Volume 682 Week 18 - Thursday 2 August 2012 
Text is incorporated into the Bound Volume 
Volume 682 Week 18 - Thursday 2 August 2012 
[Sitting date: 02 August 2012. Volume:682;Page:4233. Text is incorporated into the Bound Volume.] 
Thursday 2 August 2012 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Business of the House 
Hon ANNE TOLLEY (Deputy Leader of the House) 
: 
 Next week the House is in a 1-week adjournment. When the House resumes on Tuesday 14 August the Government will look to complete the remaining stages of the Appropriation (2012/13 Estimates) Bill and begin the Committee stage of the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill. Wednesday is a members’ day. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 Can the Deputy Leader of the House confirm that it is the Government’s intention to move in the next 3-week period to debate the age-related matters of alcohol law reform and then to do the substantive Committee stage in the September period and when is it the Government’s intention to announce a request for substantive Supplementary Order Papers so we can get a more coordinated approach? 
Hon ANNE TOLLEY (Deputy Leader of the House) 
: 
 It is my understanding that the Leader of the House has already indicated that he will be bringing the matter of the alcohol law reform bill to the Business Committee in the next session for discussion. 
Questions to Ministers 
Savings and Debt Household—Reports 
1. 
PAUL GOLDSMITH (National) 
 to the  
Minister of Finance 
: What reports has he received on progress in lifting New Zealand’s household savings and reducing household debt? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The latest available data comes from the year to March 2011 and shows that net household savings in that year were 0.2 percent of disposable income. Although this is modest it is the first annual positive savings rate since 2000 and only the second since 1993. Treasury forecasts an increase in the household savings rate from 0.2 percent of household disposable income to 3.9 percent by 2016. This higher savings rate and the reduction in household debt are expected to be helped by continued restraint on consumer spending which of course is not such good news for the retail sector. 
Paul Goldsmith 
: What impact has the recent increase in household savings had on household debt? 
Hon BILL ENGLISH 
: Household debt did grow quickly through the mid-2000s. However since then the growth has slowed and started to turn down helped along by New Zealanders being careful with their money. As a result household debt as a percentage of disposable income has fallen from 155 percent of disposable income in 2009 to 140 percent today. So that is quite a significant reduction. The level of household debt however is still high and I would expect that New Zealand households will continue to pay down their debt. 
Paul Goldsmith 
: Given the improvement in household savings and the fall in household debt what factors are behind forecasts for the current account deficit over the next few years? 
Hon BILL ENGLISH 
: The current account deficit is forecast to go out to 6.7 percent of GDP by March 2016. This is still significantly less than its peak at 8.7 percent of GDP in 2006. The forecast widening of the deficit will reflect a couple of factors. One is the Christchurch rebuild which is being part-financed from overseas insurance inflows. Statistics New Zealand estimates $15.7 billion of reinsurance for Christchurch. A second driver of it will be increasing business investment—that is where people are financing investment in their own businesses which will generate future income. 
Andrew Williams 
: Has the Government any plans to ensure more household saving is invested in New Zealand - owned financial institutions rather than in foreign-owned banks; if not why not? 
Hon BILL ENGLISH 
: There is a bit of a trade-off in this respect where large investors such as the New Zealand Superannuation Fund and ACC have investment policies that include diversification of their holdings. Both of those funds are so large that they have probably invested almost as much as they can in the New Zealand stock market though they do invest a considerable amount of their funds offshore as a rational investor probably would. 
Christchurch Recovery—Funding and Potential for Sale of Council Assets 
2. 
EUGENIE SAGE (Green) 
 to the  
Minister for Canterbury Earthquake Recovery 
: Did the advice he has received on Christchurch City Council assets contemplate a sell off or sell down of shares in companies supervised by Christchurch City Holdings Ltd or of other council assets; if so which ones? 
Hon AMY ADAMS (Associate Minister for Canterbury Earthquake Recovery) 
 on behalf of the Minister for Canterbury Earthquake Recovery: I think it is important to be clear that the advice the Minister has received on the Christchurch City Council’s assets from Treasury and the Canterbury Earthquake Recovery Authority is not advice of any specificity; it is simply advice on the financial position of the Christchurch City Council and its ability to contribute to the recovery. There is no list of assets compiled for the purpose of considering sales and the Minister has had no discussions with either Government officials or the council around the particular sales of any assets. 
Eugenie Sage 
: Given that the running costs for the Wellington electricity network have increased by 296 percent since 1990 attributed to the privatisation of electricity distributors is the Minister concerned that selling off or selling down Orion would risk increasing electricity prices for people in Christchurch who are already facing high energy costs in damaged homes? 
Mr SPEAKER 
: I am a little uncertain. Is Orion an asset owned by the Christchurch City Council? 
Eugenie Sage 
: Yes. 
Mr SPEAKER 
: Well the Minister has no responsibility whatsoever for assets owned by the Christchurch City Council. But in the interest of fairness I will allow the member to rephrase her question to try to bring it within the Minister’s responsibility. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I think we have already had tabled in this House—and if not I am prepared to offer it for tabling—two things: a Cabinet paper and also a list of assets of the Christchurch City Council— 
Mr SPEAKER 
: Order! 
Hon Trevor Mallard 
: Can I finish sir? 
Mr SPEAKER 
: No. I have allowed the member some time to make clear what the issue of order is and I do not hear what the issue of order is. Disputing by way of a point of order—even if cleverly done—a Minister’s answer is not acceptable. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I was not in any way disputing the Minister’s answer; I was disputing your ruling. Your ruling indicated that there was no responsibility. The point I was making was that the Minister asked for and received a list of the Christchurch City Council’s assets— 
Mr SPEAKER 
: Order! That is not an issue of order. I cannot for the life of me see how that has anything to do with the proceedings of this House. It may have something to do with whether the member judges the Minister’s answer to have been a good answer but that is not a matter to do with the proceedings of the House. The questioner has the opportunity to dig into the Minister’s answer if the questioner finds the answer surprising but what the member cannot do is ask the Minister about matters for which the Minister is not responsible. The Minister for Canterbury Earthquake Recovery has no responsibility for former sales of assets owned by any city council. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. The matter that the member was bringing up was not the former sale; it was a possibility of a sale of an asset the list of which was asked for by the current Minister— 
Mr SPEAKER 
: Order! The member continues to seek to question the Minister’s answer. The Minister gave the House a certain answer. The member seems to disagree with that answer. He has the chance to ask supplementary questions; that is the way to deal with answers that surprise the member not points of order. My ruling stays. But I am not dismissing the question and saying the member loses the question; I am just asking her to rephrase the question in a way that clearly brings it within the responsibility of the Minister. I stress in doing that that the Minister for Canterbury Earthquake Recovery has no responsibility whatsoever for the assets of the Christchurch City Council. The Minister has responsibility for advice he receives—or he is answerable for advice he receives—but he is not responsible for those assets. 
Hon David Parker 
: I raise a point of order Mr Speaker. Just dealing with that point as to whether the Minister does have responsibility. The legislation this House passed gave the Minister the authority to by regulation pass regulations that can take over the Christchurch City Council—very wide-ranging powers—which I would suggest mean that this is a question that even in its present form is within order because the Minister could do that and take control of Orion and sell it if he thought it was a wise thing to do. 
Mr SPEAKER 
: I think that is a pretty long bow. I have invited Eugenie Sage to rephrase her supplementary question. 
Eugenie Sage 
: In the event of advice from Treasury about selling down shares in Orion would the Minister have a concern that that would potentially risk increasing electricity prices for Christchurch residents given the experience in Wellington where the privatisation of the electricity distribution network has increased prices by 296 percent? 
Hon AMY ADAMS 
: The matter is entirely hypothetical. The Minister has received no such advice. 
Eugenie Sage 
: Does the Minister believe it is fairer for Christchurch people to pay what is effectively an earthquake levy through their rates or to spread this across all New Zealanders through a temporary earthquake levy? 
Hon AMY ADAMS 
: My view is that the approach the Government has taken is the appropriate way to fund the response. 
Eugenie Sage 
: Given that a majority of respondents in a nationwide poll supported a temporary earthquake levy to look after Christchurch why will the Minister not support this levy instead of encouraging further increases in rates council borrowing or selling down productive assets? 
Hon Anne Tolley 
: I raise a point of order Mr Speaker. If you look at the primary question this is the second supplementary question now that has wavered quite widely of the primary question which is about advice that the Minister has received about the sell-off or sell-down of shares on behalf of the Christchurch City Council. There is nothing in there about a rate an earthquake levy—nothing. 
Mr SPEAKER 
: I do not think I need to hear further on this. In my view the question was in order. The question related those other matters that the honourable Minister has mentioned to the issue of sales of assets and the primary question asks about fundraising through the sales—advice on the sales of assets. I think the question does relate to the primary question sufficiently to be in order. Does the Minister still recollect the question or shall I ask the member to repeat it? 
Hon AMY ADAMS 
: I would point out to that member that all taxpayers of New Zealand are contributing to the recovery of Christchurch through the $5.5 billion of taxpayers’ funds that the Government has collected from all the citizens of New Zealand and is contributing to the rebuild in Christchurch. The important issue is that we also expect the Christchurch City Council to play its part in the rebuilding of Christchurch and we expect it to consider all the funding options available to it to do so. 
Eugenie Sage 
: Will the Minister give an assurance that the Government will not use the Minister’s powers under section 48 of the Canterbury Earthquake Recovery Act to direct the Christchurch City Council or Christchurch City Holdings Ltd to sell down or sell off their assets? 
Hon AMY ADAMS 
: The Government has sought no advice in that regard it has had no discussions with the council in that regard and it is unhelpful for that member to continue to speculate and raise fear in that respect. 
Kevin Hague 
: I raise a point of order Mr Speaker. The question sought an assurance from the Minister that that power would not be used. The Minister’s answer relates to the advice that has been received about that matter but does not address the issue of whether or not the power will be used. 
Mr SPEAKER 
: I hear the member’s point but in fairness where assurances are sought over hypothetical matters Ministers cannot see into the future. It is not reasonable to expect the Minister to be able to give an absolute assurance of yes or no when circumstances—we do not know; there might be another earthquake for example. No one knows what the future holds and that is why traditionally in this House while it is fair to ask a Minister in case a Minister is prepared to answer such a question it is not reasonable to expect an absolutely precise answer on a hypothetical question like that. 
Eugenie Sage 
: Given that the Christchurch long-term plan provides for the council to fund its share of the earthquake rebuild through rates and borrowing without selling assets will the Minister give an assurance that the decision will be Christchurch City Council’s as to how it funds its share of the rebuild cost? 
Hon AMY ADAMS 
: We have made it very clear that we expect the Christchurch City Council to play its part in the rebuilding of Christchurch and that we expect the Christchurch City Council to consider all of the relevant options in doing so. How the council makes its decision is not a matter of my responsibility. 
Eugenie Sage 
: If the Government is expecting Christchurch City Council to consider all relevant options will the Minister give an assurance that the Government will not put any pressure on Christchurch City Council or Christchurch City Holdings Ltd to sell Christchurch’s assets? 
Hon AMY ADAMS 
: The member keeps asking the same question with respect and with respect my answer remains the same. It is a matter for the Christchurch City Council. We expect it to consider all of its options and we expect it to play its part in the rebuilding of Christchurch. 
Gareth Hughes 
: I raise a point of order Mr Speaker. With all respect the Minister is talking about the council which is outside the Minister’s responsibility. It is a clear question around the Minister’s responsibility: will the Minister put any pressure on the council to sell down the assets of the holdings? 
Mr SPEAKER 
: I think in fairness that I understand why the member has raised his point of order but the Minister has said in relation to that question that the Government expects the Christchurch City Council to consider all its options but then the decision is theirs not the Government’s. OK the member came back with a further question about it but the Minister has not changed her answer in that matter. I think it is a reasonable answer to the question. You cannot always expect to get exactly the answer the member might be wanting but then further questions can be asked. There is a further question available. 
Eugenie Sage 
: I seek leave to table an article from the Public Service Association journal  
Working Life 
 from March 2012 that finds that Wellington’s electricity network’s running costs increased by 296 percent in 20 years due to privatisation. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. 
Hon Lianne Dalziel 
: Can he confirm that he specifically asked for the list of the council’s strategic assets in the context of discussions with the council about cost-sharing; if so what other implication than the potential for inputting the funds from selling those assets could one take from that request? 
Hon AMY ADAMS 
: No. 
Hon Lianne Dalziel 
: I seek leave to table the response from the Canterbury Earthquake Recovery Authority to the Minister’s office setting out “The Minister requested that we advise what the CCC identified as their strategic assets.” and listing all those strategic assets. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
New Zealand - Australia Migration—Effect on Regional Areas 
3. 
Hon DAVID PARKER (Labour) 
 to the  
Minister of Finance 
: Does he stand by his answer to yesterday’s primary question “as I understand it there are no regional statistics that specifically isolate the number of people leaving any particular region to move overseas” and has the Treasury reported to him the existence of official statistics on permanent and long-term migration compiled by local council area and region? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 What I meant yesterday was that you cannot isolate the relative impact of internal and external migration relevant to the question that the member asked. However the member is right that there is a separate series of external migration statistics by region. However the big issue here is the actions the Government is taking to try to create more opportunities for young New Zealanders who would rather have good job opportunities in New Zealand. 
Hon David Parker 
: Since he made that statement yesterday has he read the official permanent and long-term migration statistics prepared by Statistics New Zealand and do those statistics show by region and local council area that the regions of New Zealand are being hollowed out by the departure of young New Zealanders to Australia? 
Hon BILL ENGLISH 
: No I have not but the member’s question illustrates more of the defeatism that I originally criticised. We live next door to one of the fastest-growing developed countries in the world. That means we have to compete for the talent of our young people and as I said we should get on and compete instead of standing around counting everything. 
Hon David Parker 
: If the Australian resources boom is the main reason why people are going why did Taranaki lose 1232 people last year—which is even after migration into the region a net loss of 885 people—when it has some of the best natural resource development in the country? Why are they going from a resource-rich region to Australia? Is it because so few of them are getting a trickle-down of any benefit to working families? 
Hon BILL ENGLISH 
: No and actually there might be a couple of logical reasons. One is that when it comes to resources it is the huge new investment in Australia that is generating the jobs and I look forward to the support of the Labour Party as we ensure there is huge new investment in the Taranaki Bight to create the same sorts of jobs. The other reason people will be moving from Taranaki is that that is exactly the kind of expertise that is needed particularly in the gas industry in Australia. We want to help Taranaki businesses benefit from that large opportunity. 
Hon David Parker 
: Is there any region of New Zealand where the trend of departures has stopped or is getting better or do the figures show that the permanent departure of young New Zealanders is hollowing out every single regional area of New Zealand? 
Hon BILL ENGLISH 
: All I can do is repeat what I said earlier. There are young people leaving. It does not matter whether you count them regionally or nationally you get the same result. The issue is this: it is time New Zealand stopped being defeatist about it and got on with competing and taking advantage of living next door to the fastest-growing economy in the developed world. That is exactly what the Government is doing. 
Hon David Parker 
: Has he seen comments from the New Zealand Institute of Economic Research that “Rural New Zealand is likely to disproportionately suffer the consequences of the country’s ageing population and outward migration through a loss of skilled and innovative labour” and does he think young New Zealanders would be leaving in droves for Australia if New Zealand offered job opportunities and wages here? 
Hon BILL ENGLISH 
: Of course we need to offer them jobs and opportunities and what that needs is strong support for the businesses that make the decisions to invest and to create that new job. That is why the Government is advancing pro-growth policies and that is why it is hard to understand why the Opposition is against those pro-growth policies because that is stopping businesses creating jobs and opportunities. 
Hon David Parker 
: Are the regions that have lost the most young people in the last year the regions that tend to have the longest-serving National MPs and is that why they are leaving? 
Hon BILL ENGLISH 
: No. Actually I represent a region that has had challenges of population probably for about 30 years but what is happening in Southland is the opposite of the kind of defeatism that the member is talking about. We have worked very hard to develop our local resources and provide more jobs and opportunities. Because of that we have a vibrant and successful local economy—more productive than any other part of the country. 
Industry Training—Changes 
4. 
SCOTT SIMPSON (National—Coromandel) 
 to the  
Minister for Tertiary Education Skills and Employment 
: What changes is the Government making to improve results from industry training? 
Hon STEVEN JOYCE (Minister for Tertiary Education Skills and Employment) 
: 
 Yesterday I announced the Government is seeking to further improve the performance of industry training by boosting the number of apprentices and increasing the support for apprenticeship training. These proposals follow a comprehensive policy review conducted by the Ministry of Education. The changes are the next step in improving the performance of the Government’s investment in industry training and include clarifying the role of industry training organisations increasing the performance expectations of industry training organisations enabling learners to transition easily between workplace-based and non - workplace-based training and ensuring a sustainable funding regime is in place for results-focused industry training. The Government expects the changes to drive a higher level of qualification completion in industry training so that workers are equipped with transferable skills that improve this country’s productivity and boost economic growth. 
Scott Simpson 
: Given the revised system’s focus on improving the performance of the Government’s existing investment in industry training who will benefit from these proposals? 
Hon STEVEN JOYCE 
: When the Government came into office it was clear that training enrolments were high but actual credit achievement was very disappointingly low with huge numbers of phantom trainees. We set about making changes as we have in other parts of the tertiary system to focus on results and improve value for money for taxpayers. Those changes have successfully raised credit achievement in the industry training sector by 19 percent since 2008. A more high-performing industry training sector will significantly benefit trainees first of all in achieving valuable skills and higher wages in the labour market but also businesses with a more productive workforce and the New Zealand economy in producing goods in demand around the world. 
Christchurch Recovery—Funding and Potential for Sale of Council Assets 
5. 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
 to the  
Minister for Canterbury Earthquake Recovery 
: Which of the assets identified by CERA in response to his request has he ruled out asking Christchurch City Council to sell? 
Hon AMY ADAMS (Associate Minister for Canterbury Earthquake Recovery) 
 on behalf of the Minister for Canterbury Earthquake Recovery: As I have already made clear in answers to question No. 2 today the Minister has received advice from Treasury and the Canterbury Earthquake Recovery Authority that considers the financial position of the Christchurch City Council in the context of its ability to meet its rebuild obligations. These reports do not consider the sale of individual council assets and do not recommend the sale of any assets. Instead the advice suggests that the Christchurch City Council should consider all of its options to fund its share of the rebuild. 
Hon Lianne Dalziel 
: When was the Christchurch City Council first advised of the specific details of the council’s anchor projects that it would have to fund itself and what the mayor has called “the gap between what the council can afford and what’s outlined in the [Government’s] plan.”? 
Hon AMY ADAMS 
: I cannot give the member the specific date but what I can tell the member is that we have been working with the Christchurch City Council comprehensively through the development of the blueprint in the plan and furthermore that the council is very well aware that the assets identified as anchor projects in the plan have been blocked for location with a clear understanding of all parties that each one of those assets be they centrally led assets or civic assets will now have to go through a specific design process. It is through that design process that final costings will become known. 
Hon Lianne Dalziel 
: What was the reaction of the council members when he met privately with the Christchurch City Council on the Thursday before the public announcement to tell them the news and when they told him that it was going to cost them another $1 billion? 
Hon AMY ADAMS 
: I cannot advise as I was not physically present at the meeting. What I can tell the member though is that the Christchurch City Council has acknowledged to us that it is entirely reasonable that the Government would want it to demonstrate that it has considered all of its options when it comes to funding of the projects that it is responsible for and that the Government is correct in expecting that the council would demonstrate that before it were to seek any additional funding from the Government. 
Hon Lianne Dalziel 
: Can the Minister confirm that when he met with the council on the Friday he was able to give it a reassurance that the difference was not the $1 billion that it had been advised the night before but he had managed to get it down to $100 million and what is the gap that the Christchurch City Council is expected to fund? 
Hon AMY ADAMS 
: Can I reiterate once more that the final costings for these assets is a long way from determined and will not be determined until we go through a process of final design specifications and costings for each asset. The member should be aware that when we launched the blueprint it was made very clear that it was a matter of identifying the locations for key assets—not the design of them not the final configuration of them and not the costings for them. The discussions we have had with the council have focused on the fact that the Government will certainly take the lead in the replacement of central government facilities and that we expect the city council to be the lead agency in the delivery of the civic assets that are part of that plan. 
Hon Lianne Dalziel 
: Why did the Government announce the specific projects that will be civic assets when it had not even discussed them or the costings with the Christchurch City Council before it made the final decisions? 
Hon AMY ADAMS 
: I reject that entirely. The Christchurch Central Development Unit which compiled the blueprint was made up of a collaboration of Canterbury Earthquake Recovery Authority officials and Christchurch City Council officials. The point was made repeatedly at the launch that the Christchurch City Council had been intimately involved in the formation of the plan and it is well aware of the proposals to the extent of listing its contributions to them in its annual plan. So to suggest that it had no idea that it would be called upon to fund them is simply wrong. 
Hon Lianne Dalziel 
: I raise a point of order Mr Speaker. I know it is difficult because the Minister is not the Minister who would normally be answering the question but it has been made clear in the public arena that the officials who were seconded to the Christchurch Central Development Unit were sworn to secrecy. They had to sign a gagging order— 
Mr SPEAKER 
: Order! This is not a matter of order in this House. The member asked questions and has received answers and I can see that some of the answers have surprised the member asking the questions but that is what asking questions and getting answers is about. The point of order is not a valid point of order. 
Hon Lianne Dalziel 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Well I will hear further from the member. 
Hon Lianne Dalziel 
: I am not trifling with the Chair; I am just trying to get an understanding. I used the phrase “Christchurch City Council” but I am referring to the council not to staff members who are seconded and I just wonder whether the question has been answered in the context that it was given. 
Mr SPEAKER 
: Well on my listening to the answer given I believed the question had been answered. I could see the member was surprised by the answer given but an answer to the question was given. The member does have further supplementary questions though to pursue the matter should it be of paramount importance to sort that detail out but it cannot be done by way of point of order. 
Family Court—Changes 
6. 
KATRINA SHANKS (National) 
 to the  
Minister of Justice 
: What changes is she making to improve the Family Court? 
Hon JUDITH COLLINS (Minister of Justice) 
: 
 Today I have announced plans to reform the Family Court that will focus on supporting parents and families to resolve their family disputes independently and will help modernise the Family Court to make it more efficient effective and responsive. We know that if at all possible it is best to keep some family matters out of court especially when children are involved. Our changes put the needs of children and vulnerable people first. 
Katrina Shanks 
: How will the Family Court changes improve the focus on children and vulnerable parties? 
Hon JUDITH COLLINS 
: We know that court proceedings can have a harmful impact on children. We want to minimise that harm. A new Family Disputes Resolution service will include free access to the highly regarded Parenting through Separation course which helps families cope with the emotional upheaval of a domestic dispute. We are creating a fast track for urgent cases and better supporting victims of domestic violence with improved treatment programmes an increased maximum penalty for breaching a protection order and recognition of economic abuse as a form of psychological abuse. 
Katrina Shanks 
: Why are changes to the Family Court needed? 
Hon JUDITH COLLINS 
: Earlier this year judges lawyers and counsellors raised serious concerns about how the court currently operates including long delays and a lack of focus on children and vulnerable parties. Our new Family Disputes Resolution service will see about 4000 fewer applications involving 2000 children going to court each year for Care of Children Act cases. We are clearly putting the needs of children and vulnerable people first. People needing immediate access to court legal representation legal aid or court-funded counselling will get it; this is not changing. What is changing is that for some private family matters we can help families resolve their disputes without having to go to court. 
Charles Chauvel 
: Does she agree with her officials’ estimate that her new fee of $897 for families to access the Family Disputes Resolution service which will replace the existing counselling—which is provided free of charge and without any formalities like affidavits required—will deter 1200 families with children every year from having their problems resolved by the New Zealand Family Court? 
Hon JUDITH COLLINS 
: Of course I do not agree with that advice and I can tell the House why. Of course this is the whole fee—$780 plus GST—for a hearing or in fact a dispute resolution mediation service. What that actually means is that for anyone who is on a low income such that they would normally get legal aid their share will be paid for them. The other half of that share I can tell the House equates to about 1 hour of a lawyer’s fee and is actually a very minimal cost towards what is resolving matters that if they were allowed to go on could ultimately cost people many hundreds of thousands of dollars. 
Charles Chauvel 
: I seek the leave of the House to table an information document provided to the public by the Minister today which shows that $780 plus GST equals $897 and also— 
Mr SPEAKER 
: Order! Could I just check that this is not a press release. 
Charles Chauvel 
: No it is a Q and A put out by the Minister. 
Mr SPEAKER 
: But it is put out by the Minister? 
Charles Chauvel 
: Yes. 
Mr SPEAKER 
: Has it been put out for all members? 
Charles Chauvel 
: No I do not believe that it has been sent to members. 
Mr SPEAKER 
: Well I will leave it up to the House. The member can describe it. 
Charles Chauvel 
: Thank you. The second point that the Q and A document makes is that 1200 fewer applications to the Family Court are expected per annum. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
Hon Trevor Mallard 
: Is it her intention to extend the new affidavit-making process into the rest of the legal system therefore making it easier to establish the truth as to whether John Judge is correct when he describes the Minister as pathetic knowing the truth and trying to blacken Mr Judge’s name or she is correct when she wrongly suggested that he had wiped his computer and removed evidence about her leaked documents? 
Hon JUDITH COLLINS 
: I can tell that member that I am not anticipating taking that action but I can tell him that there will be far better anger management assistance for abusers in the Family Court from now on. 
Whanau Ora—Recipients of Funding 
7. 
Le’aufa’amulia 
 ASENATI LOLE-TAYLOR (NZ First) 
 to the  
Minister for Whanau Ora 
: Does she stand by her statement that “I don’t object to any vulnerable family receiving Whanau Ora support because that’s what the money is for”? 
Hon BILL ENGLISH (Deputy Prime Minister) 
 on behalf of the Minister for Whanau Ora: Yes. 
Le’aufa’amulia Asenati Lole-Taylor 
: Given that answer how does the Minister justify the Mongrel Mob receiving $20000 through Whanau Ora? 
Hon BILL ENGLISH 
: I am not sure what the member is referring to. I know there is a trust that is before the courts facing charges of misappropriation. I am not sure whether it is the same group that the member is referring to. 
Le’aufa’amulia Asenati Lole-Taylor 
: Has her department undertaken any inquiries into how the Mongrel Mob came to be in receipt of $20000 of taxpayers’ money; if so what was the result of these inquiries? 
Hon BILL ENGLISH 
: I understand the relevant department has made inquiries. In fact those inquiries may have been of some assistance to the police. 
State Housing Auckland—Condition 
8. 
Hon ANNETTE KING (Labour—Rongotai) 
 to the  
Minister of Housing 
: Does he stand by all his comments on housing; if not why not? 
Hon PHIL HEATLEY (Minister of Housing) 
: 
 Yes as long they are taken in context. 
Hon Annette King 
: Do the statements that he made over 4 years ago about mouldy old damp State houses apply to any State houses now almost 4 years after he became the Minister of Housing promised to rid the land of slum State housing and said that upgrading State houses was a high priority? 
Hon PHIL HEATLEY 
: Yes. As I said yesterday in fact—more recently than 4 years ago—of our State houses that we inherited about one-third were of the wrong size in the wrong place or in a serious state of disrepair. We are insulating every State house that we can by the end of next year. We are very proud of that. In fact we consider that as a State landlord this should have been done decades ago and the previous Government should be a bit embarrassed about it. 
Hon Annette King 
: Can he recall his visit to the flats at 44 Symonds Street Auckland early this year and did he notice the mouldy old damp walls the broken windows the peeling paint and the one laundry for 45 flats; if so what action has been taken to address these slum-like problems after his visit? 
Hon PHIL HEATLEY 
: I have visited a number of State houses both in Opposition and in Government. I confirm again in this House that the State housing stock was left in a serious state of disrepair. There are a large number of State houses even today that are in a serious state of disrepair. I look forward to the Labour Party and the Green Party supporting this Government upgrading them— 
Mr SPEAKER 
: Order! Order! Does the member need a new prescription for his glasses? 
Hon PHIL HEATLEY 
: Are you offering Mr Speaker? 
Mr SPEAKER 
: Well I was on my feet and the Minister just kept going. I was very impressed by the passion in the answer; the only problem was I do not think it said anything about the question asked. There is a lot of licence with that kind of question but there should be some reference to the question. It asked whether the Minister had visited a certain block of flats I think or apartments in Symonds Street in Auckland. There is nothing wrong with the Minister giving a little more information than necessary but there was no mention made of those flats whatsoever. If the Minister could assist the House in that regard I would appreciate it. 
Hon PHIL HEATLEY 
: I may or may not have visited them. I have visited a lot of State houses in my time. I can let you know though—and the House—that there are a large number of State houses that we want to demolish and subdivide and we would appreciate the support of the Labour Party instead of its members stopping every development we are trying to do in this country. On the one hand they want them fixed— 
Mr SPEAKER 
: Order! Order! That is sufficient. 
Hon Annette King 
: Has he been told that the only maintenance that has been done at 44 Symonds Street in 4 years occurred a few days before he visited when the entrance foyer got a new piece of lino which is now called the ministerial lino; if so does he intend to visit again so that they can get another piece of lino? 
Hon PHIL HEATLEY 
: I always suspected I was a very effective member. I notice that member never gets a red carpet laid out for her. What I can say is simply this. There are a large number of State houses in this country that need repair. Every time we try to subdivide a section and move someone else to a new State house that party’s members object. The State housing stock needs upgrading. I want their support. 
Hon Annette King 
: I seek leave to table a photograph taken by Jacinda Ardern on our recent visit at 44 Symonds Street showing the ministerial lino. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is objection. I call Jacinda Ardern. [ 
Interruption 
] Order! The House has had some fun. I must be able to hear the supplementary question. 
Jacinda Ardern 
: Is he planning to demolish or sell the flats at 44 Symonds Street as he implied in his earlier answer? 
Hon PHIL HEATLEY 
: I am unaware of any moves to do that. It would be a matter for the Housing New Zealand Corporation. What I can say is that there is a large number of State houses across New Zealand that we wish to either upgrade subdivide or demolish and rebuild and every time we do it the Labour Party members oppose us. Yet they want them upgraded. What do we do? Well we get on with the job. 
Foreign Affairs and Trade Ministry—Uncontested Contracts Awarded to External Consultants 
9. 
Dr KENNEDY GRAHAM (Green) 
 to the  
Minister of Foreign Affairs 
: What is the total number and cost of uncontested contracts given by the Ministry of Foreign Affairs and Trade to external consultants in the last two financial years? 
Hon TIM GROSER (Associate Minister of Foreign Affairs) 
 on behalf of the Minister of Foreign Affairs: In 2010-11 the Ministry of Foreign Affairs and Trade engaged 82 consultants or contractors through non-contested processes at a cost of $5.06 million. In the more recent fiscal year the numbers dropped to 49 consultants at a cost of $2.98 million. 
Dr Kennedy Graham 
: Why did the ministry this year give a contract worth more than $300000 for change management with no tender process and the only reason given as justification is that the consultant Harrington Allen and Associates had previously worked for the ministry? 
Hon TIM GROSER 
: The Minister has a very strong view based on Public Service policy that this is an operational matter for the chief executive. 
Dr Kennedy Graham 
: In asking the Minister to extend his ministerial writ and comment on issues that naturally fall within his purview perhaps he could answer why there was no tender process for this particular contract given that the consultant’s original contract the previous year also costing about $300000 was awarded with no tender process this time due to urgency? 
Hon TIM GROSER 
: I can only repeat the underlying point. This is obviously a decision of the management. I am sure they had good reasons to consider the alternative and made this decision in the best interests of the process. 
Andrew Williams 
: Will the Minister agree to end the use of uncontested contracts given by the Ministry of Foreign Affairs and Trade to external consultants on the grounds that they are inconsistent with open transparent and merit-based contracting in the public sector; if not why not? 
Hon TIM GROSER 
: The answer to that is no because it would be extremely inefficient to do so and it is a longstanding matter for the Public Service across many agencies to have uncontested contracts particularly for contracts of $50000 or less although that is not a complete bar to considering proposals above that figure. 
Dr Kennedy Graham 
: I raise a point of order Mr Speaker. I put it to you that the issue of the integrity of tenders being put out is not an operational matter; it is a ministerial matter. The ministry applies the policy; the Minister is there to judge and set the policy. 
Mr SPEAKER 
: The member is quite correct as I understand the situation and that is why the last question that asked about policy was answered quite firmly by the Minister. Previous supplementary questions that have asked about detailed particular contracts the Minister has deferred to the ministry because they are management matters just as the member himself has described. 
Dr Kennedy Graham 
: Asking a broader matter of policy of the Minister what is the threshold for tenders for legal advice at the ministry given that Bell Gully received $121000 in 2011 for work relating to aid contracts and no other tenders were called the price being deemed to be below the threshold? 
Hon TIM GROSER 
: I do not have that information available to me as to what the policy structures are for that matter. 
Dr Kennedy Graham 
: Has the Minister’s recent cutback meant that the Ministry of Foreign Affairs and Trade no longer has officials able to provide advice on diplomatic matters given it is paying external contractors hundreds of thousands of dollars for advice on diplomacy? 
Hon TIM GROSER 
: I think that is a somewhat broader question and I think I can assure the member that the type of independent consultant whom I am aware of—most of whom I have known personally over many years—are people of great international standing of unrivalled expertise and of very high integrity. I do not think the member needs to be concerned. 
Hon Phil Goff 
: Why was the Minister not aware that deliberately leaving policy positions unfilled and then cutting foreign policy positions by more than 30 would prove to be false economy leading since he became Minister to a doubling of public expenditure on external consultants to $8.4 million a year? 
Hon TIM GROSER 
: I think there are two qualifications I would put to the member’s question. The first is a relatively minor matter and the second is more profound. The minor matter is of course that he is not comparing apples with apples because the previous Government’s use of consultants excluded Ministry of Foreign Affairs and Trade consultants used in our aid programmes which are a very considerable part of the package. The more important point of course is that this is like listening to one hand clapping. The basic point of this whole process at least in part was to get Public Service efficiencies and we expect savings of $24 million or some three times the amount of money we are arguing here. [ 
Interruption 
] 
Mr SPEAKER 
: Order! I must hear Dr Kennedy Graham. 
Dr Kennedy Graham 
: I seek leave to table three documents. The first pertains to the four guiding principles for recruitment by the Ministry of Social Development including selection on merit and open honest and transparent processes so that those with unrivalled talent can compete with others. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
Dr Kennedy Graham 
: I seek leave to table section 77H of the State Sector Act which— 
Mr SPEAKER 
: Order! We do not table bits of legislation. 
Dr Kennedy Graham 
: I seek leave to table the recruitment process of the Ministry of Foreign Affairs and Trade which advertises for “Experienced foreign policy staff wanting to return to the Ministry”. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. 









Document by leave laid on the Table of the House. 
Broadband Ultra-fast and Rural—Progress 
10. 
MARK MITCHELL (National—Rodney) 
 to the  
Minister for Communications and Information Technology 
: Has she received any reports on the progress of the Government’s Ultra-Fast Broadband and Rural Broadband Initiatives? 
Hon AMY ADAMS (Minister for Communications and Information Technology) 
: 
 Yes. Today I am releasing a report on the results of the first year of the build programme for both the Ultra-fast Broadband Initiative and the Rural Broadband Initiative. Under the Ultra-fast Broadband Initiative the fibre network now reaches over 76000 premises exceeding the year 1 target by nearly 10 percent. Under the Rural Broadband Initiative 69000 homes and businesses in rural areas now have access to improved broadband meeting all first-year expectations. The four rural hospitals scheduled for connection have been connected. A total of 661 schools now have fibre to the gate representing 85 percent of an ambitious year 1 target with the remainder to be connected by September. As well as the nearly 500 rural schools 10 of our most remote schools have also been connected. These initiatives are part of the National-led Government’s commitment to deliver world-class connectivity to drive innovation create jobs and grow our economy. 
Mark Mitchell 
: Has the Minister seen any reports on the provision of international bandwidth and its effect on ultra-fast broadband? 
Hon AMY ADAMS 
: Yes I have. This is an area that we monitor closely. Although our position is that we would welcome and encourage a second cable provider we are satisfied that the existing capacity is sufficient to meet New Zealand’s needs. The key point is that the case for our ultra-fast broadband and rural broadband projects was never reliant on a second cable. There is ample capacity in the medium term in the Southern Cross cable with upgrades planned to increase capacity tenfold by 2016 and numerous commentators have now confirmed this position. New Zealand also indirectly benefits from the competitive international market in Australia as Southern Cross Cables charges New Zealand the same rates as it does in Australia. I am confident that as market dynamics change there is every likelihood that the investment case for a second cable will improve. 
Clare Curran 
: What is the best estimate she has received to the nearest $100 million of the economic loss to the country from the collapse of the Pacific Fibre cable deal? 
Hon AMY ADAMS 
: My interest in this issue is ensuring that the Ultra-fast Broadband Initiative and the Rural Broadband Initiative will not be hampered by the provision of international bandwidth. I am satisfied that they will not so I have not requested any further analysis in that regard. 
Foreign Charter Fishing Vessels—Labour Law Breaches 
11. 
DARIEN FENTON (Labour) 
 to the  
Minister of Labour 
: Does she stand by her statement regarding foreign chartered fishing vessels “If breaches of labour law occur—such as underpayment of wages or illegal deductions or breaches of the Code of Practice the Department of Labour will be able to investigate them and take action”? 
Hon KATE WILKINSON (Minister of Labour) 
: 
 Yes. I said that as part of our announcement that we will be moving to require reflagging of foreign fishing vessels. This bold step was much needed because the current system which Labour put in place in 2006 was simply not working. That system has created many difficulties around pay conditions and enforcement on foreign boats and we are trying to deal with these current issues as we transition to the new regime. 
Darien Fenton 
: Why after more than a year have the crews of  
Oyang 
 75 
 and  
Shin Ji 
 still not received the wages they are owed under the Minimum Wage Act when she said the Department of Labour would help? 
Hon KATE WILKINSON 
: There are various vessels going through various stages of the auditing process which is an increased auditing process under the improvements that we have made. We did inherit a system that was in disarray we did move boldly and we are doing what we can to make sure that minimum wages are actually maintained and that conditions are actually enhanced. 
Darien Fenton 
: How much funding are the crew members owed and is the amount greater or lesser than the cost of the three investigations her department has so far ordered into this issue without achieving any result? 
Hon KATE WILKINSON 
: I do not have the amount in order to answer that question but if you put it in writing I am happy to give it a go. 
Barbara Stewart 
: Has she read the US Department of State’s  
Trafficking in Persons 
Report 
 for 2012; if so what is her response to claims that foreign charter fishing vessels are employing slave labour in New Zealand waters? 
Hon KATE WILKINSON 
: We are always very concerned about any suggestions of slave labour in the seas whether they are our seas or not. That is why we took the very bold step of having a ministerial inquiry into foreign fishing vessels and that is why the decisions following on from that went further than the recommendations of the inquiry itself. 
Darien Fenton 
: Is it true that the widows of the six crew who drowned when the  
Oyang 
 70  
sank in the Southern Ocean in 2010 have also not received the wages owed to their lost relatives; if so what is her department doing about it? 
Hon KATE WILKINSON 
: As I answered in response to a previous question albeit generically the department is going through various audits of all fishing vessels. We have got the services of KPMG as an independent auditor because some of the tracking of the money through the sources is actually forensic accounting takes some specialist work and is not an easy job. That is why we tried to fix a code that was put in place under Labour and was not working. 
Darien Fenton 
: Can she assure the House that the new rule she is introducing around the flagging of foreign fishing vessels will stop this 21st century slave labour conduct; if so why is she allowing these practices to continue for 4 whole years before implementing the new rules? 
Hon KATE WILKINSON 
: I can assure the House that the new code that is being proposed is vastly superior to the old code which was in place under the Labour Government and which it did nothing for. 
Waste Management—Waste Minimisation Fund and Plastics Recycling Scheme for Farms 
12. 
NICKY WAGNER (National—Christchurch Central) 
 to the  
Minister for the Environment 
: What recent announcements has she made in relation to the Waste Minimisation Fund? 
Hon AMY ADAMS (Minister for the Environment) 
: 
 Last month I announced that more than $1 million has been awarded to 10 projects that will reduce the amount of landfill rubbish under the latest funding round for the Waste Minimisation Fund. The 10 projects receiving funding this round include initiatives that encourage public recycling the sorting of treated and untreated timber to make biofuel and a project to help businesses compost more of their waste and raise the importance of composting. Every year New Zealanders send 2.5 million tonnes of waste to the landfill. That is over a tonne of rubbish per household. These projects will make a significant difference to our environment by encouraging individuals and businesses to reduce reuse and recycle. 
Nicky Wagner 
: How have previous projects funded through the Waste Minimisation Fund helped to reduce waste in landfills? 
Hon AMY ADAMS 
: I have recently received a report describing that more than 650 tonnes of plastic farm waste has been recycled nationwide during the past year thanks to a Government-accredited product stewardship scheme called Plasback. Plasback supplies more than a thousand recycling bins to New Zealand farms and collects agricultural plastics such as bale wrap agrichemical containers crop bags and silage wraps and covers which are recycled into new plastic products. This voluntary scheme is about getting alongside farmers and providing an environmentally friendly alternative. Thanks to the Waste Minimisation Fund and the agricultural sector’s commitment this means there are now 650 fewer tonnes of plastic waste that are no longer being burned or buried. 
Non-bank Deposit Takers Bill 
Second Reading 
Hon Dr JONATHAN COLEMAN (Associate Minister of Finance) 
 on behalf of the Minister of Finance: I move  
That the Non-bank Deposit Takers Bill be now read a second time 
. I want to begin by thanking the members of the Finance and Expenditure Committee for their prompt handling of this bill. The committee received nine submissions and heard from four submitters. This bill seeks to implement the final components of a new regulatory regime for non-bank deposit takers which are referred to as NBDTs and comprise in the main finance companies building societies and credit unions. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I apologise for doing it during a changeover in the Chair but there was another changeover that also occurred. You properly called the Minister in charge of the bill who was in the House at the time and was here for at least a minute afterwards. I wonder how it is possible for another Minister to get the call in such circumstances. 
Mr SPEAKER 
: The member makes a perfectly valid point. It is not the first time that this has happened in the last couple of weeks where a Minister in charge of a bill has been in the House and not actually intended to take the call and the Speaker as a consequence has called on the face of it the wrong Minister. I called the Minister who was in charge of the bill who was present in the House and they then sought to leave saying “Oh no someone else is handling this.” I have called the Hon Dr Jonathan Coleman now and he is now leading the second reading on this bill but I think the point is well raised. I say to Government Ministers that they need to be watchful of this. It is not good enough to have a Minister in charge of the bill in the House and have another Minister seeking the call to lead off the second reading debate or whatever the particular debate is that requires the Minister in charge to be dealing with the bill. The point is well made and I would rather not see it happen again. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. Can I seek an assurance that in future your practice will be to comply with the Standing Orders and call the Minister who is in charge of the bill notwithstanding the fact that they are indicating that they are leaving? 
Mr SPEAKER 
: Again the member is correct that strictly the Speaker should do that so I have I guess let the Government off on a couple of occasions in recent times by deferring to the Minister who is obviously intending to handle the bill in the second reading. I alert the Government that strictly I should not do that. The Hon Trevor Mallard is absolutely correct. That is why I do not want to see it happening again. 
Michael Woodhouse 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: I will hear Michael Woodhouse briefly. 
Michael Woodhouse 
: Thank you; it will be brief. I think we run the risk because there is a transition at the end of question time for which many members are required to attend parliamentary business in other parts of the building. What we risk doing is having Ministers leaving before the end of question time and I think that runs the risk of disrespecting that very important part of the parliamentary process. So although I will certainly counsel Ministers to ensure that this does not happen again I would be disappointed if it did result in that occurring. 
Mr SPEAKER 
: Order! I simply repeat to the senior Government whip that the Standing Orders are the Standing Orders. It is not difficult for a Minister mindful of the Order Paper to leave at an appropriate time. The only time I could possibly see where it would cause a problem is if the Minister is answering the last question on the question sheet and it is the first business coming up. But there is a small pause as the Clerk announces the reading as the Speaker closes down question time and Ministers just need to be mindful of their responsibilities in that regard. The Hon Trevor Mallard has raised a perfectly proper point and he reprimands the Speaker appropriately. I have not strictly applied the Standing Orders and maybe in the future I should. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: I will hear the member briefly. 
Hon Trevor Mallard 
: I want to make it clear right now that I am not sending you from the House; you were going to do it anyway. 
Hon Dr JONATHAN COLEMAN 
: What I was saying is that the bill seeks to implement the final components of a new regulatory regime for non-bank deposit takers and this is with the aim of promoting a sound and efficient financial system. It incorporates the prudential requirements already imposed under Part 5D of the Reserve Bank of New Zealand Act 1989. It also introduces new measures including the licensing of non-bank deposit takers suitability assessments for directors and senior managements restrictions on changes of ownership and new powers for the Reserve Bank to detect and manage instances of distress or failure of non-bank deposit takers. 
The bill continues with a broad definition of “non-bank deposit taker” in order to allow for potential changes as a result of market innovation while leaving scope for some entities to be exempted or declared out of the full regime. This definition targets the substance of deposit taking to ensure the activity is captured instead of particular types of organisations. The committee has recommended a number of refinements to this definition to clarify the scope and application of the bill. If a person was a deposit taker under Part 5D of the Reserve Bank of New Zealand Act before the bill comes into force or is a non-bank deposit taker under the bill once it takes effect the person will remain a non-bank deposit taker until all the debt securities it had issued are repaid. The new definition will not capture those entities that were not deposit takers before the bill’s introduction unless their activities mean that they have begun to meet the definition. 
An amendment has also been made to ensure that those entities the bill specifies as not being non-bank deposit takers such as registered banks remain outside of the regime regardless of whether they are otherwise caught by the refined definition. However the bill acknowledges that this definition might at times be too broad or too narrow. It does so by including a regulation-making power that would allow persons to be declared to be or not to be non-bank deposit takers. This has been amended to allow the Governor-General to specify additional detail and regulations as to the circumstances in which a person or class of persons is or is not a non-bank deposit taker. This approach provides useful flexibility to respond to market changes and to exercise control when circumstances mean that control is required. Regulations may also declare certain securities to be debt securities for the purposes of the bill. The Reserve Bank must not recommend such regulations unless satisfied the securities are similar in substance to debt securities. This is to ensure that other forms of investment vehicle such as collective investment schemes are not inappropriately captured. 
This bill introduces a licensing regime for non-bank deposit takers. The committee has recommended an amendment in relation to applications for licence by overseas persons for the Reserve Bank to have regard as to whether specified aspects of the law and regulatory requirements of the applicant’s home jurisdiction are satisfactory. 
Licences may be issued subject to conditions. The bill sets out the consultation procedure to be followed if the Reserve Bank wishes to add new conditions or amend or revoke existing conditions of licence. An amendment has been made so that the procedure does not apply when imposing conditions at the time the licence is initially issued. The committee has added an express obligation for non-bank deposit takers to comply with the conditions of their licence so that a failure to comply with a licence condition becomes a failure to comply with the Act. Breaching such a condition will be grounds for cancelling a licence. As trustees are the direct supervisors of non-bank deposit takers if the Reserve Bank intends to cancel a licence then it must notify the trustee of that intention and also notify the trustee if a licence is to be cancelled. 
The committee has recommended an amendment to the Government requirements that were in Part 5D of the Reserve Bank of New Zealand Act to clarify that if non-bank deposit takers include provisions in their governing documents that would allow directors to act other than in the best interest of the non-bank deposit taker then these are of no effect. The change of ownership requirements have also been clarified. These stipulate that the prior consent of the Reserve Bank must be sought for any transaction that would result in a person increasing their level of influence above a specified level or above the level previously authorised by the Reserve Bank. 
This bill enhances the powers of the Reserve Bank in respect of non-bank deposit takers and their associated persons. These include a direction-making power which has been amended so that the same range of directions are able to be given to non-bank deposit takers and their associated persons. The Reserve Bank can direct that a non-bank deposit taker replace its auditor and the committee has recommended amendments to ensure the non-bank deposit taker is able to comply with such a direction. In situations where a direction requires the trustee to disclose information the committee has recommended that trustees be protected against any civil criminal or disciplinary proceedings arising from such disclosure. The Reserve Bank is also able to remove and appoint directors where the non-bank deposit taker is in financial difficulty or is failing to comply with statutory requirements. 
The bill now provides that the Reserve Bank must give reasonable notice of its intention to remove a director as opposed to notice with a minimum period specified. Notice must also be given to the non-bank deposit taker’s trustee. The committee considered that in some cases it might be desirable to appoint an additional director without first removing an existing one and the bill has been amended accordingly. Where the Reserve Bank has made a decision regarding the suitability of directors or senior officers those persons have a right to appeal that decision. This has been amended to allow appeals by those who were proposed to be directors or senior officers but were prevented from doing so by a Reserve Bank decision on their suitability. 
The committee has introduced a new clause carried over from the Reserve Bank of New Zealand Act that allows the Minister to direct the Reserve Bank to have regard to a Government policy related to the Reserve Bank’s functions. A new clause has also been introduced in relation to incorporation by reference. This will exclude material that is made or issued in New Zealand is made under the authority of an Act and is freely available from the need to be certified and made available by the Governor of the Reserve Bank. It is necessary for the governor to certify corrected copies and make them available only if they originate outside New Zealand. 
There have also been a number of minor drafting changes. Technical changes have been made to the offence provisions throughout the bill to align more closely with the approach in the Criminal Procedure Act 2011. The bill includes a 12-month transition period for the licensing of existing non-bank deposit takers. As non-bank deposit takers are also required to be on the Financial Service Providers Register the committee has recommended delaying the commencement of some of the consequential amendments to the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to allow for the licensing transition period. 
Once again I would like to thank the committee members for the work they have undertaken on this bill. It has been significantly enhanced through the committee process. It will increase confidence in the New Zealand deposit-taking sector helping to maintain a sound and efficient financial system. I commend the bill to the House. 
Hon DAVID PARKER (Labour) 
: 
 The Labour Party will be supporting the Non-bank Deposit Takers Bill through its continuing stages. One of the lessons from the global financial crisis is that regulators all around the world really became too lax in the regulation of the financial services sector following years of prosperity when people and regulators assumed this would carry on forever. It was really only after the collapse caused by some of the risky lending that took places in jurisdictions mainly overseas in respect of derivative transactions but also in New Zealand in terms of some of the non-bank deposit takers that the regulators and their masters including parliaments were sufficiently alert to the need to update regulation. 
Indeed it is only posthumously that one of the leading academics in this field Hyman Minsky an American economist has had his views gain currency. There is a reference I think now in the language around these things to the Minsky moment. That is effectively the point when it all tipped over and cascaded downwards and imploded upon itself; we had cascading failures in the financial sector locking up the financial sector around the world. Why this is particularly important in the financial sector compared with some other sectors is that if a business unit fails in the non-financial sector then the rest of the economy keeps working but when the financial sector wheels stop turning the rest of the economy stops as well because financial intermediaries are important to the functioning of the whole economy not just to the profitability of the financial sector itself. 
Hyman Minsky’s view of the world was that regulators have to constantly update financial regulation in order to keep the financial sector from embarking upon risky behaviour that puts at risk the operation of the financial services sector in a way that can impact upon the wider economy. Indeed Hyman Minsky pointed out that the longer the period of settled prosperity the greater the need there is for financial regulators to be staying ahead of the moves made by the financial services sector and that is because the longer the period of prosperity the dimmer the memories are as to the last time there was a clean-out and the dimmer the memories are as to what can be the consequences for both the financial services sector and the wider economy of too much risk-taking behaviour in respect of the financial services sector. He also made the point that the longer the period of financial security in the financial services sector the greater the expectation is that next year the profits will be higher and in order to have that building profit from year to year exponentially growing the only way banks and other financial intermediaries can do it is generally—well actually it is not the only way but a preponderance of later years of long periods of economic prosperity is risk-taking behaviour in respect of our financial institutions. 
How that manifests itself is that banks and non-bank deposit takers in order to do those things embark upon things that are not controlled because they do it around the outside of regulations and therefore they are not caught by some of the prudential rules that apply under the status quo regulations. Hyman Minsky said the regulator has always got to be keeping an eye on what is happening in the market and always got to be keeping ahead of these changes in practice on the part of the financial intermediaries in order to avoid these risks becoming heightened everything falling over at once and cascading failures leading to the financial sector grinding to a halt and effectively closing down other parts of the economy in part because consumers who are lending money to these deposit takers are so hurt by the sudden shock of not being able to get their money out of these financial intermediaries. They themselves then do not have money to spend in the economy and you get into a declining economy and a deflationary spiral or at least a recession. That is what happened around the world at the end of 2008 and 2009 and as a consequence we have seen financial regulators around the world taking steps to minimise the risk of that happening again. This bill is part of that. This is not in respect of banks; it is in respect of non-bank deposit takers. 
This bill imposes prudential requirements upon these non-bank deposit takers by incorporating prudential requirements that are already able to be applied by the Reserve Bank under the Reserve Bank of New Zealand Act 1989 pursuant to a new part that was introduced by this Parliament not so long ago but the provisions of which have yet to be applied to the non-bank deposit taking sector. That is what this bill does; it extends those prudential requirements through this bill. The Reserve Bank can now apply those prudential requirements to the non-bank deposit takers. 
This is therefore worthy legislation and that is why the Labour Party supports it. But—and you would expect a “but” from me in the Opposition because there are so many “buts” to be given at the moment—it really does not do anything substantial to overcome New Zealand’s problems. We heard the Minister of Finance saying today that New Zealanders are saving more. Actually New Zealand debt as he acknowledged quickly in the early part of his answer has gone down by 0.2 percent in the 4 years since National came to Government. The trade deficit is projected to go out. There was a 0.2 percent reduction in household debt and that is at a time of recession when people are losing confidence. They actually put their cheque books away for a while and they do not buy as many TVs and cars and they do not spend as much money on their house alterations etc. Therefore you would expect if New Zealand’s economy was performing relatively well that we would have household debt going down by more than just 0.2 percent in the last 4 years. That of course is one of the reasons why we are losing so many people to Australia including from our resource-rich area Taranaki. You would expect if the drive to Australia was because of the resources boom that Taranaki would be different to that trend even if it was apparent elsewhere in New Zealand but it is not. 
What does the Labour Party say is more important than the likes of this bill? We should be debating real pro-growth tax reform in this country. Does New Zealand need tax changes in order to put on a better footing investment in our productive sector rather than our speculative sector? I think we do. I think it is abundantly clear. Treasury thinks we do. The Reserve Bank thinks we do. The IMF thinks we do. The OECD says—but the National Party refuses to have a debate in this House as to whether we should be passing a capital gains tax. It is absolutely necessary for the health of the New Zealand economy but not at all on the National Party agenda. 
Dr David Clark 
: They’re worried about the 1 percent. 
Hon DAVID PARKER 
: No it is a 0.2 percent reduction in household debt. We do need to transition to higher savings. We need more New Zealanders saving. We need a universal KiwiSaver scheme. Improving the regulation of non-bank deposit takers is a worthy thing to do but if people are not saving more money then there is not going to be much more money to be lent by those non-bank deposit takers to sections of the economy. This bill does nothing to fix that. 
The bill does not change the shape of where investment money is going into New Zealand. It does not increase the amount of investment money in the New Zealand economy but it does further regulate the economy. So it is somewhat strange that we have got a National Government which thinks the answer to most things is further deregulation and I am pleased that it sees in this area that deregulation is not the answer and that there is a need for more regulation. But I do make the point that it does not lift New Zealand’s economic fortunes in the way we need in order to stem that flow of so many New Zealanders overseas. Forty percent of them now are aged 18 to 30. It is a terrible loss of that resource from New Zealand—those people who do not think they have got hope and opportunity in New Zealand but instead go overseas. They are going because of New Zealand’s problems because the Government is not discussing these other important issues. 
I am going to run out of time to talk about how this bill does not affect Treasury but maybe Mr Cosgrove or— 
Todd McClay 
: Ask for an extension of time. 
Hon Members 
: Seek leave. 
Hon DAVID PARKER 
: I hear Government members seeking leave for me to have an extension of time so I am happy to— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: No no— 
Hon DAVID PARKER 
: I seek leave for another 10-minute call in this debate in addition to the other contributions that are made pursuant to the Standing Orders. 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Can I say that the member of course is perfectly entitled to seek leave of the House but whether the House gives it to him is another matter. So I am going to put the question. Is there any objection to that course of action being taken? There is. I am sorry Mr Parker; there is objection. 
TODD McCLAY (National—Rotorua) 
: 
 It gives me pleasure to rise and speak on this bill the Non-bank Deposit Takers Bill. What I wanted to say was had the last speaker sought leave to speak after I have spoken I probably would have said yes. But in this case I am not able to. 
Mr Parker is correct that it is not often that the National Government wants to seek additional regulation. Indeed we are firmly focused on lifting economic performance and in many areas of the economy that is moving away from getting rid of unnecessary compliance and red tape that binds businesses takes up their time and stops them getting on and doing the things we want them to do—which is work hard and employ others—and often is meaningless. But in this case I do believe it is important that in looking at economic performance we make sure those who are taking finances on behalf of others are doing so appropriately and that there are appropriate and correct rules and regulations around this to offer the investor a protection but to hold to account those who as we have seen through our newspapers over some very long periods of time and under different Governments have not been held to account to the degree they need to be. Of course I am speaking of finance companies here. 
So the Non-bank Deposit Takers Bill completes several years of work to tighten up the regulation of the sector. I note that in 2006 deposits were about $8.6 billion in the sector and an amount of this was put at risk around finance industry failures. Both sides of this House have tried to work together to tackle this issue and I want to touch briefly on some of the things we have been able to do. We have not always agreed but I do want to say to my colleagues on the other side of the House who sit on the Finance and Expenditure Committee with me that at least in so far as this piece of legislation is concerned I think we were as harmonious as it is possible to be in moving forward. 
I want to say that the Government over the past 3 years has been supporting measures to ensure the right protections are in place to maintain and build investor confidence. And has not that been important as the world—as New Zealand—has struggled with a global financial crisis and great difficulty in investor markets. We have established a one-stop shop—the Financial Markets Authority—which has a sharper focus on the enforcement of the law. Already it is unbelievably active and is acting on behalf of New Zealanders. We are seeing people brought to account being prosecuted but more important than that the rules that have been put in place we see are having good effect when it comes to New Zealanders being able to rely upon the statements that are made by some of these other groups and institutions. 
We have tightened oversight of the working of the financial markets—the 33-year-old securities law leading to the Financial Markets Conduct Bill has been amended. I believe we have improved financial literacy. Minister Bridges is focusing on loan sharks and bringing some very important work to this House I understand and combating anti-competitive behaviour such as price fixing which will be dealt with. 
Hon Clayton Cosgrove 
: Tell us about wheel clamping. 
TODD McCLAY 
: Mr Cosgrove I know you are speaking next and I want to say some very nice things about you so you will do that to me in return. But do not make me think too hard because I might not be able to come up with as many things to say about you as no doubt you will find to say about me as a chairman. But what I did want to say is the bill is expected to become effective—and some of these previous bills—in October 2013 so it is important this House gets on with its job. 
In particular the bill does a couple of things. The Non-bank Deposit Takers Bill will ensure that the Reserve Bank’s ability to promote the maintenance of sound and efficient financial systems will be reinforced. We are going to give a lot of authority to the Reserve Bank when it comes to directors and senior officials being appointed in these non-bank deposit taker organisations and put in place sanctions where changes are made that are not in the best interests of these organisations or of the investor and also not in the best interests of adhering to the laws that we are putting in place. 
When we come to the Committee stage I want to delve into this important piece of legislation in much greater detail. Indeed I do want to say before we go on to my colleagues on the Finance and Expenditure Committee that this was an area where we were able to work closely together and although we did not agree on every issue we were able to debate it widely. I do note that we brought the bill back to the House quite quickly actually. We decided we did not need to take a lot more time because we had done quite a bit of work here together. I just want to commend Mr Cosgrove particularly for the way he is cooperating with the Government in this committee. I do not want to ruin his career but we have been able to move some things back to this committee much faster than they thought we would have been able to otherwise without his sterling cooperation and I thank him for that. 
Hon CLAYTON COSGROVE (Labour) 
: 
 For a moment I was almost in tears! My colleagues will note that very few things in life stun me into silence but for a moment there I became a tad misty-eyed I have to say. It is an emotional place the Parliament from time to time is it not? 
Getting back to this bill the Non-bank Deposit Takers Bill the Labour Party does indeed support this piece of legislation. It is part of a series of measures many of which were initiated when we were in Government in terms of preserving the integrity and credibility of the financial sector. But I have to say that when I read the bill given recent weeks and where it talked about non-bank deposit takers I thought for a moment that they were talking about John Banks. Because you could argue that John Banks of course was a non-bank deposit taker—in a number of ways! When we get to the Committee stage I just wonder whether we could ask the Minister of Finance when he is in the chair whether these provisions would apply to all sorts of banks including the Hon John Banks. 
 I am sure we could wax eloquent and in the spirit of Mr McClay’s fondness for my career prospects I will not delve into that— 
Andrew Williams 
: But did he take a deposit? 
Hon CLAYTON COSGROVE 
: Pardon? 
Andrew Williams 
: Did he take a deposit? 
Hon CLAYTON COSGROVE 
: Well the member raises a very—not Mr McClay; that would be unfair. Did John Banks take a deposit indeed? 
Dr Cam Calder 
: He is voting against the bill. 
Hon CLAYTON COSGROVE 
: He is voting against the bill is he? Oh that is interesting. But I have to say on a more serious note given that there is a lot of love in the room that this bill is about preserving the credibility and integrity of our financial system. 
But I would just make this other point in passing on a very serious note. Although these regulations are about the private sector and as Mr Parker said prior to the global financial crisis we had institutions in New Zealand that fell over and as a result of that—well you could argue that they fell over. I do not mean this in a humorous way but you could also argue that some were deliberately pushed by some of the individuals who now reside in the clink and yet it is the poor old taxpayer or the investors—thousands of them—some of whom for those reasons find their future financial security is in jeopardy. But I just say this: that is the private sector. 
There is also a scheme called the Crown Retail Deposit Guarantee Scheme. Although this is not absolutely germane to this piece of legislation I do note in passing that as the result of the scheme which was of course put in by the Labour Government—I know Dr Nick Smith will jump up and down and become possibly animated if he takes a call about this. It was put into place—and before Dr Smith makes the point on this I will do it for him. I remember the day it was put into place because I was an Associate Minister of Finance. It was the day of our party launch. I know Dr Smith is fond of saying that that was all done for political hanky-panky sorts of purposes but it was done because the Australians as I recall contacted us and said: “We are doing it. We are letting you know.” and we had to act that afternoon because we did not want the possible fiscal implication of people saying: “Our deposits are secure in Australia.” Therefore if the Government of New Zealand at the time was not going to do it there would have been a run on the banks—not John Banks—and deposits would flow out of New Zealand to Australia where in theory they would have been more secure. 
Dr David Clark 
: Faster than a helicopter to the Dotcom mansion. 
Hon CLAYTON COSGROVE 
: “Faster than a helicopter to the Dotcom mansion.” Mr Clark said. Well I could not possibly comment. But the point is that that scheme was put in place to ensure that there was not a run on deposits. 
The point I am getting to because this is an important point as we return to the bill is that that scheme was then inherited by the National Government. We heard before the Finance and Expenditure Committee that there was we think—the Auditor-General of course did a report and there was $300 million possibly even $500 million of excess losses right? Excess losses that the taxpayer had to pay for as banks ramped up because when the Auditor-General actually came in and spoke to the select committee I recall her saying that there was no written communication between Treasury and the Minister of Finance over a period of I think a month or a couple— 
Dr David Clark 
: Oh 3 months. 
Hon CLAYTON COSGROVE 
: —3 or 4 months. So that money just sort of washed out the door. You could argue that the financial sector gamed the Government because with a guarantee in place that guaranteed every deposit that was put in there and when you give a guarantee you have an absolute right to seek information and demand information to ensure you are not being gamed. So for there to be no traffic and no paperwork and no questions asked by the Minister of Finance at the time Bill English over a 3-month period it is absolutely evident in my view and the view of most of us on the committee— 
John Hayes 
: It’s not related to the bill. 
Hon CLAYTON COSGROVE 
: —on our side that we were gamed. It is interesting that Mr Hayes makes an interjection because I was about to come to “Sir Les Patterson” and it is this and I thank him for reminding me that I had to come back to him. In the Finance and Expenditure Committee we were actually very concerned—very concerned—that there was not appropriate oversight. Members will recall that the Government blocked us from getting Treasury and actually having a proper examination of this. We wanted to do that because the estimates were $300 million to $500 million of losses to the taxpayer and Mr Hayes interjected in the committee: “That’s loose change.”—loose change. 
John Hayes 
: No I didn’t. Quite wrong. 
Hon CLAYTON COSGROVE 
: Oh he denies that now. I would be very careful denying that on the record given the number of witnesses who there were. But putting that aside—putting “Sir Les Patterson’s” comment aside—that shows that it is not loose change to lose $300 million to $500 million. Returning to the bill the comparison I will make is this— 
Hon Trevor Mallard 
: Is this Dotcom’s bank? 
Hon CLAYTON COSGROVE 
: No no we were talking about non-bank deposit takers and I had already referred Mr Mallard to John Banks. I know that Mr Mallard having been a former Associate Minister of Finance will be eager to take a call on this bill given his intricate knowledge of non-bank deposit takers one of whom I think may be residing in this Chamber as we speak—from up north. But getting back to it we have a set of regulations here that are very appropriate—and we support them—to secure and maintain the security of our private sector financial markets. But the point I make in briefly alluding to the Crown Retail Deposit Guarantee Scheme is that you could argue that because of the lack of oversight from this Government it was gamed to the tune of $300 million to $500 million. It refused any retrospective oversight by the Finance and Expenditure Committee or to have this debated in the Parliament so you could ask: does the Government need to up its game in terms of ensuring that there are not unintended financial losses to the taxpayer? I would have thought the loss of $300 million to $500 million is not as John Hayes said to the committee “loose change”. It is a substantial amount of money. 
So I would argue that if it is good enough for us—and it is and it should be and the Government has done the right thing in carrying on the work of our previous Government. I am not point-scoring on that. I think both Governments have worked—and certainly Mr McClay is right about the Finance and Expenditure Committee as we work well together in New Zealand’s interests. But I think if it is good enough for us to make sure that there are strict requirements on the private sector in terms of non-bank deposit takers and ensuring that the private sector’s integrity and credibility is locked in and therefore that confidence is maintained to invest in that market and in that sector the Government has an equal responsibility to ensure its house is in order. I just say for the record that it is interesting through the passage of this bill that there has been a lot of appropriate effort put into this but the committee and Mr English and every Government member has refused any form of Government inquiry into the Crown Retail Deposit Guarantee Scheme. 
 Even when the Auditor-General came before a committee and said that there was no written communication between a finance Minister and his department the Minister of Finance did not say: “Am I being gamed? Are there any controls in place to ensure that financial institutions do not rip the taxpayer off”—if you like—“and ramp up the deposits they take because they are guaranteed by the Crown?” and the Minister of Finance failed to ask any critical questions. I think one of the excuses that was brought up by Dr Nick Smith Mr Hayes and whoever else was on the Finance and Expenditure Committee was that there was an election. Well for 3 months after the election the Minister of Finance was derelict in his duty to ask the critical questions as he provided a guarantee to depositors to ensure that the Crown was not gamed. 
So if it is good enough I think for us through this bill to ensure that there is credibility and integrity around the private sector I say for the record that it should be good enough for the Government and its Ministers to at least wake up in the morning and ask the critical questions when they provide a Crown guarantee for deposits. I know Dr Nick Smith—as I said—will get up and say it was all politics. The record is that the Aussies went ahead and did it and if we had not moved on it that very day—that very day—there was the potential that Sunday for a run on the banks. He will get up and talk about politics campaign launches and stuff but I say this that “Sir Les Patterson” should get up and tell us why he called $300 million to $500 million “loose change”. Maybe it is because some of the change is a bit loose between his ears. 
DAVID CLENDON (Green) 
: 
Tena koe Mr Speaker. Kei te mihi nui ki a koutou. I am pleased to make a few comments about the Non-bank Deposit Takers Bill as it proceeds through the House in a reasonably brisk fashion I have to say which is appropriate given that the content of it is important. It seeks to plug a reasonably large and gaping hole in our regulatory and oversight legislation. This bill sets out of course to improve the level of financial oversight and prudential regulation of the rather inelegantly named non-bank deposit takers including obviously everything from credit unions through to building societies through to the many finance companies some of which have fallen into considerable disrepute in the last few years. 
The breadth of the spectrum of organisations this bill set out to cover was one of the initial barriers one of the initial concerns and I know that this was reflected in the consideration of the Finance and Expenditure Committee. Clearly organisations like credit unions are honourable institutions. They have a very long history. To my knowledge we have never had a failure of a credit union and in fact contemporary credit unions agree amongst themselves that none of them will be allowed by their peers to fail in a way that would disadvantage their investors. I think that is a very solid and good approach. Similarly many of the building societies have a good long history. So the key was to punish the wrongdoers if you like and to put barriers in place to the sort of unregulated unconstrained incompetent and often illegal activities that we saw were rife in recent years but not to impose too much compliance cost or regulation inappropriately on some of the smaller and more honourable institutions. 
I have to say that the outcome of this bill does seem to be that that quite difficult balance has been struck and I have to compliment the members of the Finance and Expenditure Committee who seem to have navigated that difficulty very well. Ideally we want sufficient regulation and we want to minimise compliance but also to ensure the integrity of these organisations. The point has been made by a couple of speakers already that we do need to give people places to invest their money other than in more bricks and mortar. We need to rebuild confidence that people can invest their money in productive enterprise using mechanisms like perhaps the new generation of finance companies. To the extent that this House can increase that level of public confidence based on genuine integrity and reliability that clearly will be a good thing. 
We know of course that the situation that occurred in the 1990s and indeed in the early 2000s was to a large extent driven by the excessive deregulation—the madness of deregulation—that was upon us in the 1980s and through into the 1990s. We hope the lesson has been learnt—we fear it has not—that sufficient regulation is necessary to the operation of a genuinely free and fair market. Excessive deregulation counts against that. Hopefully that lesson has been learnt and this bill goes some way to putting that in practice—the lessons of that time. 
There is a great deal about integrity in this bill. In the Greens we consider that in much of our legislation around business and financial practice there are still too many legal mechanisms allowing individuals to escape responsibility for their actions. We have no sense that all business failures are the result of incompetence or indeed dishonesty. Clearly things do go wrong businesses fail and companies can fail but we do feel that too often there are too many means by which people can legally avoid individual responsibility. Over time we would like to see further amendments in the broader picture to ensure that where excessive risk is evident or where individuals have not acted responsibly or with integrity there should be much more personal liability. This is partly because we think that would engender a much more thoughtful approach to doing business. 
There is an absolute responsibility. If people choose to be reckless with their own money or their own resources good luck to them but when people are managing resources on behalf of other people then that is the point at which the appropriate level of risk has to be ascertained and that liability must be sheeted home to those who have acted irresponsibly or without due regard for the well-being of the investors. 
I have made the point already that this is quite a complex piece of legislation. There are many stakeholders in this and there are many relationships between this bill and multiple other pieces of legislation each of them in its own right quite complex. I claim no expertise or experience in commercial law but even for the reasonably informed layperson it is easy to see that a bill like this could have a lot of unintended consequences. There could be fish-hooks in it that would lead to further difficulties down the track. Again I would have to say that I think the select committee has probably done a pretty fair job of navigating through that. The idea of delaying the commencement date was I understand an acknowledgment that there could otherwise be unintended consequences or consequences that were not preferred by the committee nor indeed the affected parties. 
So all in all it does seem that a useful piece of work has been done here. It by no means gets us to the end in terms of assuring people that their investments will be secured will be responsibly managed and will be surrounded by integrity and a reasonable degree of individual responsibility and liability when things go wrong but it is a good step in the right direction. For those reasons the Greens will be happy to continue to support this bill. Kia ora. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 The Non-bank Deposit Takers Bill is part of National’s sensible agenda for restoring public confidence in our financial markets. It is an essential component of the Government’s broader programme around improving regulation investing in infrastructure developing our natural resources investing in skills and opening up new markets—a whole packet of measures that can provide the brighter future for this country. It gives the Reserve Bank considerably tougher powers to be able to deal with finance companies building societies and credit unions that are long overdue. I want to make only a brief contribution given the wide consensus around the importance of this legislation but I am very happy to also engage in the broader debate about financial regulation. 
I did think it was with gall that the former Associate Minister of Finance Clayton Cosgrove had the audacity to challenge Bill English over being derelict in his duties. Let us put the record very straight. During the term of the previous Government when Clayton Cosgrove was an Association Minister of Finance ordinary New Zealanders lost over $7 billion in savings as a consequence of a lack of oversight and regulation of the financial sector. My simple challenge for Mr Cosgrove and his colleagues is to say whether they passed a single piece of legislation to deal with that massive debacle. And the answer is: not one. 
Before members opposite get on their high horses and give the sorts of speeches they give I have a simple challenge for them: please get to your feet and do the honourable thing and apologise to New Zealanders to those tens of thousands who lost their lifetime savings. I have not heard in over 3½ years that they have been in Opposition any acceptance of responsibility for the financial mess that they left which has had a disastrous impact on the lives of so many New Zealanders. 
The reality is that this Government since 2008 has gone about very responsibly addressing the deficiencies in our financial regulations with the establishment of the Financial Markets Authority and with bills of this sort. So I just simply say to the next Labour speaker: “Where is the apology?”. I ask Labour members to please say sorry because in my view they have absolutely no financial credibility or economic policy credibility until they accept the responsibility for their poor economic policy. 
My worry is this. In the last 2 weeks of parliamentary debate Labour’s answer to New Zealand’s financial woes has been to tax more and to spend more. We have a bill from a Labour member to double paid parental leave—a “nice-to-have” but when Governments are running deficits of $8 billion and when you have got developed economies around the world teetering on the edge of bankruptcy I simply say to Labour members: “Get real. Get real.” 
More spending more holidays and sideshows on issues like gay marriage are not the issues that this Government should be focused on in these difficult financial times. It is a National Government that is doing the things that are required in these challenging times. We are getting our regulatory environment right balancing the books growing our natural resources and opening up export markets. That is the agenda that is the right one for New Zealand at this time. This bill is an important part of it and we need to get on with the business of ensuring we build that brighter future for New Zealand. 
ANDREW WILLIAMS (NZ First) 
: 
 Kia ora. I take a call on behalf of New Zealand First on the Non-bank Deposit Takers Bill 2011. Is it not a shame when there was so much loving going on in this Chamber and so much fondness and goodwill coming from the chairman of the Finance and Expenditure Committee and other members of the committee that that was all tossed out in one swift stroke of the pen by the Hon Nick Smith? But that is the case. It is unfortunate— 
Hon Clayton Cosgrove 
: He’d gone troppo though. 
ANDREW WILLIAMS 
: It is but it is quite normal for the Hon Nick Smith because there is never a lot of loving coming from the Hon Nick Smith normally. I used to find when he was the Minister of Local Government that there was no loving there at all. In fact I do not think he liked local government one little bit. He hated local government so this is just a continuation of that. 
But it was interesting. He alluded to the fact that the next Labour speaker should raise this point but I am not going to wait for the next Labour speaker to raise it; I am going to raise it myself. He did overlook the fact that during the last term of this last National Government in the last 3 years Government members sat on their hands for more than 6 months during that Crown Retail Deposit Guarantee Scheme while it was in operation. The Reserve Bank and Treasury under this Minister of Finance allowed billions of dollars of deposits to continue to be put into that Crown Retail Deposit Guarantee Scheme—billions of dollars—including South Canterbury Finance which took massive amounts of deposits during that period only to subsequently fail. It failed under this Government and members of this Government sat on their hands. For a period of 6 months there was no policing of the system there was no oversight by the Minister of the system and there was no good governance by this Government to ensure that that Crown Retail Deposit Guarantee Scheme was well and truly under control. As a result the taxpayers of New Zealand can thank this Government for losing a huge amount of additional money—there was already money being lost but additional money—that may well not have been lost had the Government been on top of the case had it been on the ball and had it actually been keeping control of the books. So it is disappointing to hear the Hon Nick Smith having a huge dig at the former Labour Government over this when in fact in more recent times—in the last 12 to 18 months—there have been some serious wrongful actions on the part of the Government in not keeping a closer look at the books. 
But I go back to the Non-bank Deposit Takers Bill. This is a good bill. As we have said in this House before New Zealand First will support good policy. This is a case of some more good policy coming out of this particular Government and we will as a result support it. We have always said we will support good policy. And why would we not when this bill legislates a bolstering of the Reserve Bank’s powers? We are in favour of that because what it allows for is for the Reserve Bank to vet the suitability of directors and senior advisers appointed or elected to any of these non-bank deposit taker organisations. Well that is a good thing. It is a good thing for the Reserve Bank to be able to vet the suitability of those directors and senior advisers. It also empowers the Reserve Bank to delicense a non-bank deposit taker in prescribed situations. Again that is a good thing. We like the idea that it can delicense them if they are not up to scratch. 
This bill also requires the consent of the Reserve Bank in order for ownership changes to be given approval where a person acquires 20 percent or more of that non-bank deposit taker’s voting securities. Again that is a good move because if you start acquiring more than 20 percent that starts becoming a significant stake in such an organisation and it should therefore have the consent of the Reserve Bank in such a situation. The bill also allows the Reserve Bank to gain more information from those very same non-bank deposit takers. Again as we have seen in the instance of South Canterbury Finance and some others had the Reserve Bank been in the position to gain more information at a much earlier stage and had it not sat around for 6 months doing nothing perhaps many of the investors in some of these organisations around New Zealand would not be in the sad situation they are in today having lost most if not all of their money in some of these organisations. 
Lastly this bill allows the Reserve Bank to remove directors in special circumstances. Well that is very good and we like the idea that directors can be removed. We like the idea that perhaps directors who have been found to be acting either incompetently or in a misleading or fraudulent manner can be removed. So that is a good thing. It is sad that so many people have had to put up with such huge losses around New Zealand while those very same organisations that have incurred those losses have had directors building mansions on Paritai Drive buying luxury launches on Auckland harbour buying overseas holiday homes in the likes of Hawaii and buying all sorts of other luxury items. These sorts of people need to be taken to task. The Reserve Bank does need to have the ability to remove such directors in special circumstances where clearly they are out of order. In the past 5 years or so there have been a lot of instances in this case. 
This bill brings New Zealand better into line in relation to our partners such as Australia and other major investment countries that we deal with and in terms of our banking system with the Australasian banks and the major banking organisations in this country. This is the non-banking sector. This is what you would call the others. But it is important to note that this legislation tidies up a lot of our financial services area and brings in a lot of controls that were not there previously. 
It is important to point out that building societies and credit unions are also exempt from this piece of proposed legislation so although people out there might perhaps think that this is taking away a huge amount of the risk we do have to bear in mind that there is still a level of risk for any investor and they still must be very very vigilant in terms of what they do and how they deposit their money in various schemes. We do still expect a great deal of caution on the part of any New Zealander and investor in any such banking scheme or any deposit scheme as we all would do with our own money. 
I would just like to close by saying that New Zealand First supports any initiatives in this area to tidy up the financial markets in this country. There have been a number of bills in this House in the last month or so in other areas of international banking law in other areas of international contract law and in areas to do with the Commerce Commission and tidying up some of these areas. Many of these are long overdue. It is sad that some of these bills have taken 2 3 or 4 years to get to this House. It is I think incumbent on the members in this House from all parties to do our very best to try to tidy up many of these grey areas and many of these loopholes to provide a much higher level of security for the people in this country who are putting money into what is often their major savings scheme or their way of saving for retirement. Therefore anything we can do in this regard is supported by New Zealand First and we support this bill. 
JOHN HAYES (National—Wairarapa) 
: 
 It is quite interesting to reflect that on the right-hand side of the House as I stand here there has not been a speaker this afternoon on this bill the Non-bank Deposit Takers Bill who is not a list member of Parliament. I sat there listening to what they were saying. What I perceived was a disconnect from the community that electorate MPs represent and a detachment from the community in New Zealand that those other members purport to represent. I would simply say to the last speaker Andrew Williams that I am deeply disappointed that Winston Peters was not available to take a slot this afternoon because he made a really tremendous contribution to the development of this legislation and I do not recall the last speaker being on the Finance and Expenditure Committee that was discussing this subject at all. 
Particularly I felt that the last speaker misunderstood the intent and the value of the legislation when he said that its most desirable quality was the bank being able to dismiss directors. The point of this legislation is that it enables the bank to vet directors before they arrive. That is a much more important point because we are trying to stop people getting into the House before we run into trouble. Nothing as an MP in the last 7 years has caused me greater anguish than listening to people in my community who have come into my office and said “I’ve lost my life savings because I took advice from people like Money Managers - Masterton.” and their whole retirement savings have been lost. That is something that I felt very deeply about and I am very pleased that our Government has been able to bring this legislation to Parliament and process it through the Finance and Expenditure Committee in relatively very fast time. 
I think that Mr Parker was also critical of the pace at which the economy is moving but I draw his attention to a document that I noticed this afternoon in Copperfields. It comes from the Parliamentary Library. It is a research paper and it sets out trends in the economy. It points out that economic growth is averaging 1.7 percent in 2010-11 and 2011-12 and goes on to say: “The rate of economic growth in the March 2012 quarter exceeded expectations with the economy expanding by 1.1 percent over the quarter. The main contributors to growth came from manufacturing business services and agricultural industries.” Those are all things that employ people in this economy. If you look at unemployment it is consistent at around 6.6 to 6.7 percent. If you look at inflation it has dropped from 4.5 percent to 1.6 percent. If you look at interest rates they have dropped from 2.65 percent in 2010-11 to 2.61 percent in 2011-12. 
Hon Clayton Cosgrove 
: How many people are leaving New Zealand? How many people are going to Oz? 
JOHN HAYES 
: When we come to the list member for Christchurch or wherever it is—he used to be an electorate member of Parliament but his electorate tipped him out. Mr Cosgrove I think his name is. Why did they tip him out? Because as Associate Minister of Finance he was responsible for losing $7 billion of taxpayers’ money. That is why they got rid of him. 
This bill is another step in the Government’s programme to restore investor confidence in capital markets. That is what this bill is about. In the context of the global financial crisis and the collapse of finance companies this bill at least enables the Reserve Bank to have much stronger powers to deal with the non-bank deposit taking sector—that is anybody who is not a bank. The Non-bank Deposit Takers Bill completes several years of work to tighten up the regulations of the sector. From 2006 deposits of about $8.6 billion were put at risk by finance industry failures. Some of the directors are actually in my electorate and I know them personally. I know they tried to do a good job but they did not and so a key focus of the Government over the past 3½ years has been supporting measures to ensure the right protections are in place to maintain and build investor confidence. 
So what have we done? We have established a one-stop shop Financial Markets Authority with a sharper focus on enforcing the law. We have tightened up oversight of those working in the financial markets sector by putting in a new regime for financial advisers requiring licensing of trustees and auditors and strengthening disclosure requirements. We have rewritten the 33-year-old securities law leading to the Financial Markets Conduct Bill. We are working on improving financial literacy. We are cracking down on loan sharks and we are combating anti-competitive behaviour such as price fixing. 
The bill requires non-bank deposit takers to be licensed by the Reserve Bank when deciding whether to grant a licence and the bank is required to satisfy itself that an applicant can comply with the sorts of prudential requirements that you would require of a trading bank. All directors must be suitably vetted in advance by the Reserve Bank and I think that by doing that we will eliminate a whole lot of people from the governance structures of financial markets who are beyond their competence to be involved with. I think the bill also will allow the Reserve Bank to delicense non-bank deposit takers in prescribed situations. 
I think this is a particularly good piece of legislation. It is really important for people in my electorate my constituents who want to invest their money safely without risk of losing it. And with that view I support this bill unreservedly. Thank you. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I want to thank the previous speaker John Hayes and say that generally like members on this side of the House—list members and constituency members—we are supportive of this bill the Non-bank Deposit Takers Bill. I was pleased to see that he did not repeat in his speech the comments that he made about the $700 million or $1 billion of taxpayers’ funds that was lost as being small change as he did by way of interjection. I am not one of the people who think that that unnecessary loss is a matter of small change. 
I do want to refer to the speech made by the Hon Dr Nick Smith— 
Hon Clayton Cosgrove 
: Who? 
Hon TREVOR MALLARD 
: Nick Smith. I wonder why he did not quote that financial expert whom he appointed as chair of the ACC board John Judge. We disagree with many of the things that John Judge did but he is a person of impeccable integrity. He achieved the financial turn-round for ACC and someone of his financial expertise was necessary if the Government was to do what it was going to do and of course we disagree with it. But he has integrity and he did a very good job. I want to quote from Mr Judge’s comments on this ministry. He has called this ministry “pathetic” today. He has said that one of the Ministers needs to become acquainted with the truth. He has said that one of the Ministers just tries to go and blacken good people’s names. 
Hon Clayton Cosgrove 
: Who is that? 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! 
Hon TREVOR MALLARD 
: This is John Judge. 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! The member must come back to the purpose in the content of a second reading speech. 
Hon TREVOR MALLARD 
: The point I am getting to is that the purpose of this bill is to provide integrity within the financial markets. John Judge is someone who is I think universally accepted as having integrity and he is commenting that this ministry does not. You just then wonder what right what moral authority the Government has to bring in this sort of legislation and to promote it when the very Ministers who are in charge of it are being questioned as to their own integrity. I just say that when it comes to a question of Judith Collins or John Judge on a question of truthfulness I will go with John Judge. He is the person whom I believe in that circumstance. I am very surprised that Nick Smith who was the Minister who appointed Mr Judge to ACC has not suggested that he be used further given his integrity and given his expertise in this financial markets area where his expertise is absolutely clear. 
I would now like to go to the list of contents of the bill and look at some of the headings. It is called the Non-bank Deposit Takers Bill. It is a bill that I have not been involved in a lot and I will be happy if the National Party speaker who follows me wants to elucidate on some of the questions. I am just looking around. Is there a Minister of Finance who is able to answer the questions? No but I will put the questions down and I am sure that the Minister when the Minister becomes available will answer them. 
Where there is a non-bank deposit taker does that include people who get brown paper bags or plain envelopes from Dotcom or Skycity? Are they a non-bank deposit taker if there are large cheques that are either anonymous or not anonymous you know? They apparently had the name on them. They were not bank cheques. I wonder whether a non-bank deposit taker could take anonymous deposits or not and if there was a name on a cheque whether for this purpose that would be anonymous or not. And if it was put into a non-bank account—a “John Banks account” might be a good description or a “John Banks account”—would there be a requirement to record the source of the deposit or not? It is a relatively simple question about the purpose there. In fact there are probably some interpretation issues around that as well. 
Clause 4 is the interpretation clause and the question I want to ask members opposite is whether within the clause there is anything that will clarify whether John Banks is included as a non-bank deposit taker at the point he receives the plain envelopes—or even the addressed envelopes—with the large tens of thousands of dollars’ worth of cheques. If in that case he is a non-bank deposit taker is he also a non-bank deposit taker when he receives brown paper bags stuffed with cash? If he receives a brown paper bag stuffed with cash is he a non-bank deposit taker? 
I want to refer the Chair and the members opposite to clause 6 “Related party defined” which is within Part 1 “Preliminary provisions”. I want to ask in this particular circumstance whether if the ACT Party gets a brown paper bag full of money and it discusses it at a tea party with the National Party in front of a whole pile of cameras that makes the National Party a related party to the ACT Party for the purposes of this legislation. I do not know. I mean the National Party is clearly a related party now. I think it is fair to say that the National Party—I do not think I can use the expression—is having something done to it by the ACT Party at the moment that is normally seen to be done within a marriage. It is basically being rooted is it not? I mean it is being stuffed. The National Party— 
The ASSISTANT SPEAKER (Lindsay Tisch) 
: Order! I think that word is completely unparliamentary and I ask the member to withdraw it. 
Hon TREVOR MALLARD 
: I withdraw. My question is whether John Banks should have at some stage. So there is a related party question. The next question is whether clause 9 applies in this. Clause 9 in this particular bill states: “This Act binds the Crown.” Well again it is clearly a case—well there is a bit of S and M involved in this particular case. I think it could well be that John Banks is putting the National Party in handcuffs for part of this relationship. Certainly there appears to be a binding of the Crown on the part of John Banks in this legislation. Money is being transacted a non-bank deposit has been made and the Crown is being bound by ACT. That is exactly what it says in here; that is exactly the heading of the clause: “Act binds the Crown”. 
If I was John Key I would not want to be bound up by John Banks. If I was John Key I would not submit to the handcuffing on the part of John Banks. The way that he is at the moment I think I would be cutting the links—I would be cutting the links. I would be undoing the chains that are binding the National Party the Government the Crown to ACT. I think the classic is clause 11. That is the clause that is headed “No holding out”—no holding out. It is clear that John Key has not been holding out on John Banks. 
DAVID BENNETT (National—Hamilton East) 
: 
 Thank you Mr Speaker— 
Hon Clayton Cosgrove 
: How do you compete with this? 
DAVID BENNETT 
: How do you compete after that last speech? It was really “Thursday afternoon - itis” for Mr Trevor Mallard who really needs to take a break I think and come back at a different stage. Everybody in the House left with the lack of decorum in that last speech from that member. 
But Mr Mallard did ask one question and I want to give him one answer to that one. The answer to that is that a non-bank deposit taker does include those people who take deposits outside their electorate office when they are selling items on the street. So just for his clarity: you would be covered by this bill Mr Mallard. Just for your own purposes this is something that is important for you as a member. 
It is important that we look at the nature of why this bill is here. Many New Zealanders over the last few years have really felt the impact of the world recession and the financial crisis through the loss of money through finance companies and the like. That second-tier debt you could say—where people take more risk on the debt and they expect a higher return—has found itself out to be a very delicate and bad investment for many people. Anybody in their electorate office would have seen many sad stories where people especially later in life had invested their whole life-savings and lost it; sometimes they have even borrowed to put into finance companies and the like. 
We cannot protect people from making some mistakes. The nature of Government and the world especially in finance is that you make some choices you take some risks and every reward has a risk—the higher the risk the higher the reward. Many people forgot that and the financial crisis was a wake-up call that brought back to home that there is nothing out there for free and if you think you are going to get a higher return by just investing passively well you have to take that risk with it. 
So we have had to make some big changes. These changes will not solve all the situations. Do not expect the Government to solve all the situations. I think that is the message for everybody in the second-tier debt market. We are not there as a Government to protect in all circumstances and nor can this Parliament because whatever rules we make there will be an incentive in the market to provide other instruments that get around these rules. That is just the nature of it and that will always happen. But what we can do is close up those gaps when we see them. It is very sad when the New Zealand First Party comes in here and abuses this Parliament around this issue. 
 The Labour Party when it was in Government previously started the process of trying to deal with this situation. The National Government took that over and tried to deal with that process as well. It is all right to come in here and say you are lily-white and had nothing to do with it but that is not how it works. We cannot tell the future—nobody ever can—and it is a matter of dealing with those situations as they arise. 
This is a good bill in that it promotes new reforms in this area to give some confidence and some comfort to investors. It will not change everything. It will not solve all the problems. The big lesson for all New Zealanders is that you take a risk on some investments and that the Government and this Parliament cannot deny that risk or take that away. But what we can do is work towards being as constructive as possible in reducing that risk so that we give investors the most protection that is possible. This bill does that. It goes some way to achieving that. That is good for our people. It is something that we need to mix and match with good education and an awareness of the dangers of investment as well. Thank you. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 I want to begin with some words of wisdom that were offered to us in the Finance and Expenditure Committee when we heard submissions on the Non-bank Deposit Takers Bill. We have heard some great submissions in the debate this afternoon. There have been some light-hearted contributions and we have had some fun with it but there is a point that needs to be made and this point was made in relation to this tax legislation by a senior partner at one of the large law firms in town. He said that basically this bill moves legislation from one area to another and it is a total waste of Parliament’s time. That is a direct quote—or he said words very similar to that which I wrote down immediately. 
He was concerned that we are concerning ourselves with matters that are not of significant importance that most of these matters have already been addressed and that in fact what we are really doing is shuffling paper in this Parliament. I think that this speaks to a wider point which is around the Government’s priorities and its agenda in the area of financial management tax change and so on. We have a Government that is not pushing the big ideas. Instead it is focused on changing legislation from one Act to another because it needs to be seen to be doing something. In its current form the bill is largely window dressing. 
Another point made by the same submitter was that this legislation which has capital adequacy criteria will tend because of that to be more stringent in practice than the advertised minimum capital of 8 percent and that that will push some unusual behaviours. It may well cause a perverse incentive to loan heavily in the mortgage market and to drag capital away from productive areas of the economy. If that is indeed true and if that perverse incentive plays out what we have here is something that goes in the opposite direction to pro-growth policies. Indeed that would be consistent with what the Government has done so far. This is a Government with the worst—worst—economic growth record in 50 years. In part that is because where there is real change to be made it is shying away. Instead in this bill we are dealing with matters that are largely already dealt with. 
The previous speaker David Bennett mentioned the need to strike a balance in terms of making things clear for investors about risk and also in terms of making sure that there is appropriate regulation in place. I want to agree with that member. That member sometimes has some wise ideas and this is one of them. I think that that balance does need to be struck but we do need to be wary of creating perverse incentives though and stepping too far away. 
The New Zealand Association of Credit Unions in its submission said that it felt that it was ironic that the regulation that is being introduced is going to be borne by the firms that did not collapse. The association was concerned that in its case this regulation is a bit tight. The credit unions all have skin in the game in the cooperative business model and the association felt that perhaps this legislation goes a bit far in terms of regulation rather than in terms of signalling to businesses what the risks are so that they can make the decisions for themselves about where to invest their moneys. I think it is worth taking that into account as we progress this bill. 
The Labour Party will support this bill because although it is ultimately window dressing there are one or two things that it tidies up that can and should be tidied up. So we are not going to oppose that certainly. We are concerned that there be integrity within financial markets which is ultimately the purpose of this bill. That goes to the confidence in the Government as a regulator. We know that that is something that is highly desirable—indeed necessary—for the future of our country. 
Mr Cosgrove earlier in the debate made a germane point about confidence in the Government as a regulator and about the finance sector and the Government’s handling of the Crown Retail Deposit Guarantee Scheme. That discussion is very germane to this bill because here we have people taking deposits in a scheme that did stop a roll on banks and that did stop flight of finance to Australia but it is clear from the report that we got from the Auditor-General which we asked the Minister of Finance about that a full investigation has not yet been conducted into the avoidable losses of that scheme which are really the responsibility of this Government. The avoidable losses of that scheme have been estimated at somewhere between $100 million and $500 million. That is the biggest loss of Crown funds—the biggest preventable loss of Crown funds—in the history of New Zealand. It seems to me— 
Hon Clayton Cosgrove 
: Didn’t we invite Bill English to come in and talk about it? 
Dr DAVID CLARK 
: We did invite Bill English to come and talk about it. 
Hon Clayton Cosgrove 
: What happened? 
Dr DAVID CLARK 
: He has so far resisted any suggestion that he should look into this and answer for the fact that we have potentially the biggest loss of taxpayer funds in New Zealand history—far bigger than INCIS or any other scandal—with additional losses as a result of mishandling this scheme. There were no reports for 3 or 4 months on the additional losses that were incurred. We know for example that there was an increase in South Canterbury Finance’s balance sheet in terms of the risk that it was carrying of 25 percent during the period that there was no effective Crown monitoring of the scheme. We know that there was a 10 times increase in another finance company’s loan book—all risky loans. This was all as a consequence we would argue of the mismanagement of the scheme—the failure of Treasury to intervene after it had written effectively an open cheque on behalf of the taxpayer to preserve taxpayer interests but did not monitor effectively beyond that. This is something that we feel needs to be investigated fully. This gets to the integrity of New Zealand’s position within financial markets and confidence in the Government as a regulator which is what this bill is designed to ensure and we would argue that that is a more poignant and pressing concern than the matters raised in this bill. 
Talking further about this bill we can look at some of the other things it does. One of the things it does is it develops and completes work that the Labour Government started. Although it is tinkering it is tinkering in a way that is consistent with addressing the concerns that were raised in the finance sector when we were faced with finance company collapses and the world financial crisis. New Zealand faced those challenges and the Labour Government introduced for example the Crown Retail Deposit Guarantee Scheme to ensure that Kiwis could invest with confidence. It is not the scheme itself that we find fault with; it is the handling management and monitoring which the Auditor-General has pointed to and where the Auditor-General has found clear fault. It is that handling of the scheme that has not been addressed or investigated thoroughly. And so it is very hard for New Zealanders to have confidence in the Government as a regulator if it does not address those bigger issues and seems to be focused on addressing smaller issues around the finance sector. 
 It was 3 years as well until the Government got around to the second part of this reform package which was started by the Labour Government. Since the first reading of this bill another year has passed. We have got to ask why if this legislation is so important it has taken so long to get through the House. This is a Government that seems to be out of ideas. It is not facing up to the reality that we as a country need pro-growth tax policies we need research and development policies we need proper savings policies and we need monetary policy reform to ensure that exporters are supported so we can start earning more than we are spending as a country and so we can address the real problems with our economy rather than tinkering around the edges as this bill attempts to do. 
In closing although Labour will support this bill we take seriously the words of wisdom from submitters and the legal companies that told us this is really a waste of Parliament’s time. We as the Labour Party if we were in Government would be doing more serious things to ensure confidence in the finance sector which is so important to our future as a country. 
MAGGIE BARRY (National—North Shore) 
: 
 I rise to take a short call on the second reading of the Non-bank Deposit Takers Bill. Like many of my colleagues such as David Bennett we have heard a lot of things a lot of difficult and sad stories about people who require assistance and who need a restoring of confidence and this is what this bill has achieved. It is against a background that has been outlined by other speakers today. There was a need when Australia moved for New Zealand to move quickly and there is now a raft of measures that this Government has brought in to restore confidence in the capital markets. After the global financial crisis after the collapse of so many finance companies there were many people who felt that they would never invest again. As my colleague David Bennett said there were some very sad stories indeed: older people on fixed incomes who borrowed to buy were in difficulties. And this bill which has rare accord across the House does complete several years of work to tighten it up. 
John Hayes has already gone through some of the regulations that are going to be changed; we have introduced some very good protections in this to maintain and build confidence. I will not go through them all but the Financial Markets Authority was long overdue. It was needed to have a one-stop shop and that does the job. There is a new regime for financial advisers again and we have rewritten a lot of the old laws—the 33-year-old securities law—and we have cracked down on loan sharks. These are all things that needed to be done. 
Sitting as I was on the Finance and Expenditure Committee on the Non-bank Deposit Takers Bill we had nine submissions. We had Chapman Tripp we had the Financial Services Federation and we had the Trustee Corporations Association of New Zealand which all came to us and were very happy about the outline. They had some suggestions and in amongst some robust debate some changes were made—some drafting changes—that have made it a better piece of legislation. 
I would have to commend the chairman. I think Todd McClay has done an excellent of job of expertly corralling some of the troops. Is he still in the Chamber? He is here now. I can lavish more praise upon him. He has done a great job. 
Todd McClay 
: I had to run. 
MAGGIE BARRY 
: He had to run—he had to run to come back. See that is the kind of dedication you like to see in a chair. You know when you are faced with irascible individuals who will argue with their own shadows who will pick holes in anything at all—I am not talking about their hairdos. Members in our own team of course are above and beyond reproach. But I have to say it has been a rare opportunity to actually agree with some members on the Opposition benches. Every now and again as a novelty in this House people do join forces and try to work for the greater good. I believe that that has happened with this bill and I think it is an excellent piece of legislation. So for its second reading there is not a lot more to be said. It has been covered in great detail. There have been some frivolous and unusual moments as often occurs in this Chamber but I commend this bill to the House. Thank you. 
Bill read a second time. 
Taxation (Annual Rates Returns Filing and Remedial Matters) Bill 
Second Reading 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill be now read a second time 
. It has been a while since this bill was introduced so let us just recap briefly on what it does. It is an omnibus bill that makes a number of wide-ranging changes to our tax system. Some of these aim for greater efficiency in innovative tax services some deliver on changes that were announced in Budget 2011 and others ensure that the current rules continue to work effectively and with greater fairness. 
It is a point that is worth stressing repeatedly that in tax administration an important way to simplify the system and to gain greater efficiency is through the greater use of electronic systems—a theme that underpins this legislation. For businesses the bill’s main thrust is to modernise the record-keeping requirements they face by making it easier for taxpayers to store their records offshore through applications from their data storage providers and by allowing taxpayers who submit returns electronically to also store them electronically. The bill also contains a proposal to simplify and reduce the costs of record-keeping by removing a number of legal barriers to electronic filing and record-keeping as the Inland Revenue Department moves away from its currently cumbersome paper-based systems towards the greater use of electronic services. 
The bill also proposes to rid taxpayers or their agents who send electronic returns to the Inland Revenue Department of the requirement to retain paper copies of those returns. That may seem a simple and indeed an obvious step in today’s environment but it is a significant one that will substantially reduce the cost of keeping records. 
It is also worth noting that the bill contains a proposal to give business greater certainty over the tax treatment of costs incurred on software development projects that are unsuccessful by allowing an immediate deduction for expenditure incurred in the year that the development is abandoned. The consequence of this will be a fairer outcome which should help more investment in innovation. 
Continuing the theme of fairness to bring greater equity to the filing returns system the bill also amends the tax return filing rules for salary and wage earners. Our tax system works on the principle of paying about the right amount of tax through the PAYE system and this will even out over time. The advantage for many taxpayers is the removal therefore of the annual requirement to file a tax return meaning a reduction in their compliance costs and freeing up the Inland Revenue Department from processing those returns to focus its resources on higher-value activities. 
 Over the years that advantage has been eroded. Some salary and wage earners have been cherry-picking only the most favourable years in which to square up their tax obligations in order to receive a refund while of course ignoring those years where there might well be tax to pay. This has resulted in the number of refunds for small amounts flowing out of the system and none of the balancing tax to pay it back if you like coming back in so the evening-out process that the legislation—which dates from the late 1990s—sought to put in place is in effect being nullified. So what this bill proposes is that taxpayers who choose to file a return for a particular year in which they expect an advantageous result should also be required to file returns for the previous 4 consecutive years. 
The bill will also remove the requirement for taxpayers to file an income tax return or to receive an income statement from the Inland Revenue Department merely because of their Working for Families entitlements. 
This bill was considered by the Finance and Expenditure Committee. I want to acknowledge the work that the committee did and the fact that in bringing the bill to its second reading the committee made two very important recommendations. The first of these is that the proposal to amalgamate the IR3 and personal tax summary return which members may recall was included in the original proposals should not proceed. Its second recommendation was that the implementation of the other return filing proposals for individuals that were remaining in the bill should be changed from the 2014-15 tax year to the 2016-17 tax year. These latter proposals can be activated earlier if that proves necessary by way of an Order in Council. I think that these are sound recommendations. I think that they will allow the Inland Revenue Department to implement the returns filing proposals for individuals alongside other high-priority changes that are already being implemented. 
I should also inform the House today that I intend to release a Supplementary Order Paper on this bill. That Supplementary Order Paper will focus largely on issues relating to the Canterbury earthquakes. I am confident that it will provide real help to the citizens of Canterbury as the matters that it addresses were all raised by taxpayers and their agents. It will introduce a series of remedial changes to ensure that the international tax rules are also working as intended. 
Overall this is a straightforward piece of legislation. It is consistent with the changes that we have been making over a number of years to simplify and make the process more efficient. It is taxpayer-friendly in the main. It has been well considered by the select committee and I acknowledge the members for that work. I am now pleased to commend the bill to the House for its second reading. 
Dr DAVID CLARK (Labour—Dunedin North) 
: 
 The Taxation (Annual Rates Returns Filing and Remedial Matters) Bill follows neatly on from the last that we have debated and that is because it also is about tinkering. It is an omnibus bill as the Minister of Revenue has told us and it does some worthy things—I will not deny that. The Minister is striving to ensure that the tax system we have has loopholes plugged. He is making some useful flip-flops on KiwiSaver and he is tightening up one or two things that it is good to address. 
The submitters to the Finance and Expenditure Committee which was well run by members opposite made a number of salient points and so we had some general consensus around changes that should be made. We heard from Mr Crooks Mr Gilchrist Mr Lay Buddle Findlay a coalition of insolvency practitioners Contact Energy Ltd the New Zealand Law Society the New Zealand Computer Society PricewaterhouseCoopers the Corporate Taxpayers Group Gerry Rea Partners KPMG the New Zealand Bankers Association and so on. You get the picture. These were a worthy group of submitters who had given this bill full attention. So I think it is fair to say that technically it is a very competent bill and the Labour Party will support it on that basis. 
However the thing this bill does not do is address the real problems with our taxation system. This bill does nothing to address the 4 percent drop in revenue since this Government came to office 4 years ago. 
Hon Dr Nick Smith 
: The GFC. 
Dr DAVID CLARK 
: The global financial crisis as the Hon Dr Nick Smith points out did have an effect on the tax take. The member is quite right. The Inland Revenue Department attributed 1.5 percent of the drop in tax take of a 4 percent drop to the global financial crisis. The other 2.5 percent it attributed to policy changes. 
We know that the biggest change in recent times is the tax changes of 2010 that the Government made. They have seen Government revenue plummet and this bill does nothing to directly address that. Sure it stops a few loopholes. It does make some small amount of difference but no measurable difference in that respect. The finance Minister continues to describe those changes made in 2010 as broadly fiscally neutral and with that—we know he takes some licence from his surname—he is really redefining the English language in that respect. The word “broadly” has been given new meaning I would suggest because “fiscally neutral” usually refers to the forecast period which is a 4-year period. Now the Minister is referring to the “business cycle”. He has stopped saying that it is fiscally neutral; he has started saying it is broadly neutral over the business cycle. 
This is evidence of a Government that is struggling. It is struggling in this area. It does not have pro-growth tax policies and so the investment signals that people are getting encourage them to put money into the speculative sector and not into the productive sector. This is something that needs to change. This is not addressed in the bill in any sense really other than stopping some loopholes which again could be speculative but are probably not productive. It does nothing to address that. 
It also does nothing to increase savings. We need a universal KiwiSaver. This bill does raise the employee contribution rate for KiwiSaver from 2 percent to 3 percent. National has been flip-flopping all over the place on KiwiSaver. Only 2 years ago I will remind members of this House National cut the employee contribution from 4 percent to 2 percent. So it has gone down from 4 percent to 2 percent and now the Government is putting it back up from 2 percent to 3 percent. It is all over the place. The Government has more positions on KiwiSaver than the Kama Sutra I would contest. 
We see that the Government is tinkering with savings but it does not really have a vision for this sector. The minimum wage increase that my member’s bill puts forward would assist with savings policy because it would ensure that hard-working New Zealanders could make contributions to this KiwiSaver scheme addressed in the bill. 
We know we need pro-growth tax policy. We know we need savings increases. If we look across the Ditch to Australia we see it has $1 trillion in its superannuation scheme looking for a home—looking to support businesses. We have nothing like that in New Zealand. Muldoon scrapped it. A previous National Government leader scrapped this scheme and if we had it today we know we would be in a much better position. We would have greater capital depth in this country. But this bill does not directly address that problem. All it does is correct a few loopholes. The research and development tax credits which could change it are not in there nor is monetary policy change to support our exporters. 
Why are we not getting that? Why are we getting this kind of bill? I want to contest that it is because we have a problem with the Inland Revenue Department. We have a computer problem in the Inland Revenue Department that this Government has not yet dealt with. We have computer systems that are on their last legs. I want to quote from the Prime Minister who said in February this year that tax policy is being held up because the computer systems—and here is the quote—“can’t actually support radical changes from Government.” This Prime Minister here—the National Prime Minister—says that his own tax department cannot actually support radical changes from Government. This is the Prime Minister of this country saying that it cannot make significant changes that will be of benefit to our country. This is really troubling stuff. “You don’t want to be in a position where Parliament is held hostage to a lack of technology.” Who said that? That was the Prime Minister. 
Chris Hipkins 
: The Prime Minister? 
Dr DAVID CLARK 
: Yes. He said: “You don’t want to be in a position”— 
Hon Trevor Mallard 
: The current one? 
Dr DAVID CLARK 
: —the current Prime Minister—“where Parliament is held hostage to a lack of technology.” That is precisely what we have got. That is why we have got this watered-down legislation. That is why we have got legislation that is not going to make a difference to New Zealand. That is why our economy is in the doldrums. This is what he told Parliament. 
We know that when the Government attempted to do something about this—it was told when it first came to office that this system was on its last legs—Mr Dunne received that briefing and the department did start to try to address some of the issues. It made a $21 million false start—a $21 million false start. That is taxpayer money that went into a system. I think it did the right thing in pulling out by all accounts—it went nowhere. But what has it done since? We have no plan as to how this tax system is going to be fixed. We have the ageing FIRST core computer system now more than 20 years old. That was built in 1992 before Google and before Facebook. This is the system that we are reliant on as a country to ensure confidence in our tax system and we have a Prime Minister who tells us we cannot rely on it. 
I want to say that we are in a dire position and that is why this Government is reduced to tinkering on tax policy. Partly it does not want to address the big issues but partly it is hamstrung because it does not have a clear plan as to how it is going to get the systems in place. It is about time the taxpayers of New Zealand were given a clear picture of how this problem is going to be addressed. 
This bill does raise the employee contribution for KiwiSaver from 2 percent to 3 percent after National wound it back from 4 percent to 2 percent previously. It is also true that the big ideas that the Government has are reduced to things like the paper boy tax. We know that that was the big idea in the Budget from the Government. This is along similar lines. We have an omnibus bill. It is worthy and it closes a few gaps but it really is not going to address those big issues. The tax switch which all our hard-working New Zealanders are hurting from is still in place. The top 10 percent of New Zealanders got 44 percent of the value of those tax cuts; the bottom 20 percent got about 2 percent of the value. We have got a tax system that is not fair and we have got a computer system that can hardly keep up. The Inland Revenue Department computer upgrade we are told is going to cost $1.5 billion—$1.5 billion this new computer system—and yet we do not have a timetable and we do not have sense of who is going to build it what it is going to look like or how it is going to give us confidence as taxpayers that our tax dollars are being properly collected. 
We have a Government that needs to get its act together. We need this Government to get its act together to get our tax system together so that we can actually make the changes that will take New Zealand ahead as a country. Then we can stop our workers flying away to Australia because there are no prospects here and because the tax system cannot handle pro-growth tax policy. We need to make a difference. I contest that the National Government is not on top of this and it must get up to speed and fix this issue. 
TODD McCLAY (National—Rotorua) 
: 
 It is a pleasure to rise and speak on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. 
Can I apologise to anybody watching this on television for the speech from the last member David Clark because it was full of doom and gloom. The only bit that I thought worth picking up was when he was talking about the bill and suggested that it had more positions in it than the Kama Sutra. Well I have got to say that there will be people all over New Zealand who have heard that who are thinking of the Kama Sutra and now have a picture of that member in their minds and procreation around the country will have ceased. So I do not think that we should do that again. 
He also mentioned to us that all the bill does is fix a few tax loopholes—a few tax loopholes. Does anybody remember the last election when the then leader of the Labour Party—somebody who is thought of quite fondly now compared with the new leader—said that a Labour Government policy was to close a few tax loopholes? He said that it would save about $5 million by doing that and would then use it for $6 billion worth of new spending. So when it comes to closing loopholes I can say that this bill actually does a very important piece of work. It is a real piece of legislation and is not like the pie-in-the-sky dreams that we heard previously. 
I want to talk about a couple of bits of the bill that I think are quite important for New Zealanders. In particular I want to talk about KiwiSaver. What this piece of legislation does and what our Prime Minister has done is focus on ensuring a very strong and important future for KiwiSaver that New Zealanders will benefit from. Before I do talk about it though I want to say that the Government is clearly focused on lifting New Zealand’s economic performance. I want to pay particular attention to this in so far as the work the Government is doing collectively but also more important I want to say that individual members of the Government are also doing their fair share. 
On my right we have Mr Paul Goldsmith. Can I say to members opposite that when they go to the airport shortly before they rush into a lounge there to dine then go home to their families they should have a look in the bookshop on the way past. There will be some serious fun to be had because I have heard that tomorrow a book called  
Serious Fun 
 will be available to New Zealanders authored by somebody sitting very close to me. If you pick up a copy it is good for the economy. The book focuses on lifting economic performance and if you are nice to Mr Goldsmith—sorry if the members opposite are nice to Mr Goldsmith—he will sign it for you. I can see already that there is quite a bit of interest in that happening. The title is  
Serious Fun 
 and that is what we say about Mr Goldsmith on this side of the House. 
I will say just briefly that when it comes to KiwiSaver the Government has made an absolute commitment to New Zealanders that this is about saving and focusing on the future. The $1000 kick-start is secured in law and will remain there. That is a commitment on behalf of the Government. The changes that we are making will reduce the Government’s borrowing whilst increasing the focus on saving through KiwiSaver. 
I want to give credit where credit is due because KiwiSaver is a great scheme and it is one that we know that 1.9 million New Zealanders have opted into. I want to give credit where credit is due. That credit deservedly goes to our Prime Minister John Key who secured it worked hard to deliver on it and made some important changes here that mean that KiwiSaver is something that New Zealanders can benefit from and rely on. That is actually very much what they also think of this Government. There are 17500 new members a month joining KiwiSaver—a fantastic number of New Zealanders. There was $9 billion in it 3 years ago. The KiwiSaver fund has grown to $12 billion and it is expected to be worth $60 billion by 2022— 
Dr Cam Calder 
: How much is that? 
TODD McCLAY 
: —$60 billion by 2022. 
I can say very clearly here that not only is the Government committed to KiwiSaver and not only does the Prime Minister support it fully which is why we have made these important changes but we will not touch it as opposed to the members opposite should they ever get on the Treasury benches again. We will leave it there for New Zealanders. It is for their use in the future. It is the Opposition that will say: “We have closed loopholes we have saved $5 million but we have found another $6 billion of spending and we might have to raid New Zealanders’ piggy banks to do that.” The trust of New Zealanders is firmly in this side of the House. I look forward to the next speaker’s speech. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 I hope not to disappoint the last speaker Todd McClay. I see the prior speaker has brought up the issue of  
Serious Fun 
 a book to be published by Paul Goldsmith I think. Of course Paul Goldsmith is the biographer of John Banks— 
Dr David Clark 
: The hagiographer. 
Hon DAVID PARKER 
: The hagiographer—that is right. Actually there are two biographies already on John Banks. One was a vanity book which was the one that Paul Goldsmith authored. The other was a more transparent biography of some of his prior things— 
Hon Trevor Mallard 
: Noel Harrison’s book? 
Hon DAVID PARKER 
: —that is right by Noel Harrison—called  
Banks: Behind the Mask 
. Because I stood against Mr Banks I had the misfortune of reading both. I not sure whether this  
Serious Fun 
 is poking fun at Mr Banks in the next part of his career or whether it is about some other topic. 
There is a serious point to be made about that though and that is that rather than getting on and dealing with the important decisions that need to be taken through some pro-growth tax reform and through some really significant changes to savings over time in New Zealand which the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill only tinkers with this Government has left tinkering and seems to be spending more of its time managing its own faux pas than it does managing the interests of the country. Whether it is fiascos at ACC with exaggeration as to the level of problems in ACC by Dr Nick Smith—followed by a miraculous cure about a year later. Having jacked premiums up higher than he needed to he then dropped them down for the election then he eventually bit the dust because of some other problems. Since then we have had John Judge dumped. I did not agree with everything he did but I actually did think he was a decent person and did not deserve the indignities that he has suffered in recent months. We have had other— 
Hon Trevor Mallard 
: Even this morning. 
Hon DAVID PARKER 
: Even this morning it continues. 
Hon Trevor Mallard 
: Judith Collins dumped on him this morning. 
Hon DAVID PARKER 
: Yes she dumped on him this morning and accused him of sort of covering up documents rather than those documents having been wiped off a computer by ACC itself. Other things going wrong are legion. The latest Budget we had was all about increasing class sizes to improve teacher quality. What a nonsense. That one fell. That one bit the dust. 
This bill itself as the prior speaker the man from Rotorua said does increase the compulsory contribution under KiwiSaver to “3 plus 3” but what it does not do is expand the scheme to more people or set out a path for the future that has savings under that scheme growing progressively over time. New Zealand needs both of those fundamental steps if it is to right the wrongs that we have had in this country for decades now since the last National Government to tinker with saving schemes Mr Muldoon undermined— 
Paul Goldsmith 
: You weren’t listening. The member wasn’t listening to the answer to question No. 1 today. It was talking about savings. 
Hon DAVID PARKER 
: Oh he talked about savings—OK. Mr Goldsmith tries to defend himself by saying that Mr English in answering at question time today said that there has been a decrease in household debt in New Zealand in the last 4 years. You would expect that. You would expect that because in a recession people put their cheque books away. They do not buy cars they do not buy as many dishwashers or home improvements and things and they do not buy as many books Mr Goldsmith—they do not buy as many books. How much to you think New Zealand household debt has gone down by? 
Dr David Clark 
: You’d expect 10 percent or something wouldn’t you? 
Hon DAVID PARKER 
: By 0.2 percent Dr Clark—0.2 percent. Those members claim that that is some wonderful success—0.2 percent. I thought Mr English went through that part of the question very quickly. It was almost sotto voce “0.2 percent” then he carried on with the rest of his answer. 
This Government is failing to address the big issues. We need everyone who is in work except in cases of hardship—where they have a serious illness for example—in KiwiSaver. That is the big difference between Australia and New Zealand. We had Mr English again saying: “Oh it’s resources.” It is resources he was saying. Then why is it that we have net migration out of Taranaki? When I uncovered that statistic this week I was most intrigued to think: “Ah well I’m sure we will have that same old excuse now that the excuse about Greece is wearing thin.” given that people are not leaving New Zealand because of Greece’s problems; they are leaving because of New Zealand’s problems. 
Andrew Little 
: A two-speed economy in Taranaki. 
Hon DAVID PARKER 
: A two-speed economy in Taranaki. Unfortunately they are both a bit slow relative to Australia because this Government refuses to take the decisions that are necessary in order to get the economy moving. These are long-term entrenched problems but we will not overcome them unless the Government takes the decision that New Zealanders need it to take and that businesses need it to take so that the economy starts moving. There are some decisions that business can take. There are some decisions that business cannot take. Our population relies upon the Government taking those right decisions and they are not being taken. 
As we have heard from Dr Clark real wages are dropping. Then we hear the Minister of Finance say: “Oh not after tax.” What he does not tell you is his not-after-tax figure. It is true enough if you are one of the highest income earners in New Zealand who got 40 percent of the tax cuts that went to the top 10 percent; their after-tax real wages have gone up a little bit. But there are other people— 
Simon O’Connor 
: Tell the full story! 
Hon DAVID PARKER 
: I am telling you the whole story. The real wages after tax of the lower deciles in the economy have not gone up. They have not gone up; they have gone down. That is another reason why we have got this great outflow of people to Australia or this terrible outflow of people to Australia. They have no sense of optimism that they can have a profitable and secure future in their own country. Now we have reached the terrible situation in that the Government promised it was going to reverse this drain to Australia but we have had it go up and 40 percent of the people who are leaving are between the age of 18 and 30 from the regions as well as the cities. Those who are leaving from the regions are not replaced by immigration into Auckland. We have an ageing population in our regions. We have a spiral downwards in some of those centres. It is very sad and I suspect it is not going to change much under this Government. 
The Government says that unemployment is not as bad as it is in other countries and that is true. Unemployment is not as bad as it would be if we were not losing 53000 per annum to Australia. 
David Bennett 
: Oh! 
Hon DAVID PARKER 
: We have David Bennett say “Oh!” and throw off at that comment. 
Hon Clayton Cosgrove 
: He just woke up. He was snoring. 
Hon DAVID PARKER 
: No actually he was not asleep. He was not asleep. 
Paul Goldsmith 
: This speech lacks punch. Come on. 
Hon DAVID PARKER 
: This speech lacks punch—OK. Well I will let Judy over there take the next call. 
The Taxation (Annual Rates Returns Filing and Remedial Matters) Bill does another thing that I am not sure—although overall we are voting for this bill—is right. Contact Energy complains that this bill is changing the laws relating to the taxing of bonus shares issued by companies under profit distribution schemes. The one public company that this was going to affect in New Zealand to a significant extent was Contact Energy. Contact Energy came along to the select committee and said “Look don’t do this to us.” because actually what the bill is doing is making it harder for it to raise the capital that it thinks it needs in its business. It currently operates under a rule that enables it to have people retaining some of their earnings in the company and taking a bonus share in lieu of a dividend which was causing no loss of tax to the revenue but was causing an increased rate of leaving retained earnings in the company to the benefit of that company and probably increasing New Zealanders’ savings. 
Again the Government did not listen. It did not listen to Contact Energy which said that this was going to decrease the rate of savings in New Zealand and decrease the capital available in that sector of our economy for no good reason. The concern that the Inland Revenue Department had was that these schemes could be misused in other parts of the economy but they are not currently being. So why do we not wait until they are being misused before we fix this fictitious problem? At the moment it is a future problem rather than a current problem. Instead the Government moved on this again a somewhat peripheral matter when it should have been dealing with bigger issues. 
Record numbers of people are going to Australia exports are decreasing and the Government is not pulling the levers it has control of to reverse that trend. We are not doing the things that we need to do to improve our productive export economy and the economy is not rebalancing. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on behalf of the Green Party on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. The first thing this bill does of course is set the annual tax rates for the 2012-13 tax year. The setting of those annual tax rates fixes in place the great so-called tax switcheroo that the Government introduced. If you remember the tax switcheroo the Government introduced was meant to pull the wool over people’s eyes. It was meant to trick people— 
David Bennett 
: Come on switcheroo! 
Dr RUSSEL NORMAN 
: It obviously tricked David Bennett. It would be a pretty easy job you would have to say. But the idea of the tax switch was that the Government would decrease the taxes on upper-income earners which it did and the exchange would be that it would increase GST. So what that would mean is that ordinary New Zealanders would pay by having an increase to the GST on their groceries. Every time you go to the supermarket you have to pay a little bit more GST. You pay a little more GST so that those who are the very upper end of the income scale can have tax cuts. It meant a 5 percent tax cut effectively for those at the top end. So if you earned $1 million a year then the National Government the John Key - John Banks Government gave you a 5 percent tax cut. So if you earned $1 million a year you were given an extra $50000 or about $1000 a week. Of course that money has to come from somewhere so the way that the John Key - John Banks Government organised this was that it said: “Oh well every time ordinary New Zealand mums and dads Kiwi mums and dads go to the supermarket to buy their groceries they can pay extra GST on those groceries.” And that is the heart of the tax switcheroo. What it meant was a big tax cut for upper-income earners which is very significant if you are on $1 million a year. That is a tax cut of $50000 a year or $1000 a week thank you very much John Key and John Banks. But if you were a middle-income earner then you have to pay increased GST to cover that cost. 
Aside from the sheer inequity of that tax switch the old tax switcheroo which was at the heart of this bill that we are considering in front of us—and aside from the sheer unfairness of a system that says we are going to give big tax cuts to those at the very top and we are going to pay for it by taxing ordinary New Zealanders more through their GST—the Government said it would be fiscally neutral or broadly fiscally neutral. That is what the Government told us. Of course it has been no such thing. It is not fiscally neutral. At no point was it fiscally neutral. In fact the revenue lost was probably something in the order—it is very hard to get the numbers out of the Government because the Government is very shifty on these issues; it is the John Key - John Banks Government after all. It is very hard to get the numbers but it is probably about $2 billion. That is the deficit. So instead of being fiscally neutral as we were told at the time it has in fact cost maybe $2 billion so far. If that is the case then that means an extra $2 billion has had to go on the Government credit card. We have had to borrow that money to cover the tax switch that is implicit in this bill. 
So the Government introduced changes that made our tax system much less fair on the one hand by taking money away from middle-income earners and giving it to upper-income earners and on the other hand it made the fiscal position of the Government much worse. It made the deficit worse. So that was the heart of the Government’s great tax shift policy that is put in place by this bill. For that reason the Green Party will not be voting for this bill. We think that this bill is fundamentally unjust and unfair because it sets tax rates that are fundamentally unjust and unfair. 
But most of all this bill is part of the Government’s overall economic package—the Government’s dumb dirty grey economic package. So instead of having smart Green economics which is the direction in which the world is heading—smart Green economics is the 21st century economics that we should be embracing as a country—this John Key - John Banks Government is giving us dumb grey dirty economics. It is the economics of the 19th century when we should be embracing the economics of the 21st century. That is what this tax package is part of. 
So instead of seeing a tax shift that would be progressive such as moving tax on to capital gains which is highly progressive what we are seeing is actually increasing taxes on the poor and cutting taxes on the wealthy. Instead of seeing a tax shift that would reduce the taxation pressure on ordinary people and actually put a carbon charge in place what this Government is doing is spending about $1.5 billion a year to subsidise greenhouse gas pollution via the emissions trading scheme. And instead of this Government introducing some kind of resource rental—for example around water which is one of our most important resources—which could then take some of the pressure off the tax system so that we would not see the kind of tax rates that we are seeing in this bill the Government is doing nothing about water. In fact what it is doing is giving away the rights to water for free. So irrigators who use water and make billions of dollars out of water literally do not have to pay anything for the use of that water. 
Instead of having a smart Green economic future where we would actually increase savings and would support KiwiSaver—and an automatic enrolment system would be part of that in order to increase the number of people who are getting into KiwiSaver thereby increasing our savings—the Government backed away from automatic enrolment in KiwiSaver because it said it cost too much. And of course the reason why the Government could not afford it was that it gave away so much money in tax cuts to upper-income earners that it could not afford to make the kind of structural change that we need to make in the economy to actually increase the amount that we are putting into savings through KiwiSaver. So auto-enrolment did not happen. 
The other part of it of course that is missing in terms of a taxation policy is the Government’s decision to borrow to pay for the rebuild and of course to put a levy on just the people of Christchurch. So it is Government policy now that the people of Christchurch will pay an earthquake levy through their rates and the Government will borrow to pay for some of the rebuilding costs but there will not be across the country a temporary targeted earthquake levy—or a tax as the Minister for Canterbury Earthquake Recovery Gerry Brownlee quite rightly identified which is fair enough. A temporary targeted earthquake levy could have been used to take some of the pressure off the Government’s fiscal position to pay for the rebuild which would have been fair and would have been spread across the whole country. Everybody would put in a few bucks it would take the pressure off the people of Christchurch and it would reduce Government debt. Instead of that being part of this tax package which it is not what we are seeing is that the Government has actually put a levy through its rates on the people of Christchurch—the very people who do not need extra burden at the moment. The John Key - John Banks Government has put an extra levy on the people of Christchurch to pay for the rebuild but the rest of the country has not worn it. Instead of having that levy as part of this package it has not had it there at all. 
In terms of dealing with the structural imbalances that underpin the poor economic performance of New Zealand since the new-right economic revolution of the 1980s and 1990s which has been an economic catastrophe for New Zealand we have not seen anything to address the overvaluation of the currency. So whether it is part of this bill or whether it is part of monetary policy we have not seen any attempt by this Government to deal with the problem of the overvalued Kiwi dollar. In the middle of the currency war this Government just says: “Oh well whatever is whatever.” Even though the Reserve Bank says we have got an overvalued currency which is destroying the productive sector and even though all of the leading economists say we have got an overvalued New Zealand dollar this Government is doing nothing on it and sitting on its hands. 
Instead the Government has gone on a spending splurge. The spending splurge is really amazing: $12 billion or thereabouts on new motorways which have never been through Treasury’s infrastructure criteria. Treasury has a special thing. It has a special set of rules. If you are going to invest in infrastructure you are supposed to put it through Treasury’s infrastructure rules. The roads of national significance project a $12 billion project has never gone through Treasury’s process. And then we have the $1.5 billion on greenhouse gas subsidies. We have the $120 million to $500 million cost of the assets privatisation programme—still unquantified. The Government will not say how much it is planning to spend on that. Of course the permanent impact of the privatisation of the assets is that it means that the Government’s deficit is worse by $100 million a year according to Treasury’s Budget Policy Statement 2012. 
So that is the reality of this fiscally imprudent Government. It has many many hundreds of millions and billions of dollars to give away in tax cuts for upper-income earners to subsidise pollution to spend on new motorways and to subsidise its assets sale programme and that has put the Government books into a terrible hole. So instead of getting the kind of smart Green economic transformation that we need as a country what we are getting is very poor economic management from a Government that does not know how to manage the books. What we are getting is a tax bill in front of us here that basically cements in place the old tax switcheroo which simply gave away large amounts of money to upper-income earners and made middle-income earners pay for it. The Green Party will not be supporting this bill. 
PAUL GOLDSMITH (National) 
: 
 We had to listen again to that great Australian Russel Norman talking about economics. Circa 1955 Eastern Europe was the feeling I had there. Here we have supposedly the Government taking the tax off the high-income earners. We have got a tax system now where three-quarters of earners are paying no more than 17.5 percent in personal tax and a big chunk of that group would be paying no income tax after Working for Families is taken into account. But that is not good enough for Russel Norman. I just wonder what he would be really wanting to have as the top tax rate. He would probably want a 75 percent top tax rate like Francois Hollande or something like that. Perish the thought for the country if that man became Minister of Finance in a future Government. 
The Labour research unit has obviously got its lines very well organised. Everybody over there talks about tinkering. That seems to be the word that they have been told to get across—“tinkering”. Well this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill which we are talking about here at its second reading is all about tax maintenance. The last thing this country needs right now is to be lurching all over the place with madcap new taxes as proposed by the Labour Party at the last election. The last thing we need is a capital gains tax. It has still never been explained to me how sticking a new tax on the productive sector like small companies farms and all those sorts of things is going to somehow improve economic growth and entrepreneurialism in New Zealand. 
Then Labour was going to undermine the GST system that we have here which is the envy of the world. Our GST system is consistent right across the board. Everything is done the same way. There are no exceptions. They were going to undermine that by fiddling around with fruit and vegetables. No doubt if they had the chance they would return the top tax rate up to 39 percent or 40 percent and open up a gap between the top rate and the trust rate which Michael Cullen did previously which grossly distorted the system led to a whole lot of avoidance schemes and undermined the integrity of the system and yet they have not learnt from that. I am sure if Russel Norman got his chance he would be widening and confusing all the tax rates leading to an undermined system. I heard in the last speech that we are now going to start taxing water and he is thinking about how best to manipulate the currency. I can just imagine him watering the milk and trying to do a good idea there. 
This Government got the basic tax settings right back in earlier Budgets where we did the tax switch focusing on lifting tax off work and income and putting more of it on to spending and getting that alignment right so that the economy is focused on making work. It never ceases to amaze me in the Finance and Expenditure Committee that we talk about smoking and most of the members understand that if you actually tax something you discourage it and so they are all happy to put the excise taxes up on cigarettes—fully understanding and believing that if they do that it will discourage people from smoking. But they never take the next logical step and understand that if you increase the taxes on working you will discourage people in that area as well. They do not seem to follow that logic. I just encourage them to think about that as we go on. It amazes me. 
Look at where we have got to on tax. We have a competitive tax system internationally which is tilting the economy away from borrowing and spending and towards saving and investment. It is a simple tax system. Two-thirds of the cost of the income tax went into reducing the bottom two tax rates. That is something that Russel Norman never mentions. As I said three-quarters of the earners are paying less than 17 percent in personal income tax. We have got a company tax rate at 28 percent which is internationally competitive. A family with two children in this country can earn up to $50000 a year and effectively pay no tax when Working for Families is taken into account—$50000 a year. So I hardly think this is a land where lower-income earners are oppressed and are carrying an unfair burden. This is a land where we have got a very good and very equitable spread of the burden of taxation. 
Drilling down to some of the specifics of this bill that we have before us at its second reading the main purpose of it is to simplify tax filing requirements for individuals and support businesses in handling their tax obligations electronically. We have seen here that we have introduced a number of supports giving people in the business sector more flexibility about how they use online and electronic media in the course of managing their tax affairs. Another area is closing up a loophole that has emerged in the last few years where people have started cherry-picking their tax returns. If they realise that this year they have got a return due they pop it in but if they have had 3 years before where they actually had to pay a little bit of extra tax they are not paying that. So this bill goes in a logical sense to say that if you are going to pick one year actually you have got to cover the last 4 years and we will even it out. During the course of the select committee we did hear a number of arguments about that and have made some changes so that under the 4-year rule you will not now incur use-of-money interest or penalties from the previous date due. We thought that was a little uncalled-for and that change has been recommended by the committee. 
The application date for changes to the profit distribution plan is another area of this bill. It was interesting to see Mr Parker defender of the big corporates on that score. But we did listen and deferred the implementation of that provision from 1 July to 1 October which has given those companies more time to make the changes necessary. The application date and savings provision for the proposal to charge GST on late payment fees will be deferred again from 1 April to 1 January. Again furthermore GST will not be charged on late payment fees if the underlying charge is exempt. So some of those things are all on the whole good solid maintenance of a tax system that is working well and that is all about National being firmly focused on lifting New Zealand’s economic performance and taking this country to the brighter future that its people deserve. Thank you. 
ANDREW WILLIAMS (NZ First) 
: 
 I take a call on behalf of New Zealand First on the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. It is very interesting that I am giving this speech while the Olympics are on because much of what we have heard from the National benches could be aligned to some of the Olympics in the last week. In particular I have seen at the Olympics a number of own goals and we have here in this Chamber today basically an admission that the Government has made a number of own goals. It is also almost like watching the rearranging of the deckchairs on the  
Titanic 
. When they talk about tinkering they are quite correct—there is a lot of tinkering going on around the edges in relation to some of these taxation changes rather than addressing the big picture of proper tax reform. 
In respect of this you do wonder whether had this Government not provided those tax reductions for the wealthy a couple of years ago and had it not knocked a billion or two off the taxes of the wealthy it would today be needing to rearrange the deckchairs on the  
Titanic 
 to come up with some of these sorts of nickel-and-dime margins-of-error amounts of tax on the edges. Had the Government actually kept that billion or two from a year or two ago which would have been in the coffers today we would probably be $4 billion or $5 billion better off today 2 years later. It could have done that rather than giving all the mates of this Government—mainly the mates of this Government—some significant tax reductions. 
In that respect I had to smile when I heard the previous speaker Paul Goldsmith talk about “lurching all over the place”. If it is not lurching all over the place to reduce the employer contribution to KiwiSaver from 4 percent to 2 percent a couple of years ago—or last year was it—and then bring it back up to 3 percent this year I do not know what is. It almost feels like many of these Government people were actually sitting in a chair on the  
Titanic 
 while it was going down because they have had to hold on very firmly and watch the KiwiSaver employer contribution start at 4 percent go down to 2 percent and now go up to 3 percent. People out there in “KiwiSaver land” in New Zealand—New Zealanders who genuinely want to have a good savings scheme—must be wondering what is going on with this Government that it can basically play around with such an important scheme year by year. It puts a huge cloud and a huge doubt over the Government’s long-term intentions in terms of KiwiSaver. That is another own goal; that is the second own goal for the day. 
The third own goal is coming up because it says here in the introduction to the bill that it will allow “the capital costs of unsuccessful software development to be tax-deductible”. 
Hon Clayton Cosgrove 
: Is John Banks involved? 
ANDREW WILLIAMS 
: I wondered whether Dotcom was involved in this and I wondered whether John Banks was involved in this as well because “allowing the capital costs of unsuccessful software development to be tax-deductible” clearly means that people in the software business who have not been that successful—and there are one or two in Coatesville; there are one or two who live out at the Dotcom mansion who in recent times under this Government have not been that successful—are probably hoping this will go through because they will be able to deduct it. Hopefully they will be thankful to this Government that those unsuccessful software developments will be tax deductible. They then will not have to put anything in brown envelopes and maybe give them over desks board tables or dinner tables in a Coatesville mansion. They will know that in the future that will be tax deductible and they will be able to do that quite above board—quite above board—because they know that their unsuccessful software development will be all right. That is another own goal; that is three own goals. It is three nil to the Opposition at the moment—three nil to the Opposition. 
But it gets worse. It gets worse. The next own goal is taxing bonus shares issued by companies. Well holy mackerel! Have we not got bonus shares in State-owned assets for the power companies coming up shortly? Those are also going to be part of this scheme. The bill states that taxes on bonus shares issued by companies are going to be part of this review. Why would that be? Is that not convenient that when you are selling off all the shares in your power companies that you own that I own that you own that he owns and that she owns—that we all currently own—in the future the taxes on bonus shares given out by companies are going to be part of that? This is the grand scheme. This is the fourth own goal so we are up to four nil to the Opposition now. This is incredible; it is amazing. 
It goes on and on. Basically this tinkering around the edges this playing around with all the margins of error in the taxation system is an excuse for this Government over the last couple of years—coming up 4 years now—to make major changes and give major reductions in tax for its mates for its business friends and for its wealthy friends on Paritai Drive who are building $30 million mansions or buying luxury launches on Auckland harbour. The Government is helping them out and giving them reductions in taxation—giving the likes of the former chief executive officer of Telecom who was earning $5 million a year another $5000 a week in savings in tax. It is also giving the Prime Minister John Key another $1000 a week in his back pocket so that he will be better off and can invest in another house in Hawaii maybe or more shares in the Colorado ski fields or more investments in Bankers Trust in the United States—wherever else his $50 million is around the world. Basically a lot of this bill is just tinkering around the edges but not addressing the big picture of proper tax reform.  
New Zealand First has said on the previous bill the Non-bank Deposit Takers Bill that we will support any policy that does try to tighten up taxation and banking issues. We are going to support this bill because there are some merits in it. There are some merits in it. The fact that it is bringing KiwiSaver contributions back up to 3 percent is a good move—it should never have gone down to 2 percent in the first place—as is the fact that it is starting to weed out taxpayers who have not necessarily filed returns when they should have. Again probably most of those who have not done it will be the wealthy mates of those on the other side of the House. Most average Kiwis do not get much in the way of a tax refund. Most of them do not so it does not really apply to— 
Hon Clayton Cosgrove 
: Especially paper boys. 
ANDREW WILLIAMS 
: —paper boys in particular. How many tax refunds will paper boys get in the next year? Not many. Not many. But the Government did find $14 million from the paper boys and the paper girls of this country a few months ago in the Budget. They will be some of the ones affected in terms of the tinkering around the edges of the taxes. 
But we will support this bill continuing through. Taxation is an important matter in this country. It is important for all 4.5 million New Zealanders who depend on all the services that this country provides and the services that the State does provide to have an efficient and effective taxation system. Some of the provisions in this bill do allow for improvements in that area and therefore New Zealand First will support this bill. 
JOHN HAYES (National—Wairarapa) 
: 
 I sense that that last speech in the House was delivered by somebody who aspires to be the deputy leader of New Zealand First. When I hear people constantly using phrases like “shifting the deckchairs on the  
Titanic 
” “tinkering around the edges” and “own goals” these are just euphemisms because the speaker does not understand the bill against which they are talking. It is unfortunate that the member was not involved on the Finance and Expenditure Committee at least to my knowledge so unlike his actual leader he is not as well versed in the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. He hides his lack of understanding in these glib clichés. 
I feel that it is a little bit important to explain something to that member about the issues around taxation. If you have a perfect market think of it like a supercomputer network. It has sensors in every part of the economy. They reach into brains—even small brains—and they read our desires. Constantly the market is re-optimising production and allocating resources perfectly. But efficiency is not enough to ensure a fair society. If Bill Gates has got all the money then the rest of us starve. We need to do something to improve the efficiency of our economy so Mr Williams we have things called taxes. They are inefficient but we need the money to spend on things like health police schools and roads. But taxes are inefficient because the market price no longer equals cost and cost no longer equals value so the Government faces a dilemma. We want to avoid inefficiency because we pass up the chance to make someone better off at no cost to anybody else. Most of us want to use taxes to move income from rich to poor. 
The Government needs and attempts to make the economy both efficient and fair and underlying this bill is a drive to do that. Under a Labour Government supported by New Zealand First and the Green Party I think New Zealand would have first of all a capital gains tax—Labour promised that in the last election—on all businesses and farms which would penalise our productive industry and would add to inefficiency. We would see more than a doubling of employer KiwiSaver costs Mr Williams. We would see a big gap between the company rate and the top personal rate which encourages tax avoidance. 
We have been through this bill on a first reading and the changes between the first reading and the second reading can be summarised like this: the changes in this bill are in addition to the biggest tax reforms in the last 25 years which are helping families to get ahead. They are boosting growth to create jobs and to lift incomes they are encouraging savings and investment and they are making the tax rules fairer for all New Zealanders. We have moved from a situation that we inherited from the last Labour Government where people were spending $1.11 for every dollar they earned to the position that we are in now where we are spending only 98c for every dollar we earn. 
We have built a more competitive tax system that is tilting the economy away from borrowing and spending—which is what the Labour Government would do if it came back; it would borrow and spend—towards savings and investment. 
Hon Clayton Cosgrove 
: You’re borrowing $300 million a week. 
JOHN HAYES 
: I know Mr Cosgrove that you blithely got rid of $7 billion as Associate Minister of Finance—$7 billion—but we are trying to move this economy towards savings and investment. 
This bill will produce a simpler and fairer tax system that rewards hard work and protects the vulnerable. Across-the-board tax cuts instituted by this Government already are rewarding hard work and delivering more money to New Zealanders to every New Zealander— 
Andrew Williams 
: For the wealthy. 
JOHN HAYES 
: —whether you are working or you are retired Mr Williams. Two-thirds of the cost of the income tax cuts went into reducing the bottom two tax rates. About three-quarters of earners as Paul Goldsmith said are paying no more than 17.5 percent personal income tax. We cut the company tax rate— 
Andrew Williams 
: What about the paper boys? What about the paper girls? 
JOHN HAYES 
: —by 28 percent ensuring that New Zealand businesses remain competitive. A family with two children Mr Williams can earn up to $50000 a year and effectively pay no tax—no tax—when Working for Families is taken into account. After-tax wages are increasing faster than prices under this Government and we have taken steps to tighten up property tax rules by eliminating depreciation removing the loss attributing qualifying company rules and improving Working for Families integrity measures. 
Since the first reading this bill has been revised a little bit since last September. The two main income tax forms for individuals—the IR3 and the personal tax summary—will no longer be amalgamated. Instead existing practice will continue because the initiative would have put a lot of pressure on officials from the Inland Revenue Department and their ability to undertake further systems changes. The bill has been changed to contain a proposal to require individuals who choose to file for a particular year to also file for the previous 4 years. The application date for this proposal is to be deferred from the 2014-15 income year to 2016-17. However the implementation date can be set earlier by Order in Council. 
The bill also clarifies that the 4-year rule applies from the most recently ended tax year—[ 
Interruption 
]—rather than from the year for which an individual chooses to file. I know this is difficult for you Mr Cosgrove but then that is the lot of a list MP who has no constituents to look after. Tax debts from the previous years under the 4-year rule will not incur the use of money interest or penalties from the previous due date; a new due date will apply instead. Credits and debits arising from the 4-year rule will be used to offset each other Mr Cosgrove. 
Hon Clayton Cosgrove 
: It’s not necessary to read the bill from cover to cover John. 
JOHN HAYES 
: These are the changes. I am not reading the bill; I am describing the changes that were introduced from the last drafted bill to this one. 
 The application date and savings provision for the proposal to charge GST on late payment fees is going to be deferred from April 2012 to January 2013. 
Andrew Williams 
: When are you going to be a Minister? 
JOHN HAYES 
: I know that you did not understand that Mr Williams but GST will not be charged on late payment fees if the underlying supply is exempt. Other changes to the GST provisions have also been made such as clarifying the definition of land where new apportionment fees for zero-rating supplies can be used. Finally the foreign investor tax credit scheme will be expanded to investors in foreign investment portfolio investment entities with application from the 2013-14 income year. 
This is an excellent bill. The Government has listened to submissions through the select committee process. The bill has been improved and I have no difficulty whatever in commending its passing to the House. Thank you. 
Hon CLAYTON COSGROVE (Labour) 
: 
 Well I think we have had a medical breakthrough here in the House tonight. I think for all those insomniacs out there they will not need to go to their local general practitioner for sleeping pills; they will just put on an endless tape of John Hayes—a loop tape of John Hayes’ dulcet tones talking about the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. I have got to say that it was an extraordinary contribution by Mr Hayes. Mr Hayes said that if the Labour Government got in it would be borrowing and spending. But in his own Les Patterson - like unique way he forgot—or maybe he has not had enough sleep—to mention of course that his crew are borrowing 300 million bucks a week to fund a tax cut. 
He also talked about tax as shifting resources from the rich to the poor. Those were the sorts of words he used but he forgot to mention that on top of the $300 million per week that his Government is borrowing the so-called tax switch—which is the tax swindle—by this Government gave the top 10 percent 44 percent of the tax cuts. And the bottom 20 percent got what? They got 2 percent. Poor old Sir Les Patterson had not got the abacus out; he had not worked out using all his fingers and toes exactly what the tax switch had done for New Zealanders. Those earning the most got the most and those earning the least basically got zip. So I say to John Hayes: use all your fingers and toes. We will even supply some batteries for the calculator or another abacus if that is broken. I say to John Hayes: try again. Go out and get the standard 4 old-fashioned maths textbook; work out how to add divide subtract etc.; work out percentages; and have another crack. And then he can come back into the House have another speech and send the rest of us to sleep again. Well done I say. 
He is an example of the ineptitude exhibited by this Government. You know when it is in trouble because it sent the big heavy hitters—seriously heavyweight hitters some of them—into the House to defend a tax bill. 
Hon Trevor Mallard 
: He’s not as heavy as he used to be. 
Hon CLAYTON COSGROVE 
: Well using the Maggie Barry principle I cannot comment on that. Gerry Brownlee probably can of course and maybe our friend Parekura our good mate but I certainly cannot. I am a shadow next to John Hayes. 
But I say this: this bill is interesting because other colleagues have pointed out that it is tinkering. Dr Clark on our side pointed out that the Inland Revenue Department computer system has been around since 1992. I will give members an example of how this computer system is inefficient and why this Government should have done something about it. We all pay tax on interest on deposits right and that is an automatic process. It is deducted. The tax on interest is deducted from your account and it goes to the Inland Revenue Department. But then you get your tax statement if you want to request one—and I have taken this up with the Inland Revenue Department a number of times actually—and there is not a line item that says: “Tax on interest”. What you then have to do in theory unless you want to just gamble and say that you have paid your tax—and most people do not do anything about it because the tax has automatically gone in—technically is you can ring the Inland Revenue Department and advise the department or send in your tax certificate from your bank and then the Inland Revenue Department will send another statement out generate it and put the line item in. 
It is irrelevant actually because you have paid your tax. It is an automatic thing if you have given the bank your Inland Revenue Department number. Even if you have not you are on the top rate. So why is this the case? It is because the Inland Revenue Department computer system cannot reconcile the fact that it has got the money from the bank. The bank has sent it the money—and Mr Hayes’ tax on interest has been sent through—but it cannot reconcile it through its technology so that it appears on your statement. How stupid is that? That is something actually because taxpayers want to be reassured that they have—99 percent of them—complied with the law and actually paid all their tax and most do of course. But there is an inefficiency and something that could have been worked on. 
I just make this point: when we talk about debt and when we talk about taxes another history lesson from Mr Hayes that he sort of forgot in his laconic way is that of course when we left office Mr Hayes we left with net Crown debt being zero. You will find a zero if you go back to the old standard 4 maths textbooks and find out what a zero looks like Mr Hayes. Have another crack. Zero— 
Hon Trevor Mallard 
: Like he used to look. 
Hon CLAYTON COSGROVE 
: Yes that is right. Have a look at the scales; there will be a zero on there. Just do not jump on Johnny. The second thing is that we had 9 years of surpluses—9 years of surpluses. That is the legacy we bequeathed this bunch of tired inept Ministers and members of Parliament who now run the country. That is what we bequeathed them: net Crown debt at zero and 9 years of surpluses. The record of this— 
Simon O’Connor 
: So you took too much money from people. 
Hon CLAYTON COSGROVE 
: I will come to you in a minute. The record of this Government of course is 300 million bucks a week in borrowings 44 percent of the tax cuts going to the top 10 percent and the bottom 20 percent those on Struggle Street whom Mr Hayes of course has never bumped into in his electorate—he would not know the bottom 20 percent if he fell over it—get 2 percent. What is the great tax reform the Government hit us with in the Budget? It even dealt to the old paper boys. It even put the boot into the old paper boys. I do not know whether John Hayes was ever a paper boy—you know cycling around maybe on a penny farthing or with a bit of exertion running around delivering papers. He may not have even embarked on that; he might have been a pizza delivery man. Who knows? They probably get paid more. 
Hon Trevor Mallard 
: The James K Baxter approach to delivering pizzas: they never made it to the destination. 
Hon CLAYTON COSGROVE 
: Indeed. Forgive him Mr Speaker. That is John Hayes’ legacy and that is his Government’s legacy. 
And then we look at KiwiSaver. This was of course a proposition that National in Opposition opposed bitterly—utterly opposed. It opposed it it has tinkered with it and it has made changes to it. In terms of making changes to a superannuation scheme—multiple changes in a short period of time as these geniuses have done—ask anyone in international finance and they will tell you that actually that undermines people’s confidence in that superannuation scheme. I worked in Australia in around 1995 and I remember that the then Prime Minister John Howard made substantial changes to what is a pretty gilt-edged superannuation scheme that the general public of Australia because it is compulsory superannuation there enjoys. There was a hue and cry about it. Of course it is compulsory so you cannot not be a part of it. But where you do not have a compulsory scheme of course people say: “Hang on they are changing the rules. We’re not going to be part of this.” They are not confident that some future crew—this mob of course—will not come in and next year have another tinker and another change and undermine confidence again. The truth is that this mob—and they are a mob an outfit; they are not a real political party they are a mob—this crew over here do not really believe in KiwiSaver. They never have. They have got it because we put it in and because there is universal acclaim that people want it. 
Andrew Little 
: People love it. 
Hon CLAYTON COSGROVE 
: People love it. It is just like of course them wanting to put the teacher-pupil ratio up. They did not do it because the people got to them and said that they were not going to accept it yet they still say of course that they were right to do it which means that they will probably do it again. They have no principle and no backbone and these are the sorts of tinkering around the edges things that— 
Hon Trevor Mallard 
: You can’t say that. 
Hon CLAYTON COSGROVE 
: Which? These are the sorts of tinkering around the edges policies that we have from this Government as it implodes—as it implodes—and as it becomes— 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I apologise to the member. It is something that I expected the Government to do and I would have thought you would intervene. It has long been a breach of the Speakers’ rulings in this House to suggest that members opposite lack backbone. For that to go unchallenged I think is inappropriate and if the Government will not stick up for itself then I will. 
Hon CLAYTON COSGROVE 
: I withdraw and apologise. I want to thank Trevor Mallard for that redemption speech. When you have got Trev behind you you know— 
Hon Nathan Guy 
: Has he got a backbone? 
Hon CLAYTON COSGROVE 
: Oh Trev has got a backbone—cast iron. 
Dr Cam Calder 
: Titanium. 
Hon CLAYTON COSGROVE 
: Titanium. And there are a few around this place who might be able to strengthen their backbones by adopting our colleague’s philosophy on life— 
Hon Trevor Mallard 
: I wanted to make sure it was on the record Clay. 
Hon CLAYTON COSGROVE 
: Thank you. I appreciate that. I have never said a bad word against Trevor Mallard at all. But anyway— 
Hon Trevor Mallard 
: Hey that’s a breach of privilege. 
Hon CLAYTON COSGROVE 
: I may have misled the House yes. The final thing I want to say is I want to address some of Mr Goldsmith’s comments very briefly and simply say this: for that man to talk about debt when he was a councillor under John Banks’ mayoralty which trebled—trebled—the debt of the Auckland City Council is extraordinary. This is the man of course Mr Goldsmith who wrote two books one on Don Brash who is gone and one on Mr Banks who is hanging by a thread—hanging by a thread. The next one that is due to come out given that he is so overworked that he has time to write a book will I suspect be  
The Rise and Fall and Fall and Fall of John Banks 
 or perhaps and we wait with bated breath it could well be the political obituary of Mr Banks. 
DAVID BENNETT (National—Hamilton East) 
: 
 I want to take just a really short call. I think the Labour Party has obviously run out of things to say on this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. It is a good bill it is in the best interest of our tax policy and we look forward to it passing through the House. 
Mr DEPUTY SPEAKER 
: Is this a split—[ 
Interruption 
] Order! I will put the question if someone does not—[ 
Interruption 
] I am addressing the member the Hon Trevor Mallard. Is this a split call? 
Hon Trevor Mallard 
: Not that I’m aware of. 
Hon Member 
: Yes it is. 
Mr DEPUTY SPEAKER 
: It is—5 minutes. The Hon Trevor Mallard—5 minutes. 
Hon TREVOR MALLARD (Labour—Hutt South) 
:  
Only 5 minutes for my speech—that is shocking; that is absolutely shocking Mr Deputy Speaker. I want to speak to the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill and I think it is fair to say that I would like to focus mainly on the returns filing aspect of this bill. Returns filing is a matter that is currently before the House. The first thing I would like to ask the Minister in charge of the bill—do we have a Minister in charge of the bill in the House at the moment? Could the Minister in charge of the bill put their hand up? Mr Deputy Speaker is there a Minister in charge of the bill in the House? I raise a point of order Mr Speaker. I am sorry to interrupt myself. I am just checking; it is a normal practice when officials are in the House for them to be here to advise a particular Minister who is in charge of the bill. I am just trying to check and see because I want to address questions but to whom do I address those questions? 
Mr DEPUTY SPEAKER 
: You would do that in the Committee stage. 
Hon TREVOR MALLARD 
: I raise a point of order Mr Speaker. The only purpose of having officials in the House is for them to advise a Minister and part of the second reading is getting the questions down for a Minister to deal with at a later stage. I think there are three Ministers here and all I am trying to do is work out which one of them is the Minister to whom I should be addressing this because there is always a Minister in charge of a bill at any time. 
Mr DEPUTY SPEAKER 
: The Minister is speaking to the House and any Minister may or may not be listening in his office or wherever. And it is not the Speaker’s responsibility to ascertain whether officials are in the House or not. 
Hon TREVOR MALLARD 
: I raise a point of order Mr Speaker. 
Mr DEPUTY SPEAKER 
: No no look I— 
Hon TREVOR MALLARD 
: I apologise. It is not a question of your ascertaining; I can see the officials— 
Mr DEPUTY SPEAKER 
: Order! I think the member is trifling with the Chair. I just ask him to get on with his speech. 
Hon TREVOR MALLARD 
: We will just work on that particular question at the moment and we will come back to it. The first point that I want to ask—whichever Minister is currently nursing this bill through its second reading—is whether there is any requirement as part of the returns filing section of this bill for a person who is filing a return to read it. Because what we have had established by the police in New Zealand on another piece of legislation is that failure to read before signing appears to be an excuse under the law—appears to be an excuse under the law—for filing a false return. I want to know whether this legislation has the same fault in it as the local government electoral returns legislation has—whether a person who signs a document without ascertaining whether or not it is factual is committing an offence or not. It is a relatively simple question that I would like answered. 
The next point that I would like to refer to is the limitation on deductions by partners in limited partnerships which is new section HG in clause 39. What I would like to know is whether that section applies in the case of the limited partnership between John Banks and Skycity which was established by way of consideration of the receipt of a plain envelope with a cheque in it which may or may not have been opened. I think it is a matter that is unclear—well clearly it was opened because the cheque was banked—with regard to the person who is involved in the limited partnership if someone else is in receipt of the consideration with regard to that limited partnership and that is the person who opens the envelope. It is unclear whether or not that person can use the deductions that flow from that for the purposes of new section HG of the bill. 
The next area I would like to talk about is the taxable distributions from foreign trusts. I think the important point that I would like to ask here is whether this has any relevance to any trusts held in Germany or held in Hong Kong. I ask whether any receipt from any taxable distribution from trusts that are held in either of those jurisdictions are caught in section HC 18 of the principal Act under section CV 13(b) and whether any effect on the Dotcom donations from any of his trusts is affected by the change from “section CV 13(b)” to “section CV 13(c)” in clause 37(1). I would appreciate some comment from the Minister on that particular point. 
Dr KENNEDY GRAHAM (Green) 
: 
 In the interests of House efficiency let me just sum up the Green Party position on this which was quite ably presented by our co-leader Russel Norman both in the first reading and in the second reading today. We see that there are small but significant parts to this bill the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill that are positive. 
In a more broad sense we see this bill as essentially the tip of an iceberg of the Government’s general macro policy which reflects a position that is socially regressive in its GST policy and its income policy fiscally negative in increasing the deficit economically irresponsible in increasing the national debt ecologically destructive in not imposing a resource rental on water and not imposing a true carbon charge and regionally skewed against Canterbury for failing to impose or introduce a levy that would make it fairer for Cantabrians in the broad recovery process which is in the national interest. For those reasons the Green Party will continue to oppose the bill. 
MICHAEL WOODHOUSE (National) 
: 
 It is my pleasure to stand in support of the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill. I have been listening very carefully to the contributions by members on all sides of the House. I certainly respect the different points of view including those of the Greens which I simply cannot agree with. One of the things that we have found over the last couple of years is the very eloquent way in which they tell half a story very well. The so-called tax cuts for the rich completely ignore the fact that we now have one of the fairest tax systems in the world once again I think whereas we saw increasingly distortionary tax policies being put in over 9 years of a Labour Government which the Tax Working Group was very clear about. This Government under the Minister of Revenue and the Minister of Finance has set out on a path of remedying those distortions and I think this bill continues that very well. 
I am particularly interested in the software changes and I look forward to talking about them in the Committee stage of the bill. But in the meantime it is my great pleasure to support it. 
A party vote was called for on the question  
That the Taxation (Annual Rates Returns Filing and Remedial Matters) Bill be now read a second time. 
Ayes 106 
New Zealand National 59; New Zealand Labour 34; New Zealand First 8; Maori Party 3; ACT New Zealand 1; United Future 1. 
Noes 11 
Green Party 10; Mana 1. 
Bill read a second time. 
The House adjourned at 6 p.m.