; I am sure it is a great world. Unfortunately the world he lives in constrains his understanding of where ordinary people in New Zealand come from. It constrains his understanding of legislation that is put in place to help those less fortunate than perhaps he is. 
I cannot help but think back to the years of “Kiwi Keith” Muldoon Marshall and all those sorts of people. I think about what they would make of a National Party front bench made up of money dealers and people in the financial world. I do not know what they would make of that. Back in times past the National Party had aspirations certainly but it also was a grassroots organisation that actually understood real people and the real problems and real concerns of working people in New Zealand as well as the elite. We certainly would not have had tripping off the tongue of “Kiwi Keith” Muldoon or many of the other leaders of the National Party light-hearted talk about pool boys and people who come to service pools clean houses do the windows do the lawns and all of that sort of thing. 
 The sort of people KiwiSaver is aimed at do those things themselves and they take their kids to school they struggle mum and dad both work their kids do paper rounds and all of those sorts of things. This bill more than anything else is about trying to instil a savings habit into New Zealanders. This is not about the financially secure. This is not about those who deal in money markets. This is not about those who are literate and more than literate in financial affairs. This is about getting struggling Kiwis some way on the track to saving. 
Mr Key talks lightly about his trips to Singapore—and good luck to him—and how an account did not have this and so forth but in the very next breath he will say that KiwiSaver is not needed because the first thing people should do is pay off their mortgage. 
John Key 
: No. 
R DOUG WOOLERTON 
: Well I am surprised but he has said it before and he will say it again. But this bill does both. Where Mr Key is right is that it does come as somewhat of a surprise even to me that a bill suddenly goes from the select committee without any mortgage diversion component in it and— 
Craig Foss 
: And hello! 
R DOUG WOOLERTON 
: —and hello it appears in the House with a mortgage component in it. I have been around this place a wee while now and I have come to expect little surprises of that nature. If they are good I can force myself to live with them; if they are bad we will certainly speak against them. I think that this is an enhancement that we can certainly live with and we have no hesitation in saying so. 
New Zealand First supports Part 1. As we go through the bill we would like to see other enhancements. We are sure that successive Governments will add to it and change it. The bill allows for that to happen and we think that is a good thing. I will speak to Part 2 when that comes along. 
KATHERINE RICH (National) 
: 
 I always enjoy the contributions from the previous speaker the Hon Doug Woolerton but I was a bit surprised to hear how excited he is about the mortgage diversion aspect of the bill because I understand that he voted against it at the select committee. Although Mr Woolerton might euphemistically call it a “wee surprise” it is a pretty major addition to the KiwiSaver scheme. 
I wonder what the addition of the mortgage diversion provision says about the parliamentary process whereby a select committee can work thoroughly on a bill seek submissions hear from the public then unanimously decide that such a provision is not a good addition to the bill—it votes on it it reports back and hello 2 weeks later it is slotted back in there. The Minister in the chair the Hon Lianne Dalziel might like to rise to her feet and explain to the Committee how that happened because it smacks of some arrogance to totally override the select committee and insert something into a bill that not just National members New Zealand First members or other members of the committee but also Labour members decided was not in the best interests of New Zealanders. 
When the Minister last spoke she talked about how this bill addresses the savings problem. We all know what the word “addresses” means in this Chamber. Day after day in question time a Minister can stand up and basically say “rhubarb” and we are told that that addresses the question. If we look at the purpose of this bill we see that it aims to increase the well-being and financial independence of individuals particularly in retirement. The purpose of the legislation is to encourage long-term savings but what we see in it does not necessarily deliver that. What we have seen from the Government is a lot of rhetoric and a lot of words but in our view what is delivered does not necessarily address the problem of long-term savings. That is why we are concerned about turning a savings account into something that is basically a cheque account whereby New Zealanders can take out money albeit to divert to their mortgage payments but none the less they have access to that money to divert to something else that is not about retirement. 
I think that is where the Government runs into difficulty in many cases because it mixes objectives. It seems to be combining homeownership objectives with retirement savings objectives and I think that is where this scheme potentially has an Achilles heel. Many New Zealanders will be able to buy their first home then they can sell that home and bang they have the funding in their pockets. 
Until we address the fundamental issue in this country that some people do not have the capacity to save or to put money away because they are overtaxed or for other reasons—they may not be earning enough—we will not move towards really addressing the long-term savings issue. Many people whom I have spoken to say: “Well yeah I would like to save a little bit more but I am paying for my kids’ school fees and I am paying for food on the table etc.” If those middle-income New Zealanders paid less tax they would have more to put away. 
In terms of the scheme that has been provided I would like to hear the Minister explain why she thinks it will contribute to long-term savings when in the first instance people can whip out that money as if it is a cheque account to put it into something totally different. That was never part of the scheme when the measure was first discussed. It was never part of the scheme when Michael Cullen first dreamt it up. It is something that has turned up in just the last 2 weeks which brings on all sorts of concerns about process. 
It also makes the members who sat on the Finance and Expenditure Committee wonder what they have been doing for months. Also the members of the public who put their hearts and souls into the submissions and came along to the committee were consulted on one part of the idea then hello the bill is totally different when it comes back into the House. I do not think that is good process. Sure we often have fine tuning but to make such a dramatic change to the KiwiSaver scheme requires a lot of explanation. It might be a cute idea that can be debated on the platform but will it work? We do not know whether it will work we have not heard from the public on that point. 
BRIAN CONNELL (National—Rakaia) 
: 
 Thank you for the call on the KiwiSaver Bill. I will start by picking up where my colleague Katherine Rich left off and say that the process we have witnessed makes a mockery of our democracy. How can a select committee meet week after week to examine a bill in minute detail simply to be ignored by the Minister when the bill is reported back? That is a mockery of our democracy by any gauge. 
Craig Foss 
: It’s a “mockracy”! 
BRIAN CONNELL 
: It is a “mockracy”. The Finance and Expenditure Committee heard 72 submissions and to the best of my information not one of them supported the idea of mortgage diversion. It was not even in the bill yet here we are debating it as a key component of the legislation. I wonder what went through Gordon Copeland’s head that makes him think he can ignore the collective wisdom of the select committee process. What makes him think he is bigger than that process and can go to the Minister of Finance and do sneaky dirty little deals like this one? 
I turn to the bill proper. Conceptually of course the National Party agrees that a rigorous sensible savings culture is necessary in this country. But will this bill achieve that? The answer is clearly no it will not happen at all. The next question I pose to members of this Committee is: who will pay for it? A significant start would be for the Government to put into the savings scheme the $882000 it stole from the taxpayers of this country. That would be a good start to a savings scheme would it not? 
Let me turn my attention now to the contributions holiday. Who really believes that having a contributions holiday will support a savings scheme? People will be putting in money and whipping it out quicker than Taito Phillip Field whips out money from his electorate office. That is how quickly the money will be coming out of this scheme. It is not something that any member of this House believes is robust. I encourage members of this House to look at the statistics of countries that have contribution holidays. What do those statistics tell us? Essentially that these schemes do nothing. People will take their thousand bucks—of course they will—but will they continue to save or will they whip out that money? That will be the end of the grand KiwiSaver scheme. It will be a disaster because it is badly structured and badly thought through. It had some merit until Gordon Copeland decided to do his little back-room deal. I am saying that even that is an exaggeration. 
The real problem with this bill is that it does not address the fundamental issue which is that in order for people to save they have to have their tax burden reduced and they have to receive higher wages. If Gordon Copeland is to say the way to get asset-rich is to pay off one’s mortgage then for goodness’ sake why do we not just give people more money and encourage them to do that? Why go through this convoluted scheme I ask Mr Copeland? Why does he not just come clean and say that the real issue is that Kiwis pay too much tax? Does this bill address those fundamental issues? No it does not. Here is a wake-up call for this Government. It should start to deal with the real issues rather than skirt around the edges. 
As I have said the purpose of the scheme is OK but its method is appalling. The scheme will not work. I look forward to going through all the parts of the bill systematically dissecting it and pointing out to members of this House why it will not work. The Government could not even get the starting date right. 
GORDON COPELAND (United Future) 
: 
 I rise to make a brief contribution in terms of part 1 of the KiwiSaver Bill and clause 3 “Purpose”. I think it is relevant to actually read what clause 3 states: “The purpose of this Act is to encourage a long-term savings habit and asset accumulation”—two things: a long-term savings habit and asset accumulation—“by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement. The Act aims to increase individuals’ well-being and financial independence particularly in retirement …” In short this bill is about savings and asset accumulation for retirement. 
I say straightaway that when I read some of the commentary—for example this morning in the  
Dominion Post 
—that somehow or other finds a mischief in the mortgage diversion part of this legislation I have the view that it is simply not looking at this thing holistically. Because the key to having financial security in retirement is No. 1 having a freehold home and No. 2 having some savings in the bank to supplement New Zealand superannuation. Both of those things are relevant. I might say too that when some of the commentators say there is no savings problem in New Zealand then go on to quote the fact that the price of housing in this country has skyrocketed over recent years and therefore if one takes the stock of housing now and divides it by the number of people in the country that average household wealth has gone up I want to say to them that it is all very cold comfort for people who are paying rent. Because one is either in the housing market or one is not. 
One of the very very sad things about this country which goes all the way back to 1975—as mentioned by the Minister Lianne Dalziel—is that we have never had a national savings scheme. I am sure that when John Key was in Singapore he would have picked up that Singapore now has the highest percentage of private homeownership of any nation in the world. Does Mr Key know—because he is a generation younger than me—who used to be number one? It used to be this country. That is the extent to which we have fallen behind in the last 31 years and it is time we got into catch-up mode. 
I would like to thank the three National Party members for the speeches we have had so far and for their compliments to me in relation to the mortgage diversion scheme. Since I have been in Parliament I have never before been portrayed in a way that I personally can somehow change the law of the country just because I decide to do it. I regard that as a tremendous compliment and I really do thank them for that. On that basis I think I should really be in line to become the Prime Minister because I thought she was probably the only one in the whole of the House who could actually do that. So that really is putting me in pretty exalted company and I am very very grateful for the compliment. 
None of the three National Party speakers in their 4 or 5-minute speeches seem to have actually figured out that the mortgage diversion relates only to 50 percent of contributions. That is the maximum that people can do—only 50 percent. Therefore the sum the member John Key did before is quite wrong when he said that people would end up with nothing going in. He said 2 percent from the employer would go in and 2 percent from the employee and then he said the employee would take out his or her 2 percent. No the employee will be able to take out only 1 percent maximum. That leaves 1 percent of their contribution in the scheme. Therefore it is 50 percent—or many hundred percent actually—greater than having nothing at all in the scheme which would have been the result if there were no mortgage diversion. 
So we are really looking here at a win-win situation. I hope the National Party members will get their minds around what this really means because I think it will be good for New Zealand and I am sure it will be good for savers. I am absolutely convinced the mortgage diversion will be greatly successful. In reality it was just an idea whose time had come and people who have thought it through have said that it will try to fulfil the purposes of clause 3. It is really fundamental to the whole purpose of what we set out to do in Budget 2005. I remind members that in that Budget we had a mortgage diversion element in the KiwiSaver scheme. That has been reinstated in a different form and in my own humble opinion in a superior form. It will be more effective than the original suggestion which was discarded by Cabinet back in about February or March of this year. So I just appeal to commentators to consider that. 
By the way I should say that the  
Dominion Post 
 
 New Zealand Herald 
 
and everybody else have picked up that people can divert only 50 percent of mortgage contributions but apparently the members of the National Party have not. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak to the KiwiSaver Bill 2006. First and foremost I wish to compliment the Finance and Expenditure Committee which I worked with on this bill. There was good continuity in that committee. In fact the continuity of the committee could probably be held above the continuity of the bill with the exception I guess of Rodney Hide who was not a regular in the committee— 
Brian Connell 
: Irregular. 
CHRIS TREMAIN 
: He was an irregular visitor. It was interesting to hear the Minister Lianne Dalziel’s recent comments about Cossack dancing; dancing had something to do with Mr Hide’s absence from the committee. 
The only thing in this bill that has remained the same is the title: KiwiSaver Act 2006. In fact if I lifted up the entire bill and glanced through it I do not think I would see a page without a change to it. It is changed throughout. The only other thing that has stayed the same from the start is the purpose of the scheme which is to encourage a long-term savings habit. 
Let us look at the initial purpose of the bill and at the submissions that came to the Finance and Expenditure Committee regarding it. If we look at the officials’ report on the purpose of the KiwiSaver scheme we can see that the submissions were two to one either supportive with reservations or moderately supportive with considerable reservations. 
I start with the broadly supportive—largely the financial institutes that will benefit from this bill. First the Financial Services Institute of Australasia is supportive of the intent of the bill or considers it sets a laudable objective. Secondly supportive of the need for a culture change and the development of a long-term savings habit is Fidelity Life which contributed comments in that regard. Thirdly supportive of KiwiSaver as the means to improve savings rates is Westpac. 
In terms of submitters who were supportive with reservations we start to see right from the word “go” the reason why significant changes were made to this bill which I have pointed out before. We start with the Public Service Association (PSA) which said that it considers that “given the right environment even lower-income New Zealanders may save but that savings does not just cover financial assets but also includes housing.” However even with KiwiSaver the PSA pointed out people will still under-save. That is a key point. 
The second point is that there are potentially broader macroeconomic benefits associated with increased domestic savings. That was pointed out by the Council of Trade Unions interestingly enough. The Council of Trade Unions also said: “KiwiSaver is not bold enough to prompt a long-term change in savings behaviour.” I think that was one of the key reasons why Dr Cullen made so many changes to the bill from that point in time. Even the Council of Trade Unions believed that the bill was not bold enough to prompt a long-term change in savings behaviour. 
Thirdly were the submitters who submitted that they had moderate to considerable reservations. At the start of the bill a significant number did. If we look at the officials report we see that 11 bullet points outline submitters with considerable reservations. Let us look at a few of those. The first one from the Auckland University’s Business School retirement policy and research centre stated that the purpose of the scheme was unclear and would not change long-run economic performance. 
Let us move to other submitters like Kelvin Prisk Consulting ING Mutual Fund Ltd and Superannuation Investments Ltd who said that the “home loan assistance provisions are inconsistent with the objectives of the bill”—again inconsistent with the purpose. In addition from the retirement policy and research centre we have comments along the lines of “Confusing saving for retirement with saving for a house through the subsidised first home purchase may aggregate the problem of low individual savings.” It goes on. From Mercer Human Resource Consulting we have: “The scheme objectives will not be achieved but considerable expense involved.” 
We go on. The Association of Superannuation Funds of New Zealand questions whether New Zealand actually has a savings problem with particular reference to Scobie et al. who really focused on their belief that New Zealand did not have a long-term savings problem. Also the Business Roundtable submission stated: “Long-run living standards were determined by economic growth and the ability of people to continue to save.” 
CRAIG FOSS (National—Tukituki) 
: 
 As earlier speakers have mentioned the National Party is opposed to this bill at this stage in its current form. First of all I would like to thank the members who were present at the Finance and Expenditure Committee consistently. I would like to thank the officials and also on behalf of National Party members to apologise to the officials. The apology is because of all the hard work the resource allocation and the time they spent on a bill that arrived at our committee was discussed was submitted upon and then was changed radically last week. I think that is an absolute abuse of process. Last Thursday about 4 hours before the second reading two radical changes were made to the bill. They are quite radical. 
I would like to take maybe 30 seconds to quickly go over the discussion we had in the committee around the mortgage diversion scheme. I will give that discussion verbatim for 30 seconds starting now. That is exactly it: there was no discussion around the mortgage diversion scheme. There was no discussion around a fundamental part of and change to this bill whatsoever. 
Brian Connell 
: Can we hear it again? 
CRAIG FOSS 
: I say to Mr Connell that he can hear it again. 
I would also like to replicate verbatim the discussions around the specified superannuation contribution withholding tax changes to this bill. Maybe I will take 10 seconds. This is the discussion verbatim over many months that the committee had about this bill starting now. The silence is absolutely deafening. I ask those listening to the radio out there to please tune in. 
The CHAIRPERSON (H V Ross Robertson) 
: The member is not to refer to radio listeners. 
CRAIG FOSS 
: I apologise. This is an absolute disgrace and an abuse of process. I have been here nigh on a year and I have learnt an awful lot in the last week about the process of Parliament and how one can openly and absolutely abuse it. 
The title of this bill is the KiwiSaver Bill. There is another “kiwi saver” scheme out there that is quite laudable and that we should all applaud. It does save kiwis. It saves our culture. It looks forward and it nurtures the environment. That of course is the Bank of New Zealand’s scheme for saving the kiwi bird. 
I would like to save Kiwis more money. On the pledge card an amount of $800000 could have been saved. The Working for Families package could have saved $16 million on its advertising. There are more opportunities. Kiwis need to find their savings from the $200000-odd talked about in relation to the Service and Food Workers Union issues at the moment. Kiwis could also save money from the $100 that a poor Auckland family is alleged to have paid to an MP regarding immigration matters. That is what counts. Those are the people on the ground whose problems need to be fixed long before a bill like this tries to come into play. 
This afternoon I asked the Minister of Finance a question which I will repeat: why did the Minister reject the unanimous opinion of the Finance and Expenditure Committee plus that of many officials when he decided to proceed with the mortgage diversion facility? Perhaps Mr Copeland was very convincing in his arguments to the Minister and maybe it is a $35 million cost to the fiscal books or perhaps it is $500 million over time. If Mr Copeland’s addition to this bill is worthy of that cost he obviously has a fair bit of pull. As I said the Minister of Finance could not answer as to why he rejected the unanimous opinion of the members of the all-powerful great Finance and Expenditure Committee. But he could not. The committee was totally unanimous. Very senior officials within various Government departments rejected any installing of a mortgage diversion scheme right away. 
I would like to point to some of the reports and press releases around this bill—especially on the changes last week. The Council of Trade Unions has a very good quote in its press release. Yes it waxed lyrical around the wonderful—in its opinion—bill but it states: “It is vitally important that in addition to employer contributions we see a continuation of wage rises so workers are better able to afford workplace savings.” That says absolutely everything: that people are struggling long before they try to make the decision to save for a house. 
PANSY WONG (National) 
: 
 It is easy to tell a National member of Parliament from a Labour one. The fine member Craig Foss is prepared to apologise to the officials because the Minister once again did a backroom deal with United Future and wasted all their hard work—and it was not even Craig Foss’s undertaking. One can tell. If it is a Labour Party member or the Prime Minister their stand is to never admit a mistake never apologise and never pay back. But a fine member like the National Party member Craig Foss would take it on the chin. 
I would like to raise two points under the purpose of the KiwiSaver Bill. The first one is that the purpose of the bill is: “to encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement.” I wish the Minister would take a call to answer a question because there are members of the public out there—those who have just started work those who have to take two jobs and those who are working 7 days to make ends meet—who ask how they can enjoy their current standards of living. At their current standards of living how can they look ahead 20 or 30 years? 
 A lot of New Zealanders are not in the fortunate position of being able to plan for retirement. They actually struggle just to meet their current standard of living when there have been huge huge increases in the local body and council rates made because of central government giving local bodies all those additional responsibilities without giving them the funding to go with it. So it is hard to see how the Government can expect people to change their current behaviour when they are struggling to make ends meet. Just now when Gordon Copeland mentioned Singapore having a savings habit he neglected to mention that Singaporeans also have a much higher average wage compared with New Zealanders. It is just like Australia. 
The second point is even more interesting. It states that the purpose of the bill is to ensure savings habits so that those individuals can “… enjoy standards of living in retirement similar to those in pre-retirement …”. It is a big call to expect people to have standards of living similar to those they had before they retired. Actually I would invite my colleague Mr John Key to take a call in the next part because he is a self-made man. From nothing he built up a wonderful future for himself but how is John Key to ensure his after-retirement living standard will be similar to his standard of living now? Well if anybody were to lead New Zealand to achieve that I think that most New Zealanders would trust John Key to come up with a better KiwiSaver design than the Hon Dr Michael Cullen. 
Brian Connell 
: A “Key Saver scheme”. 
PANSY WONG 
: I think this is a great thing. I am sure that the public would have faith in a “Key Saver scheme” because John Key has proven that New Zealanders given the right tax relief and the right incentive to work hard can start to look at saving—not just because the Labour Government has decreed that they should save. 
I also add my concern to the worry that was raised by both Chris Tremain and Craig Foss—the hard-working National members on the Finance and Expenditure Committee. Once again the Labour Government is riding roughshod over the select committee. It is ignoring all the hard work of the select committee. Why bother sending this bill to the select committee for very careful consideration if the select committee consideration will then be ignored? I am surprised. United Future used to claim to be the party that was responsible and that would respect the select committee process. 
MOANA MACKEY (Labour) 
: 
 I move  
That the question be now put 
. 
CHRIS AUCHINVOLE (National) 
: 
 I rise to address Part 1 of this bill. We are talking here of long-term savings ambitions and the effectiveness of bringing them about. The bill seeks to encourage savings as a practice but the reality is in its present form that would appear to be a bit of a dream. Savings are not achieved through compulsion and not through regulation—both those items being the standard currency of this Clark-led Government. I guess what we have here is a mismatch between the political agendas of people within Labour and within United Future. In spite of the excellent work done by my colleagues on the Finance and Expenditure Committee therein lies the problem. If Government members really want to put it clearly after the purpose of the bill they should put in the phrase “in accordance with Labour Party ideology”. 
One of the advantages of having a family now in adulthood is that it has been possible to study the development of savings habits—or the lack of them—and the stresses they come under as one’s children are growing up into adulthood. It is an interesting comparison to see how need affects habit. In my own case and in that of many people of my generation I think it was a Post Office Savings Bank book from my grandmother that started off my savings behaviour. Our children benefited from the same experience. Savings had a high priority to the extent that when my son was in his teens and his car needed repairs I suggested that he might wish to contribute to the cost of the repairs from his weekend earnings at a restaurant. His response was: “Dad I will have to use my savings.”—shock horror! I had to use mine instead. 
Savings in my experience are a blend of training opportunity and needs. The needs will always take precedence. Earlier speakers have emphasised the vulnerability of this particular scheme when need becomes predominant. The present Minister of Finance wishes to encourages saving. If he does so sincerely he should think of the effect of his other financial policies—tax for instance. But no the limp legacy of the Labour Government will always be one of over-regulation. To instil long-term savings habits necessitates having money that is surplus to immediate requirements. 
What particularly worries me are the compulsory changes that the Minister will make when the scheme proves to be unsuccessful and inoperable because we will then see more of the same sorts of changes imposed without it would seem too much reference to others—and that is a disturbing worry. 
Thank goodness that we have the prospect of improvements through the introduction of a “Key Savings Scheme” which will follow on from this one. 
John Key 
: Definitely will. 
CHRIS AUCHINVOLE 
: We definitely will because it is not the intention to deny the fact that we need improved savings habits; the issue is just one of how we go about achieving them. And I have not seen anything to date in this bill that would do so in satisfaction of the requirement to introduce a savings scheme. 
DARIEN FENTON (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to Part 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 1 as amended be agreed to 
. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Part 1 as amended agreed to. 
Part 2 Membership of overall KiwiSaver scheme 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 Part 2 contains three subparts which are very important to the implementation of the scheme. Subpart 1 talks about becoming members of KiwiSaver Subpart 2 deals with the allocation of people to KiwiSaver schemes and Subpart 3 transfers between KiwiSaver schemes. So those really are the operational aspects of the KiwiSaver legislation. 
It was interesting to listen to other members’ contributions to the debate on Part 1 because they are relevant to this part as well. This part gives effect to the objective of the legislation which is to encourage people to take up savings. As the Minister of Finance said in the second reading debate this is not designed to make savings compulsory; he said that it was designed to make savings compelling rather than compulsory. Of course I too recall the Post Office Savings Bank books that we had with the little squirrel on the front. I think “saving for a rainy day” was the message we were given in those days. I certainly did not have parents to bail me out for anything I wanted to buy in my time growing up. I worked from the time I was old enough to go in with my dad and earn a few dollars at the office by putting things in numerical order. Then I worked in a dairy after school and then I worked in a hospital. I spent my time working to support myself for quite some time. 
Brian Connell 
: Did you save anything? 
Hon LIANNE DALZIEL 
: No. Saving money was not very easy to do when I was being paid 40c an hour—that was how much I was being paid when I was 14 years old. But I did manage to save up for the things I really wanted the most. I think that is something in our culture that we have lost. I wanted a pair of ice skating boots; my parents could not afford to buy them for me because they had seven children and if one person got one thing then everyone else would be lining up for it as well. So my parents said to me: “If you want ice skating boots you save up for them yourself.” At 40c an hour I saved up week after week after week and those boots cost me $45. I still was not a very good ice-skater but what a fantastic lesson I learnt: if people want something they have to work for it and save for it themselves because no one else will do it for them. 
It was interesting that comments were made about training opportunity and needs. Yes training opportunity and needs are very fine but when those opportunities are often ones that people have to learn for themselves it is those people’s parents who give them the lessons in life that stand them in good stead for the future. 
What we are doing here is about accessing those who can save. People who earn an income can save. Not all of them will be in a position to save which is why this is an opt-out scheme. It is not an opt-in scheme because we know that people may not take that step to give up some of their salary in order to save for their future. We are offering an opt-out scheme so people are automatically enrolled. That is what this part does: it provides automatic enrolment so there are automatic deductions of contributions made from people’s salary—the next pay calculated after the new employment begins. 
I thought a really important part of the scheme was for that deduction to happen straight away so people could look at the pay packet and see what it looked like without the money there. There is the ability to opt out but we are hoping that with a common trait known as inertia—which I certainly experience on occasions—a lot more people will remain in the scheme because it will take some effort to come out of it. But for those who cannot afford it the opt-out provisions are there. This is not a compulsory scheme. Yes we are setting it up to make it easy for those who can save to do so but we are not forcing people to save even though we might think that to do so would be good not only for them but for our country as well. 
I do not believe I have heard any good alternative arguments especially the one about pool boys. The idea of somebody having to spend his or her finances on pool boys to clean his or her swimming pool—it is not even gender neutral; it was always men rather than woman who were talked about as being employed to do those particular jobs—is ridiculous. 
JOHN KEY (National—Helensville) 
: 
 That speech made by the Minister of Commerce was touching in this regard: she spent quite a bit of time down memory lane talking about how she had saved up for the white boots she got when she was 16— 
Hon Lianne Dalziel 
: They were so cool! 
JOHN KEY 
: I am sure they were really cool. She talked about why savings are really important—I assume this is a Government that believes in savings—why the Government wants to develop a culture of savings and why that is really important. Why do I think that is touching? In 1999 the Labour Government was elected into office. An interesting fact about 1999 is that New Zealanders looked at each other after polling day and worked out that they owed $80 billion. That is what New Zealanders owed when the Labour Government came into office—the Labour Government that Lianne Dalziel has been an important member of. That same woman just told us that she saved up for things and that that was really important. I wonder whether she could answer this question for me because it is quite an interesting little question. 
Hon Lianne Dalziel 
: I bet it’s not relevant. 
JOHN KEY 
: No it is a very relevant question. If savings run to the heart of this Government and if savings are really important can she answer this question— 
Hon Lianne Dalziel 
: I still don’t have a pool boy! 
JOHN KEY 
: I do not have one either interestingly enough. Why have New Zealanders racked up $60 billion worth of debt in 6 years under a Labour Government? That is what they have done. New Zealanders owed $80 billion 6 years ago; they now owe $140 billion under a Labour Government. 
There are a couple of interesting things here. Firstly Mr Woolerton made an interesting point about poor people not being able to afford to save and about my obviously not being able to recognise those issues—which is not correct. I thought I would make this point to him. I wonder whether Mr Woolerton can explain to me the following. If someone earning $40000 a year puts the 4 percent contribution into KiwiSaver that person would pre-tax put in $1600 but because they pay tax they would put in $1200 let us argue. If that person is getting no employer contribution and is earning $40000 bringing up two children paying off the mortgage and everything else how can that person afford to pay that $1200? What has changed? 
Hon Lianne Dalziel 
: Working for Families. 
JOHN KEY 
: No. What has changed in the position of that person from the day before yesterday? Nothing. That person could not afford to save then; he or she cannot afford to save now. That is the whole point. 
I ask members to have a look at the $1200 that that person could put in. If he or she received an employer contribution I accept that that would make things a little easier. He or she could divert only half of his or her own contribution—Mr Copeland wrote his own essay piece about that and he is right. Under that scenario the employer would put in $800 and the employee would effectively put in $600 of which $300 could be taken out. The Government is now telling us that people who earn relatively limited incomes maybe less than $40000—less than the average wage—will somehow miraculously be able to afford to go without that money. That is the very reason why this scheme will not work. Nothing changes in the position of the people whom the Government wants to go into the scheme—those on low to middle incomes. They cannot afford to save. Nothing has changed. If the Government had said to those people that if they earned under a certain amount—if they earned 40 grand or less—a certain amount would be put in by the Government that would have been interesting. But no that is not the position. The Government is telling us that those people will miraculously be able to save. 
That is the very reason that when the Government collects $550 million from the specified superannuation contribution withholding tax—[ 
Interruption 
] Mr Hodgson knows this because he spends a lot of it on the health system and gets nothing for it. The sum of $550 million is sucked out through the specified superannuation contribution withholding tax. Now he is telling us that KiwiSaver will be a roaring success but it will cost $35 million. Well I do not think so. 
When Mr Woolerton takes his next call I suggest that he formally apologises because he now knows that I am right and he is wrong. I understand absolutely how people who do not earn very much money go along and they will not be able to contribute to the scheme because very very little in their position has changed. That is the problem. 
There are lots of different scenarios that would have made the scheme better. Interestingly enough if the Government had not been rushing this measure through because it had stolen $882000 of taxpayers’ money or because it had a problem with Taito Phillip Field if it had been actually doing its work it would have read about what President Bush did in relation to tax cuts. He asked the US Treasury to do some work for him around tax cuts. 
R DOUG WOOLERTON (NZ First) 
: 
 I will take up John Key’s challenge because as every financial adviser knows one can always put aside a dollar for savings. I am not talking about the financial advisers in the money markets that John Key deals with; I am talking about the budgeters the people who talk to other people about how to extend their dollars in order to make the home budget work as his mother did. His mother would have understood that just as my mother would have. It is a matter of making savings a priority and it is a matter of getting the habit of saving into one’s psyche. People know—and Mr Key knows this but he has forgotten it because it is a very long time ago for him—that the important thing is to make the effort to save and to make saving a habit. Anybody who does budgeting or who does household budgeting knows that. 
I suggest that in many many homes across the country when the man of the household is not doing as he should it is the mother the lady of the household who will quietly put aside a couple of bucks each week for what she knows will be a rainy day—or for the skates that the Minister in the chair Lianne Dalziel was talking about— 
John Key 
: Boots I think she was talking about. 
R DOUG WOOLERTON 
: The boots or the skates. That conjures up thoughts that actually put me off my speech so I will not go there. 
Chris Auchinvole 
: Have a visual! 
R DOUG WOOLERTON 
: No we will not go there. It is the mothers who understand these things. It is the mothers who will take money out of the household budget and put it aside for a rainy day. This Government because it has mothers within it understands that and that that is the answer. 
It is not a monetary answer. It is not an answer one will find in the money markets; nor is it one that people who deal in big amounts of money will understand. It is an answer that households across this country will understand because they are living with it each day. They will put the money they take from their household budgets into KiwiSaver. From time to time they may take a holiday from putting money into the scheme. They may actually have a diversion to the mortgage or for whatever else but slowly and surely over many many years—and hopefully over a generation or two if somebody does not come into power and wreck this scheme—we will build again a savings culture in this country. More than anything else that is what this scheme is about. 
Mr Key is an intelligent man—people tell me he is and he seems to be. He knows that this scheme is about building a savings culture. He knows it is to be intergenerational. He knows saving is made for the long term but he is required to speak against this bill. Mr Key favours it himself but because he is required to speak against it by other members of his caucus team he goes out and stonewalls on it. 
As the Minister was saying this is not an opt-in scheme; it is an opt-out scheme. So people who join the workforce or start a job have the option 2 weeks later of opting out. I think that is a good thing too because it is true that often we do not get around to these things. It is like putting the money in the cookie jar: we do not get around to it and largely it is the mothers who do so. I can just see mothers right across the country asking their children whether they have joined the KiwiSaver scheme yet. For years mothers have been asking their children whether they have joined a savings scheme and are putting a little aside and whether they have done something about superannuation. And the answer is no no no all over the place. The mothers I am speaking about will be happy to see this KiwiSaver scheme because they know they have a better chance of holding their children in the scheme than of getting them to join it. 
KATHERINE RICH (National) 
: 
 I thank you Madam Chair as I rise to speak to Part 2. We have heard a lot of members talk about the savings culture and how things have changed over many generations. I have to agree with that because I recall speaking with my own grandparents about their attitudes towards money and saving. Many of the generations before my own generation would never take out loans. And if people did they would do it for something important—certainly not for something flippant like going on a holiday. 
Things have changed and to a certain extent I think there are a number of reasons for that. Banks are always telling us to take out more loans. Credit card companies are always marketing themselves and encouraging people to take out additional credit. Things have changed over a period of time. Even in the schools there has been a small change. Years ago schools used to encourage banking. Kids used to bring along their 20c or 50c a week to put it into their savings account but many schools do not do that any more. I think the changes have chipped away at a culture of saving. I listened to my colleague John Key’s comments about the rise in debt even in the last 6 years. When we hear the figure of $60 billion that is being talked about we feel it is a figure so large that it is hard to imagine that amount in physical bills. So something has been occurring. 
I proffer the view that the Government has played a role in that by giving people the impression they do not need to save because the Government will always be there to let them off the hook if they rack up some debts. Later on today we will be debating the Child Support Amendment Bill (No 4)—legislation that will let liable parents who have child support debts off a pretty hefty amount of child support. Since when has the answer to having a debt been to write it off completely? I do not know. But I think all those decisions made by the Government contribute to the idea that if times are tough the Government will write off people’s debt. There is not the same attitude towards personal responsibility as there was previously. Some younger people think it is OK to rack up a huge debt just so they can travel overseas thinking they will pay it off at a later time. 
I wonder what role this bill will play in terms of changing the culture of New Zealanders. That is my concern. When we look at the bill we see that the scheme is not a compulsory one but an opt-out one so it will be very easy for a young person to decide that he or she wants to have his or her income now. I remember that when I was first a public servant many moons ago now the department I worked for had quite a good superannuation scheme. The Government chipped in $2 for every $1. Well a lot of young people—admittedly we were all in our early 20s—thought they wanted their cash then. They did not want to put it into superannuation savings thinking that retirement was decades away. 
 Even if a scheme with certain advantages is provided it is another thing to try to encourage people to take part in that scheme. That is what I am interested in and I would like the Minister in the chair the Hon Lianne Dalziel to take a call and explain how in an opt-out scheme those people can be encouraged to put in their funding and how it will be explained that even in their early years—in their first employment—it is to their advantage to do so. Unless we do that we will not change the culture in this country and we will continue to have Kiwis who think it is OK to outspend their income on their lifestyle and to take out loans and use credit for luxuries as opposed to important assets like homes etc. 
The other point is that in this bill the Government is promoting homeownership again at a time when the Governor of the Reserve Bank is trying to get Kiwis away from their infatuation with property. I am still concerned about those mixed messages. If this bill is about saving for retirement then that is something quite different from homeownership. I think this scheme runs the risk of muddying the water and not doing a good job of encouraging people to save for their retirement so they can have a better lifestyle in their later life. 
BRIAN CONNELL (National—Rakaia) 
: 
 I thank Madam Chair for the call on Part 2 of the KiwiSaver Bill. I start by saying that the speech by Lianne Dalziel was one of the finest Tory speeches I think I have heard in this House for a long time. Right at the heart of her speech was capitalism; people who work hard are rewarded. Mind you the mind boggles at the thought of Lianne Dalziel in a pair of knee-high boots. 
I want now to tell my own story in relation to this bill one that sums up the Labour Party’s attitude to saving. When I was about the same age as Lianne Dalziel in her story I was saving hard. When Mum and Dad gave me threepence or sixpence for an ice cream—this story does go back a long time—I would take the money and I would save it. Then when all the kids in my family—and there were six of them—ran out of money for ice creams Mum or Dad would say to me: “Don’t be mean Brian share your money.” All that time I had gone without ice creams. And now the Labour Government comes along and says I have to share that money and Mr Employer has to share the money because it is not fair. 
It is typical is it not? Here we are debating Part 2 of a bill where we are spending more time dealing with the process of the bill than actually getting it structured right in the first place. My colleagues have quoted chapter and verse as to what is wrong with the bill but the slow-witted members of the Government are still struggling to understand why someone earning $40000 a year will simply not be able to afford to take up the opportunities that this scheme offers; it simply will not work. 
I have some questions for the Minister in the chair. Clause 9 is headed: “Meaning of new employment”. I ask the Minister whether if an employee who is in the scheme changes employment the scheme is portable and is fully vested and the employee can go. I ask the Minister to take a call and answer whether employees can take their contributions from one scheme and go to another employer if that employer is not an exempt employer under the definition of this scheme. I should be grateful if the Minister in the chair would take a call and answer that question. The fundamental flaw in this bill is that it will not bring about the behavioural change that is necessary if we are going to have a savings culture in this country. 
Darren Hughes 
: Will the member answer a question? 
BRIAN CONNELL 
: The member is calling out and asking me whether I will answer a question. When he is speaking certainly I will. When I am speaking he will listen because he might learn something. The fundamental question is that this bill will not bring about any behavioural change. How can a behavioural change be brought about when people simply have an opt-out clause in a scheme like this? People will opt out. They will take their $1000 and they will act according to what we have told them from time immemorial and that it is that it is better to pay off a mortgage than to save. The biggest asset that people create in their lives is in their houses and that is the crux of the matter—the distinction between good debt and bad debt. Whether we like it or not we have created a consumer society. We have created a society where people say they want they want they want and they are going to have. What these people do—and it is no fault of theirs because we have made money so easily available—is buy or get into bad debt. They will buy a TV or a depreciating asset called a car that a few finance companies are finding out about now rather than putting money into investments that will create asset wealth. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak on Part 2 of the KiwiSaver Bill. I want to take this opportunity to get to the heart of some key issues of this part of the bill. I will canvass clause 7A “Outline of how people become members of overall KiwiSaver scheme”; clause 8 “Who automatic enrolment rules apply to”; and clause 9 “Meaning of new employment”. I will particularly focus on the compliance costs around this bill and temporary employees for a period of up to 28 days and—if time permits—round it out by having a look at the time limit for opting out. 
Clause 7A outlines how people become members of the overall KiwiSaver scheme. This is an issue which vexed the Finance and Expenditure Committee when we first considered the opt-out versus the opt-in provisions. Initially when the bill first came to us it was an opt-in situation. It was not until the select committee changed that particular rule that it moved to the opt-out position. The bill now essentially provides for opting-out and gives employees the opportunity to do so after 2 weeks. 
Clause 8 deals with who automatic enrolment applies to. There is an interesting point here that the Minister of Commerce may like to take a call on to give me an answer. Clause 8(b) states that it applies to people of the ages of 18 through to 65 so unfortunately when the Minister Lianne Dalziel at the tender age of 15 first conducted her working life and first started saving towards her new pair of boots she would have been unable to make contributions to KiwiSaver at that point. The vexing question—and I would be interested in her taking a call here—is what happens to an employee at the age of 64. Do these employees opt in for a year and will they receive the $1000 remuneration at the end of that year? Will the Government be forking out a significant amount of money to an employee aged 64 who is on $30000 and may have contributed only $400? Will the Government be forking out $1000 to those employees? 
I move to clause 9 “Meaning of new employment”. Again this was another vexing issue for members of the select committee purely because of the compliance costs that surround temporary employment which is specifically covered in clause 9A. This was something that the select committee focused on because the definition of “temporary employment” and who can be involved in the scheme is very important. Members will see that there is a new unanimous clause dealing with casual agricultural employees that moves them outside the scheme until they become permanent employees. More specifically it deals with employment that is “under a contract of service that is for a period of 28 continuous days or less.” This is another question I would like the Minister to consider. Is this period long enough given that a significant number of employees in our workforce move from job to job? I suggest to the Minister that the compliance costs around these temporary employees will be significant. 
I turn to the officials report to delve through what would happen if an employee enrols in the scheme after the 28-day period decides to opt out after a 2-week period then leaves that employment for another job. Let us go through the process. The employee starts the job and a deduction is made from the first pay. The employee then sends an opt-out form to the Inland Revenue Department. A deduction is made from the employee’s second pay. The opt-out form is received by the department it is processed and the employer is advised to cease deductions. The employer then has to send the deductions dating from the first pay to the Inland Revenue Department. The department provides a refund to the employee via the employer. Do not tell me that is not a significant process for an employer to go through! I suggest that the compliance costs surrounding temporary employees will be significant. 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I think it is worthwhile responding just briefly to the questions that have been asked. Persons aged 18 or under may opt in only by contracting directly with a provider and that is catered for in clause 26(1). The employee’s contribution belongs to that person and is portable to a new employer. I think the question was asked by Mr Connell and I refer him to clause 14(1). The employer contribution if it makes up 4 percent has to vest immediately and is portable. I refer the member to paragraph (ii) of new clause 56A(b). 
CRAIG FOSS (National—Tukituki) 
: 
 I would like to pick up on one of the earlier speeches in which Dr Cullen mentioned that he wanted savings to be compelling and not compulsory—that this was not a scheme of compulsion. I tend to argue that that is not absolutely clear because there are compulsion traps all over this bill. It may be an opt-out bill but if say under this bill someone starts a job tomorrow and has 2 weeks to opt out that is OK the person is out. In a year’s time the person starts a new job and is asked again whether he or she wants to opt out. The choice is made to opt out and that is fine. 
However if someone starts a new job tomorrow and chooses to opt in that is fine. The person is in the scheme. If the person starts another job in a year’s time he or she is still in. The person could take a holiday or do the mortgage diversion scheme but he or she is still in. So talk of it being voluntary nice and gentle and just helping everyone on is not the total truth. This is almost compulsion by stealth. 
During the consideration in the Finance and Expenditure Committee the officials pointed out the number of new job events a year and I was staggered. I think they said there are 1.1 million new job events every year. 
Hon Lianne Dalziel 
: That’s right. 
CRAIG FOSS 
: Every year 1.1 million job events. We tried to get to the bottom of that and maybe someone could explain it further. That represents 1.1 million KiwiSaver events every year so who will be doing the compliance and work on that? It will be good old small business of course. They have to make their affairs correct in the eyes of the Inland Revenue Department and supply different pamphlets information etc. to their employees—1.1 million times. Fair enough there may be some casual labour in that number but even at half of the 1.1 million I just find that absolutely staggering. 
We must compliment the Minister on the 110 weeks to save for her ice-skates at 40c a week I think it was. 
Hon Lianne Dalziel 
: No an hour! 
CRAIG FOSS 
: An hour? Oh I am sorry. I totally misheard the Minister. Excuse me! There is a very important issue in Part 2 and that is around default KiwiSaver providers. The select committee had a lot of discussion about this part of the bill particularly around the process of how those providers would be chosen. There seems to be confusion and I have different press releases and comments from Ministers made at different times and in different speeches. It is clear there will be about four to six default providers. The finance Minister Mr Cullen is on the record as saying something along the lines that it will be very hard for any of those default providers to not make money out of the KiwiSaver scheme. Goodness gracious me! With the announcements made last Thursday particularly the mortgage diversion scheme it should be quite impossible for anyone not to make money as a default provider. 
I would like to read from the commentary on the bill because what happened was that the tenders the contracts and the request for proposals for default providers actually went out in advance of consideration of the bill in advance of finalisation of the bill and of course therefore in advance of the bill being reported back and passing through the House. That was the form of the bill referred to the committee. Those businesses out there that have spent hundreds of thousands of dollars preparing a tender and their systems to the tight time frames that this bill demands—even with the 3 to 6- month extension—did so before they even knew they had to factor in mortgage diversion. 
National speakers used the words “abuse of process” earlier on and this is yet another example of the ends trying to drive the means whereby the select committee process has been totally overruled by a roughshod administration. It just wanted to get this thing out so it could grab some good headlines in a week where the Government’s polling is absolutely plummeting. Further to the default provision I would like to read from the commentary: “Some members”—and that includes members in addition to National Party members on the committee—“were concerned that the Government progressed the default provider provisions of the bill matters on which submissions were received prior to the select committee reporting back to the House.” 
JOHN KEY (National—Helensville) 
: 
 I want to go back if I may to the issue of mortgage diversion and talk about that for a minute. Some New Zealanders may be considering going into KiwiSaver and it is important they understand a few things. The first is that if they want to have mortgage diversion so they put their money into KiwiSaver and decide to elect to have mortgage diversion they cannot do that for 12 months. That is the first thing. 
The second thing is rather interesting and the Minister might want to check this with her officials or take a call on this herself. She may know the answer. In Michael Cullen’s Supplementary Order Paper 52 from memory clause 194A states: “The Minister of Finance may make a recommendation under subsection (1) only if the Minister is satisfied that a mortgage diversion facility that is provided … (a) there is no compulsion on providers to provide a mortgage diversion facility:”. There is no compulsion. That is interesting. 
So people may sign up for KiwiSaver and be one of the low-income New Zealanders whom Mr Woolerton thinks the National Party does not understand. But he is wrong because many of our supporters are aspirational New Zealanders who want to do better and want to pay less taxes. They are New Zealanders who do not want to be booted off Pete Hodgson’s waiting list. They are New Zealanders who do not want to have $882000 stolen from them to buy an election. They are New Zealanders who do not support Taito Phillip Field rorting his electors and running a cash business in his office. They are New Zealanders who are sick of seeing Helen Clark breaking the rules whenever she wants. They are New Zealanders who thought that an election spending cap meant that a party stuck to it. They are New Zealanders who thought that when they signed up to a Prime Minister who said that she was going to set new standards that did not mean she would take $882000 because her party was down 3 percent in the polls and spend whatever it took. Those people are decent hard-working New Zealanders and they support National because they understand what we are all about. But now they are thinking that under mortgage diversion they will be able to divert something into their mortgage but lo and behold here we have a little clause in the bill that says there is no compulsion on providers to provide a mortgage diversion. 
No wonder the 71 submissions we heard on the bill did not talk about mortgage diversion. That is right it was not on the agenda last week when we had a Government that was not in a complete freefall in the polls. Was it not interesting I might add when I spoke in the general debate? I pointed out to Trevor Mallard that the polls were going south for Labour. Trevor Mallard looked at me as Pete Hodgson is now and said: “No no they are going up.” Well that is not what we found out on  
Agenda 
 on Saturday morning. The UMR Insight poll—Labour’s pollsters—only 4 weeks ago had Labour three points out in front because I saw it which was very interesting. Two weeks ago when mortgage diversion was not even on the agenda Labour was four and a half points behind. Now it is more than four and a half points behind. [ 
Interruption 
] 
So no wonder Mark Gosche is giving a longer speech than I am and I am on my feet. Mark Gosche knows that $882000 of taxpayers’ money was paid to prop up not only his re-election but for goodness’ sake Taito Phillip Field’s re-election. Labour used taxpayers’ money to do that. Labour members are very quiet over there; they know that mortgage diversion may not apply to these issues. I find that very interesting and I think New Zealanders will find it very interesting when they have a look at this legislation. 
The real truth is that KiwiSaver is the same as any savings scheme and that means that people will engage in savings schemes if they are matched by an employer. We know that. The take-up rate in schemes such as the State Sector Retirement Savings Scheme is about 47 percent I think from last memory and that is matched dollar for dollar up to 3 percent. So the real issue here is: will employers embrace KiwiSaver? That is the only question one has to ask. Because if they will embrace KiwiSaver then I agree that more New Zealanders will actually take up the savings pledge. I agree with that. 
My question for the Government is in its rush to get Taito Phillip Field and its $882000 of theft off the front page why did it not do something to make the scheme more attractive to employers? Because the Government has made it slightly more attractive to employees—it has got rid of the specified superannuation contribution withholding taxes so employees get the full benefit going in—but there is no change for an employer. If last week an employer was putting $1000 into an account over the course of a year and $300 was going to the Government for withholding tax and $700 was going into the account now $1000 will go into the account. So that is good for employees they are happy but the employers have no benefit. 
PANSY WONG (National) 
: 
 Part 2 has 40 pages and it is really interesting that the Labour members seem for the first time to understand what is in this bill. That is why they are getting very nervous and excited. They now realise that this legislation will not save them in the polling even though the Minister of Finance pushed it out as if it would be the saviour for Labour. Part 2 has 40 pages dedicated to procedure and definitions. In fact there is a distinction between new employment and new jobs which apparently are quite different. I wonder whether the Minister in the chair the Hon Lianne Dalziel would like to take a call and say whether the Government will propose a subsidy to employers for administering this scheme or learning how to comply with all these 40 pages of requirements. Last time the Labour Government introduced payroll legislation that affected employers instead of making an employer’s job easier it actually provided a subsidy to employers who furnished PAYE returns. Instead of reducing compliance and making life easy for employers it is continuing with the Labour hallmark of putting people on welfare—introducing welfare and putting taxpayers’ money into that. 
It is interesting that in my hand I have one of the little red books—no doubt it is part of the $882000 stolen by the Labour Party for election expenses last year. The Labour Party spin machine states that some people talk about a Budget surplus as if there was a pile of money building up in the Government’s bank account when in fact all the money was spent on current and future New Zealanders. What it is really trying to say is that all the money was spent on stealing last year’s election for the Labour Government—$882000! Now it is fine for the Government to preach to New Zealanders on spending. Why would New Zealanders need incentives to spend when they have a Government that steals over $800000 of their money to use on spin? 
Then the Government turns around and says it is for the good of New Zealanders that they should learn to save. It is interesting that the Minister just now said this bill is not for people who cannot afford to save. So firstly we want to know what measures the Government has for those people in order to get them into a position where they can afford to save. The other interesting thing is that the Minister said that this bill is for people who can save but will not save. Well that is the Labour Government making a huge judgment call and accusing New Zealanders who it says can save but will not save. I say that the Labour Government provides a very poor example to people by failing to ensure there is less wastage of taxpayers’ money. It should not have given local government all those additional responsibilities without funding. Local government is taking so much off individuals through tax for council rates that that ensures they are in the position of being unable to save. 
I hope the Minister will take a call and say how she on the one hand champions the reduction of compliance costs yet on the other hand has 40 pages in Part 2 of the KiwiSaver Bill that do nothing to encourage anybody to save but rather put a lot of additional paperwork and administrative barriers in the way of employers and equally of employees. 
Our fine National member Craig Foss once again gingerly pointed out that all that talk about KiwiSaver being voluntary was rubbish. It is not quite voluntary. 
CHARLES CHAUVEL (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to Part 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 2 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Part 2 as amended agreed to. 
Part 3 KiwiSaver contributions 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I have found it very interesting to listen to members of the National Party commenting on the KiwiSaver legislation. I have been trying to understand what they are trying to say but the message seems to be so fundamentally mixed. They have missed the point of the effect of their Government’s decision in 1975 to end a superannuation scheme that might have made John Key’s comparisons with Singapore sound sincere—we might have been in a similar position to Singapore today if a superannuation scheme had been allowed to continue since 1975. But no National Party members have always known better than everyone else in terms of what will do and talking about buying elections that 1975 decision will stand this country in ill stead for a very very long time. 
This is about making a difference. It is about turning things around. The scheme that Dr Michael Cullen introduced in order to smooth out the superannuation scheme that exists for all of us was the first big step this Government took to right the wrongs of the past. This bill is the next big step that we are taking. I cannot understand why National Party members are so opposed to a scheme that will enable people who have the opportunity to save to actually become savers—a scheme that will inculcate a savings culture in this country that we lost the opportunity to pursue in 1975 with an outrageous promise we could never afford to keep. 
Pansy Wong and Katherine Rich both talked about families who do not earn enough to save. Both ignored the Working for Families package which was the alternative under our Government to a pack of tax cuts that would have destroyed those families once and for all. Pansy Wong and Katherine Rich also ignore the impact of the Employment Contracts Act on ordinary working people in this country who throughout the 1990s saw their pay and conditions of employment slashed. We saw wages and conditions of employment coming down in New Zealand as they went up in Australia. National Party members ask why people went from New Zealand to Australia. They went because the Employment Contracts Act drove them overseas. 
National Party members talk about the lack of depth in our capital markets and then watch with envy Australia which is awash with money because of a compulsory superannuation scheme entered into a number of years ago. What I think is incredible about the National Party’s absolute gall in terms of the position it has adopted—I am not allowed to use the “h” word to describe it—is that it ignores the reality of the opt-out provisions for new employment. The opt-out provisions are there for new employees so that they do not have to stay in the scheme if they do not want to. But National Party members completely ignore the fact that this legislation enables any New Zealander to opt in. All National Party members want to do is bag us and bad mouth us. They have done the same with superannuation; they have been making it into a political football ever since I was 15 years old. I hope this is the end of that. 
Not one single National Party member has stood up and said that the party will get rid of this scheme if it ever becomes the Government. I believe that the Labour Party will be in Government long enough for this scheme to become completely part of the New Zealand psyche. Everyone will want to have a KiwiSaver account. I agree entirely with contributions that have been made in this Chamber that have suggested it is parents who will tell their kids not to let it happen again and to get themselves a KiwiSaver account as soon as they start a job and never let it go. The reality is that KiwiSaver will give people the base for their first home. But it will also give them the base for a retirement income that will supplement New Zealand superannuation. New Zealand superannuation will still be in place when they are older and the simple reason is that this Government has taken responsibility for it once and for all. I am really proud to be part of a Government that has made superannuation part of its commitment to New Zealand and will continue to do so. 
JOHN KEY (National—Helensville) 
: 
 The only thing worse than Charles Chauvel’s best speech so far which we heard a few moments ago—“I move that the question be now put.”—was Lianne Dalziel’s speech just before. She told us she was opposed to New Zealand superannuation. It is no wonder that Labour spent $882000 trying to buy the last election—if it had come in with that policy it would be spending $3882000 of taxpayers’ money. Lianne Dalziel told us she did not like what the National Government did when it came into office in 1975. It got rid of the scheme that was in then and introduced New Zealand superannuation. It is a universal scheme that all New Zealanders can access it is world-acclaimed for being elegant in its ease to look after and it does not differentiate between people in and out of the workforce. It is a scheme that works tremendously well and Lianne Dalziel just told us she does not like that scheme. That is very interesting from a Labour Minister. It is no wonder that Labour stole $882000 of taxpayers’ money to buy the last election. 
This is very interesting. I draw members’ attention to the contribution rate in Part 3 which is either 4 percent or 8 percent. Maybe someone would like to explain to me how someone in New Zealand earning $43000 the average wage and who is getting overtaxed will be able to afford to put in 4 percent of his or her gross income. The fact is that that person will not be able to make that contribution and the Minister and the Government know it. That is why the withholding tax that currently earns the Government about $550 million will be reduced by only $35 million once KiwiSaver comes in. The Government knows that the only people who will take up KiwiSaver are higher-income New Zealanders who will use this scheme to drain out a little bit to repay their mortgage through mortgage diversion and who will actually have the higher tax benefit when they either pay it themselves or pay it through the scheme. 
A second group of people will use clause 87 which is all about how to apply for a contributions holiday. This is the way it works. Employers have to tell people that they have been compulsorily opted into the scheme. The Government thinks the reason people do not save is that they have inertia. I have a different theory on that. 
Hon Lianne Dalziel 
: No no. 
JOHN KEY 
: Yes it is. That is what the Government thinks. It thinks people do not save because they have inertia. Actually I have a different reason. I think the reason people do not save at least in one part is that they do not have enough money to save. They have to pay their taxes their rates—which have gone up—and their mortgage rates which are very high because we have a Government that would rather go out on a hiring binge and hire huge numbers of people from hell— 
Hon Maurice Williamson 
: Helengrad. 
JOHN KEY 
: —Helengrad. Those are reasons why those sorts of people are in that position. They cannot afford to save. Now the Minister is telling us they will save. They will go along to their employer who will have to offer them the scheme and this is what will happen. My view is that the vast bulk of people will immediately tell their employer that they want to opt out. Those who go into the scheme will then be locked in for 12 months unless they can prove financial hardship. That will be a very interesting situation. The Finance and Expenditure Committee never really got an answer on the way the courts will determine financial hardship. My guess is that financial hardship will be tested. Some people’s definition of financial hardship is not paying the Visa bill. Some people’s idea of financial hardship is not having a holiday. For other people it will be when they cannot afford to put food on the table. It will be up to the courts to decide how financial hardship is actually interpreted. My view is that that will be pretty interesting. Those who do go into the scheme will seek to have a contribution holiday. They can do that after 12 months and can do it for 5 years. Why will they seek to do that? In part it is because they will decide they want to use the money. 
This is the interesting thing. Many people who are working for an employer and who change company to one that does not have a KiwiSaver match contribution will in my view drop out. 
Earlier I took a call on Part 2. I would have liked an extended call but I was closed down by Charles Chauvel’s speech which was the best speech he has given in Parliament so far. I thought the  
Dominion Post  
was a bit cruel. It stated that Mr Chauvel’s maiden speech was nothing flash—that there was nothing special in that speech. It sort of cuts to the quick when one is first in Parliament and comments such as that are written but after a while one gets used to it. It is no big deal. 
CHRIS AUCHINVOLE (National) 
: 
 Let us consider again the parts of this bill. We heard Minister Dalziel the Minister in the chair suggest that this bill is not supposed to be compulsory but compelling. Again this begs the question. If the Minister means “compulsion” but is using “compelling” as a device then it is a sham. It is not an inducement it is on the Minister’s own admission dependent on inertia. The problem with that is that if inertia does not work—and it will not work—what will come then? 
Minister Dalziel gave a personal indication of a series of recollections of her own savings habit and used the phrase “against a rainy day”. Well that used to be the philosophy then along came a previous Labour Government with Rogernomics. We were told in a business sense that stacking money away was an improper use of funds it was wasteful it should be put into assets debt levels should be lifted and we should get our money working. In my own case we used to scrimp and save as we established our own private company. We tried to avoid taking drawings in our first year’s trading to build up a reserve against a rainy day. But the emphasis on rainy days is not what we are talking about here. 
The purpose of the bill is establishing a savings habit to benefit those in retirement etc. It is about establishing a personal system of wealth accumulation. The recent inclusion of mortgage diversion the opt-out system and the holiday provision all auger ill for the success of the system. That is why so many comments are coming from this side of the Chamber. 
Let us reflect again on our actions when we were young and at the stage of building systems of wealth creation. I well recall that when I was 12—I remember being 12—I confidently put my holiday pocket money of 5 shillings on a horse being ridden by a young jockey called Lester Piggott. I was shocked to find when he did not win that I did not get my money back. I have never bet on a horse since. 
The next venture was later in life—and this one is pertinent—when I was contract milking cows in Whangarei with two of my brothers and we actually had money surplus to our requirements. 
Darren Hughes 
: Where’s this in Part 3? 
CHRIS AUCHINVOLE 
: I am coming to that. Part 3 talks about compulsory deductions. I took out a life insurance scheme that after 20 years would yield enough to buy a farm freehold. It did not take into account the various things that would happen to inflation in that time. But I guess that scheme and other schemes I have taken out since were really ways of taking compulsory deductions from my bank account. During my early married life once my insurance scheme had accumulated a reasonable nest egg it became an item to be surrendered to meet whatever need the family had at that time. 
I think the KiwiSaver Bill is weak in that direction. It does little to address the central question of savings habits. Surely it needs to be accompanied by a much wider review of tax adjustments. It needs to be accompanied by a system to address the huge private debt that currently exists. We have a fat chance of people saving when they have such debt burdens to clear and I think everybody knows that the most efficient way we can use our money is to clear our debts. People will probably always find that they are paying more interest than they would ever get for saving. 
All the time we have a Minister of Finance who feels that the country has achieved wonderful things by retiring all Government debt. I suggest that that has been at the cost of private people—a cost equivalent to their level of personal debt. If the Government had not been acting as a robber baron perhaps people may have had some money to use in discretionary saving. 
It is not just income tax it is the whole gamut of this socialist Government’s economic policy from the Resource Management Act and business compliance costs to imposed costs on councils. There seems to be an illusion on the part of the present Government—and we have heard it today—that what it is doing is acceptable to the majority of people. It bases this on the illusion— 
CRAIG FOSS (National—Tukituki) 
: 
 I wonder why more Labour members are not speaking to this bill apart from the Minister in the chair the Hon Lianne Dalziel. If this bill is supposed to be such a flagship if it is supposed to be such a platform and if it is supposed to take pride of place on the illustrious pledge card why on earth are we not hearing more speeches from the Labour MPs? I can see only one Labour member of the Finance and Expenditure Committee on the other side of the Chamber at the moment and I think that speaks volumes. 
I guess it is because Labour members do not actually understand the bill because it keeps changing. The bill they studied the bill they examined the bill that was taken to the Finance and Expenditure Committee in the first instance has radically and fundamentally changed. For example when I picked up Supplementary Order Paper 52 which sets out the Minister’s amendments off the table it was still hot. The ink was still smudgy—that is how fresh it is. That is how much the legislation has been changed and it is an example of the haste with which the Government is trying to push the bill through. 
I invite any member opposite to take a call to speak for the bill not just to waste time trying to get this thing passed and get it into tomorrow morning’s papers so that there are no more Taito or pledge card stories in the papers. Members opposite should have faith in their party. I guess it is a credible indictment of the confidence and faith they have in their Minister of Finance that they are not speaking on the bill into which he has put so much political capital. 
A lot of people have said that it is better to pay off a mortgage than to invest. That is not absolutely true. Sometimes it is true but if people have a mortgage at 5 percent and they can invest it at 10 percent then it is a bit of a no-brainer to me to string the mortgage out. There is an inherent conflict between saving in a financial asset sense under a superannuation scheme and a first home buyers scheme. That confusion has been compounded by the mortgage diversion scheme that has been put into place. 
Why on earth would people try to build up financial assets when inflation is out of control? Inflation is through the band of 1 to 3 percent. Inflation has been north of 3 percent for the last 18 months and it will be near 4 percent for the next 18 months. Those who have done Econ 101 somewhere along the way will know how corrosive inflation is to financial assets but how beneficial it can be to fixed assets such as property. Within the environment in which this bill is trying to encourage New Zealanders to save for their superannuation there is the disincentive out there in the real world of inflation bursting out of the band north of 3 percent for the next 18 months—an anticipated consumer price index of 4 percent or even up to 6 percent in some projections. 
Why on earth in the real world would people save for a superannuation fund as a financial asset? We know that consumer price index inflation is corrosive for financial assets and that this bill could have the exact opposite effect to what it intends to do. It could pour more money into the property market and increase the base level for first home buyers’ homes because of the taxpayer subsidy and the incentives this bill gives some first home buyers and all it will do is raise the floor. 
Frankly when we look at the $1000 per annum provision or at the $3000 or $5000 provision after 5 years we have to consider that the average price of a house in Hawke’s Bay for example is something like $280000 or $290000 which means $30000-odd for a 10 percent deposit. How on earth will this bill help in that instance when we remember that inflation is going through 4 percent? Property inflation will go to 5 or 6 percent increasing the value of the properties that this bill is supposed to be encouraging people to buy. It is such a vicious circle. 
The Minister is screwing up her face—perhaps she does not understand it. This is a simple real-world example. I will give an example about ice skates in a minute I guess. 
Part 3 is about contributions etc. but it has been mentioned that this bill goes hand in hand with the Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill which is also before the Finance and Expenditure Committee. In the words of the Minister of Finance the KiwiSaver Bill has to be in place for the Taxation (Annual Rates Savings Investment and Miscellaneous Provisions) Bill to go through with the changes he wants to bring in. But let us make an example here because the previous speaker spoke of low-income New Zealanders. The KiwiSaver Bill is in conflict with that taxation bill. 
R DOUG WOOLERTON (NZ First) 
: 
 I think that if anybody wants an example of why the Finance and Expenditure Committee is such an interesting place they need only listen to that last speech from Craig Foss. As I said while in that committee—which is a committee I did not particularly want to be on; I regard it as a punishment as a matter of fact—I take a great deal of interest in looking across the table. I watch my National colleagues looking at these sorts of bills and money matters and I can just about hear the cash registers going “Chonk! Chonk!”. It is all very predictable. I admire these gentlemen but they have a one-track mind—financial investment at a very high level or in the case of Chris Tremain real estate. So the question is: what they are going to do—what are New Zealanders going to do—about bills and money matters? How can they avoid them? How can they leverage off them or get around them? Or how can they not pay them? Those are the questions that go through National members’ heads. 
I want to tell my colleagues in National yet again—and I suspect that this will be a recurring theme—that 98 percent of New Zealanders do not think that way. Ninety-eight percent of New Zealanders think about saving. They think about putting a little bit aside each week and each month and slowly building it up over the years. They are still trying to instil the habit of saving into their children and families. If—God bless them—some people can aspire to having a pool boy lawn boy tennis boy cleaner or all the things John Key takes as normal family add-ons in his life— 
Hon Maurice Williamson 
: Doesn’t everybody? 
R DOUG WOOLERTON 
: Well exactly. As Maurice Williamson said: does not everybody? That absolutely explains why National members are not only opposed to this bill but why they cannot even get their heads around it. It is not about stacking up numbers or even about an algebra equation; it is about investing slowly for the long term and the future and about getting something in people’s psyche. 
National members also do not mention that the bill can be changed. A person can make a joint contribution of 4 or 8 percent. They can go along with that give notice and go back down again. 
Hon Maurice Williamson 
: Is this a leadership bid? 
R DOUG WOOLERTON 
: No it is certainly not that! They can put some money into a mortgage diversion scheme. They can do all of those things. The problem that National has at this point is that it has Mr Auchinvole saying that the first thing a person should do is pay off the mortgage—which is pretty straight-line financial advice—but then it has John Key saying that he would not advise people to do that and that he would advise them to take out the $1000 or whatever it is. So there is a conflict in the reasons why National is opposing this bill. 
In actual fact this bill will allow people to do all those things that National members are talking about. If it is an advantage for people to put some money into the mortgage diversion scheme they will do that. If it is to their advantage to put in 8 percent instead of 4 percent they will do that. They can change up and they can change down. But behind all of that is the fact that it is in people’s interest to stay in the scheme. They can get out of the scheme but it is in their interest to stay in it. I suggest to members that people in New Zealand—average New Zealanders—will be encouraging their children to join the scheme to stay in the scheme and to take advantage of the options the scheme offers. 
KATHERINE RICH (National) 
: 
 Just to follow on from the comments of the last member Doug Woolerton I agree that parents will continue to encourage their children to consider some kind of superannuation or savings programme. The issue though is actually getting younger people to take one up. Going back to my own experience I recall that when I first worked for a Government department we had a superannuation scheme. There was a great incentive to join the scheme: basically one doubled one’s money. If employees put in $1 the Government put in $2. But even with the best incentive younger people decided that they wanted to have their own cash and to have a bit more to go out with on the weekend. Even though the incentives for them to take part in that scheme were put in black and white the employer still could not get people to join up to have a vision of what their life would be like when they turned 65 and to put money aside for their retirement. 
We need to talk more about the cultural change that needs to happen but I do not have the same faith that the Government and the previous speaker do that this bill will change culture at all. KiwiSaver is quite a complex system. The Government will argue that the incentives are there but actually they are not. The system is a pretty loose arrangement whereby one can opt out if one wishes. It is a pretty loose arrangement whereby one can decide to have a contributions holiday. Well we all know that people will go and do that. They will dream up some reason why they have to postpone putting away a nest egg and have a contributions holiday. A number of people will opt out right from the start. 
As we have heard from John Key there is no incentive for employers to put this scheme in place; there is no incentive for employers to offer a scheme to their staff. I will get on to the subject of what this bill will do for small-business owners in New Zealand. This bill will impose upon them a very complex system. I would like to hear the Minister Lianne Dalziel talk about the complexity that a small-business owner will face when he or she sits down at the end of every pay period to work out whether it is 4 or 8 percent of an employee’s wages that goes into the scheme. In many cases the amount of wages will change over pay periods so the contribution will often not be just a direct credit—it will have to be changed for every period. Small-business owners will have to monitor whether someone has opted out and will have to keep tabs on who has made a request for a contributions holiday over a period of months—not to mention do the PAYE and GST. And what happens if an employee has a student loan to pay off or is paying child support or some other court debt? It just adds to the complexity that small-business owners will face when they are just trying to work out what to put in their staff members’ pay packets at the end of every pay period. It will not be easy. 
We assume that people are aware of the laws of this country but I know one thing for sure. Here we are passing a bill that is 205 pages long. We cannot hope for one moment that the knowledge of what is in here will be firmly implanted in each small-business owner’s head. It will not be so this will be fraught with difficulty. I would like to hear the Minister talk about what kind of education programme will be in place and what ideas she has to try to minimise the complex nature of this bill so as to make it easier for small-business owners to implement it within their workplace. Employers will try to establish what to pay someone at the end of a week a fortnightly period a month or whatever it is but that amount will change and it will take a lot longer for some small-business owners to work the process out. I think that is something we should talk about here. 
It was interesting to hear the Minister talk about the dancing Cossacks of 1975. It was quite a long bow to draw to suggest that that is the key reason the savings culture has died in New Zealand. Some of the members across the way were not even born in 1975 so it is hard to imagine how their attitude to saving has changed. For us to hear lectures about National buying elections is ironic coming from a Government that spent billions of dollars on the student loan scheme. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I rise to speak to the amendment in my name to clause 55. The Finance and Expenditure Committee considered the question of whether a 4 percent contribution rate would be beyond the scope of people on low incomes to afford and particularly the young people whom we are trying to encourage into this scheme. They are of course at the low earning end of their careers and may well find that 4 percent is more than they can manage. I presented the case for an option of a 2 percent rate as in fact did a number of submitters. A number of union groups in particular argued that their members would find 4 percent difficult and that if we wanted to get them into the scheme we needed to give them the option of 2 percent. The contrary argument was that if they were given a 2 percent rate people who could quite well afford to save 4 percent might save only 2 percent and that would be a negative consequence. 
In my view though the important thing is to get people started on saving while they are young and not wait until their income is such that they can manage to put aside 4 percent because at that stage they do not have a savings habit. At one stage it appeared that the select committee had accepted my arguments but then somehow the position changed and in the end nobody else was advocating for this point of view. 
I want to give the House the option of reconsidering that and I will be moving an amendment to clause 55 to insert at the beginning of subclause (1)(b) before the words “8%” the words “either 2 % or” and in subclause (2) to insert 2 percent into the range of options to which employees may change their contribution rate. I hope members will consider again the reasons behind this amendment. I do not believe it makes the bill too complex to administer if there are three rates rather than two and savers are allowed to select their contribution rate to suit their own personal circumstances. 
It is true that the mortgage diversion scheme the Government has proposed and the employer contribution scheme both of which came up right at the end of the discussions have gone some way towards these. If an employee is trying to pay off his or her mortgage and also wants to save he or she can contribute 2 percent to each and if an employer is prepared to put in 2 percent then that reduces the employee’s contribution to 2 percent to qualify. Both of those are steps forward. 
However it does not cover the situation of an employee who cannot even afford a mortgage or a house at all and wants to save 2 percent but works for an employer who is not interested in contributing in this way. An employer who is simply paying the minimum wage and would pay less if he or she had that option is certainly not going to add a 2 percent contribution to an employer’s superannuation. I hope the Committee will consider this amendment and look at improving this otherwise pretty good bill even further. 
CHRIS TREMAIN (National—Napier) 
: 
 I take this opportunity to canvass Part 3 and three clauses in particular—the contribution rate; clause 72 which covers interest on money in the holding account with the Inland Revenue Department which I will start with; then the contributions holiday. 
I would like the Minister to give New Zealand a commitment regarding clause 72 which covers interest on money in the holding account. What happens is that from the start of contributions money from the employer is put into the Inland Revenue Department. It sits there for 3 months before it is passed on to the default provider that the particular employee has chosen. I want the Minister to give us a commitment that the Inland Revenue Department will not be taking the margin on that interest. I want New Zealanders to know that there is no margin on the money going into that account for a 3-month period and that the full amount plus interest that the Inland Revenue Department provides will be going into the accounts of the KiwiSaver scheme providers. I am looking forward to an answer on that point. 
What I would like to canvass in particular in Part 3 is the contribution rate. It was an interesting issue that vexed the Finance and Expenditure Committee and Jeanette Fitzsimons has raised it today as well. Clause 55(1) focuses on that contribution rate. The key point with this bill is that there will be two contribution rates—firstly a default rate of 4 percent and secondly an 8 percent rate which employees can choose to contribute against. I would like to talk members through the different submissions that the select committee received on these rates. Mr Woolerton was present for these but Mr Hide was not available. 
The first submission we received was that employer contributions should be supported if not required. We heard that from a number of union organisations—from Eriksen and Associates and a number of different submitters. I guess that is why we have ended up with clause 56 which states that contribution rates may be changed by Order in Council. So at any time we could see a change to this bill to make employer contributions compulsory. I want employers out there to know that that clause is there and that at any time this bill could be changed simply by Order in Council and not by an Act of Parliament to make employer contributions compulsory. 
I come back to the submissions. The second submission was that a more flexible range of contribution rates should be supported to allow more choice and to encourage greater participation and Jeanette Fitzsimons has come to the Chamber this afternoon with her amendment to add a change to 2 percent. A number of submitters stated that 2 percent would be a rate that many employees could afford. In fact the Hon Mark Gosche was an advocate of the 2 percent rate and stood up on many occasions to fight for it. But there are a number of reasons why the 2 percent rate was not put into the bill and I will go through them. Firstly it was felt that a greater number of small savings accounts with very small totals would eventuate and that was a concern. The second point is there was a concern that a greater number of people would take up the account in the first instance with only a small amount just to get the $1000 incentive payment. That is where the committee spent quite a bit of time deciding—and Jeanette Fitzsimons put this forward—whether we should be putting up only a $500 incentive instead of a $1000 incentive for people who save at the 2 percent rate. We basically decided it was getting too difficult at that point and on the principle of “keep it simple stupid” we focused on two contribution rates—4 percent and 8 percent. 
Another reason why the 2 percent rate was not considered was that a very accurate table the officials gave us showed us the contribution rates needed to achieve a 70 percent income replacement in retirement. That also takes into account New Zealand superannuation which my colleague John Key pointed out was introduced by Mr Muldoon in the 1970s and we still have it to this day albeit somewhat changed. The table conveys important information. It shows us the contributions that employees would need to make to get to a level that would give them 70 percent income replacement in retirement. 
STEVE CHADWICK (Labour—Rotorua) 
: 
 I move  
That the question be now put 
. 
BRIAN CONNELL (National—Rakaia) 
: 
 Thank you for the call on Part 3. I start by saying that Lianne Dalziel and Doug Woolerton have both lamented the fact that we do not have a savings culture in New Zealand society. I say to them that is why I was such a strong supporter of Lianne Dalziel’s speech when she told us about her savings scheme for her skates. That was the savings culture this country had—and Doug Woolerton knows that. If we work hard and put a bit of money aside we save. But the point is that it is called personal responsibility. That is what is lacking at the moment—personal responsibility. 
Some members of the Government know about that. Taito Phillip Field understands personal responsibility. He understands savings schemes. He is working towards his own benefit. He is working hard and he is making sure that every bit of money that comes into his electorate office goes into his savings scheme. I tell members that Taito Phillip Field is doing his bit for international relationships as well by trying to send some of our money and hard-working labourers off to Samoa. And do people know what? There are members of the Government who have actually taken the time to go to Samoa to see that savings scheme in action. I have to say that it is a first-class scheme—if one is a rogue. 
But I tell people that other members of the Government think that savings scheme is pretty good as well because they have an adjunct to it. Rather than wasting the Labour Party’s own money on electioneering they decided to save it $886000 by spending taxpayers’ money on its electioneering. So I tell people that those guys have worked out personal responsibility—when it suits their own purposes. 
I now turn to clause 55 “Contribution rate”. In particular I will look at subclause (1)(a) which states that 4 percent of employees’ gross salary or wages can be used for contributions. I ask my colleagues to keep that figure in their minds and to overlay that fact with this: when we talk about mortgage contribution rates or diversions those are capped at 2 percent. If we contribute 4 percent we are allowed to use 2 percent with the exception that we are only allowed to use 50 percent of that amount. So the mortgage diversion component is only 1 percent. Doug Woolerton knows that a 1 percent diversion into anything is hardly a workable figure. I mean that is about the support that New Zealand First has. He knows that is not critical mass and that it simply will not work. 
There is more of an inherent contradiction in the Government’s position and it is this: was 2 percent not rejected by the Government as the entry level into the scheme? Jeanette Fitzsimons has picked that up. She has put an amendment before the Committee for consideration and the National Party is thinking long and hard about supporting that amendment. But the Government said that 2 percent would not provide enough money to develop a savings culture in this country. That of course contradicts the very thing the Government is setting out to do under this legislation which is to create a savings culture. But Government members just do not see the inherent contradiction. 
Still Doug Woolerton maintains that members of the National Party do not get savings cultures. Well I say to that member there are members in this party who have developed their wealth by working hard and saving hard—by taking that 40c an hour and turning it into good money by the sweat of their brow—and we do not want to see that culture undermined by the Government’s putting in place a savings scheme that simply will not work. 
Michael Cullen knows that KiwiSaver is flawed. When he ran off and did his deal with Mr Copeland he overlooked the fact that in his haste to put together a 2 percent cap on mortgage diversions he badly undermined his own policy. 
CHARLES CHAUVEL (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the following amendments in the name of Jeanette Fitzsimons to clause 55 be agreed to: 
to insert in paragraph (b) of subclause (1) before the expression “8%” the words “either 2% or”; and 
to omit subclause (2) and substitute the following new subclause : 
(2)The employee may change his or her contribution from either 2% 4% or 8% to either 2% 4% or 8% by giving notice to his or her employer of the new rate. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 58 
New Zealand National 48; Green Party 6; Maori Party 4. 
Noes 61 
New Zealand Labour 50; New Zealand First 7; United Future 3; Progressive 1. 
Amendments not agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to Part 3 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 3 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Part 3 as amended agreed to. 
Sitting suspended from 5.59 p.m. to 7.30 p.m. 
Part 4 KiwiSaver schemes 
JOHN KEY (National—Helensville) 
: 
 I am pleased to engage in Part 4 of the KiwiSaver Bill. Before the dinner break there was a very interesting situation. My good friend from New Zealand First Doug Woolerton had made some interesting comments in the debate. He spoke about the desire to have KiwiSaver rolled out to lower-income New Zealanders which is something the National Party fully supports. Interestingly enough he made the point about how difficult it is for lower-income New Zealanders to have enough money—enough after-tax dollars—in their hands. He did not go so far as to mention that if Labour had not stolen $882000 to pay for its election campaign New Zealanders would all have a little more. But he had an opportunity when the rubber hit the road to vote to have a lower contribution for New Zealanders who earned a little less and could not afford initially to put their money in. 
I was shocked because the vote on that amendment was much closer than I thought it would be. Had ACT been in the Chamber the vote would have been 61-60—that is how close it was. When I went upstairs earlier Jeanette Fitzsimons was there. She said to me: “Mr Key I thought it would be Mr Woolerton who would have voted for that—caring for those lower-income New Zealanders.” I said: “Jeanette my apologies to you then on behalf of New Zealand First and Doug Woolerton. He talks tough when he is on his feet in the House but the truth is that he did not want to support lower-income New Zealanders to be able to afford to put 2 percent in.” It took the National Party to front up. 
That is why National will be on the Government benches in less than 2 years’ time. The people of New Zealand know a good thing when they see it. One thing that they know is not a good thing is the KiwiSaver Bill and they know this for a number of reasons. Within the bill there are a number of substantial issues. Those issues are partly around the bill’s complexity. One of the things Part 4 does is provide for a default provider. The way a default provider works is that if a person goes to his or her employer and does not specify whom he or she want the funds to be managed by then that person is allocated on a rotation basis of the default provider. At this stage we do not know who the default providers are. 
It was a very interesting exercise on the Finance and Expenditure Committee. Some of my fellow members on that committee including Mr Foss and Mr Tremain who are very hard-working members and Dr Smith who is an incredibly hard-working member had some really interesting questions to ask about default providers. They failed to get the sorts of answers we would have liked. Many of those default providers went to quite considerable expense including one of them who told me that the time scale for the application—the request for proposal—to be a default provider was so tight that the default providers could not courier the documents down and be sure they would get there. They flew a person from Auckland with the documents. They then put that person in a taxi at Wellington Airport—this is an absolutely true story. It turned out that the roads were so badly maintained under a Labour Government—those taxpayer dollars were being used to prop up its re-election campaign as opposed to fixing the roads of Wellington—that the taxi could not go the normal way and the person ended up paying $228 for a taxi ride to get the document out to Lower Hutt where it was delivered. That is what the default providers went through and they know that it was not worth putting the time and effort into that expense unless the bill was changed. 
We know from Michael Cullen that the first round of changes came when his back was to the wall last week. My prediction is that before the next general election substantial changes will be made to KiwiSaver because the Government knows that it will not work in its current form; it knows that the private sector and the default providers that are covered under Part 4 of the KiwiSaver Bill have gone to tremendous expense to try to become a default provider. Those default providers know that that is a waste of time a waste of money and a wasted exercise unless some changes are made. 
In fact tonight during the early part of the dinner break I wandered over to the new Treasury building—another mausoleum being built by a Labour Government that houses one or two bureaucrats in every second building in Wellington. There was a huge celebration when the Prime Minister was there to launch yet another building. There I ran into one of New Zealand’s most pre-eminent fund managers—someone who is definitely involved in KiwiSaver. When I spoke to that person—whom I will not identify for good reason—that person said to me: “It’s a disaster we can’t understand it and it’s only worse if you look at overseas tax bills.” 
R DOUG WOOLERTON (NZ First) 
: 
 New Zealand First is pleased to be supporting Part 4 of the KiwiSaver Bill. 
Hon Members 
: Explain why. 
R DOUG WOOLERTON 
: I am happy to explain why New Zealand First did not support the amendment put forward by Jeanette Fitzsimons. People should know the way in which Parliament works. This is an example of the informality that the public does not see—the friendship part. Craig Foss came to see me and said: “Doug are you going to support Jeanette Fitzsimons’ amendment? It’s bunkum of course but are you going to support it?”. I said: “Craig you shouldn’t talk about Jeanette’s bill like that. She is serious about these matters.” He said: “I can’t help what she thinks but I’m telling you it’s bunkum.” I said: “OK fair enough we’re being honest with each other. Look mate I can’t support it because we’re happy with these provisions.” The select committee hammered out the bill. Unfortunately a couple of people got the jump on us and there now is a mortgage diversion scheme. But there are tax incentives for employers which we agree with. I told him that I could handle change as much as any man but three changes were too many. I told Craig that we could not support the amendment. 
People should know that he then said: “That’s OK mate. We just want to look good in the eyes of the less well-off. If you had said you were going to support it we would have run to the hills mate.” He added: “You know how it works in this place—the look is everything.” I know that John Key agrees with that and I know that many of his bench mates agree with that. One needs just to look at him to see—the look is everything. 
People need to know in the spirit of comradeship and all the rest of it that I am happy to admit I did not go along with the suggestion by the National Party and others that perhaps it was pushing the boundaries a little bit to have the default providers’ bids—as I call them—come in before the bill had actually come into the House. I did not know about the taxi; I have to admit that is something new. 
John Key 
: It’s true. 
R DOUG WOOLERTON 
: I am not saying it is not true. The member is a man of honour because the Speaker told me so. I did not know about that but it does not surprise me at all. It shows the eagerness with which people are flocking to administer KiwiSaver. But I must say I was a little bit concerned so I was happy that New Zealand First was mentioned as one of the parties that was concerned we had moved a bit fast on the default provider issue. I think we all tried as a select committee to have newer entrants to the financial market become involved—more entrepreneurial entrants perhaps. But sadly it does not seem that that will be the case. How many new entrants will we end up with—eight or something like that? 
John Key 
: Four to six. 
R DOUG WOOLERTON 
: It seems that they will be the old big companies that have been around for years. Personally as a dynamic member of a dynamic new party I would like to give encouragement to any new players on the block. We could not achieve that so I was happy to have my name put with those who showed a little bit of concern. 
 Mr Key is a gambling man. As a Presbyterian of Scottish heritage I cannot afford to be and it is against my religion and all the rest of it. But Mr Key can afford to be a gambler. I am not going to take up his challenge but he bets that changes will be made to the KiwiSaver scheme before the next election. He is probably right. I must say that when I get the  
Hansard  
of the debate I will go through it to check but I suggest that I said that in every little speech on every little part of the bill. The scheme is designed to have changes made to it and if it is in the interests of the public to change it changes will be made. 
CHRIS TREMAIN (National—Napier) 
: 
 I rise to speak to Part 4 of the KiwiSaver Bill which gives the specific detail of the KiwiSaver scheme. I welcome Minister Clayton Cosgrove to the chair and say that I am looking forward to his reply on this part of the debate just to demonstrate his knowledge of the KiwiSaver Bill. It will be fascinating. 
Lindsay Tisch 
: I raise a point of order Madam Chairperson. I do not like to interrupt my colleague but I think that in fairness to the Minister in the chair my colleague should refer to him by his correct name. I know it was an oversight but I suggest that my colleague might like to refer to him as Minister Damien O’Connor. 
The CHAIRPERSON (Ann Hartley) 
: I am sure he will. 
CHRIS TREMAIN 
: Madam Chair you do not have to demand an apology here: I will withdraw and apologise. 
John Key 
: I think that was one of the harshest things you have ever said about Damien. Your career is over! 
CHRIS TREMAIN 
: My apologies. I come back to where I left off on the KiwiSaver scheme. The deadline has already closed for KiwiSaver scheme default providers. The fact that the deadline has closed already was a key point that came up in the submissions we received in the Finance and Expenditure Committee on the actual time frame in which the bill would be passed. 
I want to talk about a couple of submissions the committee received that dealt with the deadlines that have to be achieved in order to get to the point in time where the bill can be implemented. In the submission process it was pointed out that the implementation time frame is a significant issue. The first deadline we had to overcome was the time by which default providers had to provide their submissions. A couple of submissions stated that the time frame was too short for a successful implementation of the bill. We have the likes of KPMG Mercer New Zealand the Financial Services Institute of Australasia Chatswood Consulting Ltd Business New Zealand ANZ National Bank Ltd ASB group Comacc Ltd and Superlife Ltd all submitting that the time frame was too short. A number of others went on to say that the time frame despite its having been moved out to 1 July would still be too short. A number of submitters believed it should have been moved out to 1 October 2007. ANZ National Bank Ltd the ASB group the Meat Industry Association and others thought it should be moved out to 31 December 2007. 
So I have some sympathy for those default providers that have had to put up submissions for this scheme—firstly because of the initial start time which I still believe is unworkable at 1 July. The application process they had to undertake was onerous particularly given the systems that these major providers will have to install in order to deal with the issues of the KiwiSaver Bill and particularly given that having put up a submission a number of significant changes have been made to the bill as recently as last week. So once again these submitters are having to deal with changes being made on the hoof—last-minute policy to be enacted within a deadline of 1 July. And here we are expecting this KiwiSaver Bill to have credibility in the marketplace. I ask the Minister to say whether he thinks this is genuinely achievable—whether the providers will be able to achieve this date delivering credibility into the marketplace and ensuring that as many employees and employers as possible get on board with the bill and take it forward. 
Despite those complaints about the submission time every fund manager and his dog actually wants to be on board with it. They see it as a huge opportunity because they see it ultimately turning into a compulsory situation. They see that while in the short term it will cost them some money—they do not see themselves making a lot of money out of it in the short term—in the long haul they see it as being a real winner for them. 
I want to talk about some of the conflicting views on the number of applications that were put in. Firstly the Finance and Expenditure Committee asked to see the terms of reference for the application process. It was unfortunate that we were unable to see those terms of reference until after the deadline had closed which was somewhat disappointing. Despite this we believe there were 10 to 15 submitters. But in saying that the parameters and time frames were so difficult that as many as 90 percent of the submitters voiced concern about the time frame within which they had to submit. As a result the date has moved back to 1 July. As I said previously I am still concerned that that deadline will be difficult to meet. 
The actual decision about who will be the default providers will be politically contentious—there is no doubt about that. Who will be the lucky four to six default providers that will be involved in this scheme? We put the question about the number of providers to the Government and it came back and denied that there was a pre-set number. 
PANSY WONG (National) 
: 
 I found the speech from the New Zealand First member Doug Woolerton to be very enlightening. He is now looking at setting up a good-looking party because “look” is everything according to him—substance is a minor detail. We know that the president of New Zealand First is hunting for new leaders for that party. Doug Woolerton must be really quite miffed that he has been overlooked as a good-looking dynamic potential leader for New Zealand First. But I say to him that he has to show a lot more substance before the public can support him. 
First of all as my good colleague John Key pointed out he cannot champion the cause of the so-called struggling Kiwis without making sure that this scheme is actually friendly. I find it ridiculous that he simply voted down the Green Party’s 2 percent contribution rate which would have been an achievable rate. Second it is very telling that New Zealand First has let us know that it can now handle only two issues—two changes—at any one time. It is quite telling that a very dynamic member is limited to handling two changes. 
I want the Minister in the chair Damien O’Connor to take a call to explain something. People have just mentioned that the number of default providers might be limited to four to six. The reason is that they might not be able to make a lot of money. But in the long term if this scheme becomes compulsory it might be worthwhile. I say to my good colleague John Key that in the short term some innovative people might be able to set up a scheme that was quite beneficial. I was looking at the criteria in Part 4 and thinking about whether Taito Phillip Field MP who is very innovative in providing for his retirement might be able to fit his scheme in. After all we are told in clause 99(1)(b) that the “principal purpose is to provide retirement benefits directly or indirectly to natural persons;”. I think his scheme to have people help him build his property more cheaply would actually fit this criterion. 
The other thing is that new schemes need an independent trustee and that is very very confusing. Clause 99A states that one trustee is named as the independent trustee. But if no independent trustee is named in the application then a person named in the application can become the independent trustee. It is quite flexible so I think Mr Taito Phillip Field’s scheme might actually qualify under these Part 4 provisions. His spirit in terms of saving for retirement is actually quite innovative. I hope that Part 4 after describing at great length which scheme can qualify as a default provider actually makes sure those loopholes are not utilised. 
 The other thing that John Key and Chris Tremain mentioned is that this scheme might become compulsory in time. I think the public should note the fact that New Zealand First embraces it so warmly. Indeed in 1998 it was New Zealand First’s the Rt Hon Winston Peters who wanted New Zealanders to have compulsory savings— 
John Key 
: Affectionately known as “Spider-Man”. 
PANSY WONG 
: Yes “Spider-Man”. I actually named the latest tragedy that happened to Mr Peters as “Asian bites back” but I think “Spider-Man” sounds pretty good. In 1998 the compulsory idea of Mr Peters was voted down by what—98 percent? It was well over 80 percent of New Zealanders. I think this measure is the latest attempt to go there. 
CRAIG FOSS (National—Tukituki) 
: 
 I rise to speak to Part 4 of the KiwiSaver Bill. I acknowledge the new Clayton’s Minister in the chair—sorry; the new Minister in the chair—the Hon Damien O’Connor. As I pointed out in an earlier speech I have learnt much in the last week about how Parliament and the debating chamber work and about the abuse or lack of process particularly around this bill. In the last half an hour I imagine I have learnt a bit from the wise experience of Mr Woolerton. I look forward to sitting down with him and having a bit of a yarn at some stage. I also acknowledge again the powerful and vibrant speeches of all the Labour MPs who have endorsed this bill tonight. So far—we are up to Part 4 just over halfway through the bill—we have had a grand total of zero speeches from Labour MPs endorsing what is supposed to be flagship legislation for their final term in Government. 
Part 4 deals particularly with various superannuation schemes and with what happens to KiwiSaver schemes—more with the operational side of things. During the Finance and Expenditure Committee I recall quite a lot of discussion about—and other speakers have spoken of this—the default providers etc. This bill will drive significant changes to the New Zealand finance industry. Earlier speakers including myself have touched on the default providers and commented about the abuse of process around that provision. I think members will see some interesting joint ventures amongst say insurance companies and banks all absolutely clamouring to be one of the default providers. As I noted in an earlier speech Mr Cullen has noted that it would be very very difficult not to make money as a default provider. 
We do know that this bill will drive almost every fund and every small organisation to be KiwiSaver-compliant. No one is addressing the cost to those small funds and small institutions etc. of becoming KiwiSaver-compliant but they have been driven into a corner here. Particularly with the amendments tabled last Thursday they virtually have to become KiwiSaver-compliant. What does that mean for small credit unions around the country? There are quite a few in Hawke’s Bay. They are doing the right thing but they are struggling in the face of competition from the larger Australasian banks. What about our small local building societies? Again this bill will actually harm those building societies. They will struggle to cope with the changes and the compliance issues that they bring. 
Being a default provider brings massive first-mover advantage to anyone who wants to participate and try to become a default provider. As noted earlier there will be four to six default providers. Funnily enough if members think about the large financial institutions around the country they all begin with the letter “A” or they have a series of “A”s in their name. I ask members to think about what will happen in the real world when Joe or Jane Bloggs bowls along to a new job and wants to opt in and select a default provider. Whom will he or she select? It will be like what happens with “AAA Plumbing”. People will not have thought about their choice too much and they will go to the top of the list. They will guess that the providers have all done the trust deed and are OK so they will tick the top one under “A”. Then there will be ones starting with “AA” then “AAA”. It is absolute nonsense. That is the kind of real-world mesh test that this legislation will come up against and fail. 
It is interesting also to note from some of the submitters particularly the very large players that they are not going into KiwiSaver because they want to be part of KiwiSaver but because they see it as an awesome but loss-leading opportunity to market themselves to an entirely new group of customers or potential customers as they try to parade their wares to them. Let us remember that 1.1 million new job events every year will give those players 1.1 million opportunities to sell their products. What kinds of products will those large multinationals try to sell? They will try to sell insurance products and there was some wide-ranging discussion about that at the select committee. There will be various forms of cover and there may be some deals with employers. Providers may say to employers that if they select a particular scheme for their employees they will be given a 10 percent discount on fire and accident insurance for their buildings. Of course employers will take that. Does that actually serve employees to the best advantage? 
There is another very very interesting little item that people will try to solve. 
KATHERINE RICH (National) 
: 
 I rise to speak to Part 4. It has been interesting to hear a number of Ministers wax lyrical about what KiwiSaver will do. One of the comments made regularly is that the captains of the finance industry are very keen on it they are enthusiastic about it and they think the Government’s proposal is a good idea. I think Ministers need to understand that those involved in the finance industry have no choice. Most of them who have made some positive comments about the KiwiSaver scheme have done so because they do not want to be left behind. They are interested in this section of the bill which is all about the processes used to select the default providers. Those firms do not want to be left behind because they see this as an opportunity to take on a serious amount of business. 
One of the things that has concerned those involved in the finance industry has—of course—been the time delays with the development of this bill but also some of the time frames. Everybody who had a look at them said they would be unworkable. It has been interesting that in the eleventh hour the Government has been forced to heed those calls for extra time because what is currently before the industry is nothing more than a dog’s breakfast. It is going to be a nightmare if this thing is rushed. One of the things that concerns many on the Opposition side of the House is that when Kiwis start to look at this as an option there cannot be a rushed system with firms keeping to a Government-placed deadline that is unworkable. 
Another concern to those in the industry relates to some of the changes made in just the last couple of weeks—the miraculous inclusion of a mortgage diversion section to KiwiSaver. They argue that in order for them to be able to provide this service to Kiwis at a reasonable rate and one at which they can make a profit there has to be a maximum number of transactions. The more transactions there are the more costly it is for them to provide this service. In the last 2 weeks the Government has brought in mortgage diversion. This means that some Kiwis will ring up and say they want to put some money on to their mortgage they want to do that regularly or whatever decision they might make. That increases the transactions involved in the scheme and therefore the cost. Likewise there is the cost of contribution holidays. The stopping and starting of payments makes the system more complex than it needs to be and also more costly to run. 
A lot of firms have looked at this and I think they are banking on a long-term thought that this could be compulsory. Although the Government is looking at Australia and saying that New Zealand could have some of the positive things that the Australians have it will not be the same. The Australians have a scheme that is compulsory; the payments go out on a regular basis; there is no stopping and starting or opting-in and opting-out. There is not the complexity of KiwiSaver. The number of firms involved is set and they can calculate what they are going to make out of it. 
The other point that is really important is that if tax breaks are provided to one scheme—the KiwiSaver scheme—then that inevitably creates an unlevel playing field for all other kinds of schemes that aim to do exactly the same thing which is helping New Zealanders prepare for their superannuation. The Government says it wants a scheme that Kiwis will use but in this way it is giving KiwiSaver the advantage vis-à-vis all sorts of other superannuation schemes. That does not make sense. If the Government wants to deal with the tax issue in superannuation it may as well do it with all the schemes—that is keep the rules the same and the products the same so they can be compared. At the moment the Government is making KiwiSaver stand out on its own: “Be part of this scheme and you’ll get a tax advantage. Be part of some other scheme and you won’t.” That will not provide fairness for those Kiwis who have done the right thing by providing for their superannuation without the help of this scheme. 
It will also put some other company schemes on the back foot. Some companies have been providing superannuation for their staff members for a long time but perhaps because staff cannot pick up their superannuation entitlement and take it somewhere else their scheme will be treated differently as well. 
BRIAN CONNELL (National—Rakaia) 
: 
 I shall start by making a number of observations. The first one is that only one Minister—in fact only one member of the Government—has stood up and taken a call in support of what the Minister of Finance and Prime Minister are trumpeting as an outstanding scheme. I see that Mr Jones has just walked in and I know he is a man of integrity. He will stand up and tell the Committee precisely what he thinks but I would be surprised if an independent and clear thinker like him would be supporting this scheme. But at least he will stand up and take a call. I repeat that other than one Minister not one member of the Government has stood up and taken a call in support of this legislation. 
The second observation is that Part 4 has 64 pages. They deal with process but very little effort has gone into making sure the scheme per se will achieve its objective. My colleague Katherine Rich correctly drew the Committee’s attention to the compliance costs hidden in the scheme the way it is constructed now. I think Mr Woolerton acknowledges his assent because he knows that is right. 
While I am mentioning Mr Woolerton I want to put right for the record a conversation that he and Mr Foss had earlier. Mr Foss tells me that the way Mr Woolerton has portrayed it is not exactly accurate. Mr Foss went across to Mr Woolerton and said: “You’ve just made a very telling speech demonstrating that you’re in touch with poorly paid New Zealanders and here’s a chance for you to put your money where your mouth is. I suggest that you live by your convictions and vote in support of Jeanette Fitzsimon’s amendment.” Mr Woolerton said to Mr Foss: “You really think I should do that?” and Mr Foss said: “I think you should because that’s what you believe isn’t it?”. Mr Woolerton said: “Yes it is but I’m not sure the boss would agree with me.” The way Mr Foss tells it he said: “Well if you want to be leader you’ve actually got to be more decisive. You have to take a risk and do what you think is right then others will follow.” Unfortunately Mr Woolerton failed at the first hurdle because despite his conscience telling him that he should look after poorly paid New Zealanders he let that opportunity slip. So I am just putting that right for the record. 
Let me turn my attention to the default providers. Yes providers are flocking to the scheme because they sense opportunity and they sense compulsion. That fact should not be confused with them thinking the scheme is sound. In private conversations with some of the providers that I know on a personal basis I have been told that they think it is not sound. Mr Key and other speakers have already alerted the Committee that there will be changes to the scheme before the next election. 
One has to ask why we are rushing this. What sense does it make for default providers to apply before they see the terms of reference? I see Mr Copeland over there with his head down. He was very keen—behind closed doors and outside the select committee process—to do a deal with Michael Cullen. Maybe he will seek a call and explain why the terms of reference were not made available until after the close date. That does not make a lot of sense to me. Why are these default providers rushing in? As I have said it is because they see this scheme as being compulsory. 
DIANNE YATES (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to Part 4 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That Part 4 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Part 4 as amended agreed to. 
Part 5 General Provisions 
The CHAIRPERSON (Ann Hartley) 
: The debate on Part 5 includes debate on schedule 3. 
JOHN KEY (National—Helensville) 
: 
 We are led to believe that the Labour Government cares so much about the KiwiSaver Bill. Well the all-powerful Finance and Expenditure Committee that I sit on is chaired by none other than Shane Jones. 
Lindsay Tisch 
: Who? 
JOHN KEY 
: Shane Jones is the chairman of the Finance and Expenditure Committee. I have not heard Shane Jones take one call tonight. Interestingly enough the Labour Government cares so much about KiwiSaver that Shane Jones has not fronted up to the Committee and taken one call. Why is that? Because Shane Jones does not recognise the bill from when he was shepherding it through the select committee. It has changed so much from the time it left his careful hands that he has not recognised it. I told myself that Mr Jones could be a little too tied up to make a speech tonight—although he is in the Chamber and we hope that he will take a call later on. 
Then I looked to the next more senior member of the select committee from the Labour Government Mark Gosche. I asked myself how many calls Mark Gosche a former Minister of the Crown who sits on the Finance and Expenditure Committee has taken tonight. Zero—not the number of dollars that the Labour Party took when it bought the election with $882000 worth of taxpayer dollars. Mark Gosche a senior member and a former Minister of the Crown has taken zero calls. 
We then have the next select committee member for Labour Paul Swain. He is a former member of the Crown and a senior member of the select committee. How many calls has Paul Swain taken on this bill tonight? Zero! Then we come to the next member of the Labour caucus who sits on the Finance and Expenditure Committee George Hawkins also a former Minister of the Crown. How many calls has George Hawkins taken on this bill? Zero! So here we have it. 
The Labour Government cares an awful lot about KiwiSaver. Apparently it is the biggest thing that has ever hit since sliced toast. Michael Cullen paraded before the kiwi with the very long beak and Labour members care so much about the scheme that none of the members Shane Jones Mark Gosche Paul Swain and George Hawkins have come to the Committee tonight to give a speech on it. I tell Mr Jones—who is in the Chamber tonight—to go to his seat stand on his feet defend KiwiSaver and tell us about the changes that occurred to the bill when it left the select committee and before it came down to the floor of the Chamber. Mr Jones cannot recognise this bill. That is why he has not taken a call and I predict that he will not take a call. He cannot recognise the bill. 
Part 5 of the bill I think has a very interesting situation. It is about investment statements and about giving investment advice. This provision was put in because the Prime Minister of New Zealand the Rt Hon Helen Clark has had a lot of difficulty when it comes to investment advice. New Zealanders will remember that she told them: “Do not sell your Air New Zealand shares. Hang on to them for a little bit longer.” Actually I hope people did not hang on to those shares for too long because fundamentally they have not been doing all that well. 
The Prime Minister is in good company because about 6 weeks ago another member of the Crown—David Cunliffe the Minister of Communications—went out and told Telecom that its dividend policy should look radically different from the dividend policy it has today. So that is why clause 183 in Part 5 talks about investment advice. 
Clause 182 is very interesting as my colleague Katherine Rich pointed out. It states that there is no Crown guarantee in respect of KiwiSaver. I make the point that the one thing investors should realise of course is if they put their money into KiwiSaver then they are liable for whatever investment returns are put in. That is standard procedure. They are also liable for the integrity of those funds and they should choose their adviser very carefully. 
Again the process to support the default providers and the quality of fund managers in New Zealand does not concern me but I just make the point to New Zealanders that they should not be under any illusions. When they put their money into a KiwiSaver scheme there is no guarantee for those schemes and there is certainly no guarantee on a return. I think it would be very wise for them to make sure they choose their provider well they consider that situation fully and they make sure their provider is the one they believe can produce the best return for them. I believe that return will be very very important because so many investors will have such small balances in their account every dollar will matter. 
GORDON COPELAND (United Future) 
: 
 First of all when the member John Key tells New Zealanders correctly that there will be no Government guarantee involved with KiwiSaver it appears to me that since National is voting against every part of this bill so far it intends to actually vote against the KiwiSaver Bill. So I would like to point out to New Zealanders that if that is the case there will be no guarantee that KiwiSaver itself will continue if there is a change of Government. 
John Key 
: That’s right; there is no guarantee. 
GORDON COPELAND 
: Mr Key has confirmed that that is the case—that National would look at scrubbing the whole thing. I think it is quite good to have that on the record so that people clearly understand that they will be given a real choice in relation to this bill. 
I would like to go though to new clause 194A which has come in under Dr Michael Cullen’s Supplementary Order Paper 52 relating to the mortgage diversion facility. As others mentioned in the second reading debate this change to the bill was promoted by United Future and by myself in particular as its spokesperson on finance and revenue. So let us just get the record straight. 
Far from doing a back-room deal on this I actually took the suggestion to the Finance and Expenditure Committee. I laid it out to members as best I could with back-up papers diagrams flow charts and all the other things that they would need to make a decision on it. National is completely wrong in saying that the select committee unanimously rejected the mortgage diversion facility. That is not correct. It was voted for by United Future it was voted for by the Green Party and it was voted for by the Maori Party. So let the record stand corrected in that regard; that was the situation. It is true that subsequently I entered into discussions with the officials to whom the Government had signalled its intent which was clearly signalled in the commentary on the bill that the bill merited further work and further consideration. The result of that is the Supplementary Order Paper that members now have before them. 
I believe that this is a very very important improvement to the design of the KiwiSaver scheme. It will have manifold advantage from the point of view of investors. For example we were told in many submissions that the fear was that people would invest for 1 year get their $1000 reward from the taxpayer and then take contribution holidays for maybe 25 or 30 years while they paid off their mortgage. This mortgage diversion provision on the other hand ensures that those people will contribute to KiwiSaver continuously. It is very very important that they do because only by being in KiwiSaver will they be eligible for top-ups from their employer. If they are not in the game they are out of the game completely. 
Mortgage diversion creates an opportunity for people to stay in the KiwiSaver game in order to get their $1000 subsidy and whatever their employer decides to top up for them and at the same time to use up to 50 percent of their own personal contributions to service mortgages. As I said earlier that is holistic because it means that people can end up in retirement with a freehold home and with a reasonably tidy sum invested to help them supplement the level of New Zealand superannuation which by any standard is going to give people only a very basic income indeed. In particular a person who is still renting a house will not be able to survive on New Zealand superannuation—cannot survive. So it really is a very very important measure. It will assist literally hundreds of thousands of savers in the years to come to accomplish those two goals of ending up in retirement with a freehold home and at the same time ending up with a tidy sum put away to invest for their retirement. Therefore it really increases enormously the retirement security of New Zealanders. 
Furthermore of course it will swell the base of capital funds in New Zealand and the availability of that pool of funds—as we have seen in Australia in Singapore and in other jurisdictions—so that New Zealand companies can more readily access the capital they need to grow their businesses. Instead of having a continuous line of Australian companies taking over Kiwi companies maybe we will even see some reverse of that and we will grow our economy to be strong enough to actually diversify overseas and become an ownership-based society. That is one of United Future’s central goals in all of our policy. We want to see a genuine ownership-based society built in New Zealand so that we have a stake in our future and in our prosperity. We want that spread right across the whole of our society. 
I am very pleased tonight to take some credit for the mortgage diversion facility. It is an idea whose time has come and I have no doubt that the mature judgment of New Zealanders as we move forward into the scheme and see it implemented and unwound will be that this was a great change to a good scheme. 
KATHERINE RICH (National) 
: 
 It has been very interesting to see the transition that Gordon Copeland has made. 
John Key 
: I raise a point of order Madam Chairperson. I am very sorry to interrupt my colleague Katherine Rich but I think the chairman of the Finance and Expenditure Committee was distracted when you were seeking the call. As we have pointed out during the entire debate tonight not one Government member has taken a call. The Associate Minister of Finance and the chairman of the Finance and Expenditure Committee are here and they were obviously distracted. If they believe so much in KiwiSaver maybe they would like to take a call. It is great to see the Minister on his feet. 
The CHAIRPERSON (Ann Hartley) 
: That was not a point of order and the member knows it. 
Hon Trevor Mallard 
: I raise a point of order Madam Chairperson. That point of order has no merit. It is clearly a spirited one from the member after dinner and it is about time he was a bit more responsible. 
KATHERINE RICH 
: That was exactly the sort of point of order we have come to expect from Trevor Mallard. 
It was interesting to hear the two financial mandarins debate across the Chamber but I am more interested in the transition that Gordon Copeland has made this evening. Earlier on in the debate we said he had had a lot to do with bringing in the mortgage diversion provisions of the bill and he said it had nothing to do with him and that he was humbled if not flattered by the thought that the National Opposition should think he had something to do with it. Now in his last speech he said he was happy to take all the credit. So it has been an interesting transition during the debate. 
In this part of the bill the rate of the Government contribution is specified—the $1000 which is apparently designed to make New Zealanders line up up and down the country to take their part in the KiwiSaver scheme. This is also the part that lays out quite complex rules and regulations about how money can be taken out. What interests me is the purpose of this bill which I will just recap for those who are listening. It is: “to encourage a long-term savings habit and asset accumulation by individuals …” so that they can: “enjoy standards of living in retirement …”. Likewise: “The Act aims to increase individuals’ well-being and financial independence particularly in retirement and to provide retirement benefits.” 
If that is the case then why is it so easy for young people to take their money out after they have been involved in the scheme for only 5 years? If individuals go into the scheme in their 20s they will be able to have full rights to withdraw large sums when they are nowhere near retiring. If the aim is to encourage people to think seriously about their retirement then we have to make it harder not easier for people to take their money out. The Government thinks that it has brought up a new political idea in mortgage diversion. What the Government has done is create a cheque account. It has made it very easy for New Zealanders to divert their funds and put them into their first home. What is to stop them from selling their first home? We live in a country that seems to have a fascination with property. Most Kiwis do not live most of their lives in one house any more and are in their first home for probably only a couple of years. This is what this scheme is designed to do. It gives us the opportunity to put money towards our first home and then sell it—to make a bit of money on it and then put it back in our pocket. It is not put away squirreled away for our retirement when we turn 65. I know that the Minister of Finance is currently thinking about that. These are the sorts of issues that do concern him. 
I am interested in a scheme that will be attractive to younger people. At the moment if we look at the $1000 and the wee bit of a tax break we must ask whether that will be enough to encourage large numbers of younger Kiwis to take up the scheme. I do not know whether it is. I have seen other schemes whereby there was huge incentive and whereby the Government might match the contribution by $2 to $1 which was the case at the Foundation for Research Science and Technology where I used to work and younger people would still not take it up. They decided they wanted to have more money in their pockets to go out on a Friday night. They were not encouraged to consider long-term superannuation no matter how attractive at that time it was. 
What we have here is a scheme that is quite different from what the Finance and Expenditure Committee actually looked at. I am not surprised that some of the Labour members have not taken a call on this bill because it looks so dramatically different from when they sat around the select committee table. The select committee looked at this bill and New Zealanders looked at it and thought they were being consulted then 2 weeks’ later it was dramatically different. That is not due process; that is not the way things should be done. This scheme will not work. 
R DOUG WOOLERTON (NZ First) 
: 
 New Zealand First supports Part 5 of the KiwiSaver Bill. We heard before that the Crown will not be responsible as there is no guarantee on the Crown’s part for the default providers. I guess that answers the issue I brought up a bit earlier that it will tend to be the bigger financial firms that will participate in the KiwiSaver scheme. Also this part outlines—and this is very important—that the employer is not to be the financial adviser or is not to give advice to the employee when it comes to which provider to choose. Sadly employees will probably have to go off to Craig Foss once he gets kicked out of Parliament and takes up his advisory role again. That is what will happen. There will not be a situation when by default the employer becomes the adviser and he or she is asked to give advice to the employee. I am certainly thankful for that. 
Just before Mr Copeland was taking all of the credit for including the mortgage diversion scheme in the bill. It is no wonder that the public sometimes gets confused because somebody was taking credit for something that members on the other side of the Chamber have spent most of the night dissing but that is the way it goes. In the course of that exchange across the Chamber Mr Copeland suggested that John Key if ever he could get anywhere near the financial portfolio as a member of a Government would change this bill. But I suggest that this would not be the case. In fact I have seen it in print that this is not the case—if we can believe whatever is in print. I do not know whether the president of my party was having a bad dream or what but I have just seen a whole lot of stuff that he put in print that I could not believe. I am not sure that what I read was correct. I read that Mr Key said it is most unlikely that the National Party would throw out this scheme. I am pleased to hear that because this is a scheme for the long term. It is a scheme to change the saving habits of New Zealanders and it should be looked on in that light. 
Following that exchange Mr Foss was talking about the providers. He said the Government had made sure that the default providers would be looked after. He was saying then—and it was a little bit contradictory—that providers would look on KiwiSaver as a loss leader for them to sell other financial products to these people. I say good good and good because that is what the bill is about. It is about involving people in the financial world who have not been involved hitherto and otherwise would not be. I think it is good that these companies may go on to sell them some insurance or whatever else or to add to— 
Craig Foss 
: Reverse mortgages! 
R DOUG WOOLERTON 
: Even the mortgage. They could even add to that sort of thing. In relation to the mortgage diversion scheme—and I am trying to cover a lot of things quickly because I transgressed a wee while ago and went over other ground—Mr Copeland said that he took credit for the mortgage diversion scheme. I just want to say that we should not get hung up on one line of thought because it is possible preferable and desirable that people save at the same time as they are paying off their mortgage. If there is a scheme whereby they can have a diversion for a wee while and pay some money to a mortgage and some to a savings scheme I think that is what happens in real life. Even though it came in at a late stage even though Mr Copeland will take all the credit for it and even though the National Party is dissing it mercilessly New Zealand First will stay staunch and support it. 
The other thing I want to mention that may be interesting to people as we go through this consideration is that we have an interesting situation in that the Inland Revenue Department will be taking a huge administrative role. That is not something that is new but it is something that is becoming increasingly prevalent. 
CHRIS TREMAIN (National—Napier) 
: 
 I would like to focus on Part 5 particularly in relation to clause 182 “No Crown guarantee of KiwiSaver schemes or products” clause 183 “Factual description of or transmission of information about KiwiSaver scheme not investment advice” and clause 184 “Application of Securities Act 1978”. I would also like to touch on clause 194 “Regulations”. 
The reason I do that is I want to focus on some of the submissions that came into the Finance and Expenditure Committee led by Shane Jones who is across the Chamber. We are certainly looking forward to his taking a call later on this evening. The submissions focus on a number of issues in regard to the financial advice that new members of KiwiSaver will need to seek. The submissions pointed out three things. The first was that the current level of financial literacy in New Zealand is relatively low. I think that all of us would accept that the average guy in the street when faced with making a decision about this will have some difficulties and will need to look for some advice. I think even the Minister of Finance would acknowledge that. 
The second point that came through from the submissions was that the KiwiSaver information pack should direct an employee to seek financial advice. That is the point I want to dwell on particularly in regard to employers and their responsibility in regard to the provision of advice to employees under this Act. Whether or not we like it employees will be faced with a number of decisions in regard to this legislation. A new employee will need to decide whether to opt out of the scheme or to stay in it. Existing employees will need to decide whether to participate in the KiwiSaver scheme. Employees will need to make decisions about mortgage diversion about contributions holidays and about which is the best scheme in terms of the risk profile that will attribute to them. Employees face significant financial decisions and given the fact that submitters to the Finance and Expenditure Committee made it clear that the current level of financial literacy in New Zealand is relatively low I am concerned about whether the implementation of the bill will cover the shortfall that I see. 
And there is a shortfall because at the end of the day it will be employers at the coalface who largely will be faced with helping employees to make these decisions whether or not we like it. It does not matter how thick a submission an employee receives or what default provider applications are put in front of them or how much financial advice they have most employees trust their employers—the guys who employ them—and will go to them to make a decision. 
That is where clauses 182 183 and 184 become very important. In particular clause 182(1) points out: “There is no Crown guarantee in respect of any KiwiSaver scheme …”. That means it is important that employees make a sensible decision about their risk profile going forward. Clause 183 points out that a factual description of or transmission of information about a KiwiSaver scheme is not investment advice. Clause 183 states: “For the avoidance of doubt the Crown or any other person does not give investment advice for the purposes of the Investment Advisers (Disclosure) Act …”. Why have I dwelt on that point? It is because the Government is trying to say here that firstly the Crown is not responsible but that secondly any other person is not responsible. So at the end of the day the decision rests with the employee fair and square. I want Dr Cullen the Minister in the chair to take a call and let us know where that point will be specifically mentioned in the applications put in front of employees so that employees do truly understand when they go to their employers to ask them to help with a decision that their employer is not responsible for the decision that is made. 
That point is spelt out in clause 184 “Application of Securities Act 1978” in subclause (1) which states: “A person is not a promoter”—and I thank the officials for helping me with this point—“or issuer in relation to an interest in a KiwiSaver scheme for the purposes …”. The legislation states there that an employer cannot be held out as a promoter. That is a very important point because if an employer was held out as a promoter then that employer could be held liable in terms of any advice given to an employee. 
SHANE JONES (Labour) 
: 
 Kia ora Madam Chairperson. In contrast to the barrage of ill-informed remarks from our colleagues across the Chamber I wish to say this is brilliant legislation. 
Hon Dr Michael Cullen 
: Barrage is right. 
SHANE JONES 
: Yes. Mr Copeland did raise with the Finance and Expenditure Committee the issue of whether there should be an improvement to KiwiSaver by way of a mortgage diversion scheme but no one less than Mr Key announced to all of the select committee members that we had run out of time. As Mr Key left the meeting I did see him encourage Gordon to pursue his line and he did give him the dim prospect of helping to fix this bill in the unlikely event he was ever to occupy the Government side of the House. 
Not only is that the case but I also have a very strong suspicion that the people who are attacking the bill this evening would in the event that there was some freak of nature or weird event such as a change of Government well into the future seek to make this measure compulsory. Underlying a lot of the questions of the Opposition members—not as much in the select committee as in the narrative in the Committee tonight—is their intention desire or preference to see KiwiSaver made compulsory. What other conclusion could my esteemed select committee colleague Mr Key have come back with from Singapore? I get a bit disappointed when people dash off to far-flung places and borrow uncritically decisions and ideas. This measure is home-grown which is why it is called KiwiSaver. Like all good policies it is capable of being refined as we move along on our waka which is why although Mr Copeland claims a key role at the end of the day KiwiSaver is reflective of the bonding that holds members on this side of the Chamber together in a very coherent form. 
People up and down the country cannot wait to start their savings scheme because they remember very sourly that when our colleagues opposite last had the opportunity to govern they undermined the matamua of the House Winston Peters. In fact the leader of the National Party at that time campaigned up and down the country saying that following Muldoon we could not have anything approaching a superannuation scheme that had an element of compulsion in it. It took members on the Government side of the Chamber to make progress—and thankfully the members of the select committee saw the value in bringing this measure back and accepted that it was capable of being improved as we proceeded. 
 In relation to whether there is a Crown guarantee of course the decision lies with the individual saver. The notion that an employer will be in a position either to intimidate employees or to falsely lead them shows a very barren approach to what ought to be the ideal relationship between employees and employers. That relationship will only grow as a consequence of both sides joining in the fray and growing the size of the savings pool. In fact when Labour is still in power in 2012 2013 2014 and 2015 we will look back very happily at this evening when we laid down the foundations for the Kiwi putea. 
Unfortunately although we had tit for tat on our committee not a single original idea emerged from the Opposition. We had the Business Roundtable serve up its usual ideological nonsense that there is no savings problem. Then we had the real experts—people who deal on a daily basis with families—say there is a savings problem and a capital deficit problem. 
This bill is a fantastic start and like all journeys it has started with a few faltering steps. But this bill is going places—unlike the Opposition which is going nowhere. Kia ora tatou. 
CHRIS AUCHINVOLE (National) 
: 
 Part 5 of the KiwiSaver Bill “General provisions” which runs from pages 156 to 174 is gripping reading. Like Part 4 it is more of what Labour likes lots of: regulations. Oh the rejoicing in the Labour ranks and hierarchies—more regulations a flagship bill. 
I have read a description from the  
National Business Review 
 that states that the scheme is “a soft version of compulsory individual accounts”. There is a view that the scheme is naught but a precursor to a compulsory savings scheme. Well well well! Compulsion is what this Government moves to if voluntary systems fail to get 100 percent adherence. 
It has always been the same. We have seen it recently with dog microchipping. During that debate it was even suggested that the salmon on salmon farms should be individually microchipped on a compulsory basis. Well that did not work out. We have seen it with farm access. A perfectly satisfactory voluntary system of providing access across private property is operating but is that OK for this Government? No it must be compulsory. The Government seems intent on delving into all aspects of private life and imposing what it thinks is necessary. When will it occur to the Government that all it is doing is hampering what could be achieved if it backed off from trying to run every aspect of life? 
Members should look at the recent economic forecast that came from the West Coast. Members have said I should mention the West Coast so I shall. This region is benefiting from the heavy private investment in farming mining and tourism but has been hobbled by the interference from the Labour-led Government without which the progress would have been so much better. 
Hon Trevor Mallard 
: Will the member answer a question? 
CHRIS AUCHINVOLE 
: When I have completed what I want to say the member will probably find that the question has already been answered. The West Coast is being hobbled by the extraordinary delays imposed on businesses by the Resource Management Act which needs changing. It is hobbled by extraordinary time delays in providing consents from the Department of Conservation for access to the Department of Conservation estate for Pike River and Oceania. It is hobbled by extraordinary reluctance to provide a hydroelectric power plant. It is hobbled by dithering indecision in settling the Stockton snail preservation question. It is hobbled in fact by a Labour-led Government that has done little for this fine region other than to provide an element of spin. When will the Government learn that piling regulation upon regulation does not encourage prosperity? 
In terms of the KiwiSaver scheme there is more hobbling. The public did not have a great deal of input into the debate about the sort of retirement savings scheme it wanted. We heard from Mr Woolerton who claims his Presbyterian Scottish origins preclude his being involved in gambling. One could then ask what he is doing as a New Zealand First member. One could remind him off the expression “Many a mickle makes a muckle.” Maybe if the debate had started on the basis of a true reflection of what New Zealanders wanted from such a scheme— 
R Doug Woolerton 
: Say that again. 
CHRIS AUCHINVOLE 
: Many a mickle makes a muckle. 
Lindsay Tisch 
: How do you spell it? 
CHRIS AUCHINVOLE 
: With ease with ease. 
Tax deductibility mortgage diversion and other aspects have been wheeled in—perhaps as sweeteners to default providers. What will the costs be to the smaller schemes that will now find it practically compulsory to be KiwiSaver - compliant? Who knows? Does anyone on the other side of the House care or are Labour members simply determined to ram through the legislation for the sake of their own political immortality? The reality is that at the present rate their immortality will be based on missing the point of public perception. Dismissing public perception is being limited to the political belt. Well from what I hear from the public the political belt is what this Labour Government is about to feel a sting from. 
As I journeyed up to Parliament from the West Coast in my little blue truck I was approached by people in the café where I stopped for lunch. A series of people expressed their indignation about the present antics of this Government. At filling stations airports car parks on the plane and in taxis—all the way—there was evidence from people who feel that their Government ignores them and is arrogant. What do they mention? They mention their indignation at the denial of the Government towards a perceived reality of the Taito Phillip Field affair—a denial that is increasingly casting a shadow. 
DIANNE YATES (Labour) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to Part 5 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question That  
Part 5 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Part 5 as amended agreed to. 
Schedule 1 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to schedule 1 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 1 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Schedule 1 as amended agreed to. 
Schedule 2 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to schedule 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 2 as amended be agreed to.  
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Schedule 2 as amended agreed to. 
Schedule 3 
The question was put that the amendments set out on Supplementary Order Paper 52 in the name of the Hon Dr Michael Cullen to schedule 3 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to.  
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Amendments agreed to. 
A party vote was called for on the question  
That schedule 3 as amended be agreed to. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Schedule 3 as amended agreed to. 
Clauses 1 and 2 
BRIAN CONNELL (National—Rakaia) 
: 
 Thank you for the call. Here we are 4½ hours into this debate into the last stages and only two Government members have stood up to take a call in support of this much-vaunted legislation. Mr Jones was the only Government member on the Finance and Expenditure Committee to take a call and he did that only because he was shamed into it. He did not understand the detail of the bill but we cannot be too tough on him. I do not think that anyone on the select committee understood the detail because of the backroom deal that has been perpetrated on the House by Michael Cullen and Gordon Copeland. No one on the select committee was aware of it and Mr Jones made that abundantly clear by his lack of detail. He just did not recognise the legislation; it has changed so dramatically. 
Mr Copeland in trying to justify his deal got up and took a call to try to convince the Committee that he took his idea to the select committee and it was voted down. “Me me me”—he said—“I took the credit for it. Well I didn’t initially but now I do.” That is how I recall the sequence of events. He did not tell this Committee that it was the Labour members who did not vote in support of mortgage diversion yet he would have us believe that that is the proposition he took to the select committee. I say that it is a sad day for our democracy when a select committee can work through this issue—[ 
Interruption 
] Bopper boy—he should go back to Samoa and complete his corruption apprenticeship. 
Gordon Copeland 
: I raise a point of order Mr Chairperson. I understand that under the old Standing Orders members could have a wide-ranging discussion on all kinds of matters when they debated the title but that under the new Standing Orders the debate is confined to the title. The title has not yet been mentioned once by this speaker. 
The CHAIRPERSON (Hon Clem Simich) 
: It is in fact the widest debate of the Committee stage. 
BRIAN CONNELL 
: For those who are listening that was Mr Copeland trying to do another backroom deal. He does not even understand the Standing Orders but of course we are not surprised by that. 
This Government would have us believe that this legislation will change the savings habits of New Zealanders. Well it simply will not do that. We on this side of the Chamber have made it abundantly clear why that will not happen. Mr Woolerton in his sane moments even nodded his agreement when we were making some of our fine points in the debate. He knows that this legislation is flawed and significant changes will be made to it before the next election. Why will the bill not change the savings habits of New Zealanders? The reason is that it will not change their behaviours. There are simply not enough incentives built into this scheme to do that. If we want to change behaviours we have to make it worthwhile. The only way we will increase our savings record in this country is by reducing taxation so that people have more money to invest. How on earth can someone who earns $35000 or less be able to afford to make a significant savings contribution to this scheme? It simply will not happen. 
The scheme is fundamentally flawed and the Minister in the chair Michael Cullen knows it. That is why he has been acting with such indecent haste to try to turn the bill into something reasonable. It simply fails on that test as well. There is no doubt in my mind that we will be revisiting this legislation and Mr Cullen knows it. What is of deeper concern from an employer’s perspective—and I bet anything one likes in this Chamber that it will happen—is that the union movement will start using this as a negotiating or bargaining chip when it comes to employers’ contributions to the scheme. 
JOHN KEY (National—Helensville) 
: 
 One of the things that is pretty obvious about KiwiSaver is that the Government is not confident at all about this legislation. It was not confident when it took it to the Finance and Expenditure Committee although over the election campaign Michael Cullen tried to tell the people of New Zealand that it would be very successful. But the truth was that the Government was not confident about the scheme at all and knew that it would not work in its existing form because it had no incentives at all for New Zealanders to change. There was no incentive for a change in behaviour by the overwhelming number of New Zealanders who do not save today. There are lots of reasons why they were not saving—mostly because New Zealanders do not earn enough and they are overtaxed. It is not because of inertia. 
About the best thing one could say about KiwiSaver was that people might put in some money receive $1000 back and maybe over 5 years they could pull their money out and have a first home-buyer’s grant—but the scheme was never going to work. It was a load of dormant accounts that were never going to work. Michael Cullen knew that. He knew that it would not work but the plan was this. It was a pretty simple plan: the Government would tart the thing up and make it look a little bit better but it would do that during the next election campaign—which could be sooner as opposed to later. But let me assume for the purposes of the debate that it will be in 2008. That was the plan. The plan might still be to do that—to extend the contribution of around $1000—and the plan might still be to change a few areas. Michael Cullen made it clear in his remarks in his second reading speech that he was far from ruling out compulsion and that may or may not happen. But basically the plan was that the scheme was to be tarted up. 
The only reason the changes happened—right after we had heard 71 submissions the committee had voted unanimously against mortgage diversion and all those things—is that this Government has its back to the wall because it stole $882000 of taxpayers’ money to pump itself up to steal an election. And the Government has a member it is very embarrassed about. On Monday morning there was so much distance between Taito Phillip Field and the Prime Minister that he could have been on Pluto which is not even a planet any more. That is how much distance there was. 
So Michael Cullen thought that he had to do something and Gordon Copeland’s mortgage diversion scheme was about the best he could come up with in a rushed period of time. So he agreed to it. But it did not even tally with his question and answer—he knows that. Interestingly enough if this scheme is to be overwhelmingly successful then it is an interesting sort of Minister of Finance who rolls it out and says: “I guess we will suck it and see.” He then went on to tell people that despite the fact that the Government collects well over $500 million currently from the contributions made by employers—specified superannuation contribution withholding tax which employers currently pay on any matched contributions they have—the initial estimates of KiwiSaver are $35 million. So it is hardly going to be an overwhelming success. And yes I accept that the specified superannuation contribution withholding tax contribution will be larger by 2011 and 2012—it will be up around I think from memory $140 million—but the reason will be that more and more schemes will convert over to be in KiwiSaver because why would people want to have their money in an existing scheme that is non - KiwiSaver-compliant if they do not receive the tax benefits? So those schemes will convert over; I have no doubt about that. But will it increase the national pool of savings? 
Hon Trevor Mallard 
: Of course it will. 
JOHN KEY 
: I say to the Minister and the Labour Government that no it will not. In fact not only is there no agreement between the Government and United Future over mortgage diversion—but Michael Cullen had to do something—there was no agreement between Michael Cullen and his next pretender Trevor Mallard who said on  
Agenda 
: “I actually kind of favour compulsion.” and he favours State-owned enterprises being able to do anything they feel like. So that was his sort of tilt at the top job when it comes up for him in a few months’ time which it will and that is OK. So there will be lots of changes with KiwiSaver but we do know that for the overwhelming bulk of New Zealanders who currently do not save in any material form KiwiSaver will not change that. 
One of the fundamental points Michael Cullen Gordon Copeland and the Government have missed is that the only way schemes like this one work is when employers buy into them. So we agree on that point probably and the change of specified superannuation contribution withholding tax helps the employees. It does nothing for the employers. If Michael Cullen and the Labour Government were really serious about giving a leg-up to young New Zealanders and those who are in the scheme then they would have made it more attractive for employers to be in the scheme. The only way that will happen is if employees put huge pressure on their businesses and that will not happen in an overwhelming way. So any New Zealanders who take up this scheme who are not matched by their employer now will not be matched by future employers either. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 What another shallow speech that was from John Key the supposed finance spokesperson for National—the man who thinks that most New Zealanders have pool boys to come and clean their pools for them. Most New Zealanders do not even have pools let alone pool boys and most New Zealanders who do have pools do not have pool boys. But he has a pool boy a gardener someone who does the hedges and God knows what else. 
He is so obsessed with me that he mentioned my name 13 times in one 5-minute speech. The real issue is that National clearly is going towards a compulsory scheme and if it wants compulsion it had better answer some simple questions. Do people have to convert their savings into an annuity when they retire? Will there be an income and asset test as Australia has to see the compulsory savings offsetting the cost of New Zealand superannuation? Is that the hidden agenda yet again from National—to introduce an income and asset test as Australia has in conjunction with the compulsory superannuation scheme? Because that is the design of its particular scheme. 
National members are obsessed with mortgage diversion which is a small part of the bill but the amazing thing is Mr Chairperson—on your behalf I have to tell you—they voted against a tax cut. Only about 10 or 15 minutes ago the National Party voted against a tax cut. Those members voted against the removal of specified superannuation contribution withholding tax on the first 4 percent of employer contributions to KiwiSaver. So much for the obsession with tax cuts on the part of the National Party! But of course those members do tell us that if we have tax cuts we will get more savings. Well how come savings fell right the way through the 1990s when taxes were cut twice? How come it has never worked in New Zealand—that when people receive a tax cut they actually save the tax cut not spend it? It does not happen. 
This bill is the most important change to retirement income provision since the institution of the New Zealand Superannuation Fund. And who did that? We did that. It is the most important change since the change in relativities of New Zealand superannuation to an affordable long-term basis. Who did that? We did that—I did that in 1989-90. What has National ever done on retirement income provision? Firstly it promised the unaffordable in 1975 and bankrupted the country as a consequence and ever since then it has broken every promise it has ever made on superannuation—“no ifs no buts no maybes”. And on this bill which is the most important bill on private retirement income provision in New Zealand for a generation since the third Labour Government scheme all National members can do is quibble about the mortgage diversion scheme and worry about the effect it might have on Mr Key’s pool boy. 
KATHERINE RICH (National) 
: 
 I always think it is pretty interesting when Labour MPs have a chip at John Key. It seems to me a defining difference between the two parties because the truth is that we in National want people in State houses to grow up to be successful and to do well. That side of the House wants people who live in State houses to stay there and to be poor for their whole lives. That Minister in the chair Michael Cullen does not like people being rich and he does not like poor people becoming rich so as a result we can only conclude that he likes poor people to stay poor. Although members on the Government side of the House chip away and talk about ornaments and houses it is really nothing more than envy and a reflection of their views of where they want the people who vote for them to stay. 
I feel sorry for the Finance and Expenditure Committee members who have looked over this bill because they have worked hard. They looked at this bill heard submissions and had members of the public come in and consult on this bill. They reached their conclusions and decided that mortgage diversion would play no part in this bill. And then—hello!—2 weeks later the bill was dramatically changed to the point that Labour members of the select committee have felt unable to take a call because in fact they were unable to recognise parts of the bill. I wonder what that says about parliamentary process. What is the point of select committees working hard on something to nut out the pitfalls and to hear the views of the public if that work is to be ignored and the bill comes back to the House where the Government will change it anyway?  
 If members look at the insertion of a mortgage diversion aspect to this they will see that it could in fact undermine the validity of the whole scheme because the whole point of the scheme was to be a savings scheme. By introducing the ability for people to take out large amounts of their money the Government has made the scheme nothing more than a cheque account. In terms of the ability to withdraw money people need be in the scheme only 5 years. If someone in his or her 20s goes into the scheme that person can withdraw most of the money by the time he or she is 25. So much for this being a scheme to help people in their retirement—some 40 years earlier people are being allowed to take the money out and put it into something else. That is not saving for retirement. That is not teaching people about saving at all; it is just saying to people that money will be put into a cheque account and they can take it out for a special project. 
The other thing is that the bill assumes people will get into their first homes and stay in them. Well a lot of young homeowners go into that first home and move on to something else within the first couple of years. I do not think that owning one’s own home is the main thing that a person should do for his or her superannuation. Certainly it is part of what Kiwis do but this country does have a fascination with property. Retiring and putting something aside for one’s future is buying a rental property; it is not putting money aside into other sorts of superannuation as other countries do. 
The main thing the Government has done by introducing mortgage diversion and having all sorts of other abilities for people to withdraw funds is to increase the transaction costs of running the scheme. All the default providers are pretending to be excited but behind the scenes they are very concerned about their ability to provide a service and make any money out of it. Some of them are banking on compulsion being introduced at a later date but that is not the reason they are interested in it; they do not want to be left behind. But if the number of transactions introduced to this scheme increases dramatically that increases default providers’ ability to provide a scheme for Kiwis. 
So I feel sorry for small-business owners. It will be very hard to work out contributions. I feel sorry for the small-business people who will have to sit down and work out a contribution that might be different every week. Then they will have to work out deductions for student loans child support payments PAYE GST—it is no wonder that small-business people out there are saying that it is getting harder to do business in this country not easier. This will add to the complexity. 
Hon Trevor Mallard 
: I don’t believe that this member is as silly as that. 
KATHERINE RICH 
: There is the Minister of Finance in waiting. He thinks it will be easy. That man has never run a business; he would not have the first idea of what the pressures are in running a business. 
R DOUG WOOLERTON (NZ First) 
: 
 New Zealand First supports the KiwiSaver Bill because we believe it is a genuine attempt to encourage saving in this country. Previous speakers have acknowledged that savings have fallen over a number of years and we believe it is appropriate that the Government is taking a lead in this role. We are also happy to see that the Government has had the wisdom through tax incentives to make it more encouraging for business people to commit their part of the contributions and to help them in some way. 
It is rather sad that National Party members are stonewalling on this issue. I believe they are doing it because of ideology. What I saw in the paper the other day about John Key was absolutely right: if the day ever came when National could take the Treasury benches—I cannot see that happening to be quite frank—I believe Mr Key would hang on to this KiwiSaver scheme. Even more than that I believe he would make it easier and just slam in a regime to make the scheme compulsory because I believe that that is where his heart lies. I believe that Mr Key having spent a lot of time in New York having made a lot of money and having come back to New Zealand with the express purpose of taking over the leadership of the National Party is in no mood to muck around with voluntary schemes. I believe he is on a path to power that means he will brook no opposition and I do not believe he would do that in a bill such as this. So I believe that in time this scheme will be compulsory—but perhaps not under the Labour Government which I applaud for having a voluntary scheme. 
We in New Zealand First also believe that if a Government does not take a lead the generations that follow will be behind the eight ball. What I am saying is that this scheme is not something that can be an instant success tomorrow. Sadly we have heard National members quote all sorts of sophisticated money schemes in other countries but this scheme is an attempt to change the psyche of New Zealand to one that is savings friendly. It is about getting mothers to encourage their children to save; it is about getting children to understand that this is something they take on for life—it is not something they can just put aside. That is why what I call the enhancements are important. There is an understanding that a mortgage is to be paid at some stage. There is an understanding that from time to time sadly people will need to take a contribution holiday. This bill allows for that. More important the bill accepts that the time has now come when messages from the Government are again important. I see that as being inherent in this bill and in there being a tax incentive for employers to contribute. So not only does New Zealand First support the KiwiSaver Bill but it does so enthusiastically. 
PANSY WONG (National) 
: 
 That was a fine contribution from the new leader of the “Dynamic Party” Doug Woolerton. He looked calm but he was quite upset that United Future seemed to want to take the credit for the mortgage diversion scheme. I am afraid that he was a bit too late. 
The chairman of the Finance and Expenditure Committee Mr Shane Jones took a call earlier. But I am very concerned about the fact that he has already shown no confidence in this bill. In fact he has already told the Committee that just as the sun rises in the east so was the bill definitely to change as it went forward. He talked about a lot of fine-tuning. Well let us talk about fine-tuning. We are quite wary of Labour’s fine-tuning. Six weeks ago after Dr Ingram’s inquiry the Prime Minister the Rt Hon Helen Clark announced that the honourable Taito Phillip Field had been cleared of a conflict of interest. Six weeks later the fine-tuning from the Prime Minister is that the member should consider his future. The same fine-tuning applies to this Prime Minister the Rt Hon Helen Clark who said the Auditor-General and the Solicitor-General were wrong. The Labour Party stole the election by spending over $800000 of taxpayers’ money so why should the New Zealand public be convinced that they will gain under the KiwiSaver scheme? 
We know the KiwiSaver scheme will not work because of some interesting things said by Lianne Dalziel the only Minister who has taken a call—actually the Hon Michael Cullen has also taken a call now—on the bill. In her contribution earlier she said the KiwiSaver Bill is not for those people who cannot afford to save. In fact an amendment from the Green Party might have actually helped those people who cannot afford to save by making the contribution a smaller amount—say 2 percent. The Hon Dr Michael Cullen shakes his head. I would like the Minister of Finance to stand up and say how the Government can assist those people who cannot afford to save. The purpose of this bill is to encourage individual New Zealanders to save so that they can enjoy standards of living after retirement similar to those pre-retirement which is quite a tall order. If a large number of New Zealanders are not able to save or cannot afford to save then surely the purpose of this bill cannot be fulfilled. 
We have looked at some research from overseas and found that in Ireland which has a scheme similar to this one 92 percent of the accounts are dormant—that is people are taking a long holiday a long break from contributing to the scheme. So I do not know why the Minister thinks that this scheme is the best thing under the sun. The first priority for New Zealanders who cannot afford to save is to increase their income. One of the ways to do that is to reduce the amount of tax they have to pay. 
For the people in the group that can afford to save would they be incentivised to save under this account? My good colleagues including Katherine Rich have repeatedly said that some people would save just the amount they can withdraw then withdraw it to pay off their mortgage. That would not be I think the main objective of this bill which is to encourage them to look beyond property investment. We all know that right now the Governor of the Reserve Bank is always warning people about the overheated property market and saying that New Zealanders should look at other types of savings. But when New Zealanders start to look at other types of savings such as shares they see what the Labour Government did to destroy their worth in Telecom. 
TIM BARNETT (Senior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
Dr WAYNE MAPP (National—North Shore) 
: 
 One of the issues I want to lay to rest is the ridiculous assertion by the Minister of Finance who calls himself the Deputy Prime Minister that National has a secret plan to somehow gut national superannuation. In case the Deputy Prime Minister is unaware of it National has accepted the savings scheme and as he himself would say that will actually future-proof national superannuation for about 30 or 40 years. It has a long-run future. So along with so many other things this Government tries to do Michael Cullen should not try to tell lies to the public of New Zealand. It is completely false and those members are doing it all the time. 
The CHAIRPERSON (Hon Clem Simich) 
: The member will withdraw please. 
Dr WAYNE MAPP 
: I withdraw. 
The Government has forgotten what its goal was for this whole scheme. Actually one of the guilty parties is one of the Government’s little helpers of elves Mr Copeland. Do members know what the Government’s goal was? It was to have a savings scheme. The Government wanted to have a savings scheme and it has been prepared to spend $400 million of taxpayers’ money in order to have one. A lot of people would say that is a good thing. The Government will even allow people to use some of the money for a first home deposit. A lot of people would say that is a good thing. The bill went through the Finance and Expenditure Committee and what did Mr Gordon Copeland decide to do? He decided to turn it into a spending scheme. 
This Government has absolutely no idea how modern mortgages work any more. It says that people can divert their money to pay off their mortgages. A lot of mortgages have floating levels so what would happen? A person may divert a bit of money out of the scheme with a Government incentive to reduce his or her mortgage. That person may then go back to the bank and essentially use the scheme as a cheque account—as my colleague Katherine Rich has said—and lift the level of the mortgage back up. So a scheme that uses a taxpayer subsidy to boost savings—on the face of it that is perhaps not a bad idea—has now because of the Government’s foolish acceptance of Mr Copeland’s plan been turned into some sort of general spending account. Effectively people will be able to use a tax deduction to pay for ongoing consumption. It has gone from being a savings scheme to one of ordinary consumption because that is how modern— 
Hon Dr Michael Cullen 
: What tax deduction? You can’t use the employer’s contribution. 
Dr WAYNE MAPP 
: I say to the Minister that the Government is making a contribution for the employees as well. The truth is that that money is now accessible to people for their mortgages. It is simply ridiculous. 
I have to say that what started off as being perhaps a reasonable idea has been totally distorted. It is true that people cannot use the employer’s component but they can use their component—and there is an incentive around that as well. So the Government in furtherance of its manipulation of the main arrangements will do anything to rort what was perhaps a reasonable idea and basically completely distort the whole intent of the scheme. 
What was the purpose of the scheme? Let us go back to that. The purpose was savings. What was the purpose of those savings? It was retirement. What will we do now? We will use that money for normal consumption. That completely distorts the purpose of the scheme and that is one of the reasons why National is voting against it—not to speak of the compliance issues and all of those other matters as well. 
As my colleague Mr Key has said the scheme involves a $35 million tax deduction but it comes at the cost of a $400 million contribution by the Government in various forms. Where is the balance there one would have to ask? One of the great things about tax policy should be simplicity. It should be simple to administer it should have simple rates and it should be easy to understand. That was achieved some years ago particularly in the 1980s and early 1990s. This Government has progressively destroyed the simplicity of the tax system and that is why the scheme will not work. 
Hon CLAYTON COSGROVE (Minister for Building Issues) 
: 
 I move  
That the question be now put 
. 
A party vote was called for on the question  
That the question be now put. 
Ayes 67 
New Zealand Labour 50; New Zealand First 7; Green Party 6; United Future 3; Progressive 1. 
Noes 54 
New Zealand National 48; Maori Party 4; ACT New Zealand 2. 
Motion agreed to. 
Clause 1 agreed to. 
Clause 2 agreed to. 
Bill reported with amendment. 
Report adopted.