Debate on Crown Entities Public Organisations  and State Enterprises — In Committee 
Debate on Crown Entities Public Organisations  and State Enterprises — In Committee 
[Volume:631;Page:3045] 
Debate on Crown Entities Public Organisations  and State Enterprises 
In Committee 
The CHAIRPERSON (Ann Hartley) 
: The House is in Committee for the consideration of the performance of Crown entities public organisations and State enterprises. The debate on the performance of Crown entities public organisations and State enterprises is a series of debates on individual financial reviews of Crown entities public organisations and State enterprises as reported by select committees. The debates on the individual financial reviews should be relevant to their performance in the 2004-05 financial year and their current operations. A member may have no more than two calls on each financial review. Three hours is allowed for the debate. At the conclusion of the 3 hours the Chairperson shall report to the House. There is a list of financial reviews available for debate on the Table. I understand that members have indicated the Crown entities public organisations and State enterprises they wish to debate. 
LINDSAY TISCH (Senior Whip—National) 
: 
 I just wish to seek clarification on the two calls that a member can take. If we look at the first number of calls under Dr Cullen as Minister of Finance are we saying that there can be two calls on let us say Air New Zealand and two on the Earthquake Commission or is it two within that whole bracket of entities? 
The CHAIRPERSON (Ann Hartley) 
: Two on each. 
Reserve Bank of New Zealand 
Dr PITA SHARPLES (Co-Leader—Maori Party) 
: 
 The commitment that the Governor of the Reserve Bank Dr Alan Bollard makes to New Zealanders in his 2004-05 annual report is that as New Zealand’s central bank the Reserve Bank will do everything in its power to build national and international confidence by promoting the maintenance of a sound and efficient financial system. Yet yesterday a survey by Bloomberg News found that the New Zealand dollar has just been named the worst performer out of 16 major currencies. ANZ National Bank chief economist Cameron Bagrie adds further gloom to doom by stating that people were finding investment opportunities elsewhere and by forecasting the New Zealand dollar would hit below US50c in 2007. 
So let us add it up: the Reserve Bank wants to promote a sound and efficient financial system; the New Zealand dollar has been named the worst performer; and to top it all off the UMR Insight research omnibus survey has identified that the unfavourable rating for the Reserve Bank has increased to 14 percent and 38 percent of all who were surveyed were unsure about or had never heard of the Reserve Bank. One of the key reasons given for the unfavourable stakes was “thinking that the Reserve Bank is out of touch with the people and a general dislike for the policies”. In plain numbers the majority—52 percent—of those surveyed either had never heard of the bank or gave it an unfavourable rating. It is a bit like if we do not know where we are going any road will get us there. As the Government draws up the road map for the Reserve Bank this is an indication that it has lost its economic way. 
One of the comments that absolutely struck home from the UMR Insight survey was the following comment describing the Reserve Bank as being out of touch with the people because it is “concerned only with inflation much too narrow concerned with GDP should be concerned with quality of life should go and measure qualitative rather than quantity.” These are serious issues. They are issues of major concern to all members of this House. What is more they are issues of absolute priority to all people of this nation. As if it could not get any worse in the Reserve Bank’s annual report under “Change with the times” the Reserve Bank states it will “strive to inspire public confidence” yet there is nothing in that report that goes anywhere near responding to the criticism described in the UMR Insight research. 
We are at a critical turning point. We can choose whether to fail or to survive in measuring the economic accomplishment of the nation. The Maori Party is here to tell the nation that GDP will never be enough in making positive advancement as a nation—advancement that is comprehensive sustainable and inclusive. All that GDP has ever intended to do and can do is to report on activity not progress. The Maori Party is committed to a new ideal the genuine progress index which is an innovative new way of sustaining all aspects of our wealth—human and other—through investment. If the Reserve Bank really wants to change with the times it needs to rethink development and prove that economists can be in touch with reality. 
Basically the genuine progress index tracks all flows of income that are not in the cash economy—the widest range of measures that affect the health of the economy. The genuine progress index offers us an exciting alternative to account for the whole value of human social and natural capital alongside standard measures. With the conventional measurement of GDP the assumption is always that more is better. With the genuine progress index we realise the assessment is always value-based and indeed as in the case of pollution ill health crime and clear-felled forests it may be that less is best. 
Tangata whenua have always understood that social economic and environmental prosperity is inextricably linked. In caring for the health of our environment as well as caring for our physical and spiritual health we can achieve an indicator of net advancement and progress—an indicator that expresses the values of Aotearoa including kaupapa Maori and an indicator that is based on the concept that if we preserve and protect our social and environmental assets we will ensure a rich legacy is left for our descendants. 
Our history and our language of communication is embellished with constant reference to sustainable development. The proverb 
 “Toitu te marae a Tane toitu te marae a Tangaroa toitu te iwi.” [ 
As long as the realms of Tane and Tangaroa remain so will the people 
.] emphasises the interdependence people have with natural resources to ensure well-being. Long-term prosperity is dependent on the land and all natural things the protection of the realm of the seas and oceans and the strengthening of the people. The Maori Party will put on record its commitment to measuring quality along with quantity to strive for a quality of life that is good for the economy and to measure real and genuine progress. Not to do so would be to perpetuate financial insecurity a deteriorating environment rising crime and sentencing rates increasing poverty and continuing inequalities. 
Hon Dr Michael Cullen 
: I raise a point of order Madam Chairperson. I am sorry to interrupt the member but this is quite an important point in a debate of this sort. Because it is a time-limited debate the time allocated is proportional to the size of parties. My understanding is that the Maori Party is entitled to only one 5-minute call in the debate so if the member continues to have an additional call he is in fact taking time allocated to another party and subtracting from that party’s entitlement. This is not an open-ended debate where the member can take further calls in that regard. I am sorry to interrupt the member but that is actually quite an important point. 
Dr PITA SHARPLES 
: That is fine. Thank you Madam Chairperson. 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 On historical principle I have a great deal of sympathy with some of what the member was saying towards the latter part of his discussion—that is that GDP is not a measure of everything in our society. Indeed I think that those people who tend to talk as if GDP per capita is the only thing that is important are missing many many points. They are missing first of all the point that GDP per capita in itself is not necessarily a very good measure of relative material standards of living because it takes no account of a whole range of costs that may go into that element. For example it is often said that when one goes to the UK £1 is worth $3 but for many things one buys one might as well regard £1 as equal to $1 in terms of what it actually buys such as a cup of coffee or something in a restaurant. The second thing is that GDP cannot possibly measure a whole range of issues around quality of life and style of life and it is often a poor proxy—except in very broad senses—around a range of social indicators such as life expectancy housing quality etc. 
However it is also true to say that over the broad span GDP is a measure of the standard of living as long as the argument is not pressed too far. Our standard of living today is immensely higher than it was 100 or 200 years ago and our GDP per capita is immensely higher than it was then. In traditional pre-European Maori society life expectancy was barely 30 years. That has been well demonstrated by the analysis of remaining skeletal evidence. Now of course life expectancy for Maori is less than it should be because it is less than the general average of the population but it is more than twice what it was under a traditional society and clearly on many other social indices similar points could be made. 
Coming back to the subject of the Reserve Bank I think it is important to recognise that that bank has to some extent a limited brief. First of all it is there to manage the financial system which is not the same as to give the value of the dollar. It is to ensure that the financial system is operating in a prudential fashion. That banks are not likely to fail for example is the most obvious measure of a secure financial system. 
The Reserve Bank’s second role and the one most seen in the public arena is to try to manage monetary policy to underpin low inflation. I am sure the member does not want to go back to the days of high inflation which erratically redistributed wealth and income and which led to enormous uncertainty in many ways. At the moment our inflation rate is something above that target rate—which is another reason why tax cuts are a silly idea at the present time. But more important than that the bank at the moment is in what is called a tightening cycle. It has been raising interest rates. 
Not unnaturally people do not like increases in interest rates. It is not the job of the Reserve Bank to be popular. It is not going out there like Westpac the BNZ or Kiwibank to try to find out whether people like its services because it is a regulator and it is a moderator of interest rates. Those are not two key functions that are necessarily designed to make the Reserve Bank popular. I have always said that the most important reason for giving central banks independence to raise and lower interest rates—apart from the fact that Ministers of Finance do not like doing the election years—is to ask: “Why the hell should the Minister of Finance take the blame and leave it off for reserve banks anyway around the world?” which my good friend Gordon Brown saw instantly as a very good reason for giving the Bank of England operational independence in that matter when Labour became the Government in the UK in 1997. 
The Reserve Bank’s job is also not to try to make the New Zealand dollar higher. Yes the New Zealand dollar in one sense has been underperforming in recent times if we mean by that that the dollar has fallen. But the dollar falling has been good news in recent times for exporters—not bad news. I do wish that our media would stop reporting the dollar as though it were some kind of representation of the male physiognomy; “up” is not good and “down” is not necessarily bad when it comes to the level of the New Zealand dollar. But if we watch television every night we know that it talks as though the New Zealand dollar did well on the days it went up or did badly on the days it went down. But if one were an exporter selling manufactured goods to Australia when the dollar was worth over A90c one was hoping the dollar would have a bad day—and one wanted a lot of bad days in a row—in order to be able to make some profit on one’s bottom line. 
So it is not the job of New Zealand’s Reserve Bank to prop the exchange rate above the rate that is represented either by the market or by the equilibrium rate. In a small economy the real problem is that the New Zealand dollar will be a volatile currency because it has low liquidity in terms of international exposure. 
Report noted. 
Television New Zealand Ltd 
Hon MURRAY McCULLY (National—East Coast Bays) 
: 
 I want to take the opportunity today to speak to the House about the unusual circumstances in which Television New Zealand Ltd (TVNZ) had its annual review completed by the Finance and Expenditure Committee this year and about the unfinished business that lies before that committee having completed the annual review. 
It is widely understood that in the past 12 months TVNZ has been beset by major eruptions. We have seen scandal after scandal culminating in the departure of the company’s chief executive Mr Ian Fraser who made assertions of political interference in the work of the management of that company. That led the Finance and Expenditure Committee to take a most unusual course in relation to the financial review. The select committee decided there should be a conventional financial review by the committee but parallel with that review and subsequent to it a formal inquiry should take place to enable members of Parliament to ask the questions in order to give the public the answers they were due about what had happened in their State broadcaster. 
 It is now a matter of history that as a consequence of the two hearings before the Finance and Expenditure Committee TVNZ ended up before the Privileges Committee of this Parliament. That was the subject of an earlier debate in this House. Suffice it to say that on this occasion TVNZ was handed a very stiff warning by the Privileges Committee and was required to apologise to the House. The director was fined $1000 which was the first time in 103 years that we have seen a fine levied by the Privileges Committee. The committee especially noted the very poor culture that exists in that company. 
I say to the Committee today that this is unfinished business lying before the House and the Finance and Expenditure Committee as we move into the next few weeks. What the Finance and Expenditure Committee and the Privileges Committee did not know when they conducted their reviews was that inside TVNZ were some private emails from Mr Fraser to Mr Boyce which told us two things. First they told us that the then chairman of TVNZ Mr Boyce thought the members of the Finance and Expenditure Committee of this Parliament were “bastards” who were the enemy of TVNZ. We could not possibly underline more graphically the contempt and disdain that senior people in TVNZ have for the select committee process and for the whole process of accountability to this House and to the owners of TVNZ than is evident in that email. 
Second we also know from those emails that Mr Boyce was part of a process of avoiding revelations about what he called the “mid-year stuff” between “yourself and Ann”—Mr Fraser and Dame Ann Hercus—because revealing the truth about that would “be a disaster for everyone”. So in this email we have a chairman of TVNZ telling the departing chief executive that it is his firm intention to go along to a select committee of this Parliament and lie like a flatfish. If the “mid-year stuff” between Mr Fraser and Dame Ann Hercus were to come up Mr Boyce intended to lie. He then proceeded in this email to traverse the lie that he intended to tell the Finance and Expenditure Committee. 
How very very unfortunate for Mr Boyce that those emails should see the light of day. How even more unfortunate for Mr Boyce that the inquiry is still alive before the Finance and Expenditure Committee. I say to Mr Jones the chairman of that committee and to my colleagues who serve on that committee that this is a test for them. This is a test for the Finance and Expenditure Committee that conducts the review of TVNZ. Are they prepared to accept being told by the chairman of TVNZ that they are bastards who are the enemy of the company? And are they prepared to now find out that the chairman intended to and duly did lie to that committee? 
Hon STEVE MAHAREY (Minister of Broadcasting) 
: 
 I will take a short call on Television New Zealand. The financial review for the year is— 
Hon Bill English 
: Another mess. 
Hon STEVE MAHAREY 
: The member Bill English should go and get therapy. He has been such an angry young man for such a long time. He ought to seek help and that is all I am saying. I want to tell listeners at home that we are just trying to get through the insistent yelling of Mr Bill English who needs a bit of counselling. 
Television New Zealand operates in a world where things have changed quite substantially for all public broadcasters all around the world. The issues canvassed by Mr McCully I will leave for the select committee to canvass because they are issues that lie within the purview of the committee and are nothing to do with the financial review. I want to put on the record of the House that the television business is a very difficult business to be in. Not only is it one of high competition with a fragmenting audience but a lot of people out there are seeking to get others involved in radio television newspapers and magazines so the media market is highly competitive. Many people like to compare Television New Zealand’s performance now with its performance in the past but the past is something very different. There were fewer outlets competition was less and people automatically watched Television New Zealand—that is what they did. 
I want to put on the record my thanks to the company for getting through what has been a difficult period where there has been a number of issues around presenters and so on. It has managed to maintain a very good financial performance during that period of time. In fact in comparing Television New Zealand with other public broadcasters around the world one can see that of all public broadcasters the company is holding its audience share which routinely peaks at around 65 percent. It holds the major news share and therefore is still returning a major commercial return to New Zealand and in that sense is more successful than ABC NHK CBC and BBC. Those organisations do not have that kind of audience share and therefore cannot command that kind of share in the market and cannot get that kind of advertising revenue. 
That is an amazing performance when one thinks about the kind of competition that is being undertaken here. New Zealand has the most competitive media market anywhere in the world at this time because of our heavy deregulation in the 1980s. It is the nature of the game. So from a financial point of view we are looking at a year where things have been good for Television New Zealand and it got its share of the market as we had hoped that it would. 
On the other side of the equation we know that the company has also had the operations of the charter to consider. The charter is a new area of work. It takes a while for programmes to be commissioned to be put on the air and then to find out whether they are working. But if we look back over the last little while with the small amount of money that the company has had we have begun to see a change in its behaviour. Whether it be more Pacific Island news being put on during an evening or whether it happens to be a new programme like the  
Frontier of Dreams 
 we are seeing an effort made by Television New Zealand to begin to do things that otherwise it would not do in a commercial environment. It is beginning to change its behaviour. It has a better relationship with the private broadcasters that make many of its programmes. It is attempting to move down that road and I am hoping that what we will see in the immediate future is more of that kind of behaviour. 
This country owns television and radio because they are part of the national infrastructure of any country. Whether it be science schools or whatever we want to have infrastructure that is our own because we want to be able to control those things that matter to this country. That is why we own Television New Zealand and when we look back over the past year we see that this company is seeking to carry out its mandate as a public broadcaster within the constraints that it has on it—for example not getting a great deal of money from the taxpayer. It is expected to generate income from its commercial revenue and it is managing to do that as well. 
As Minister of Broadcasting I want to put on the record my thanks to Television New Zealand for its performance in those areas. As I have said elsewhere on the record I will be pleased to see it out of the news for some of the things that have put it in the news over the last little while and carrying on with an underlying strong performance through this year. 
Report noted. 
Foundation for Research Science and Technology 
Hon BRIAN DONNELLY (NZ First) 
: 
 First I note that the issue that I wanted to address today was in fact the Crown research institutes but the Foundation for Research Science and Technology is so closely linked with Crown research institutes that it does not really matter. In particular I want to talk to the two reviews that were carried out during the 2003-04 financial review period. Being on the same select committee for quite a considerable period of time certainly has one advantage particularly when it comes to the Crown research institutes in the sense that one gets to see the whole lot of them find out what they are doing find out the amazing range of science that is taking place in our Crown research institutes and see how valuable they are to our society. It is also possible to see the changes over time within their practices and what is happening with them. 
I have to say that largely the model has been very successful but there are some issues with it. I want to use the two reports that were done for the New Zealand Pastoral Agriculture Research Institute and for Landcare Research to highlight some of those issues at this particular time. If we refer to the Pastoral Agriculture Research Institute we can see the contribution it makes to our society and our economy. During this particular period of time it employed 950 staff including 640 scientific staff; its total revenue was $133.651 million which compared with $129 million from the year before; and it had 13 subsidiaries operating under it. 
 During the period of review a decision was made in terms of this particular Crown research institute to transform the focus from life sciences to a closer focus on the pastoral sector. The chief executive told us that although statistics show that New Zealand farming has been the most productive sector of any industry in any OECD country in the last 20 years it is increasingly facing challenges from other countries with cheaper and better land and cheaper currency and labour. For example South American countries already produce milk more cheaply than New Zealand does and several other countries are not far behind. That is really a wake-up call to us that we cannot continue to take things for granted in this “backbone of the country” industry. 
Significant restructuring took place during the year in review particularly with the move towards establishing three national research centres in partnerships with other entities. These included an animal health institute in Palmerston North in partnership with Massey University a National Centre for Biosecurity and Infectious Disease in Wallaceville with the Institute of Environmental Science and Research and Biosecurity New Zealand and a National Centre for Reproductive Sciences and Mammalian Genomics in Dunedin in partnership with the University of Otago. So we get some sense of the complexity of the arrangements that are taking place within our society. 
One of the issues in New Zealand is the level of private funding or private investment in science research. Pastoral and agriculture research certainly highlights this because one would consider this as an area where there was a lot of private funding of research. Admittedly our figures are skewed in the sense that we do not have a lot of funding into weapons development as some other nations do. Nevertheless it is a continuing and ongoing problem. AgResearch analysis shows that in 2003-04 the pastoral sector invested approximately $10 million in research and development. This is less than one-fifth of 1 percent of the New Zealand dairy industry’s $5.72 billion in export earnings. Of the $10 million AgResearch received $1.4 million. Only $1.4 million went into the particular entity that focuses on this particular sector. AgResearch considers the lack of investment by the sector in research and development—rather than in dairy processes and proprietary in-house assets—and declining Government funding to be matters of serious concern particularly in view of the challenges facing the sector. New Zealand First has to agree that this is a worrying trend in such an important area of investment. 
It is extremely important to compare the report on AgResearch with that on Landcare Research New Zealand. One of the things I have to note with regard to the Landcare Research report is that it is a model of annual reporting. [ 
Interruption 
] Just by way of explanation for the Minister in the chair Steve Maharey New Zealand First has rolled up its two calls into one. Only one person from New Zealand First will speak in this debate and we want to put our comments all together in a cohesive form. 
Landcare Research specialises in the sustainable management of land resources by optimising primary production enhancing biodiversity and increasing the resource efficiency of businesses in conserving and restoring the natural assets of our communities. I was speaking about reporting processes. Landcare Research was awarded the Institute of Chartered Accountants of New Zealand award for sustainability reporting for its 2003-04 annual report for the fourth consecutive year. It really is a worthwhile model for us to keep a close eye on. In addition Landcare Research also undergoes a performance verification audit based on international standards for the voluntary reporting of the economic environmental and social impact of a company’s performance in accordance with the Global Reporting Initiative guidelines. We were informed that Landcare Research benchmarks itself against companies such as BP and Vodafone. So we have a model of excellence in this particular case and as I said it is certainly worthwhile noting that model of excellence. 
During our review we uncovered an interesting statistic on research output in New Zealand. In July 2004 the  
New Scientist  
reported that New Zealand scientists produced the highest number of refereed publications per million US dollars of research funding at 6.2 papers per million. In the same period Landcare Research claims that it produced 7.3 papers. 
One of the things that comes through is that vulnerability that hangs over all the institutes when priorities change in Government funding—it was certainly expressed by Landcare Research and in fact only one Crown research institute really did not come through with this sense of vulnerability. That vulnerability leaves the institutes rather exposed. We have to note—and we note positively in fact—that the Government introduced in I think last year’s Budget a capability fund of $39 million to smooth over the troughs that occur as a result of the research grants. HortResearch was a classic example of an institute that lost a huge amount of human capacity purely and simply because it did not get research grants from the foundation for a particular year. The question that a Crown research institute has to ask itself is how it holds on to staff in the interim period while it prepares fresh proposals for research in the following year. We make mention that that $39 million is particularly interesting. 
We really want to make another point which Landcare Research highlighted. It is an issue that is invariably brought to our attention. Only one Crown research institute—the Institute of Environmental Science and Research—does not report serious concerns about human capability about scientists and about being able to maintain scientists. We were informed that a critical mass of scientists in New Zealand will be retiring in the next 5 to 10 years. That particular organisation does a huge amount to try to make sure that it can retain the high-quality graduates it has including giving various benefits in addition to base salaries profitsharing from commercial dividends making employer contributions to a superannuation fund and giving bonuses for exceptional performances. It also has a rather innovative scheme whereby it will pay back the student loans of its graduate scientists—scientists coming straight out from universities—up to a maximum of 6 percent per annum. That is another sort of thing it is doing in order to retain staff. 
The Minister has to continue to look at the issue of how we can ensure that we retain the staff of our Crown research institutes so that we can make sure that the model continues to work. It generally is working fairly well but it will not work if we do not have the human beings to make it work. 
Finally I mention the interest that our select committee has in the commercialisation processes of the Crown research institutes. They all do it in a different way. I guess there have been some issues around Industrial Research Ltd and whether it is prudent to be involved as an almost 100 percent investor in high-risk companies. By this particular point in time there should be enough information around regarding best practice so that the notion of best practice when it comes to the commercialisation of intellectual property can be passed on to Crown research institutes so that they can be pretty well informed. 
Hon STEVE MAHAREY (Minister of Research Science and Technology) 
: 
 I will just take a short call on the Foundation for Research Science and Technology as well. First of all I thank the member for his support of the area of science. Science is one of the things that has traditionally received bipartisan—or multipartisan these days—support in this Chamber. But I think that one of the challenges we all have in front of us is to get the message across to New Zealanders—who in general say in surveys that they support science and scientists—that more than support is required. We actually have to apply the knowledge we are producing in this country. If we are keen on making the kind of transformation we are interested in making then it is not just about knowledge being around the place. It is about ensuring that in small businesses in families or in local councils wherever it might be people are making science work for them. That is what we are after these days. 
As the member pointed out one of the things the foundation has been doing this year to try to advance that goal has been to change its behaviour. It has done that in two ways which I will just touch on. One is that we are still working hard on the area of priorities for science. We are a small country; we have 4-point-something million people. We want a wide-ranging commitment to science but of course we do not produce a huge amount of science ourselves in the general scheme of things. Many other countries around the world are interested in this area as well and those countries are producing a great deal of science. We are a small player. 
The key issue for us is whether we are world leaders on the issues that matter most to New Zealand’s development. We have obviously benefited over the years from investment in things like pastoral science. We need to identify what we want to invest in for this century. The foundation has been helping to work on that idea along with the Ministry of Research Science and Technology and it has been talking with people about how it intends to do that. 
That has resulted in the second point I want to raise which is a discussion the foundation has been having with the sector about longer-term funding. It is clear to all people in the Chamber that although there may have been major benefits from Crown research institute reforms in the early 1990s time moves on. The kinds of benefits one gets from that shake-up therefore tend to dissipate. As we go into this century—as the OECD warned us when it came through recently—it is time to rethink the model. We have been doing that and one of the signs of that is we are seeking to have a longer-term funding model for a good deal of science. 
That funding model takes us back to one of the questions raised by the previous speaker Brian Donnelly about how we will retain scientists if their science is being refunded only every 6 months or 1 year—it is very hard to do. It is very hard to persuade young scientists to travel around the world to be a scientist here after getting a PhD somewhere if an American company invites them to America for a 20-year contract while we invite them to a Crown research institute in New Zealand for a 3-year contract. That does not add up for scientists in terms of their career. So the foundation has begun a discussion on the back of new policy about longer-term funding. The capability fund is part of that. It is currently a relatively small part still of Crown research institute funding—about 7 percent—but I intend that figure to carry on rising because we need that kind of stability. 
I stress to those people in the Chamber who may be concerned about this issue from the contestability end that it is not about getting rid of contestability or competition. It is appropriate to have that as part of the balance of funding and we will make sure that there is a balance between longer-term stable funding and shorter-term competitive contestable funding. 
I will make a couple of quick points about the Crown research institutes. There are nine of them. Over the last while I think we have seen them perform well. They have come before the Education and Science Committee which is a great idea. They have great science to talk about; in fact I am sure the select committee almost feels as if it has to toss the members of those institutes out of the room at the end because they are so keen to explain what they are doing with science. 
Certainly I urge people who want to know more about our science to get alongside the Crown research institutes to find out what fantastic things they are doing and planning. They have a great record and they are doing great things but I want them to connect more with the country. That means they need to be talking more—in platforms like the ones they have been invited to this year. The whole job of the Crown research institutes is to create value. That is what they should be doing; they need to be connected to this country and talking the language of creating value. 
Brian Donnelly raised the issue of the one Crown research institute that has had some difficulties this year Industrial Research Ltd. The case of this Crown research institute illustrates why we need to change the model in two senses. Firstly Industrial Research Ltd has drifted away from its original aim probably because it did not have enough stable funding to hold it in a very difficult area—that is small industry does not make an easy customer for a Crown research institute whereas agricultural research applies to the agricultural industry which is a very integrated industry because of cooperatives and so on. It is not the same situation for the thousands of businesses that are out there so Industrial Research Ltd has found over 16 years that that is a difficult thing to relate to. It has drifted away to where it can get that return and as a result it has moved towards more commercialisation. That is the second lesson we have learnt from Industrial Research Ltd: how to commercialise. 
Brian Donnelly said there must be distilled wisdom. There is distilled wisdom but there is still some more of that wisdom to go through Cabinet in order to see the new model for commercialisation. We have said to ourselves that we need to look at how to commercialise in a way that fits New Zealand and fits the different Crown research institute models. We think we have some distilled wisdom and we know that one of the things we should have done with Industrial Research Ltd for example was to ensure that it had a commercial partner earlier in the commercialisation cycle. That is a good example of a different way of doing things and of a lesson being learnt. But we have also learnt some good lessons from Industrial Research Ltd. 
Across the board I want to thank the Crown research institutes and the foundation for what has been a great year. Those people are just stunning in their commitment to what they are doing in science and I want to see them receive the kind of backing from Parliament that will enable them to carry on driving the innovation in this country. I thank them for their work. 
Report noted. 
New Zealand Qualifications Authority 
Hon BILL ENGLISH (National—Clutha-Southland) 
: 
 I want members to know just how serious the problems are in the New Zealand Qualification Authority which is the organisation that we are debating today. It has responsibility for running the qualifications system for young New Zealanders. That means that for 150000 young New Zealanders every year the question of whether they get a fair go from that qualification system is dependent on the integrity of that organisation’s processes. Some of its processes have integrity; it is able to conduct external exams with a couple of million scripts and it delivers results quite competently. But I have been very disturbed to find in recent weeks that the organisation has almost no intellectual integrity about how it assesses the quality of the way it examines young New Zealanders. 
In the Education and Science Committee we had a discussion with Karen Sewell whose main objective seems to have been to do a quick paint job for Minister Maharey in order to make sure there would be no controversy this year. But the New Zealand Qualifications Authority showed that it has no interest in the technical issues around the soundness of the National Certificate of Educational Achievement (NCEA) examinations. It has no interest in validity and reliability—those things are the currency of educational testing. Not only does the organisation have no interest in those areas but it has no ability to assess whether NCEA examinations are fair to our students. 
I asked Karen Sewell one simple question which was how she could assure parents like me that when a student sits an external exam and does an internal assessment on a related standard—which almost every student does—those assessments have about the same level of difficulty. Well she could not give me that assurance. Worse than that she made it clear that she thought it was a stupid question and that the New Zealand Qualifications Authority has no interest at all in whether the standards of internal assessment are vaguely similar to the standards of external assessment. 
One of the reasons the authority has no interest in this is that almost any cursory analysis tells us that NCEA is still in many respects unfair to our students. I asked her what people she employed who had expertise in assessment. Well in this vast $50 million budget she says there are two of those people. I have asked people in New Zealand universities who are assessment experts about that and they do not recognise any of those people—they say there are none. Professor Hattie whom the Minister is keen to quote when it suits him—and who has done so incorrectly in a way that misled Parliament—told me that when he did the analysis on scholarship which anyone should do in a public examination system no one in the New Zealand Qualifications Authority knew how to carry out this analysis sufficiently so that he could talk to them about it. He told me that he had never been asked to do and no one has done tests of reliability and validity on NCEA levels 1 to 3. 
That is a disgrace. It is a scandal that we are running a national qualification and national examination system that has high stakes for thousands of students and we are served up waffle and pap by the chief executive who leaned across the desk and said: “You can have confidence.” Well I would say to Ms Sewell that I do not have confidence and I am pleased that she is gone. I say to Minister Maharey that the answers to making NCEA work are not political spin; the answers come from hard-headed analysis of the validity and reliability of the exams and that is not getting done. 
We are running national examination systems without expertise in assessment and we are not using the tools that tinpot Australian states apply to their examination systems relentlessly and forever. We do not do that because we are better! The Minister will get up and go on about School Certificate. Who cares about School Certificate? A whole generation of students and parents have passed through the system since then. 
Hon STEVE MAHAREY (Minister of Education) 
: 
 I thought the previous speaker might like to take another call because the issue is an important one. I welcome the fact that the speech was one of the few times I have heard him sustain an argument rather than just criticise so it was good to have the chance to listen to it. 
I want to go back over the year in respect of the New Zealand Qualifications Authority. As a new Minister coming into this portfolio over the last little while I want to thank first of all the board particularlyCatherine Gibson who I think worked very hard over the summer period and Karen Sewell who came from the Education Review Office. I remember meeting with them and saying that the one thing I wanted for this summer was a good exam season. I think of the New Zealand Qualifications Authority as being a bit like the Reserve Bank: there is no point in having a Reserve Bank if it is not blue chip. We rely on it to set the tone for money in this country. We want the same blue-chip feel in respect of the New Zealand Qualifications Authority. It has to be an organisation that teachers parents and students can rely on to tell them that the qualifications our young people are getting are top-notch. That is what it has to be. 
I know that in politics it is always a great thing to be able to get up and slag off public officials who of course cannot answer back because they are required not to. So it is pretty easy to be a bit of a bully-boy and stand up in the Chamber and consistently slag off those people who have to be polite in return. I say to Mr English that that kind of behaviour just ain’t good. It is the kind of behaviour that should really be reserved for slagging off each other. I am happy if he has a go at me because then I can have a go at him. 
I also say to Mr English that I regard Karen Sewell as being an outstanding public servant. She took up the challenge right through the summer of not only trying to make sure we had a good exam season but also every time there were issues getting up and explaining them in public taking questions and making sure we were able to move on. Thankfully there were few problems this summer. We had a system that worked pretty well. During that period Mr English put out something like 13 or 14 attacks including one on Ms Sewell’s integrity. But we came through it pretty well and that is something members should applaud. 
I know that right across the education sector people are sick and tired of the kinds of criticisms that took place over the summer when as Wyatt Creech said when this policy was introduced under the National Government this is the kind of policy that deserves bipartisanship. How else do 14 15 16 or 17-year-old young New Zealanders apply themselves to their exams when one of the leading politicians in the country—the previous leader of the National Party—is consistently preferring norm referencing over standards-based assessment and is slagging off the people who run the exam and undermining every aspect of it without there being any evidence for him to do so? 
I see National people in the Chamber just having a quiet wee think—thoughtful people like Maurice Williamson— 
Darren Hughes 
: Reflective. 
Hon STEVE MAHAREY 
: —reflective people intelligent people like Katherine Rich. I just say to them that they ought to take Mr English aside and tell him to look at all the clippings from principals and teachers from right across the country who are saying they have had enough of this. 
What Mr English did today was I think good because today was an example of his trying to engage with the problem. Let us now look at how going from a good exam season we can improve this system. That is what I want to spend my year doing. But I am very grateful and thankful that over this summer all the hard work of last year paid off that we had a better exam season and that everybody other than Warwick Elley and Bill English agrees the system has improved. 
I think that Warwick Elley is an outstanding New Zealander with an enormous research record. I just happen to think that on this matter he is wrong. His argument was based on looking at one standard within a subject which is like one question within the exam and looking at the variability on that standard. He is condemning the whole system when he should be asking how all the standards added up into the biology exam for example and whether we got reasonable variability across the subject. The answer is that yes we did and that therefore it is fair to the students. Can we do better? I think we can. We have had only 3 years of this examination system. We can do better yet to get our consistency and fairness right. 
But for this year we did pretty well and I want to applaud those young New Zealanders who stepped up and did those exams after an internal assessment season that was busy for them as well. They had more assessments than they have ever had in their lives but they stepped up and did the exams. They are stretched because they are able to move towards excellence and we should remember that the kind of excellence that is built into those exams has never been present in our exams before—never. For example in the area of mathematics there has never within the maths exam been a standard like the standard of excellence that we have now—a standard that seriously stretches the young people who are taking those kinds of exams. This is something we should be applauding amongst our young people. We should be telling them that it was a good thing they did so well this year instead of sending them message after message that somehow on the basis of no evidence at all—just because of political expediency and just because Bill English prefers norm referencing—we are going to end up slagging off the exams those young people took. 
I think that every parent in this Chamber with young people wanted us—on the back of knowing that this year those exams worked for us—to say “Well done!” to those young people. So I say that to them. I thank them for trying so hard and say to them that they are great young New Zealanders. Now they need to step up into the next stage of their assessment which may be to level 2 or 3 or on to their further education after that. I thank those people in the New Zealand Qualifications Authority who worked so hard to get us through the exam season this year. 
We are not finished by any manner of means. No one has to tell us the problems—we will be the first to recognise them. We do not need Bill English to raise them. We will do that. What we want from Bill English is for him to engage with the issues and tell us how we can work together in a bipartisan way to make the New Zealand Qualifications Authority system a blue-chip system that we can all have total trust in because that is what we need in this country. I say to people who are involved in this debate that if they do not want to do that then they should go and do something else. Our young people are far too important to become some kind of football for someone who just wants to take over the leadership of the National Party. 
Report noted. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 Having had a discussion with the senior Opposition whip I seek leave that we debate Housing New Zealand Corporation while Mr Maharey is the Minister in the chair. 
The CHAIRPERSON (Ann Hartley) 
: Leave is sought to do that. Is there any objection? There is not. 
Housing New Zealand Corporation 
Hon DAVID CARTER (National) 
: 
 I acknowledge that on this occasion I am speaking on behalf of Phil Heatley who is ill and I wish him well for a speedy recovery. But speaking as a former spokesperson on housing I also take the opportunity of raising in the Committee today a few very real concerns I have about Housing New Zealand Corporation particularly about the way the bureaucracy of this organisation appears to have become excessively politicised over recent years. I was surprised to hear the Minister of Housing the Hon Chris Carter say in the House only last week that Housing New Zealand Corporation with its 60000-odd houses is in fact the second-biggest asset this Government has. Therefore all New Zealanders should be worried if as I am going to state now the organisation has become highly politicised. 
 We used to have a civil service that was generally taken as being apolitical that was prepared to roll with the Government of the day and that initiated the programmes of those Governments without becoming politicised itself. Yet very questionable actions have occurred recently within Housing New Zealand Corporation and its staff. Concerns have been raised about the way in which contractors for maintenance on Housing New Zealand Corporation stock have been gagged from expressing their concerns to politicians. 
Phil Heatley was able to say in a press release that a conspiracy of silence has engulfed Housing New Zealand Corporation—and that development should worry us. The conspiracy of silence extends from the chair of the board himself through to the chief executive and it has now resulted in Audit New Zealand having to examine the way in which contracts are being awarded by that organisation and more specifically how an instruction came which was known about by the chief executive of that organisation that attempted to gag people who were concerned about the improper way in which contracts were being organised. 
We know that the organisation is in a mess—it is in a complete and utter shambles—and that is because of the policies of the Government. It is largely because of the policies of the Minister who is now in the chair Mr Maharey about whom John Tamihere was absolutely correct. While we have people living in State houses who are earning $100000 or more it seems incredible to me that Mr Maharey and Chris Carter can take satisfaction from the fact that 12000 people are waiting for those particular houses. Labour members come into the Chamber and invariably say that it is all the fault of the National Party. They have been in Government for 7 long years and it is time they accepted that their housing policy is a mess. 
I will finish by mentioning one very worrying incident that absolutely proves my point about the politicisation of Housing New Zealand Corporation. During the last election an absolutely outrageously incorrect letter went from many Labour politicians direct to Housing New Zealand Corporation tenants stating that if National were elected they would be kicked out of their houses. It was absolute rubbish but the point is how Labour members such as Ruth Dyson Dianne Yates and David Benson-Pope to name but three ever got hold of the names of Housing New Zealand Corporation tenants to be able to write to them directly. The only answer is that some mole in Housing New Zealand Corporation was prepared to supply private information to the Labour Party so that it could write those threatening incorrect letters to tenants. 
It is very worrying when Housing New Zealand Corporation has become as politicised as that. [ 
Interruption 
] Darren Hughes laughs. He scoffs. He does not think it is important to have a civil service that is apolitical. He might not think that but I can tell him that many many New Zealanders do. I say to Darren Hughes that this issue is a very serious one for New Zealanders. Labour MPs should not use Housing New Zealand Corporation to obtain information that is private and confidential to that organisation. 
Hon STEVE MAHAREY (Minister of Education) 
: 
 I rise to take a call on behalf of the Minister of Housing Mr Chris Carter and to follow on from I think the former spokesperson on finance for the National Party who is the former spokesperson on housing but I am afraid I have no idea what he does now. I assume he does nothing these days. 
The previous speaker canvassed broadly the issues of the housing policies we have but let me say to him that in 1999 we inherited the virtual destruction of State housing by his National Government in the 1990s. And it did that intentionally. National introduced the accommodation supplement earlier in the 1990s for the express reason of allowing it to destroy the tradition of State housing in this country and it set about it with alacrity. It was I think near a crime for National members to have done what they did but let me tell members what they did. They sold 13000 State houses they built none they had no stock developing around the country but on top of that they sold the most desirable houses to people who were largely speculators who were able to on-sell those houses. They put people who were paying above-market rents into those houses because anybody under that Government could get into those houses. They did not have to be poor or needy. Mr Heatley comes into the Chamber and accuses us of all kinds of things. He forgets that the only people who ever got into a State house when they did not need it financially got there under the National Party. That is why those members are sitting over there. 
The National Government’s policy left us at the end of the 1990s with 13000 good houses sold. Stock that was hard to rent and often unhealthy was kept in stock because the Government could not sell it. Speculators owned the houses. The accommodation supplement rose towards something like $1 billion being paid out as a kind of supplementary minimum price to ensure that the landlords of the country were able to rent their houses. That is what the genius David Carter tells us was a housing policy in the 1990s and somehow that allows him to come in here and criticise a Government that has rebuilt those houses and that has had to try to find houses in places like Auckland where National allowed for none to be built. 
In Northland we were watching people burn down their houses and children die because of the policies of that man. Yet he has the cheek to come in here and tell us about housing! I think the best thing David Carter could do is leave the House and go and do whatever he used to do formerly because he is wasting his time trying to make a contribution to this debate. 
I thank Housing New Zealand which I was the Minister of for a short period of time. It has I think formed itself from being what was essentially a rental agency under the National Government into an organisation now that has public service as its goal; that has what is called social housing—that means that people who are needy get houses—as its goal. The Housing New Zealand people care intensely about that. They now have a housing strategy that covers the building of houses of trying to be innovative in those houses of trying to make sure the rents are right and of being innovative and working with third-party organisations. They have great policy building up and they have a real sense of dedication to the task before them. 
If that is called politicisation as the previous speaker likes to say then I guess one could tell progressive people anywhere in the country that they are being politicised. Housing New Zealand believes in the project of housing New Zealanders not quitting the stock to rich speculators who on-sell it so that they can make a few dollars off the back of the National Party’s policy. Housing New Zealand has a true commitment to housing people in this country to being innovative to doing things differently and to making sure we have people in good healthy houses so that they can live good decent lives. That is a mission worth being part of. 
I thank Housing New Zealand for that and all the people who have supported this kind of policy and I thank David Carter for going back to doing whatever it is he does. 
Report noted. 
Transit New Zealand 
Hon MAURICE WILLIAMSON (National—Pakuranga) 
: 
 I am delighted to take a call about an organisation that I now think is appallingly dysfunctional and actually now needs to be completely overhauled by the new Minister Annette King. I am of course referring to Transit New Zealand. I can back up my claim because of the number of huge volumes that Transit has released starting with this plan in my hand which came out at the end of July last year—about 9 months ago. Transit issued this huge thick glossy document with tables charts and graphs and stuck on the front of it a 10c sticker that states: “This document does not include the funding for the State highways from the extra $500 million from the Government announced last week.” 
 So Transit produced a huge document like that. The Government had put out a press release just the week before that said the Government had found $500 million extra for roading. I guess everyone was quite excited about that. The money just fell from the sky. There was no rigorous process. Dr Cullen announced that day that he had found $500 million and it was all going to roading. I guess I was quite pleased as I thought the money was going to a good cause. And then the update came in August. Members will again remember this. It was another big thick glossy document with again a lot of charts and pictures and some new time lines for a whole lot of projects. 
Members of this House will understand that Transit sets the agenda with these State highway forecasts and communities up and down the country pore over them with great aplomb and then say: “Excellent so that’s where we are on the 10-year programme.” I think every member of this House would expect that if a 10-year plan were to change between July and the August update projects would be moved maybe 3 or 6 months. There might be a bit of slippage. If a bridge was due to be started next April the date might be moved to June. Everyone could live with that. 
But what did the document do? It actually did very little because between the August one and this big thick one—this is the mother of all documents which Transit issued in February—was a complete reversal of a whole lot of stuff that had come out in the August document. Again I say to the Minister in the chair the Hon Harry Duynhoven that it is fine if a community sees a 3-month slippage in the latest February update. 
But I will give some examples because there are some doozies. When the August update came out the Taupo eastern arterial was scheduled to start in 2007-08. By my calculation that is next year because we are in 2006. The Mayor of Taupo the Taupo District Council and a whole lot of the developers who were going to plan a whole lot of property around that said that 2007-08 for the Taupo eastern arterial was great. That was August. In February the document came out and they must have spent some time going through and through it but they could not find the project. Oh no. The start date of the Taupo eastern arterial had not slipped by a few months; it had gone from the 10-year plan. It is not in the years out to 2015 in the latest plan. 
We then saw some lovely sophistry from Mark Burton the member for Taupo—the headline on the front page of his local newspaper stated: “MP: Bypass delay is not acceptable”. He is a Minister in the Government. We asked Transit when it came before the select committee for the financial review whether it had alerted the Minister of Transport that this is the document it would have to put out based on the funding shortfall it had now identified and what the Minister had said he would do about it. Rick van Barneveld told us that Transit had alerted the Minister of Transport in November last year that there was going to be this problem. It had discussed it with the Minister—and the Minister of Finance—right through to December. Transit executives then went away on the Christmas break and got no assurances from the Government at all that the problem would be fixed. 
When all hell broke loose on the day that this report was released the Acting Minister of Finance Trevor Mallard within 1 hour said: “Don’t worry. All that stuff that Transit has put out is not valid any more because we will find the $685 million shortfall that was identified.” 
I say to this Committee that is an appalling way to do business. Transit is dysfunctional and admits it. I want to quote from the log of an interview with the chief executive of Transit Mr van Barneveld by Sean Plunket. I think it is a classic. Sean Plunket said to Mr van Barneveld: “But surely you knew that the $685 million shortfall wouldn’t be tolerated?”. Mr van Barneveld said: “Well no. We have to go on planning it because no Minister would give us an indication that they would plug the gap.” Yet the Minister said so an hour after the release of this document. But the doozy of this interview is that Mr van Barneveld said: “Well I look forward to working with Transit’s board and the Minister to understand the certainty of funding and then to reflect that very quickly to the community in New Zealand who are concerned about the timing of our projects so we can get on and do this quickly.” 
I think that Sean Plunket felt like I did—I do not actually know what that means. So he asked: “You don’t sound like you think the Government’s assurance of money in the bank are here?”. Mr van Barneveld said: “I don’t think it’s appropriate for me to comment on that.” Sean Plunket then interrupted and said: “I think it’s entirely appropriate because it would seem that you’re the chief executive of Transit and you are responsible for putting out the sort of projections and draft plans that have caused so much controversy here Mr Barneveld. So I am just wondering whether or not you can tell us if you have anything more from the Government that would back up their claims this morning that they are going to make good the shortfall of $685 million that caused the problem in the first place.” Mr van Barneveld the chief executive of Transit said—and this is a classic—“I’ve only heard that advice this morning as you did on the radio.” Now how can Transit run a Government entity like the State highway roading business when its board members know there is a $685 million shortfall? 
They published an appallingly hopeless document that has so many mistakes. My favourite—not the Taupo eastern arterial actually—is Kopu Bridge which was scheduled for 2008-09 at best then slipped to 2010-11 and is now sitting at 2014-15 in the plan for the start of the project. Yet Rick van Barneveld said to Sean Plunket that he had only heard about it as Sean Plunket had on the radio that morning. Thank goodness that the chief executive of Transit was not having a shower when that news was on because he would have carried on labouring under the impression that he had a $685 million shortfall. 
I say to this Minister and to the Minister of Finance that in Thursday’s Budget where everyone truly believes that the $685 million will be in there to make up the shortfall that was identified in this last round that is not even getting us back to where we need to be. When the Government crows that it has fixed the gap and has taken the $685 million back and has plugged the hole let me make it clear that that is not even starting to address the shortfall of those projects. 
I move to Transit’s dysfunctional nature in another area which is to do with its pseudo-economic development role. Transit says that there are two ways of dealing with roading. Either when there is economic development and growth we say that if that is the level of growth we had better get on and build these roads to cope. Or we can take the Transit dog in the manger attitude—that is the level of economic growth we see happening in Warkworth Taupo or Queenstown and in every case we will race off to the court to block the project. Yes the territorial local authority the regional council the community and business want the project and all the consents have been done for it to happen. Then the politicised body that Transit has become—with the president of the Labour Party Mike Williams and John Wright a former Alliance MP—has now taken it totally under its wing to decide that it will determine where economic growth will occur. 
That is not Transit’s role. I say that to Transit today. Its role is to provide the State highway network. At the select committee Transit said that it did not want traffic flowing on to its roads. I say to Transit that they are not Transit’s roads. Those roads are owned by the people who pay petrol tax and road-user charges to fund the building of those roads. I have never seen a more dysfunctional body which puts out document after document. Then when we get to the doozy of them all the Government says that it is all the National Party’s fault. 
Hon HARRY DUYNHOVEN (Minister for Transport Safety) 
: 
 I thank Mr Williamson for his entertainment for the last little while but I say to members that we should get some facts in the way of a wonderfully entertaining story. Firstly in August 2005 there was the Transit 10-year forecast revision. This was a relatively new process that had not previously occurred in the National Government’s time. For many years when National was in Government we actually found out each year what projects were on. So we had the amazing spectacle of roads being begun but not the connecting roads to make them work which were added in the following year. 
In August 2005 the 10-year forecast showed that there were problems. Those problems revolved around two things. The first was the rapidly increasing cost of roading construction due to a number of factors but most instructively the cost increases in oil etc. The second was a reduction in the expected revenue increase which resulted in 2005 in a 10-year programme being put out and then in February 2006 a revised programme being put out. That programme showed that there were problems and this is where the member has an element of truth—and every good story has to have an element of truth. What was quite clear was that the reduction—not actually a reduction but a reduced increase—meant that there was about a $35 million shortfall to begin with. The increase was not as major as we had expected in roading revenues and at the same time a very substantial increase in the costs of construction resulted in the fact that many projects could not begin. No one is more aware of this than myself having been battered about by the New Plymouth District Council and others over the Bell Block bypass. What we had was a number of projects around the country that could not be begun because of existing projects. Unlike the previous Government we want to continue them in their entirety and actually get them completed. So those existing projects were not only proceeding very well but because we had a very good summer construction period which was longer than usual a lot more money than expected was being spent on constructing those major projects particularly in Auckland but in other parts of the country ahead of time. It was important to do that to try to make some gains. 
So I say to the previous speaker a former transport Minister who incidentally is the second-longest-serving transport Minister during my lifetime that if there is a problem with roading infrastructure perhaps he should look in the mirror and take some of the blame for those problems himself. Certainly successive Governments until Labour came to power in 1999 did not do a lot of roading construction work and certainly we had a problem with infrastructure not being kept up with not just in roading but in all areas of the economy. 
Labour has moved rapidly to fix that and in fact some of the problems are due to the fact that we stretched the construction industry. The roading construction industry regularly brought to us problems over training problems over the licences for operators of machines. We moved to address that. The Hon Mark Gosche when he was Minister was I think the first to move to address some of those issues and the Hon Pete Hodgson and I moved to address the remainder in terms of drivers’ licences training schemes for those driving road-making machinery etc. Those were issues that we addressed to try to ease the constraints that the road construction industry had. So it is a bit rich for National who did virtually nothing for years and years when it was in Government to then come back and say when we are building more roads than has been done in generations that there is a huge problem and everything is disastrous. It is not. 
Further I say to the Hon Maurice Williamson that both Dr Cullen and Mr Parker who was by that time the Minister—in February 2005—said that yes there was a shortfall and that that matter would be addressed. I take them at their word on that. I have every confidence that it will be and I am sure that members of Parliament will see that those projects that people expect to be constructed in the time frames will get back on schedule or very much approaching it. Just to take my own favourite the Bell Block bypass I say to members that it was originally scheduled in the very first 10-year plan to be built in the years 2011 to 2013. That project has begun. Unfortunately it was one of the ones that began early and then had to be stopped because soon after it had begun a major archaeological site was found. We will see I hope progress on that in the very near future. 
Report noted. 
New Zealand Venture Investment Fund Ltd 
KATHERINE RICH (National) 
: 
 One of the first points I would like to make is to express disappointment that the Education and Science Committee did not look at the New Zealand Venture Investment Fund Ltd in greater detail. I am holding the committee’s report and I am sad to say it is just a pro forma report of some four lines. I think it would have been important for the select committee to have a serious look at the fund because since it was established in 2002 a lot of water has gone under the bridge. I think it would have been an opportunity for members to ask some questions about progress. Economists seldom agree on many things but one of the things they do agree on is the role that innovation plays in the economic growth of any country. In fact some of the academic literature suggests that as much as 90 percent of a country’s economic growth could be attributed to technical change technology development and innovation. So a subject area of this nature I think is one that is vitally important and one that perhaps should have been looked at in more detail. 
The fund was set up in 2002 and it seeks to place about $100 million into commercial projects so that we can do a better job as a country of commercialising the technologies that come out of our Crown research institutes and universities and that come as a result of the work of inventors and entrepreneurs. The aim of the fund is to leverage additional funding from the private sector and I understand the aim is to ensure that private sector dollars match State sector dollars 2:1. So I am interested in the fact that the capital committed so far is some $60 million yet the amount invested through the programme—the Venture Investment Fund plus the private sector funding—is $86.7 million. So that is not even close to doubling the amount put in by the fund. The Venture Investment Fund funds other venture capital funds so the aim is to ensure that the organisation manages taxpayer funding and gives it to fund managers who will do a good job. 
One of the things I am keen about when it comes to venture capital is that it does give us a greater opportunity to commercialise the outputs of research that is generated here. It allows Kiwis to take a greater ownership in some of the technologies that are developed here and it means that overseas companies cannot just sail into town pick the cherries out of the best technologies and sail off again. So I think it gives New Zealanders a better opportunity to ensure that we attempt to commercialise our projects here and take a greater stake in the value that hopefully can be accrued from some of the research that we have made into various technologies. Venture capital is a vital part of the commercialisation process but $100 million in my view is very much a drop in the ocean. It is a very small amount of money. If we look at the amount put into venture capital in this country surely we can see we have to do more to encourage the availability of venture capital so that companies here that do have a bright idea and that have a new innovation as a result of technical and scientific research have the opportunity to commercialise their new products here. 
I understand that there are some successes. In the long term venture capital is a very risky business. Some projects that are funded can take 10 20 and sometimes 30 years before they become commercial successes but one such project I understand is Ectus put together through the University of Waikato. A company was established around a technology and some people there and it has just recently been sold to a Norwegian firm. 
If this country is to make improvements in its economic growth we have to get used to talking about the commercialisation of technology supporting the technologies that are developed here and making sure that we extract as much as we can out of the technologies that we as taxpayers fund through Crown research institutes universities and other areas. 
Hon CLAYTON COSGROVE (Associate Minister of Finance) 
: 
 I will take just a short call in respect of this matter. I want to touch on one of Mrs Rich’s final points and that was the risk associated with venture capital. Of course if one has been in business—and a number of us have—one knows that any venture capital management requires prudent allocation of funds. The New Zealand Venture Investment Fund is a success story built around a Government that says we should back our universities and our Crown research institutes. It is a success story built around the fact that we believe we need to inject technology into our communities and back those institutions. 
The member touched on Ectus and she is right. It was sold to a Norwegian company and very profitably. It is interesting to note that in the 2005-06 year New Zealand Venture Investment Fund received a $1.5 million distribution from fund managers Endeavour-icap. So there are a number of stark examples here of a successful fund. Venture capital is risky it requires prudent commercial judgment—and with risk of course sometimes there can be failure or sometimes there can be delay. Most of that delay I would argue is based around prudential management by the board and those involved. 
I thank the member for her contribution. It was one of the more enlightened contributions this afternoon. My blood pressure did not rise unlike former speakers who have been here. That member generally makes a far better contribution than some of her colleagues. I endorse some of her comments but I remind the Committee that this fund with which the Government is backing our universities and our Crown research institutes and is attempting to inject technology into the market place was set up in 2002. It was formed of course by the current Government. 
I just note for the record that prior to that I cannot recall the party in Government pre-1999 having a policy on venture capital. If it did it was kept so secret that that party was the only one that knew about it because certainly universities did not certainly our Crown research institutes did not and certainly no one in the business community or in our communities knew it existed at all. It may have been a cracker policy but no one knew it existed—because it did not. I commend this organisation to the House. It is building on sound foundations and long may it continue. 
Report noted. 
The CHAIRPERSON (H V Ross Robertson) 
: I understand that the next group of entities that members wish to debate is the State-owned enterprises. There is a considerable number of them. Is it the wish of the Committee that they be taken as one question? The reason for that is to allow a debate covering the financial reviews of all State enterprises. Is there any objection to that course of action being taken? There is not. The question therefore is that the reports on the 2004-05 financial reviews of State enterprises be noted. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I raise a point of order Mr Chairperson. Thank you for your innovation. Government and Opposition whips have not had a chance to confer on what you have just proposed. When you say State enterprises are you talking about AgriQuality New Zealand through to Transpower New Zealand? 
The CHAIRPERSON (H V Ross Robertson) 
: Yes. 
AgriQuality New Zealand 
Airways Corporation of New Zealand 
Asure New Zealand 
Electricity Corporation of New Zealand 
Genesis Power 
Landcorp Farming 
Meridian Energy 
Meteorological Service of New Zealand 
Mighty River Power 
New Zealand Post 
New Zealand Railways Corporation 
Solid Energy New Zealand 
Timberlands West Coast 
Transpower New Zealand 
Quotable Value 
Transmission Holdings 
CHRIS TREMAIN (National—Napier) 
:  
I rise to speak on the review of State-owned enterprises and particularly about the Genesis Energy review. State-owned enterprises exist to return a dividend to the Government—a dividend to the people of New Zealand—so they are a very important part of the composition of the New Zealand economy. It is very important that they operate effectively in the New Zealand economy because they in turn add to the growth of the economy. 
I was fortunate to be involved with the review of Genesis Energy this year. It was one of the first reviews I have been involved with. I compliment Brian Corban the chairman and Murray Jackson the chief executive of Genesis Energy on their honesty and on the way they presented their review to the Commerce Committee particularly given how difficult it can be when one is before a select committee and has to be a little controversial. Both the chairman and the chief executive officer were prepared to stand up and be counted on the minzone and to criticise the Electricity Commission about where that minzone sat. It is a difficult thing to do. As it turned out they were correct; the minzone was some 15 percent under where they believed it should have been. It was a gutsy call and it was good they were prepared to be heard. 
Energy is a key component a key input to this economy and is critical to the short to medium term outlook of this Government. Genesis Energy is indeed a key player in this. I just want to reflect on where real growth in GDP is. It is forecast at 2.8 percent per annum to 2010. Real growth in GDP per capita is now averaging only about 1.9 percent per annum. These rates of growth right now are well below the averages we have had since 1993. In fact in September as members well know and December we have had rates of growth bordering on a recession so we need to see some upside some going forward. The warning signs are there so it is critical that when we see Dr Cullen’s Budget on Thursday we see key indications about supporting the energy market and where we will go with that. Energy is a key input to our overall economy. 
Just looking specifically at Genesis and its energy review it is New Zealand’s largest retailer with 690000 customers. It is not the largest but is one of the largest generators of electricity with 1640 megawatts of energy multiple generation facilities thermal power in Huntly hydro power in Tongariro and Waikaremoana and a significant ongoing investment now in wind farms in the Wairarapa and Waiuku at Awhitu. Genesis had an operating revenue in the 2004-05 year of $1.495 billion with earnings before tax depreciation and amortisation of $178 million. It is interesting that its net profit after taxation has fallen back from $80.1 million to $70.2 million over that year. 
If we look at that as a straight analysis from an accounting point of view we see that it is a return of only 5.9 percent on average shareholders’ funds. It is a big decision on whether as a Government we take that huge investment some $1.8 billion into this particular company when we are not even getting the return we would get out of a bank at the moment. From a Government point of view while they are a major investor the return on shareholders’ value is not that fantastic. In terms of the Office of the Controller and Auditor-General it has a pretty good report—the rating is “good”. 
I also want to talk about the key inputs of economic growth being energy and two key factors. First is the surety of energy supply and second is the surety of the spot price. As I said previously Genesis expressed concern at the select committee over the operation of the minzone level. It was subsequently proven right which I said earlier. It was proven that the minzone level was 15 percent under where it should be. At that point in time—and members will remember this—everyone was sitting around praying for water to come out of the sky because back in February-March the lake levels were as low as they have been since 1993. We were all sitting there wondering and waiting for the water to come down. But I guess the key point is we did not have the generation capacity to take over from hydro if hydro was not there. That is where the likes of Genesis have come in with some significant investments that it is now making in Huntly. 
The key thing was where the energy spot price got to. It had a major impact on some of the industries in my own area of Hawke’s Bay. I can talk specifically about Pan Pac Forest Products which is Hawke’s Bay’s largest consumer of energy. It consumes 35 percent of Hawke’s Bay energy. 
BRIAN CONNELL (National—Rakaia) 
: 
 I want to take time to talk about the financial review of Meridian Energy. I start by saying that Meridian Energy is the largest electricity generator in New Zealand meeting something like 30 percent of New Zealand’s total electricity requirements. For the financial year under review Meridian Energy made an after-tax profit of $218.2 million which is an increase of $85.3 million on the previous year. I have taken the time to outline those figures because it is clear that Meridian Energy is the major player. In the financial review process one of the key issues that was identified by the chief executive officer was this: “In terms of electricity supply this is the tightest winter New Zealand has ever had.” 
Hon Pete Hodgson 
: Oh rubbish! 
BRIAN CONNELL 
: His remarks—and I hear somebody in the House has already rubbished his remarks again—were not related specifically to storage levels but rather addressed the overall supply and demand balance of our power system. Storage levels as Mr Tremain has already pointed out were low and are still low even after the rain that we have had. But the key issue is that it is our supply and demand of electricity that is under threat. The chief executive of our biggest generator put New Zealand on notice and said that unless we took action we faced blackouts. Blackouts for New Zealand as an investor destination would be an absolute disaster. Whether he is right or wrong when the chief executive of the biggest generating company in the country is saying that there is an issue of confidence. What was the Government’s response? 
Hon Pete Hodgson 
: That is rubbish. 
BRIAN CONNELL 
: Already I hear “Blackout Pete” saying it is rubbish. But that is not the truth of the matter. The Government’s response and that of the Electricity Commission was that Dr Keith Turner the Chief Executive of Meridian Energy was being an alarmist—that he along with other commentators who were saying the same thing were being alarmists. That came from the Minister of Energy whoever that is. Who is the Minister of Energy? 
Hon Member 
: It’s not you buddy! 
BRIAN CONNELL 
: No it is not me I concur with the member on that. I do not know who it is but let us say that— 
Dr Jackie Blue 
: David Parker. 
BRIAN CONNELL 
: Oh it is David Parker. Sorry but I would be forgiven for not knowing because they move the chairs of the  
Titanic 
 around a lot on that side of the House. Remember he was the Minister then he was not and now he is again. So let us get on with the issue. The Electricity Commission also came out and stated that the chief executive was being an alarmist. This is a commission that is so young that it still asks the Government to do up its shoelaces before it will make a decision. Keith Turner on the other hand has been in this industry forever. When he stands up and puts New Zealand on notice we in the National Party take notice. 
Hon Pete Hodgson 
: Will the member take a question? 
BRIAN CONNELL 
: Maui gas is running out—the Minister can take a call when it is his turn but in the interim will he just shut up and let me get on with it. Maui gas is running out because this Government has sat on its hands for so long and did not and will not deal with the Resource Management Act. This country now has electricity generation issues. All the chief executive officers of our major generation companies are in concert when they say that the demand for electricity will be outstripped by demand— 
Hon Clayton Cosgrove 
: Get it right. Take it slowly. 
BRIAN CONNELL 
: The demand for electricity will be outstripped by supply. 
Hon Harry Duynhoven 
: No the other way around. 
BRIAN CONNELL 
: The other way around yes. The supply will be outstripped by demand in the year 2010. The issue is still one of critical importance. That is 3½ years from now. Three and a half years from now we will have a critical lack of capacity. The impact that that will have on this country as an investment destination as I have already said will be huge. The Government simply cannot grasp that the fundamental issue is that we do not have enough generation capacity. 
Hon CLAYTON COSGROVE (Associate Minister of Finance) 
: 
 That was for the benefit of those— 
Eric Roy 
: I raise a point of order Mr Chairperson. I understood that our party was to have three calls on this matter. Does the Minister’s response indicate this is the conclusion of the debate? 
The CHAIRPERSON (H V Ross Robertson) 
: No certainly not. 
Brian Connell 
: I raise a point of order Mr Chairperson. I was seeking another call and it is normal practice in the Chamber that when a speaker seeks another call he or she gets it. 
The CHAIRPERSON (H V Ross Robertson) 
: I understand Mr Connell. You can actually have another call. The calls do not have to be taken together. I have already called the honourable Minister so the reality under the Speakers’ rulings is that he will take precedence in this case. But I have recognised that you do want to take another call. 
Hon CLAYTON COSGROVE 
: For the benefit of those out in the real world who did not know whom that was I will say that was the “bard of Christchurch” Brian Connell. After that speech which was bereft of any detail—he could not get his demand and his supply curves quite right and mixed them up—is it any wonder that he has been dropped not only off the back row in the Chamber but right off the cliff? 
We do not have a blackout power crisis. It may be in Mr Connell’s interest of course to scare the living daylights out of every pensioner in his electorate of Rakaia for his political gain but here is the truth. If Dr Brash and Nick Smith went back to the lake and stood behind the foot-by-foot measure in the same place where they had that infamous photo opportunity then they would be drowning. They would be underwater. Dr Brash is of course drowning—politically that is—but the truth is that Dr Brash and Nick Smith would be underwater. Of course that is a bit like walking the plank. There is not a lot of detail. National will whip an idea out to see whether it flies. It takes a risk and in that case that backfired. 
Now let us look at Genesis Energy—a very very solid performer. I can confirm for the benefit of the National Party that unlike it we have no plans to sell the assets and no plans to sell the State-owned enterprises. Genesis Energy has quite prudently of course as a countermeasure to any blackout—mythical or otherwise—that may occur stockpiled coal at Huntly in order to ensure that New Zealand’s power needs can be met if there is a low flow into the lakes. To that end in 2004-05 the stockpile was running at 780000 tonnes. That is not a bad countermeasure I would say and it will assure ordinary New Zealanders that if there are low lake levels—and there he is Dr Smith the man who if he stood in the lake with Dr Brash at the same place as he did a couple of weeks ago for the photo opportunity would be underwater. Some would say that he may be underwater now given the way he carries on. 
Genesis Energy paid $23 million in dividends to the shareholder the Crown—the custodian of that company on behalf of the taxpayer—which is money that we can use in other areas. That company is also building E3P—a crucial power station next to the Huntly station that will generate I am told 385 megawatts of power through its gas-fired station. That station will be ready by the end of December. That is a massive investment of $530 million and it is all good stuff. 
So I say to the National members as they attempt to scare the living daylights out of every pensioner as I said by saying there will be a mythical blackout that this Government has put in place new hydro generation. This Government through Genesis Energy has got the coal stockpiles under way. We can look at what Keith Turner is doing in respect of the massive wind generation proposals that are being planned for and rolled out. 
Brian Connell 
: You said he was an alarmist. 
Hon CLAYTON COSGROVE 
: No I said you were an alarmist actually. 
The CHAIRPERSON (H V Ross Robertson) 
: Please do not bring the Chairperson into the debate. 
Hon CLAYTON COSGROVE 
: So we have here a Government that went through a low flow and low lake level power crisis some years ago—it inherited a basket case of underfunded State-owned enterprises—and then put in place decent countermeasures. I pay tribute to the boards of Genesis Energy and Meridian Energy— 
Hon Pete Hodgson 
: And Mighty River Power. 
Hon CLAYTON COSGROVE 
:—and Mighty River Power as my colleague Mr Hodgson points out for the solid work they have done in progressing decent countermeasures. 
Again for a bit of historical context I contrast that with the previous Government’s policy which of course brought us to the situation we have now in terms of the “Mad Max” Bradford reforms. Again—and it is a bit like the previous Government’s Crown research institutes policy—no one knows National’s policies on the State-owned enterprises. On some of those enterprises that Government went to the country and said it would sell them then it backed off that because it might have been slightly unpalatable to the country and now no one knows its policy. The best the Opposition could do was to have Dr Nick Smith behind his leader as he walked the plank and beside his leader as he stood at an empty lake—which would have filled up 2 weeks later to a level over Dr Nick Smith’s head so that he would have been floating like a dead carcass on top of the lake along with his leader today. Well we know the status of the dead carcass in political terms. The body bags are out. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 It is little wonder that the electricity industry and the International Energy Agency highlight New Zealand as a country where energy policy is a mess when incompetents like Clayton Cosgrove give speeches like that in this Parliament. Let me tell members a few of the things that have been highlighted both in that report and by Keith Turner whom Mr Cosgrove chose to quote. Let me say exactly what Mr Turner said about the state of our electricity system. He said there are lines in New Zealand that are so poorly maintained we are at risk of being in a Third World situation in respect of electricity supply. The Electricity Commission an agency this Government set up has had to admit it made a mistake of about 180 megawatts in the minzone which amounts to the amount of electricity that would service 120000 households. 
Then there is the complete mess in Government policy. I wonder whether the Minister in the chair Clayton Cosgrove can tell us whether we are going to have a targeted carbon tax for the companies we are talking about. The silence is deafening. The Minister in the chair is not able to tell us even whether a carbon tax will be imposed on those companies. I ask the Minister in the chair how he can possibly get new investment in the electricity sector if he cannot answer even a basic question like that. 
Let us recite what happened. At the Commerce Committee when the representatives of Genesis Energy were before us they told us they were sick of this Government relying on the Huntly power station to bail it out. Pete Hodgson told us in the House 5 years ago that this Government’s energy strategy was to ensure we had more renewable energy. Well do members know that in the brief 6 years of this Government we have trebled the amount of electricity produced from coal? That is what has happened under this Government. 
Hon Pete Hodgson 
: We just switched fuels. 
Hon Dr NICK SMITH 
: Mr Hodgson chips in and says the Government had a strategy to increase the amount of energy produced from renewables—but it has achieved exactly the opposite of that. 
We have had the Energy Efficiency and Conservation Strategy and if ever there was a Government flop it was that strategy. I notice the Green Party is represented in the Chamber; that strategy was its great brainchild. The strategy stated we would achieve a 10 percent gain in efficiency by 2006 and we have actually achieved far less than was achieved in the last 5 years of a National Government. Then the Government has talked about developing an energy strategy. Five or 6 years after Labour has been in Government we are finally to get a strategy out of it! Well I have news for the Government: that strategy will have as much credibility as the energy efficiency strategy of which not a single target has been met— 
Hon Tony Ryall 
: Not a single target? 
Hon Dr NICK SMITH 
:—not a single target. Whether in terms of renewable sources or of efficiencies that strategy was not worth the paper it was written on. This Government has spent $100 million on that strategy yet it is fascinating that under National there was a 0.75 percent improvement in efficiency each year whereas under this Government it has been less than that—only 0.5 percent. That is what the public has received in return for its $100 million. 
In respect of transmission there is huge confusion within the sector as to who is calling the shots: the Commerce Commission Transpower New Zealand or the Electricity Commission. There is huge uncertainty in the sector about the Government’s Kyoto policies. Every single part of those policies is in tatters. There is no policy. How can we possibly expect there to be any investment in new generation when there is a policy shambles the like of which I have not seen in any area as great as that in respect of climate change? The Minister in the chair says wind power is the answer. Well I have news for the Minister: even after the wind farms have been constructed—and two have been cancelled in the last month—the reality is that the amount of energy produced by wind will be less than 1 percent of total generation. And I know that the Minister in the chair knows that Project Aqua and the Dobson River scheme should have gone ahead so that we were not in this difficult situation. 
NANDOR TANCZOS (Green) 
: 
 Dr Smith has been talking about climate change and he is quite right—it probably is the single biggest environmental threat facing humanity today. Carbon dioxide levels in the atmosphere at 380 parts per million are higher now than they have been in the last 650000 years which include five glacial and interglacial ice ages. The West Antarctic ice sheet is breaking up at an unprecedented rate. Arctic sea ice is disappearing and the ocean exposed is absorbing heat and accelerating the process. Glaciers are in retreat around the world. The Gulf Stream the warm current that keeps Western Europe inhabitable has weakened by 30 percent and we are seeing the gradual melting of the tundra in Siberia and northern Canada and the release of thawed methane. 
As Dr Smith noted this weekend the Government’s response to climate change has been pathetic. It has abandoned the only economic mechanism it was prepared to consider in order to reduce greenhouse gas emissions—the carbon charge. It has abandoned the animal emissions levy and it is now presiding over the destruction by Landcorp of 250 square kilometres of forest in order to turn it into a dairy farm. That is an area 40 percent the size of Lake Taupo. 
Members should remember that for every hectare converted from forest to pasture greenhouse gas emissions are increased by about 800 tonnes of carbon dioxide equivalents. So the 25000 hectares we are talking about will contribute 20 million tonnes over the 20 years of the conversion. Unbelievably that is a 1.4 percent increase in our total emissions from this country every year and in 20 years we are talking about a 27 percent increase over our current levels. That is unbelievable—an extraordinary amount. 
Why on earth would a State-owned enterprise be doing that? Landcorp is already the largest farming operation in New Zealand with 1.54 million stock units on 112 farms which total 370000 hectares in size. We have to ask whether this is just one more manifestation of the Government’s absolute obsession with economic growth and damn the environmental consequences. Landcorp of course has an agreement not to acquire any more land unless it sells an equivalent amount but the lease arrangement that relates to that land gives the corporation effective control over a greatly increased area. 
Two subsidiary companies Landcorp Developments and Landcorp Pastoral Ltd will convert 25000 hectares over 20 years. That will involve intensive stocking which is associated with very high nitrogen inputs both as fertiliser and as urine from those animals. It would be nice to see Landcorp lead the nation by example and institute devices to measure contamination by leachates and to see it agree to adjust stocking rates and fertiliser applications if they exceed thresholds. But I fear we are very unlikely to see anything so progressive. On the permeable volcanic soils of the area there is likely to be significant leaching of nitrogen and other nutrients from farms which will perpetuate the problem of nutrient enrichment of lakes and rivers—another significant environmental problem that New Zealand faces today. 
 Sensibly the water use application was denied by Environment Waikato which said that the leachate from the Landcorp property would negate all of the work it is doing to prevent nutrients ending up in streams and lakes through its clean streams initiatives. It is absolutely bizarre that this State-owned enterprise seems to be actively hostile—not just neutral—to any prospects of this country meeting our Kyoto commitments or cleaning up our polluted waterways. It is an absolute disgrace. 
Hon CLAYTON COSGROVE (Associate Minister of Finance) 
: 
 I thank the member for his contribution but I want to take a short call to rebut a couple of the points he made. First in my view Landcorp is one of our premier State-owned enterprises. As a member of the Primary Production Committee some time ago I paid a number of visits to Landcorp facilities and farms along with a couple of other members. It is a premier State-owned enterprise. For instance in the last 2 years it has returned to the Crown a dividend of $36 million. 
I want to touch on a couple of points that Mr Tanczos made in respect of deforestation and the decision on that. The decision was not Landcorp’s. I will give an example of what happened. Landcorp decided to take up a contract offered by Kiwi Forests which was the owner of some land to convert that land for dairy farming. If Landcorp had not taken up the contract it would have been offered to someone else and the land would have been converted for dairy farming anyway. So the decision to deforest the land was not the State-owned enterprise’s. If deforestation would have occurred anyway my view is that the State-owned enterprise should be in there as the superb farmer that it is making money for the Crown. 
I also say that if one looks at the performance of the Landcorp entity one can see that it has performed outstandingly on the back of strong commodity prices. It oversaw the transition of ownership of Molesworth Station to the Department of Conservation. Landcorp continues to farm on that property now despite the dire predictions that I recall came at the time from the Opposition. I think Mr David Carter waxed eloquently at the time making dire predictions about the handover of that land and what it would mean in terms of reducing Landcorp’s ability to farm it. As usual the reality was different from the predictions. Also if one looks at the lambing percentages one can see that they are incredible. They are 135.8 percent which is a record high compared with the previous year’s 127.9 percent. 
Landcorp is a really good solid State-owned enterprise. It is one of our premier State-owned enterprises run by a fine board with a fine chief executive and by a very solid management team. Landcorp also contributes to something that I think is important in the farming sector and in rural industry which is training. It does an impressive amount of training and upskilling which is then re-injected as people pass through that entity and back into the farming communities. 
To conclude I want to touch briefly on a bit of history. Landcorp was previously on the hit list. I recall when Labour came into Government going to a Landcorp dinner and being told it was fantastic that the Labour Government had come in and told Landcorp squarely that it was not for sale. I was told that because Landcorp knew it was not for sale given those parameters it could actually get on and make some money for the taxpayer and improve the State-owned enterprise by doing some long-term planning. Prior to 1999 Landcorp was on the block. Labour defeated the National Party at the election then and put that issue to bed. Not to be outdone a great strategist—probably Murray McCully I suspect—decided to revisit that proposal in 2002 and again in 2005 and to say to the country we should sell off one of our biggest landowners probably to the foreign interests that come in start to subdivide land gobble everything up and then compete with it. 
We say again to Landcorp to the people of this country and to this Parliament that under the stewardship of this Government the Landcorp asset—which is a huge asset in the public mind and in the community context—is not up for grabs. I welcome the next election because I assume the National Party will recycle for the fourth time its failed policy of going to the public and telling them that we should sell Landcorp to foreign interests have it carved up have somebody else come and take over and reduce to zero the dividend that our taxpayers receive through the Crown. 
GORDON COPELAND (United Future) 
: 
 It is very appropriate that I follow on from the remarks just made to us by the Minister in the chair the Hon Clayton Cosgrove because at this point in the debate on the State-owned enterprises I want to talk about the ownership of Genesis Energy Meridian Energy and Mighty River Power. United Future believes that the current view of never selling any of the State-owned enterprises and retaining 100 percent State ownership is a very very deeply flawed policy when looked at from the point of view of determining what will maximise New Zealand’s economic growth and how to take steps to ensure that happens. If the 20th century taught the world one thing very very eloquently it was that Governments are not good at running businesses. Having sat through the committee of inquiry into Television New Zealand (TVNZ) I can tell members New Zealand is no exception to that and we should not think we can do something here that has failed in every other country. 
We have Labour’s view of never selling anything. National has changed its position on the State-owned enterprises because at the last election we were told by Dr Don Brash that it would not sell anything either except for a few small farms and a wee bit of Solid Energy. The ACT party’s view is to sell them all and just go in for straight market economics and so on. United Future has a different position and it is one that I believe is fundamentally sound and the House should look at. United Future’s view is that the partial sale of the State-owned enterprises to mum and dad investors could completely revitalise those businesses lift local savings and investment increase the returns to the Government and relieve the Government of ongoing capital demands. It could also build wealth for many thousands of mum and dad investors and ownership societies. United Future therefore proposes that about 40 percent of the State-owned enterprises should be sold. 
However I say immediately that we propose that that 40 percent be sold to New Zealand mum and dad investors in the various ways in which they invest in shares—through managed funds and superannuation schemes etc. We would put safeguards in place to ensure that no more than say 20 percent—and certainly less than that in the case of TVNZ—of those shares could ever migrate overseas into the hands of non-residents. That would give New Zealand continued majority ownership and control of the State-owned enterprises going forward. That policy is unique to our party and I believe the House should look at it very seriously. 
I can understand that New Zealanders are nervous about selling even 40 percent of the shares in State-owned enterprises. I completely understand that and sympathise with them following the debacle of the 100 percent sales of Air New Zealand and New Zealand Rail which have rightly made Kiwis very nervous about asset sales. But I stress that in both cases those enterprises were sold 100 percent and certainly in the case of New Zealand Rail were sold to asset strippers. We certainly do not suggest we go down that street. Australia for example has its four pillars policy in place which ensures that banks financial institutions and the media remain under Aussie control. The United Future policy represents a Kiwi equivalent of that very wise Australian position. 
We estimate that such a partial sale would release somewhere between $5 billion and $7 billion for reinvestment by the Government in other areas. The reinvestment of those funds would provide a new and an exciting range of opportunities for New Zealand. For example some hundreds of millions of dollars could be invested long term to produce income for universities that would enable them to award scholarships for postgraduate work across a range of high-level scientific and engineering skills. That skill set in and of itself has the potential to significantly lift New Zealand’s economic growth by creating a knowledge-led economy. We cannot have a knowledge-led economy without that really top-end PhD level of scientific input and engineering skill. A similar investment could be made in the top end of medical technology by our major hospitals so that New Zealand could establish and maintain First World status in all major surgical and diagnostic areas. 
The land transport funding problems in Auckland Tauranga Wellington and elsewhere could be overcome by utilising the money realised from the 40 percent sale of the State-owned enterprises thus eliminating congestion and providing the New Zealand economy with a major productivity boost. The drag on our economy at the moment of that congestion is very very material indeed. If any money is left over after that we could use it to repay Government debt although I point out that the Government is now in a net credit rather than a debit situation. In other words our net financial assets now comfortably exceed our net financial liabilities. 
Reports noted.. 
The CHAIRPERSON (H V Ross Robertson) 
: I understand that the next group— 
Eric Roy 
: I raise a point of order Mr Chairperson. I am not sure where you are getting to but I seek leave that the next debate be taken as one question. 
The CHAIRPERSON (H V Ross Robertson) 
: Thank you Mr Roy I was just getting to that. 
Eric Roy 
: I am here to help. 
The CHAIRPERSON (H V Ross Robertson) 
: I know you are. I know that you were a former Assistant Speaker so I know that you are here to help. I understand that the next group of entities that members wish to debate is district health boards. Is it the wish of the Committee that the district health boards and Pharmac be taken as one question? Is there any objection to that course of action? There is none. 
District Health Boards 
Pharmaceutical Management Agency 
Hon TONY RYALL (National—Bay of Plenty) 
: 
 In March the Government required the Director-General of Health to write to eight district health boards around the country to threaten them with an upgraded level of monitoring and the removal of their early payment situation if they did not improve the level of their performance of what are called the elective services patient flow indicators. The ministry’s letter follows the revelation in Parliament that despite apparently billions and billions of dollars being put into the public health system in the last 6 years fewer elective procedures are being performed. That also showed that fewer surgical procedures were being performed compared with 5 years ago. As a result the Ministry of Health wrote to a number of district health boards to threaten them with increased monitoring by the Government and to send a very clear message that their current performance was concerning and that they must move to compliance with those standards. 
That is why we have seen thousands and thousands of New Zealanders culled from waiting lists in the last few months. We already know that about 14000 New Zealanders— 
Anne Tolley 
: Fourteen thousand? 
Hon TONY RYALL 
:—14000—so far this year have been culled from the waiting list to see a specialist. On top of that we know that now almost 9000 New Zealanders have been culled from the waiting list after seeing a specialist and being told by that specialist that they need an operation and would benefit from having such an operation. 
In the district health board considerations that the Health Committee conducted district health board after district health board confessed to the select committee that people have to be sicker today to get an operation than they needed to be 5 years ago. That is what the Auckland District Health Board the Waitamata District Health Board the Counties Manukau District Health Board the Capital and Coast District Health Board and the Canterbury District Health Board said. This paints a picture of an elective services system in crisis. Fewer New Zealanders are getting elective surgery today than were getting it 5 years ago. That is very serious when we consider that the Government has made a huge investment in the health system yet fewer people are getting seen. 
What is frightening in the words of Dr Frizelle a leading cancer specialist in New Zealand is that many people are being dumped off a waiting list and sent home—some to die. On top of that concern salaried medical specialists have described what the Government has under way as dangerous and risky. The Minister of Health Pete Hodgson has not responded to that criticism. Senior medical specialists are saying that the cull the Government has under way directed by these letters that the Minister instructed the Ministry of Health to write is dangerous and risky and using the word of one of New Zealand’s leading cancer specialists frightening. 
We can understand why ordinary New Zealanders are worried about this Government’s handling of the health system. They are worried because there is a major disconnect in the Government’s policy. The Government is saying that it wants to increase access to primary care and to get people who do not go to see general practitioners to see them in order to get care. It is a laudable principle. More people apparently are going to see general practitioners but general practitioners are saying that those people need to go to hospital to get dealt with and to be seen by specialists because they have a secondary need. But when people get there they hit a logjam. 
As the Ministry of Health has said in its own documents the Government’s approach to electives is focused solely on cutting waiting lists not on increasing the number of elective procedures. That is what the Ministry of Health wrote to the Minister of Health. The Government’s elective policy is more about cutting the waiting lists than it is about focusing on additional elective procedures for New Zealanders. 
Dr JONATHAN COLEMAN (National—Northcote) 
: 
 It is a great shame that the Health Committee did not get the opportunity to hear from the Hawke’s Bay District Health Board and that we ended up producing a pro forma report on that district health board. I can tell members that if we had known what we know now about what has been going on in elective surgery in Hawke’s Bay we certainly would have wanted to see that district health board because what has been uncovered there has been just appalling. I can tell members that the National Party health team has really been putting the focus on health. The more focus we put on it the more uncomfortable truths are coming home to roost for this Government. 
Back in February the Minister of Health Pete Hodgson said when he was asked that the mark for anything in health will always be 5½ out of 10. Well if we were to ask the people in Hawke’s Bay now I would say that the Minister would definitely not get his 5½ out of 10 because 5½ is a pass mark and frankly in terms of elective surgery in Hawke’s Bay as around the rest of the country this Government is getting nowhere near a pass mark. 
If one district health board illustrates the sorry state of elective surgery under this Government it is the Hawke’s Bay District Health Board. We have heard that 1800 people just waiting to see a specialist for a first specialist appointment at that district health board have been dumped off the waiting list. Those people have not even seen a specialist. What was the precipitant for that? It was a threat as my colleague Tony Ryall has stated from the Ministry of Health that if the district health board did not come up to scratch and start to meet its target and if it did not comply it would be put under intensive monitoring. That district health board like a number of others received a letter that stated: “I anticipate you will move immediately to tackle the issues that underlie this position. As an indication of the seriousness attached to this matter I must regrettably formally advise you that failure to correct current non-compliance will lead to the ministry reviewing your status on the monitoring and intervention framework.” 
What did that mean? That meant that the management of Hawke’s Bay District Health Board had absolutely no option but to dump 1800 people off the waiting list to see a specialist. Then what happened? The Prime Minister blamed the managers—it was the managers’ fault! What happened next? The Minister of Health said it was an ethical matter—that the doctors general practitioners and surgeons of Hawke’s Bay were acting unethically in removing those people from the waiting list. 
Hon Member 
: What does that mean? 
Dr JONATHAN COLEMAN 
: Yes what does that mean? What does “acting unethically” mean in this context? Really only one person is to blame for this situation and that is the person who has to take the ultimate responsibility—the Minister. People should not blame the general practitioners surgeons and management of Hawke’s Bay District Health Board; they should blame the Minister of Health. Because the sad fact is that the buck stops with him. He has to stand up and take accountability. We in the Health Committee have heard week after week from district health board official after district health board official admitting under questioning that under this Government people have to be sicker than ever to get an operation. It is harder than ever to get an operation now. People cannot just get any old quality-of-life condition fixed—people cannot get their hernias or their varicose veins fixed. A person has to be within sight of the pearly gates before he or she has a real chance of getting on an operating table. That is disgraceful. 
The figures in Hawke’s Bay however—those 1800 people—are just the tip of the iceberg. When we started asking a few other questions we found out that over 8000 patients around the country were in exactly the same situation. The funny thing is that every time we ask how many people have been sent back to their general practitioners without getting a first specialist opinion the number goes up. We thought the number was 8000 until we asked questions in Parliament last week. The Associate Minister said they thought it could be 10000 but that actually it might be as high as 14000. So I would like Minister Hodgson to take a call today to give us the revised figure because I am certain it will be higher. Every time we ask the question the number goes up. In the meantime things are even worse. Another 8100 New Zealanders have been to their hospital have seen their surgeon and have been told they will be having an operation. Then suddenly they are told they are not having the operation any more. That figure gets worse too. Last month we found that 800 more people were in that category—over 10 percent more. So now nearly 9000 people are being told they will have an operation and then are being taken off the list. 
Dr JACKIE BLUE (National) 
: 
 I want to talk about Pharmac and the national medicines strategy. The question I want to ask is why New Zealanders have to wait so long. Over 8 months ago during the election campaign Peter Dunne said he would review the role of Pharmac to ensure not only that pharmaceuticals would be made available at the most competitive price but also that the interests of individual patients would be taken into account when funding decisions were made. Last month it was announced that the long-awaited medicines review was finally under way but that a consultation document would not be available until the end of the year—over a year after Peter Dunne promised it. There is more. It was also announced it would be another year before a final document would be ready. I say to colleagues that it looks as though it will be election year before a final report will be ready. How convenient that is! 
No mention has been made in the national medicines strategy review of a forum where members of the public—ordinary New Zealanders—can express their views face to face. That is an appalling indictment. The main focus of the strategy will be on quality access and the rational use of medicines. I point out that there is an urgent need for an operational review of Pharmac. Applications for funding take far too long to be decided on. The average application in New Zealand takes about 3½ years which compares with 9 to 10 months in Australia. There seems to be no rhyme nor reason as to how drugs are referred from Pharmac’s advisory committee—the Pharmacology and Therapeutics Advisory Committee—to one expert subcommittee or another. Sometimes that advisory committee thinks it has the expertise to make important decisions about complex drugs and complex situations and bypasses the expert committees completely. 
I will take as an example the saga of the diabetic insulin drug Lantus—a very valuable drug according to the medical community. Following an application for funding in July 2004 the drug was assessed as being of only low priority by the advisory committee. Lantus was then referred to the diabetic subcommittee which was fortunate but it took a staggering 10 months to meet. When the subcommittee finally met the expert subcommittee gave the drug a high priority for funding a decision that was completely at odds with the advisory committee’s position. Now 2 years later it is hoped that a decision about Lantus is not far away. Incredibly that rate of progress is considered to be quick by Pharmac’s standards. 
I think Pharmac sometimes thinks it is doing a fabulous job. It is proud of the fact that pharmaceutical spending has flatlined over the last few years. It is proud of the fact that it takes over 3 years to fund drugs. When Pharmac told the Minister of Health that New Zealanders have access to more medicines than Australians do it was very proud of that fact until it was pointed out that that included things like condoms bandages and peak flow meters. What an embarrassing oops! The reality is that New Zealanders are being short-changed on the total number of medicines and also short-changed by the use of special authorities and other rationing mechanisms that mean the number of people who are eligible for drugs is severely restricted. 
I have been led to understand that the Pharmac model has been praised internationally and that countries like Canada are looking at adopting the model at this very moment. I doubt whether they will do so when it is pointed out to them that severely restricting the access to innovative drugs will have a negative impact on health outcomes and also that Pharmac’s preference for being the sole supplier as a means of getting the price lower is risky and eliminates consumer choice. Although that approach has saved money it has prevented patients—consumers—from receiving the treatment they need. 
Pharmac’s approach has produced a rigid divisive silo mentality. Its antagonistic and hostile attitude has meant that a number of pharmaceutical companies have downsized or left the country completely. 
Dr Jonathan Coleman 
: Yes. 
Dr JACKIE BLUE 
: That is right. I say to colleagues that unfortunately tens of millions of research and development dollars are leaving with those companies. 
Dr Jonathan Coleman 
: Out of our economy. 
Dr JACKIE BLUE 
: Yes—overseas. I say to members that research and development money would not only help to fund new drugs and improve people’s access to drugs but would help to retain our doctors and attract them back from overseas. 
Pharmac’s attitude has dumbed down the whole sector. In 2004 only 600 people were working in the pharmaceutical industry in New Zealand—down from 1000 in 1990. Members can compare those numbers with Ireland’s. Ireland which has a similar population to New Zealand has over 12000 people working in the pharmaceutical industry. I ask colleagues whether it is any wonder that New Zealand is considered to be a backwater. 
New Zealanders deserve better than that; they do not deserve only a limited access to the drugs that Pharmac has denied them. Pharmaceuticals and early intervention with drugs can improve outcomes and save lives. Pharmac has been far too Scrooge-like in its whole operation and it needs a complete and an utter review. The national medicines review does not go far enough and it is not happening soon enough. 
Hon Tony Ryall 
: And it doesn’t involve the public. 
Dr JACKIE BLUE 
: It does not involve ordinary New Zealanders who deserve the right to have a face-to-face meeting with Pharmac officials so those officials can see the human toll that denying patients access to drugs has and what that really means to ordinary New Zealanders and their families. 
I will now talk about the district health boards and the waiting lists. I was told of a horrifying story last week. A woman in Waikato who was aged 39 found a breast lump. That is a pretty scary situation for any woman no matter what her age is. She found the breast lump and went the next day to her general practitioner who acknowledged there was a breast lump and also found lymph nodes in the armpit. Naturally the general practitioner wrote an urgent referral to the Waikato District Health Board. One would have expected the lady to be seen quickly and without any problem but she was not seen quickly. In fact she received a letter from the district health board stating it was very sorry but it could not see her for 9 months—a 39-year-old woman with a breast lump! 
Jo Goodhew 
: That’s appalling. 
Dr JACKIE BLUE 
: It is appalling. 
Although the district health board offered that woman a mammogram without a specialist appointment I point out that that is bad practice. I have taught breast medicine over many years and I say that is bad practice. One should never do just a mammogram in the case of a woman who has a breast symptom; a specialist has to do a breast check an ultrasound and a biopsy. That district health board was forced to take short cuts and that is terrible. It was put in the terrible situation of being under-resourced and all it could do was to send the woman back to her general practitioner with a mammogram but without the gold-standard treatment that the woman needed. I say to colleagues that it concerns me that if the woman had decided to go with the mammogram alone the mammogram might have been negative. A percentage of mammograms do not show up cancer. What could have been worse just before Christmas was that the woman would have had her mammogram and been reassured that all was well so she would have gone off on her Christmas holidays thinking all was well. That would have been a worse situation for her to be in than to have had proper treatment. 
The Waikato District Health Board breast surgeon explained when asked why the woman had to wait 9 months that it was short of a doctor at the breast clinic. I understand the lack of resourcing at the breast clinic was the lack of a breast physician. I say to members that I have been lobbying for breast physicians to be in district health boards for years and years. Breast physicians are an important resource and they are not recognised in BreastScreen Aotearoa which is a tragedy. They are cost-effective they can be used in situations like that and they should be in every district health board’s breast clinic. Breast physicians can see women in an efficient and a cost-effective way so I hope the Minister takes up the challenge and looks at district health boards employing breast physicians. 
Fortunately the woman concerned found the money to be seen privately which was good for her. But what would other women do if they did not have the financial resource or the family support to enable them to be seen privately? So I am very concerned about the waiting lists. That woman is just one example but there are many examples of people being culled off waiting lists and being sent back to their general practitioners when they should be seen by specialists. Those New Zealanders have earned the right to be seen by the public health sector within an appropriate time frame and if there is a problem with regard to the workforce or money then it needs to be sorted out here right now. 
I am greatly concerned about how general practitioners in this country are being told how to set their fees. They are being treated like people who cannot manage their own businesses. The Minister seems to be fighting with them all the time. They deserve better treatment than that. General practitioners do a very good job in this country. They are at the coalface for patients managing them and being there for them on a daily basis. General practitioners deserve the right to be listened to and treated with respect. If they feel that patients should be seen by specialists in hospitals then that should be utterly respected. They should not be treated in the way they are at present. General practitioners are being bossed around bullied and fought with. They deserve much much better treatment than that. 
Part of my interest in the health portfolio relates to the non-governmental organisations. Those organisations are quite diverse. They range from Plunket to the Order of St John to health promoters and so on. 
Hon TONY RYALL (National—Bay of Plenty) 
: 
 I am not surprised the Minister of Health has not sought a call in this debate. What would he talk about if he did take a call? Would he talk about his vision for health? Would he talk about his action plan? I will tell members what he would talk about—us. He would talk about the National Party. When he had the opportunity to give his maiden speech as Minister of Health he spent nine out of 10 pages talking about the agenda National has been setting in health and trying to explain why Annette King managed the portfolio so much better than he is. The Minister talks about lying awake at night worrying about the bird flu. I wonder whether he also lies awake and worries about why Annette King managed to have health under control as opposed to how it is going under him—and poll after poll shows that under this Minister health is turning into a disaster. 
How was Annette King able to negotiate with general practitioners and get a successful roll-out of the increased subsidies whereas this Minister is having trouble with significant parts of the general practitioner workforce in getting those through? Why when the waiting lists were growing and growing was Annette King able to be Minister of Health without that being too much of an issue? 
Dr Jonathan Coleman 
: It’s the Kyoto touch. 
Hon TONY RYALL 
: Yes. Why were district health board deficits growing and growing under Annette King without that seeming to be an issue? And why under Annette King was elective surgery going nowhere in this country without anything being said about it? Why is it all turning to custard on Pete Hodgson’s watch? 
I will tell members what it is about. It is about a Minister who thinks he knows everything. That is what is being said in the health sector today. As we travel around the country talking to district health boards community groups and interest groups one message is becoming clear: this Minister of Health thinks he knows everything and dares not take any criticism. We have seen his performance in this Chamber. Could he justify fewer New Zealanders getting elective surgery today than 5 years ago? No he just gives a vein-popping performance which his colleagues have counselled him against. Does he stand up in this Chamber and justify why he has dumped 14000 people from specialists’ waiting lists with another 20000 at risk? Because that is what is at risk. If district health boards are to become compliant as Poutasi wrote to them about in March that is how many people would have to be dumped. 
But do we hear any explanation of that from Mr Hodgson? We hear none at all. I wonder whether he has been to Annette King and asked her how she managed health like she did for 6 years yet in the 6 months he has been in the job it has been nothing but a bad headline with cartoon after cartoon showing him as a Minister who is under pressure and out of control. What is behind it? Maybe the Minister could take a call and tell us whether he has ever gone to Annette King and asked her how she had it under control when under him it is out of control. Let us actually hear from the Minister. Let us see whether he can go 5 minutes talking about his positive plan of action without mentioning the National Party. Whatever his plan of action might be it will be in response to what we are doing because more and more people in the health system realise that this Government’s rhetoric is all it has to offer. 
Where is the real commitment to a strong and growing primary health workforce? Where is the investment in the workforce in this country? Where is the commitment to support private - practice general practitioners? Why is there a breakdown that has resulted in general practitioners issuing for the first time in years a red letter warning their members against the Government’s proposal? Where is his plan of action to provide more elective services for New Zealand? Where is his plan to stop the wasteful duplication and fragmentation in the health system? It is nowhere. I want the Minister to take a call and see whether he can speak for 5 minutes without doing what he did in his maiden speech—that is see whether he can talk the whole time about his plan of action without responding to National’s. 
Hon PETE HODGSON (Minister of Health) 
: 
 I would like to thank Dr Jackie Blue for her contribution on the role of breast physicians. There are some things I would like to understand about that and I wonder whether she and I might not share a conversation in the near future. I would like to understand some of the subtleties better. 
I am so pleased we won the last election. It was fought around whether this country was to go forward with a bunch of tax cuts worth $11 billion over 4 years or whether we were to invest in more services and better education and give more attention to our nation’s infrastructure. It was fought around whether we were to build a nation or whether we were to have tax cuts we could not afford. Members can notice how I can listen—how we all can listen—to 25 minutes of drivel from the National Party without interrupting and how 25 seconds into my speech Tony Ryall has got himself blathering like a Gatling gun. All he can do is try to talk people down. That is the sort of guy he is. Members can notice that the National Party did not speak about mental health or about older New Zealanders wanting to stay longer in their own homes. It did not acknowledge that mental health funding has doubled under this Government. Boy are we proud of that! Boy have we got some way to go yet! But that is really significant progress. 
Members can notice the amount of money that has flowed through district health boards to help older New Zealanders stay in their own homes longer and to go to rest homes later or temporarily or for the most part not at all. That sort of money has doubled since the change of Government. Members can notice how the primary health care strategy will be rolled out one more step on 1 July this year and will be rolled out in its entirety on 1 July next year and how by 1 July this year there will be an investment of $540 million near enough into the primary health care strategy. 
Darren Hughes 
: National says it isn’t enough. 
Hon PETE HODGSON 
: National does not know what to say. National wants to have tax cuts; and if it wants to have tax cuts then it cannot afford a primary health care strategy. The primary health care strategy is the largest single change in the way we have delivered health systems since probably 1950. It is a remarkable change and I want to pay tribute to those very many people in the primary health care sector and the Ministry of Health—policy makers and practitioners alike—who have contributed to the design and roll-out of that remarkable strategy. 
 I wonder why in 25 minutes we did not hear about one new hospital being built even though 22 new hospitals have been built or are in the process of being built. So there is an investment in the infrastructure of this country; but in 25 minutes members opposite could not get anywhere near it. There was no mention of the biggest vaccination programme in New Zealand’s history—not a mention. The number of children dying from meningococcal disease has already dropped by 57 percent and will drop further. That is a remarkable achievement. 
What National did talk about was Pharmac which is an interesting thing to pick on because Pharmac is an exercise in cost-effectiveness. If we had no Pharmac—if we had no reference pricing—there would be an increase in our health budget of $700 million for which we would get nothing. So let us be careful when we start to criticise Pharmac although I think the future for pharmaceutical purchasing will have to change somewhat. I noticed that Tony Ryall in his last 5 minutes which we could have done without spent all of his time as he has in his interjections ever since— 
The CHAIRPERSON (H V Ross Robertson) 
: I am sorry to interrupt the Minister because I am conscious of the time but I remind members on my left to look at Speaker’s ruling 57/3. Running commentaries are out of order. If members want to make a speech they should take a call. 
Hon PETE HODGSON 
: All that Tony Ryall could do was make an ad hominem attack. Has he not got something better to offer than a personal attack? 
Actually there is one point on which I agree with various National Party members—that is we should not be putting people into a booking system for first specialist assessment then not seeing them. We should not do that. The extent to which people are returned to general practitioners represents in my view a failure of the system. I do not think that that should happen. I think 10000 is too many. I think 15000 is too many. We have had that number for years—it is not recent—but what is really interesting is that to offer a bit of perspective 450000 New Zealanders do see a specialist in the public system each year. So 10000 or 15000 people do not and I do not think that that is good enough—I do not think district health boards are managing their front doors well enough—but 10000 or 15000 out of 450000 is not total failure either. It is a few percent and for those 10000 or 15000 New Zealanders I do not think it is at all satisfactory. That is where I agree with National members and that is why the letters have been going out saying: “Please manage your front door better.” 
The same story goes for people who have been put on a booking system for a surgical procedure. We think that 7000 or 8000 is too many but it is also the case that 107000 do get their surgery so there is a bit of perspective. 
What do we know about what National members said that was wrong? Well most of what they said was wrong. They said there are fewer elective procedures—wrong. They said there are fewer surgical procedures—wrong. They said that under Annette King the deficits went up—they went down. Pretty much everything National members had to say that was an apparent fact was wrong. Even the figure of 1800 from Hawke’s Bay was wrong. All of the figures they mentioned that I took note of were wrong. What is more not only were they wrong; they were intended to mislead. It is not OK to intend to mislead; it is a good idea to have some perspective. 
However the most important thing is that 8 months ago New Zealanders made a choice. They made a choice not to have massive tax cuts. For that reason in 2 days’ time the Hon Dr Michael Cullen will announce a further increase in the health budget— 
Hon Tony Ryall 
: No it’s already been announced. 
Hon PETE HODGSON 
: Of course it has. It is $750 million in 1 year. If National had won the election its Budget 2 days from now would have had a total new spend of $800 million—not in health but in everything. In 2 days’ time $750 million extra will go into health through the Labour Government because it can invest. The National Party wanted to give it away in taxes and National members have the gall to sit there and say that things are not good enough. I say to National members that that is a point of view that they will have to reconcile internally because one cannot argue for increased expenditure and for tax cuts. We get to spend money but once around here and that is why winning the last election was so important. 
In 2 days’ time we will have a further investment in our health system. We will be able to deal with the priorities the Government has put into the public arena. I am happy to go through them. We need to get ahead of the curve on chronic disease. Whether it is Healthy Eating - Healthy Action whether it is the Cancer Control Strategy or whether it is further reduction in the prevalence of tobacco smoking or the amount that each smoker smokes all of those things are key to the future of New Zealand’s health. 
We need to make further progress in the health of older people. We need to make further progress especially with funding in that area. We need to make sure that the primary health care strategy is rolled out well over the next 2 years and that the move to a population-based approach in primary health is taken up fully. That will take some years but that has become a priority for this year and for later. And there are a bunch of things we want to do for our children. We do think that neonatal testing for hearing is a good idea. We do think that more attention to child and adolescent mental health is a good idea. National members do not because they chatter right through it. They yell in an effort to try to break up this speech. They just keep doing it. I do not know why they do not get laryngitis but that is what they do. We need to pay more attention to the oral health of our children. The oral health of our children has plateaued. It has stopped getting better. That is not good enough. So we need to make progress— 
Hon Tony Ryall 
: Under Labour. 
Hon PETE HODGSON 
: As it is under Labour I will just say what happened under National. A National Government stopped training dental nurses. I do not know whether anyone can believe that but National stopped training dental nurses. That roughly is the difference between the two parties. It is the difference between investment and disinvestment and I rest my case readily. 
Reports noted. 
Privacy Commissioner 
KEITH LOCKE (Green) 
: 
 I want to address the role of the Privacy Commissioner. The Office of the Privacy Commissioner does extremely important work and in its latest report it refers to this being a dangerous time for privacy: “The potential for unwarranted intrusions into the privacy of individuals is rising rapidly as are the demands of the Office of the Privacy Commissioner. Rapid growth of information technologies means there are ever more means and opportunities by which the right to privacy can be compromised.” 
We have been having discussions in this Parliament about the microchipping of dogs. One issue that has come up in one of the forums hosted by the Privacy Commissioner is the microchipping of people. This was in a paper by University of Otago Professor Paul Roth about workplace privacy issues raised by radio frequency ID technology. He refers to the Mexican Attorney-General microchipping the arms of 160 of his employees with rice-sized radio frequency ID tags as a security measure in terms of access to certain buildings. He goes on to talk about not necessarily the implanting of microchips but their use on cards to track employees in the workplace and the serious privacy problems that ensue. 
It is difficult for workers to control that at all unlike some of the other things the Privacy Commissioner here in New Zealand deals with—for example what is put on our credit records. We can check what is on our Baycorp record. The Privacy Commissioner has set up a whole code in that respect. At least we can find out what is going on and can correct things. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
KEITH LOCKE 
: The Greens are concerned that Governments around the world and employers are picking up the use of intrusive technologies like radio frequency ID chips and other identifying and tracking systems. Recently facial recognition chips have been added to our passports and our Government’s immigration review document projects other biometric identifiers such as fingerprinting and iris recognition systems being brought into use. Such biometric identifiers on passports combined with other personal information are the track the Blair Government is using to bring in British ID cards. The Howard Government is pushing ahead with what is effectively an Australian ID card—one card that can be used to access the full range of Government entitlements and other services. 
Of course all this information links back to Government databases that are extending and being linked up all the time. As the Privacy Commissioner reports the amount of personal information disclosed from one Government database to another went up from 10 million items 3 years ago to 21 million items now. The number of data-matching programmes operating between New Zealand Government departments has more than doubled to 36. 
The privacy of our thoughts and communications is under challenge as never before. Google’s Gmail scans the contents of its subscribers’ emails to enable it individually to customise advertisements. The details of the phone calls and emails of millions of Americans have been illegally recorded by the US National Security Agency as we found out recently. This data-gathering process was helped—unfortunately—by the phone and email information pouring into the United States from the New Zealand satellite communications interception station at Waihopai near Blenheim. In this morning’s  
Dominion Post 
 we read that one local woman’s bank account was emptied after a trojan computer program that monitored her keystrokes was able to steal her passwords. 
The Privacy Commissioner has an important role in monitoring all of this. There are Governments around the world that misuse this technology and we have to prepare for the possibility of our having a worse Government in New Zealand at some point. We have to have systems that will prevent it from misusing its ability to find out about our identities track our movements and communications and put all this information in databases. 
Report noted. 
The CHAIRPERSON (H V Ross Robertson) 
: I understand that members do not wish to debate any other entities. The debate on the performance of Crown entities public organisations and State enterprises has therefore concluded. I shall report the debate to the House. 
Report adopted.