Cunliffe David: Financial Reporting Bill — Second ReadingText is incorporated into the Bound VolumeCunliffe David: Financial Reporting Bill — Second Reading[Sitting date: 02 July 2013. Volume:691;Page:11515. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn):Tēnā koe. Ko Titirangi te maunga. Ko te Whau te awa. Ko Hoani Waititi te marae. Ngāti Pākehā te iwi. Te Roopu Reipa te mahi. I would like to honour Māori Language Week. I would like to acknowledge members who have spoken and to reaffirm that Labour supports this Financial Reporting Bill. This bill has benefited from the work of the Commerce Committee and I recognise the chair and the members of the select committee who are here in the Chamber today.The bill seeks as my colleague David Parker said earlier the right balance between the reduction of unnecessary compliance costs and the maintenance of proper standards of accountability and transparency for companies for charitable organisations and for other forms of entities such as friendly societies. The select committee and the Government have wrestled with where that boundary line should be and in these brief remarks I would like to draw upon several of the boundary issues. But before I do that let me say that Labour’s support for this bill reflects our determination to reduce unnecessary compliance costs wherever available. Compliance costs—red tape—are a bit like a hedge. You need regulation to maintain boundaries but if you do not take the clippers to it occasionally it tends to get a little overgrown. As David Parker said earlier this bill is a worthy tidy-up bill. It is a bit of housekeeping if you like. It is where Parliament gets the hedge clippers out and tidies up some of those boundary fences around our company law and that is an appropriate thing.I would note though—if members will forgive me in a fairly technical bill a slightly political comment—that there is a bit of spin from the other side sometimes that Labour somehow likes compliance costs. I think our support for this bill really puts that ghost to rest. It is about as true as the spin that Labour somehow likes fiscal deficits. Of course members of the public know very well that in the last 15 years certainly since I have been in Parliament Labour has never ever ever when in Government run a fiscal deficit and we do not plan to. National since I have been in Parliament has never ever ever run a fiscal surplus. It does plan to but as we have said in earlier debates there is so much smoke and mirrors in Budget 2013 that it is very difficult to discern whether that will actually occur. The third piece of spin that I would just draw attention to on the way through is that somehow Labour is anti-growth. As I have said before in this House if one examines a 30-year history of economic growth data and matches it against the periods when Labour and National have led the Government the conclusion is irrefutable that growth rates on average in a 30-year cycle have been higher when Labour has been in Government. We have taken the concept of growth strategy very very seriously. We have been prepared to get the efforts of the State squarely in behind that. It does not always follow to be fair that business confidence reflects higher economic growth under Labour but none the less I make the point.May I just quickly pick up the point that several previous speakers have made about small and medium enterprises and endorse what members opposite have said. Small and medium enterprises are absolutely crucial to New Zealand. They are about 80 percent by number of our businesses and they employ about half of the total employed workforce. But as David Clark said earlier there are currently 2500 fewer new businesses being created per annum and that is something that I think both sides of the House would wish to see turned round. Our business failure rate is that four out of five new businesses go belly-up in the first 2 years. That is a matter that is not new; it has been across different Governments. But it stands in huge contrast to some of the rapidly developing countries of South-east Asia where the small business survival rate is the other way round; it is an 80 percent survival rate. I think the House and the Government need to think carefully about how we can reverse that trend.Let me go to the key issue here which is the boundary between transparency and reduction of unnecessary compliance. The requirement under the bill to prepare general-purpose financial statements will apply to large companies and large overseas companies that carry on business here. They are defined as having assets including $60 million worth of turnover; having revenue exceeding $30 million; having more than 10 shareholders—through a 95 percent vote they can opt out; and having fewer than 10 shareholders if shareholders who hold at least 5 percent of the voting shares require the company to comply. A number of different audit and financial statement requirements follow from those definitions but those are really at the heart of this. What the bill is trying to do—and Labour supports with some need for ongoing vigilance this attempt at a boundary—is say that if a company has a large number of disparate owners or shareholders then it absolutely needs to provide a full set of financial reports provided it is not effectively de minimis in scale.If a company is either very small or it is very closely held then it may not be necessary to provide the full set of audited financial accounts. That is the core principle in the bill. That is a principle we agree with. But let me just lay down a slight caution that if it were to transpire that the new flexibility was abused because for example companies that were effectively large and relatively widely held found a back-door way of redefining themselves as being narrowly held for the purposes of avoiding legitimate accountability that is something that I think a future Labour Government should and would want to take seriously and could cause re-amendment of the law in this area.I would like to compliment the Commerce Committee very briefly on two amendments that it made. The first was to increase the threshold for registered charities to not have to prepare full financial statements. That threshold has been increased appropriately on the basis of latent CPI movement from $45000 to $125000 per annum turnover. It also looked at the provisions of the Financial Reporting Act 1993 that restores an exemption that was omitted that would exempt inactive companies from the requirement to prepare financial statements. That is good common-sense stuff. The select committee also—and I think Carol Beaumont would particularly agree with this given her work in the area—assisted friendly societies to take a common-sense approach to their financial reporting obligations where they are small or closely held.With those remarks may I compliment the select committee. Often we have pretty vigorous debates in this House and the public does not always see Parliament working harmoniously in a bipartisan fashion on the sort of nuts and bolts legislation that affects us all. I think that the public of New Zealand would be pleased to see Parliament working consensually on matters of detail of this kind. It does as other speakers have said reflect well on our parliamentary system.