Swain Paul: Securities (Local Authority Exemption) Amendment Bill — In Committee 
Swain Paul: Securities (Local Authority Exemption) Amendment Bill — In Committee 
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Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 When I last rose in this Chamber I began a speech in the Committee stage of the Securities (Local Authority Exemption) Amendment Bill. I looked up and saw that the gallery was packed and I thought that it was in anticipation of my rendition of a speech about local authorities being able to issue debt. After I sat down I realised that it was nothing to do with me; it was to do with our colleague Su’a William Sio who was making his maiden speech—and a fine speech it was too. I have now had to lower my sights again and say that although I am sure the securities issue was interesting for the people in the gallery it is an important issue for local authorities. 
Before the dinner break we heard a little bit of history from the National list member Richard Worth. 
Hon Darren Hughes 
: Oh! 
Hon PAUL SWAIN 
: He often provides a little history. 
Hon Darren Hughes 
: A pre-dinner speech. 
Hon PAUL SWAIN 
: It was and it was quite an interesting little speech. 
Hon Judith Tizard 
: In the absence of policy. 
Hon PAUL SWAIN 
: The Minister is right; it was in the absence of policy and history is really a poor substitute for policy but never mind. The member talked about the fact that these amendments were brought about because a previous Government in 1996 and 1998 made some changes that made it difficult for local authorities to issue debt securities. This was in the days when we all knew about local council bonds and health board bonds etc. 
But then the Minister in the chair the Hon Lianne Dalziel—generously I thought because there was some accusation that we criticised the National Party for doing it so how come it has taken us so long—indicated that really it was not until the Local Government Forum which the Prime Minister chairs and which I have had the good fortune and pleasure to go to on many occasions. It is a great partnership— 
Hon Judith Tizard 
: Co-chair. 
Hon PAUL SWAIN 
: In my time the Chair of Local Government New Zealand Basil Morrison co-chaired the forum with the Prime Minister. It was at one of these functions that the issue of the problems that local authorities had with trying to issue debt securities was raised. I think the Minister said that from about the point when the issue was raised to the point we are at today is a little over 12 months so I congratulate the Minister on that. 
The issue is really about local authorities trying to fund large and expensive infrastructure projects. [ 
Interruption 
] 
The CHAIRPERSON (H V Ross Robertson) 
: Cellphones are not permitted to be switched on in the Chamber. Will members please switch them off. I am sorry to interrupt the honourable member. 
Hon PAUL SWAIN 
: That is all right; I thought it was a bit of light relief. I was saying that the issue is about local councils being able to issue debt securities particularly on projects that are enormously expensive. Of course with the issue of bonds and so on drying up more and more councils were left to try to fund projects out of income and it meant that that kind of opportunity was not possible. 
This bill tries to set down some rules. First it exempts local authorities from the full disclosure requirements of the Securities Act. This is primarily because people know that local authorities are pretty secure investments in the sense that there are elected people who are accountable and there is a rateable income that people can work through. It is all very transparent and open. The projects themselves need to be done and are required to be done and people can invest with some degree of certainty at a time when the whole question of investment is before the public. We do not need to dwell on the Blue Chip type of example but people are looking for a little more certainty. 
Hon Darren Hughes 
: A red chippy. 
Hon PAUL SWAIN 
: Yes a red chippy from Rimutaka will hopefully be my successor. I apologise to Dr Cullen because I did not get his joke at the start—it was far too subtle for me—but I do now and I formally apologise to him for that. 
Local authorities do not have to follow the full disclosure regime under the Securities Act but some important things do need to be done. We have added a few more subclauses just to give the matter a little bit of certainty which include things like when local authorities are issuing their financial statements they need to refer to the last audited annual financial statements in the investment statement they distribute when issuing debt security. The last audited financial statement from a council needs to be part of the investment statement. The Commerce Committee which I must say was ably chaired by Gerry Brownlee added a number of other requirements. 
We also looked at some other issues. For example when Governments issue debt the Minister himself or herself is not criminally liable. Local authorities rightly said “Well what about us? We are in a similar situation.” The select committee spent some time on that matter and in the end we decided we would not apply that general rule to local authorities. For a start there are a lot more checks and balances within the central government system. It was also felt that Ministers of the Crown are in a very different situation because they have significantly more reporting and accountability requirements. I felt that Local Government New Zealand and others made a reasonable point with their submissions and we spent some considerable time on them. 
There was another issue in relation to the problem of who signs the financial statement. We said that rather than having all councillors sign the financial statement—and that would mean there would be a power of veto and that an important project may not go through as a result of one councillor vetoing it—that as is in the Act two people need to sign the financial statement. Of course if everyone were not collectively responsible then we would not get two people signing it because those two people would be liable. What will happen is that two people sign the document and all the councillors are then criminally liable for the accuracy of the content of the investment statement. So if a particular councillor opposes a project he or she could vote against it but it would not stop the project. The councillor would be required to ensure to the best of his or her ability that the accuracy of the investment statement is correct. 
Chris Tremain 
: Is this a reselection speech? 
Hon PAUL SWAIN 
: No it is not actually. I am very pleased to tell the member who is interjecting that it is not. If he listened carefully he would know why it is not. I can tell the member that I am a shadow of my former self. In the 1990s I was much more pithy witty and sharp. 
Chris Tremain 
: Perhaps it’s an attempt at local government then. 
Hon PAUL SWAIN 
: No no although of course one never says never. 
Hon Judith Tizard 
: My father was elected for the first time into local government in 1983. 
Hon PAUL SWAIN 
: There we go—his first time in local government was in 1983. 
Hon Judith Tizard 
: To the district health board. 
Hon PAUL SWAIN 
: Well there we are you see; there is hope for us all. I thank Chris Tremain for his confidence in me but it is nothing to do with that. I am attempting to try to point out some of the vagaries of this legislation. 
As I was saying a councillor needs to make sure that the investment statement is accurate. Of course the question will be “Well look if I did try and it wasn’t accurate am I criminally liable?”. There will be checks and balances along the way and I presume that as long as minutes are recorded that people will make sure there is outside advice and help. That raised the question of compliance costs. The reality is that in this legislation the most important thing is that compliance costs are lowered. I think there will be more certainty in the legislation for local authorities to raise funds for their projects. 
One issue that was not raised at the Commerce Committee which I was just thinking about before was uptake. Perhaps I can ask the Minister in the chair Darren Hughes about it. I know he has extensive knowledge of this issue—probably coming from a more statistical background. We know that he is the fount of all wisdom and knowledge in that particular area. I hope there is an opportunity for the Minister to take a call so that I can ask the officials a question via him. One of the questions I did not ask the officials at the select committee—I came a bit late to the select committee not physically but just because I was appointed late to it and I do not know whether this question was asked—was what work had been done by local authorities to suggest what the uptake would be when this legislation is passed. I think that would be interesting to know. 
Everyone says that this legislation will make things easier and better. We can all sit here and say “Yes let’s pass the legislation” but I suppose the question really is what work has been done to get some sort of an idea about when it is passed what the likelihood is of its actually being taken up and relatively quickly. That is something that presumably I probably should have asked Local Government New Zealand when it came to the select committee but I hope there is an opportunity for the Minister to take a call. Then again the Minister might not want to take a call because he might think it is obvious and would not want to waste the time of the Committee explaining something to me that he can explain later on.