Bennett DavidHon DAVID BENNETT (National): Thank you Madam Speaker. Thank you for the chance to speak on this bill and I acknowledge those who are here from the region. I just want to start with a couple of stories from the Waikato region. I'm from Hamilton and we have made two glorious mistakes with our funding in the last generations. The first was that the Waikato Regional Council managed to sell its shares in the Port of Tauranga and that was a great economic decision that led to a fund being set up which effectively hasn't really grown much in that period of time and hasn't delivered much for the Waikato region. The second story is that when we were in Government last time we actually set up the ultra-fast broadband network. Hamilton City Council was one of the key players in that and it actually had Taranaki Waikato and Bay of Plenty and the reason we set it up was to create a community business for the Waikato. Now they—bless their socks—a few years later once they got all that capital decided to sell it and put it into a fund for the purposes of their network which defeated the purpose of what we'd set up. What I'm saying is to be very careful with these kinds of funds because there are some things that I think really stand out to me that are problems: first of all council being involved in decision making. No offence to any councillors here but the reality is that a council being involved in that decision making under clause 6 really is a problem. Secondly there is a risk averseness that comes into these funds. Often they invest in shares—and this is what the ACT Party said. They said that it's great to see diversified investments that will be spread around and you'll have 20 percent in US shares and 20 percent in New Zealand shares and all that. There is a great economic loss from doing that. There is the economic return you get in the dividend but you have the economic loss of the failure to have the asset in your area. Arena Williams: This is free financial advice. Hon DAVID BENNETT: Yeah nah it is and it's great advice—you should listen. That is a big problem that many managed funds do pose for councils. They become risk-averse they invest on a diversified basis—which is what everyone will tell you is the greatest thing since sliced bread and great financial planning—but the reality is you lose the capital input into your area. I would encourage you to look at iwi. I don't see many iwi going out there and going into managed perpetual funds. They use a different structure. Tainui Group Holdings (TGH) is a perfect example. Their asset base is completely different from the political base. The asset base has been given the job of getting to run it like a company to make money and they invest in land and they invest in assets in the region and that is the parallel with local government. Local government has got a right to be there for ever and that's your role. Like with iwi it's a long-term role. The problem with many perpetual funds is that they become investments that are run by risk-averse people that don't invest in an area for long-term gain. I note that in clause 8(3) it says that you can invest outside the region which gives the licence to do that and I think you should be very careful about that. So my encouragement for you once you get this legislation is to actually go and look at something like Tainui Group Holdings. It's a better investment model. It takes it out of council decision-making because I can tell you what you will be doing in five or 10 years' time: you will be deciding to build some social housing in a certain area and thinking that that's a great idea. TGH doesn't do that. They go build investments into Ruakura Superhub and into commercial and industrial buildings they do investments into land and they do investments into businesses that actually generate money. You can be diversified in that range but you don't have to actually have it as a slush fund for council decisions. I would really encourage you to take a wider perspective than what your advisers will be telling you because they'll be telling you diversification and all that and you'll be paying them handsomely for that but the reality is that iwi don't do that. Iwi are making more money than any managed fund I've seen in New Zealand that a council has held and they use a different structure which is a much more commercial structure. You can divorce the council from that commercial structure and that's what you should do if you want to bear long-term growth. You've got one of the best regions in New Zealand—it's got amazing potential and as long as it links with the Waikato it's got even better potential—but the reality is: don't lose that opportunity. I'd hate to see in 10 years' time that you have even $400 million in some managed fund with $50 million of that on the US stock market and the value isn't in your region. It's about using those assets for commercial purposes not for political purposes. I'm not saying that that's what you will do but it will get to that point at some point because the decisions made by council won't be commercial. We encourage you to go ahead with this bill but there are better approaches out there for how you actually structure it. Go look at iwi. They have the same long-term role that you have. They aren't going into prudential managed funds like this. They are going into asset-based businesses that are run by commercial entities that then have a role of reporting back. It's a completely different model but it's a better model and it has worked. So I'd encourage you to have a look at that.