Volume 616 Week 53 - Tuesday 30 March 2004 
Volume 616 Week 53 - Tuesday 30 March 2004 
[Volume:616;Page:12039] 
Tuesday 30 March 2004 
Mr Speaker 
 took the Chair at 2 p.m. 
Prayers 
. 
Points of Order 
Finding of Contempt—Hon Dr Nick Smith 
Mr SPEAKER 
: I hereby present a communication I have received from the registrar of the High Court regarding a finding of contempt against the Hon Dr Nick Smith. 
Hon RICHARD PREBBLE (Leader—ACT) 
: 
 I raise a point of order Mr Speaker. The House would be interested to know if you have had a report from the registrar whether that report is a report under the Electoral Act suggesting that Dr Smith has been convicted of an offence carrying a sentence of more than 2 years. 
Mr SPEAKER 
: Any member can see the copy of the report and it is here for anyone to get a copy of. 
Hon RICHARD PREBBLE 
: Do you not know the answer? 
Mr SPEAKER 
: This is a report—[ 
Interruption 
] I am sorry. I am not entering further into that argument. 
Member’s Notice of Motion No. 2—Wording 
Rt Hon WINSTON PETERS (Leader—NZ First) 
: 
 I raise a point of order Mr Speaker. You will be aware as we all are that questions in the House are approved by the Clerk’s Office and that notices of motion come through a similar system as well. Appearing on page 6 of today’s Order Paper is a notice of motion that is a gross affront and insult to all of Parliament. With the greatest of respect I do not know how it got through—or whether there is a grammatical problem with the National Party and its leadership—but clearly I do not think a member can allege that this House has a gross lack of knowledge of the Standing Orders. I think it could be said that we collectively are the experts and that we do not exhibit a gross lack of knowledge. That being the case what remedies does a member of Parliament have when he or she reads such a notice of motion? 
Mr SPEAKER 
: I agree with you that the way it is expressed does give rise to two interpretations. In fact the grammar is completely wrong. It was submitted correctly. It can be put down as a notice of motion. That is a way it can be done; but then of course it is a matter for debate. 
Finding of Contempt—Hon Dr Nick Smith 
GERRY BROWNLEE (Deputy Leader—National) 
: 
 I raise a point of order Mr Speaker. I notice you have indicated to the House that you are tabling a report from the registrar of the High Court relating to the conviction of Dr Nick Smith. With regard to that I call your attention to a news release put out at about half past 12 today by the Prime Minister in which she states in a very categoric way that Nick Smith’s Nelson seat is not in jeopardy. Last week you gave a statement to the House that you thought there was no problem in the meantime and that at some further point you may have to make some reconsideration of that. Dr Nick Smith wrote to you on 29 March asking for a clear ruling and noting that there is no need for you to wait until sentencing. 
 The reality is that the Electoral Act makes clear that you call all the shots in this case. Most worrying for us is your reply to Dr Smith that you cannot make a ruling until early next week after the Clerk has made a report to you. We would like some clarification. If the Prime Minister is wrong we would like you to state in the House that she is wrong and make it clear that these sorts of statements are not helpful to her to Parliament or in particular to the member concerned. Further if she is right why can you not deal with Dr Smith’s issues now and declare his seat safe for him? It seems—and you are perhaps unwittingly being drawn into this—that there is a programme by the Government to tell the nation there is no need to have a by-election when the reality is that because of the time you wish to take to consider Dr Nick Smith’s position there is a considerable amount of uncertainty about his seat in the House. That is not fair to him or to the people he represents in Nelson and I suggest that the Prime Minister’s actions are not fair to you either. It would be easy to suggest that the Prime Minister is attempting to usurp your position by convincing the public that there is nothing to worry about here. Dr Smith has been through this for quite some time— 
Mr SPEAKER 
: The member has made his point. Could he please come to it quickly. 
GERRY BROWNLEE 
: My point is simply this: if the Prime Minister is wrong please tell her so. If the Prime Minister is not wrong then please deal with Dr Smith and make his seat more secure—in fact totally secure—immediately. 
Mr SPEAKER 
: I cannot stop members from making such statements as they wish outside the House. We do live in a democracy. Any judgment I have to make under the Electoral Act will be uninfluenced by them. 
GERRY BROWNLEE (Deputy Leader—National) 
: 
 I raise a point of order Mr Speaker. Are you suggesting that any statement made outside the House can never in any way be considered to be a contempt of the House? 
Mr SPEAKER 
: No of course I am not. 
GERRY BROWNLEE 
: Well what is the heart of the issue we are going to? It seems fundamentally unfair— 
Mr SPEAKER 
: The member mentioned the word “contempt”. The proper way to have that dealt with is by writing to me as contempt is a matter of privilege. Any member can do that if he or she wishes to do so. As far as I am concerned—and I repeat—I cannot stop members from making such statements as they wish outside the House. 
Questions to Ministers 
Environment Minister—Confidence 
1. Dr DON BRASH (Leader of the Opposition) 
 to the  
Prime Minister 
: Does she have confidence in the Minister for the Environment; if so why? 
Rt Hon HELEN CLARK (Prime Minister) 
: 
 Yes because she is a hard-working and conscientious Minister. 
Dr Don Brash 
: How can she maintain confidence in the Minister when in 2000 the Minister rejected any substantial reform of the Resource Management Act and ditched National’s bill to reform the Act saying that it was “beautifully written and beautifully crafted” and when we have now seen that very same Act force Meridian Energy to pull the plug on its planned 570-megawatt Project Aqua a move that could ultimately plunge the country into another power crisis? 
Rt Hon HELEN CLARK 
: I note that Meridian Energy gave a whole raft of reasons for why it decided not to proceed with the application and did not single out the Resource Management Act as an overriding contributor to that decision. What has confused me is not being able to discern from a variety of conflicting statements from the National Party whether it wanted the process rushed or not. 
Jim Peters 
: Is the Prime Minister aware that the Canterbury Regional Council the operative regional body had no existent water plan and that the reviewed bill before the House that deals with the Waitaki catchment provides for and is an equitable outcome framework plan? 
Rt Hon HELEN CLARK 
: Yes. I agree entirely with what the member has said. There was no water allocation plan existent in the Canterbury region and the Government certainly felt with the support of a number of other parties in the House that it was important that there was such a plan before there was further progress with decision making. 
Jeanette Fitzsimons 
: If the Resource Management Act was the problem for Meridian can the Prime Minister explain why Meridian would have developed Project Aqua given that the Resource Management Act had been in place for many years before Aqua emerged; and was it not rather that the amendment bill closed an existing loophole by requiring a proper minimum flow regime to be set for the river before Aqua consents were considered and that that was the reason Meridian withdrew? 
Rt Hon HELEN CLARK 
: Certainly Meridian would be very familiar with the Resource Management Act. What the Government took into account though was that there did need to be a proper water allocation plan before a whole raft of applications could be considered and it has to be remembered that not only was Meridian desirous of using water but so also were many farmers for irrigation purposes. 
Hon Richard Prebble 
: Is the reality not that after 4 years of a Labour Government and as she puts it “a whole raft” of reasons the country now faces power shortages and why should we not hold her Minister and herself accountable? 
Rt Hon HELEN CLARK 
: Far from it. Project Aqua was not due to come on stream had it succeeded until 2009-12. Its early notice now gives plenty of time for other generators to come up with the extra capacity needed. 
Gordon Copeland 
: Has the Prime Minister had any recent discussions with the Minister for the Environment regarding proposals to streamline the Resource Management Act to assist with future projects of national significance; if so what was the outcome of those discussions? 
Rt Hon HELEN CLARK 
: Virtually before the ink is dry on any resource management amendment bill going through this House the Government the Minister for the Environment and other Ministers start looking at what other changes might be desirable and that process has been going on for some time. 
Dr Don Brash 
: Will the Prime Minister now be recommending to the Minister for the Environment the need for substantial reform of the Resource Management Act including concepts like direct referral to the Environment Court limiting objectors to only those actually affected by projects and abolishing legal aid for objectors—a feature introduced by Labour in 2000—if not will she take responsibility for the increased power prices increased blackouts and increased traffic congestion that this failure to act decisively will cause? 
Rt Hon HELEN CLARK 
: The early notice given by Meridian of its change of plans enables both it and other generators to get on with ensuring that the necessary capacity is put in place. It is worth mentioning also that the Government has set up the Electricity Commission to ensure that there is security of supply for the future. I also entirely agree with Dr Brash when he said in Timaru recently: “It is important to ensure that the law respects those affected by Meridian’s actions.” I assume he meant by that that he agreed with Dr Nick Smith that there should be a robust process and that “a rushed decision would be a poor decision.” 
Hon Ken Shirley 
: Why does the Prime Minister continue to express support for the Minister for the Environment when she failed to implement the 10 recommended streamlining changes to the Resource Management Act developed by Simon Upton given that the business community of New Zealand last week identified the Resource Management Act as the biggest obstacle to development in this country and given that it is a prime reason for Meridian’s pulling out of Project Aqua? 
Rt Hon HELEN CLARK 
: As the member knows it is not the prime reason. I certainly never expressed confidence in Mr Upton and the incoming Labour Government in 1999 expressly said there were changes that would have to be made to his draft bill. 
Jeanette Fitzsimons 
: Will the Prime Minister give an assurance to the House that her Government will not introduce any legislation to further weaken environmental protection and public participation under the Resource Management Act? 
Rt Hon HELEN CLARK 
: In issues of resource allocation and planning law the question is to get the balance right and Parliament from time to time will want to address whether the balance is right in the law as it is being interpreted at the present time. 
Dr Don Brash 
: Is the Prime Minister confident that under the current Minister for the Environment Transpower will be able to get the resource consents necessary to upgrade the electricity grid around the entire country and gain the consents at reasonable cost given that the Resource Management Act scuppered Project Aqua and that the consent process was reportedly costing Meridian Energy $4 million per month? 
Rt Hon HELEN CLARK 
: It would be downright silly for me to prejudge the outcome of any planning application. What I do agree with is Dr Brash’s comment that the real issue is to ensure the decision-making process for Project Aqua was robust in ensuring the law was appropriate. 
Auckland Transport Package—Reports 
2.  
CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister of Finance 
: Has the Government made any announcements in respect of the financial implications of the Auckland transport package; if so what were they? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Today’s announcement confirms the main elements of the package announced in December: additional Crown funding amounting to $1.62 billion over 10 years from 1 April next year; changes to governance including a new single transport entity; and changes to key planning documents. Details announced today also set up a clear pathway to improved transport outcomes in Auckland. A bill giving effect to those changes has been tabled and is supported by both the Greens and United Future. 
Clayton Cosgrove 
: Will the Auckland package have financial implications for the rest of the country? 
Hon Dr MICHAEL CULLEN 
: Yes. For Auckland the transport package means an additional $1.62 billion over 10 years for investment in transport initiatives made up of $720 million from increases in road-user charges and excise duty and a further contribution of $900 million from the Crown. For the rest of New Zealand there will be an additional $1.35 billion over 10 years from increases in road-user charges and petrol excise duty for devotion to road transport issues. 
John Key 
: Why did the Minister not reveal in the December transport package the decision to increase petrol excise duty each and every year by the rate of inflation; and can he confirm that this latest “stealth” tax will cost the average Kiwi motorist half a cent per litre? 
Hon Dr MICHAEL CULLEN 
: The answer is that the release in December was structured very much around Auckland and on the initial moves around Auckland. In fact there was an oversight in that regard. The matter had been discussed with other parties who supported the measure. Indexation is necessary because otherwise the excise duty will lose real value year by year in terms of roading. All the additional amounts will go into road transport because only the portion— 
John Key 
: There won’t be any additional amounts. 
Hon Dr MICHAEL CULLEN 
: If the member would be quiet he may learn something. Only the portion of the excise duty that goes on road transport will be indexed not the portion that goes into the Crown account. If the member wants to have more roads he has to learn to pay for them—that is the way life works in New Zealand. 
Keith Locke 
: Can the Minister confirm that the joint officials group on Auckland transport showed that investment in public transport and demand management were critical to fixing Auckland’s congestion problems? 
Hon Dr MICHAEL CULLEN 
: It is clear that public transport and demand management will play a very significant role in the management of Auckland’s transport problems but given the nature of the shape of the city and the nature of traffic flows within it—which are not simply flows from the perimeter into the centre—it is also important there are major improvements in roading in Auckland. 
Hon Peter Dunne 
: Will the Minister confirm that a critical part of this package is the introduction of a diversion of the petrol excise duty into direct roading costs over the next 10 years—which will be the most significant diversion to occur in the history of the country? 
Hon Dr MICHAEL CULLEN 
: Yes. All the 5c-a-litre increase announced for next year will go into road transport and the indexation applies only to the amount that goes into road transport. So progressively over time the proportion of the total excise duty going into road transport will rise as it has already done under this Government. 
Spring Hill Prison Waikato—Iwi Consultation 
3.  
RODNEY HIDE (ACT) 
 to the  
Minister of Corrections 
: Who is conducting the inquiry to produce the report he has commissioned into how the Department of Corrections spent $1.3 million on iwi consultation for the proposed Spring Hill prison and what are the inquirer’s terms of reference? 
Hon PAUL SWAIN (Minister of Corrections) 
: 
 Inquiry is not the right term and I have never used that word in this House in relation to this matter. I have asked the chief executive to report to me on among other things the consultation costs of Spring Hill Otago Northland and South Auckland women’s prison. I have also asked about proposed consultation commitments in the future. 
Rodney Hide 
: Will the Minister of Corrections ask the Auditor-General to investigate given that the lands trust chief executive officer Mr David Gray wrote to the board on 7 June 2002 stating that the only interest in the Department of Corrections contract being protected were the interests of former staff member and Department of Corrections employee Haydn Solomon and a couple of his mates; if not why not? 
Hon PAUL SWAIN 
: No. The letter that the member refers to talks about a whole wide range of issues with that person’s employment not just about the Department of Corrections. The correct place to have this sorted out and to see whether the consultation process was fit and proper is at the Environment Court which meets in May. 
Rodney Hide 
: I raise a point of order Mr Speaker. To clarify for the Minister I never mentioned anything about the letter. This is a memo that David Gray wrote on 7 June. 
Mr SPEAKER 
: That is not a point of order. The Minister certainly gave a direct answer to the member’s question. 
Martin Gallagher 
: Can the Minister spell out to this House why he believes that comprehensive community consultation is critically important in the development of any new prisons? 
Hon PAUL SWAIN 
: For a start consultation is mandatory under the Resource Management Act. Beyond that I think it is important with a project of this size which has significant impacts on landscape water sewerage traffic and so on that the wider community—be it Maori or non-Maori—has the opportunity to have a say. The Environment Court hearing in May will be the big test of whether the consultation process has been robust. 
Hon Tony Ryall 
: How does the Minister explain that Mr Haydn Solomon a former Department of Corrections staff member is also listed on the schedule of those individuals who received substantial public moneys acting as consultants on this project? 
Hon PAUL SWAIN 
: I am advised that at the first part of the consultation process before any contracts had been entered into a number of people including that man were employed as Department of Corrections staff in order to get the consultation going. Once the contracts for consultation were entered into he stopped being a Department of Corrections employee and as I understood took up a position as part of the contract. 
Jim Peters 
: Why has there not been extensive inquiries made by your ministry the Department of Corrections into the extensive cost of consultation at Ngawha and particularly in regard to the fact that there was an alternative prison site available for much less at Motatau? 
Mr SPEAKER 
: The Minister can reply to everything except anything that refers to me. 
Hon PAUL SWAIN 
: There was considerable investigation into which was the appropriate site in the north and that member could well know that. The reality is that there has been a lot of consultation going on here. I do want to say this about the involvement of Maori: Maori have been prepared as a community to work in partnership with the Department of Corrections to make sure that Maori—and Maori make up 50 percent of our prison population—are able to be reintegrated back into the community. They are showing superb leadership in this and I am hoping that other parts of the community will follow their lead. 
Ron Mark 
: If the Minister places so much importance on the consultation process with iwi why has no one to date from either the Government or the Department of Corrections consulted iwi about the ending of the private contract for the management of the Auckland Central Remand Prison or is it simply because he does not want to hear what they have to say because it is totally at odds with what he and his Government want to do? 
Mr SPEAKER 
: This question was originally about Spring Hill prison. It is quite wide but if the Minister wants to make a brief comment he can. 
Hon PAUL SWAIN 
: Because it is Labour Party policy. 
Rodney Hide 
: Does he now accept that his own department took advantage of this trust board which was in disarray to pay Haydn Solomon and a few chosen Maori to provide a report to the Department of Corrections that said on behalf of 35000 Tainui: “Sure put the prison in our backyard.”; if not why not? 
Hon PAUL SWAIN 
: No because it is not true. The point is that at the Environment Court I understand there are only four objectives. One marae out of over 130 has put in an objection. The Environment Court is the one that should work out whether those objections in the consultation process have been correct. 
Employment Relations Law Reform Bill—Amendments 
4.  
Hon ROGER SOWRY (National) 
 to the  
Minister of Labour 
: Is the Government currently considering any changes to the Employment Relations Law Reform Bill; if so what are the details of those changes? 
Hon PAUL SWAIN (Minister of Labour) 
: 
 The Employment Relations Law Reform Bill is currently before the Transport and Industrial Relations Committee. I will consider any changes the committee recommends in due course. In the meantime I am meeting with employer and employee representatives to discuss the issues arising from the bill. 
Hon Roger Sowry 
: What changes to the Employment Relations Law Reform Bill was his colleague the Minister for Small Business the Hon John Tamihere referring to when he told the  
National Business Review 
 last week: “… we’ll see what Swainey and the boys can get up to now the girl’s out of the way for a little while … when ERA Bill gets reported back.”; and has he had any discussions with the Prime Minister the Minister for Small Business Mr Tamihere and the previous Minister of Labour Margaret Wilson regarding those comments? 
Mr SPEAKER 
: The second part of the question is in order. The first part relates to what another Minister might have done but the member may comment. 
Hon Roger Sowry 
: I raise a point of order Mr Speaker. The question was very carefully worded and I am happy to repeat the wording for you. 
Mr SPEAKER 
: Did the member say “reports”? 
Hon Roger Sowry 
: I asked what changes he thought the Minister for Small Business Mr Tamihere was referring to when he said in the  
National Business Review 
: “… we’ll see what Swainey”—which I presume is the Minister—“and the boys can get up to now the girl’s out of the way for a little while”— 
Mr SPEAKER 
: I will allow the Minister to answer the question. 
Hon PAUL SWAIN 
: Yes I have seen the comments from the Minister for Small Business. I can advise that some of the first changes that “Swainey and the boys and the girls” may well be looking at are the provisions relating to vulnerable workers given that the Minister for Small Business’s name may well be added to the schedule following his comments last week. 
Peter Brown 
: Is the Minister aware that Lianne Dalziel implied to submitters in Christchurch last week that clauses that the Council of Trade Unions objected to are likely to be withdrawn; couple that with the Hon John Tamihere’s remarks why does the Minister not pull the bill now and put the whole thing to rest? 
Hon PAUL SWAIN 
: I am not aware of those comments because I clearly was not at the meeting. I am waiting to hear the report from the select committee which I understand is due to report back in June. 
Sue Bradford 
: Will the Minister consider changes to the bill that take into account the recommendations of the employment equity taskforce once it reports back and when is that report-back due? 
Hon PAUL SWAIN 
: I assume that is another matter that will be considered by the select committee and I will look at its recommendations in due course. 
Hon Roger Sowry 
: Is the Minister prepared to guarantee now that there will at least be major substantive changes to the Employment Relations Law Reform Bill or its total withdrawal in light of statements made by his colleague the Hon John Tamihere about the Government being “all ears” on the bill and about “the overwhelming weight of displeasure being displayed with the bill” by submitters to the select committee? 
Hon PAUL SWAIN 
: No. Firstly the bill will not be withdrawn but I sat on select committees for 9 years and I do not recall one single bill coming back to this House without some form of change. 
Hon Roger Sowry 
: Will the Minister be asking the Ministry of Economic Development to release the reports it produced on the Employment Relations Law Reform Bill given the statement made by his colleague the Hon John Tamihere that “When the OIAs come through you’ll see a whole range of issues that were on the table.”; if not why not? 
Hon PAUL SWAIN 
: I presume that when Official Information Act requests come through they will be released according to the Act. 
Hon Roger Sowry 
: I raise a point of order Mr Speaker. The question actually asked whether the Minister would seek the release of those reports because those Official Information Act requests have come through—well outside the time frame now—and we are told that the Minister is the person who is holding them up. 
Hon PAUL SWAIN 
: Speaking to the point of order I am happy to look into the matter on behalf of the member but I do not recall that. If Official Information Act requests are done according to the provisions of the Act then the release has to meet the provisions of the Act. 
Mr SPEAKER 
: That seems to clear up the matter for the member. 
Security—Residency and Citizenship Legislation 
5.  
Rt Hon WINSTON PETERS (Leader—NZ First) 
 to the  
Prime Minister 
: Can she give any assurances given that citizenship and passport laws are currently being reviewed that permanent and temporary residency laws will also be reviewed consistent with concerns over national security; if so why? 
Rt Hon HELEN CLARK (Prime Minister) 
: 
 The Immigration Act and policy have safeguards that provide for the decline of residence or temporary entry permits where there are character or security issues. The Act also provides for the revocation of permits if character and security issues emerge after the person is already in New Zealand which the New Zealand Immigration Service was not previously aware of. The Government does not presently have these aspects of the law and policy under review. 
Rt Hon Winston Peters 
: Why would anyone have confidence in what the Government is doing or proposes to do when we have here a man called Zaoui who in the criminal chamber of the High Court of France—far superior to any authority that has been heard in this country—was firstly convicted of being accomplice to the falsification of administrative documents; secondly possession of stolen goods; and thirdly participation in an association of criminals with intent to prepare a terrorist act; and if that is the case and having regard to the article 1F(b) of the 1951 UN convention what on earth is this man doing in our country? 
Rt Hon HELEN CLARK 
: The member could also have added to that list the fact that the Swiss Government felt sufficiently strongly about Mr Zaoui’s presence to deport him to Burkino Faso having I understand chartered a plane to do so. The facts around Mr Zaoui are quite well known. He was detained when he arrived in New Zealand and he is still detained. A security risk certificate was issued against him and it would be rather nice if the inspector-general was able to be in a position to get on with the review so that decisions can be made. 
Dr Wayne Mapp 
: Will the Prime Minister be ensuring that the Minister of Internal Affairs briefs the National Opposition as he has been requested given the importance of this legislation in the war against terrorism and the need for a bipartisan approach on such matters? 
Rt Hon HELEN CLARK 
: I am sure that the Minister would be happy to brief the member and other interested members in due course. The matter is still being discussed within the Government but it would seem certain to me that some changes will need to be made to legislation. Changes are being considered not only for issues around national security but also I think around last year’s publicity about people deliberately targeting New Zealand as a place to come on temporary visas to have babies and get them citizenship which also raises questions of whether that sort of behaviour should be targeted in our law. 
Keith Locke 
: Why in the legislation just referred to will it be possible for a passport to be taken away from a New Zealand citizen on national security grounds even when that New Zealand citizen does not have a criminal record and no charges are being offered against that person? 
Rt Hon HELEN CLARK 
: There are grounds in the law now for revoking passports and the issue the Government is considering is whether those grounds need to be widened. I might point out that in Australia there is a provision for the refusal and cancellation of passports where the Minister of Foreign Affairs is satisfied that the person might prejudice the security of Australia. Similarly in the United Kingdom the Secretary of State can exercise his discretion on grounds of national security as to whether someone is entitled to have a passport. I also point out that the European Convention on Human Rights recognises national security as a ground for restricting the rights to freedom of movement. 
Rt Hon Winston Peters 
: Why would we have any confidence in what is about to be done by Government when the fourteenth chamber of the Court of Appeal in Brussels—again a far superior court to any that has heard any case in New Zealand—found that this man was guilty of being the head of a criminal association possessed two blank passports and a Danish passport all falsely and convicted him; and when the article in respect of the 1951 convention for Mr Robson’s sake clearly states that where a refugee claimant has committed a serious crime outside the country of refuge before being granted refugee status then he should not be entitled to refugee status? Why is this man still in our country and costing us hundreds of thousands of dollars? 
Rt Hon HELEN CLARK 
: The member is correct in asserting that the decision by the Refugee Status Appeals Authority to regard Mr Zaoui as a refugee is not in itself grounds for him remaining in New Zealand. That decision must be judged alongside a decision yet to be made by the Inspector-General of Intelligence and Security—because he cannot get to make that decision with all the litigation—as to whether the security risk certificate should be upheld. 
Keith Locke 
: I seek leave to table the 213-page report of the Refugee Status Appeals Authority which answers all the points that Mr Peters has just raised. 
Mr SPEAKER 
: Leave is sought for that purpose. Is there any objection? There is. 
Social Development and Employment and Women's Affairs Ministers—Confidence 
6.  
SIMON POWER (National—Rangitikei) 
 to the  
Prime Minister 
: Does she have confidence in the Minister of Women’s Affairs and Acting Minister for Social Development and Employment; if so why? 
Rt Hon HELEN CLARK (Prime Minister) 
: 
 Yes because she is a hard-working and conscientious Minister. 
Simon Power 
: Is it acceptable for the Minister of Women’s Affairs to call another woman an “irresponsible tart” and what confidence should the New Zealand public have in a Minister who makes what the Prime Minister herself has termed “gratuitous and silly comments”? 
Rt Hon HELEN CLARK 
: The word “irresponsible” was acceptable. The word “tart” was not just as it was wrong when National Party bosses were reported as using that word about me at a party conference 2 years ago. 
Dr Muriel Newman 
: If it is not acceptable for a Minister to call a member of Parliament a tart is it acceptable that a situation has now arisen whereby because the Minister’s comments have been broadcast so widely she has brought not only all Ministers of the Crown into disrepute but all parliamentarians as well; and does the Prime Minister not believe that the only honourable course of action for the Minister to take is for her now to apologise to this Parliament for the embarrassment and offence her comments have caused? 
Rt Hon HELEN CLARK 
: I understand that the Minister has sent a letter to the select committee and she has repeated in that her apology personally to the member. Needless to say I did not get such a letter from the National Party 2 years ago. 
Simon Power 
: How can she have confidence in a Minister of Women’s Affairs who falsely accused another member of using the word “scrubber” to describe women but was quite happy to use the word “tart” to describe women? 
Rt Hon HELEN CLARK 
: The use of silly and inappropriate words by members of Parliament would not be restricted to just those two. Unfortunately it is quite a regular occurrence and I imagine will be as long as we have a democracy in a Parliament in this country. 
Schools—Funding 
7.  
BERNIE OGILVY (United Future) 
 to the  
Minister of Education 
: Is he satisfied that schools receive sufficient funding; if so why? 
Hon TREVOR MALLARD (Minister of Education) 
: 
 Never. 
Bernie Ogilvy 
: Is he satisfied that the total operating deficit of schools that are in the red has increased by over 50 percent from $21 million in 1998 to $33 million in 2002 covering a massive 40 percent of all our schools and that the average debt per school has increased from $24000 to $32000 over that same period; if he is not why not? 
Hon TREVOR MALLARD 
: I think the member will find that those numbers are relatively small differences in large amounts. Many schools now have an operating turnover of over a million dollars and frankly being $5000 over or under does not make much difference. 
Lynne Pillay 
: What additional support have schools received since 1999? 
Hon TREVOR MALLARD 
: Quite a lot. There has been about $193 million or 28 percent more operational funding in schools in 2004 compared with 1999. Taking into account roll growth and inflation the increase in that figure in real terms per pupil is 10.1 percent. There has been other funding such as an extra $57 million for laptops for teachers $128 million a year for teachers over and above roll growth$43 million in targeted literacy programmes this year alone $87 million extra in teacher professional development and in the coming financial year tens of millions of dollars for high-speed Internet access through Project Probe. This Government has been putting an enormous amount of extra funding into education to the extent where the “member for Dipton” says that some schools are awash with cash. 
Hon Bill English 
: Why did the Minister do a deal with the Post Primary Teachers Association to increase non-contact time for teachers but refuse to pay salaries for the teachers needed to fill the gaps with the effect that many secondary schools are starting late 1 day a week finishing early 1 day a week illegally taking an extra day in mid-term break and increasing class sizes significantly in order to cover the gap that he has left? 
Hon TREVOR MALLARD 
: The Government has put approximately a thousand extra teachers into secondary schools in order for them to focus on contact time amongst a number of other issues. Some schools have chosen to run down their class sizes; some schools have chosen to have higher class sizes— 
Hon Bill English 
: Increase it not cut it. 
Hon TREVOR MALLARD 
: No some have chosen to run down their class sizes—to decrease their class sizes—and to offer fewer options. That is a call for the schools to make; it always has been. 
Hon Brian Donnelly 
: Will the Minister confirm that in the Government’s response to the Education and Science Committee report on decile funding it is stated: “Links between any resources and educational outcomes are difficult to identify and measure.” and that it is therefore really not possible to claim one way or the other whether schools are receiving sufficient funding? 
Hon TREVOR MALLARD 
: I would not rely entirely on that response but I notice the Minister of Finance is nodding. 
Bernie Ogilvy 
: What does the Minister expect the total deficit for schools in 2003 to be noting there has been a downturn in foreign student numbers and as he has pointed out an increase for instance in the cost of information technology upgrades and in support staff salaries which together will put further pressure on the financial position of schools? 
Hon TREVOR MALLARD 
: I want to indicate that I am never satisfied with the amount of funding and that I will keep on working to get more and more funding because I do believe it is appropriate that we wherever possible better resource our schools. But I think the member has to be a little careful with his facts. In 2003 the number of foreign fee-paying students in State secondary schools went up significantly compared with 2002. 
Accident Compensation Corporation—Ethical and Legal Practices 
8.  
Rt Hon WINSTON PETERS (Leader—NZ First) 
 to the  
Minister for ACC 
: Is she satisfied that all of Accident Compensation Corporation practices are ethical and within the law? 
Hon RUTH DYSON (Minister for ACC) 
: 
 The Accident Compensation Corporation is reviewing all programmes where provider discretion is permitted in the implementation of its programmes because it is imperative that any such discretion is appropriately exercised. If the member has specific instances where he believes this may not be the case I would be happy to look into it. Subject to that yes I am satisfied that the corporation’s practices are ethical and within the law. 
Rt Hon Winston Peters 
: Is the Minister aware that the LTD and the car she has are because she is a Minister and it is not my job to do her job for her and that being the case why is Mr James Sowman a pseudonym writing to an accident victim and why is her department denying that victim the Official Information Act request for the true identity of the so-called Mr James Sowman and claiming that there is no public interest involved when plainly they are involved in deceit? 
Hon RUTH DYSON 
: I understand that that particular employee of Catalyst Injury Management Ltd used that pseudonym because he was afraid for his own safety. 
Lianne Dalziel 
: What improvements has the Minister made to ensure the corporation’s practices are responsive and appropriate to claimants? 
Hon RUTH DYSON 
: The development of the Code of ACC Claimants’ Rights which took effect on 1 February last year is one such measure. The code enshrines in law the requirement for the corporation to have high standards of service and fairness when dealing with claimants. 
Rt Hon Winston Peters 
: If the Minister thinks her statement in response to my supplementary question is correct why was that not said in the Seymour letter to the victim concerned and are we to look forward to dealing with “Mrs Get Well” from the Ministry of Health and “Constable Stay Safe” from the police force because there are no public interest factors supporting their revealed identity as the Accident Compensation Corporation explained? 
Hon RUTH DYSON 
: We do have a responsibility to ensure the ongoing safety of all public servants and I support what would otherwise seem to be quite unusual measures to back that protection up. 
Rt Hon Winston Peters 
: I seek leave to table a document relating to a James Sowman dated 5 March 2004 where no such claim is made with respect to— 
Document by leave laid on the Table of the House. 
Energy—Project Aqua Cancellation 
9.  
JEANETTE FITZSIMONS (Co-Leader—Green) 
 to the  
Minister of Energy 
: What additional steps will he be taking to promote energy efficiency energy conservation and renewable energy following the cancellation of Project Aqua? 
Hon PETE HODGSON (Minister of Energy) 
: 
 Several steps. The National Energy Efficiency and Conservation Strategy is being ramped up and further details will be announced in the Budget. Second the climate change projects mechanism has been highly successful in bringing on cleaner and renewable energy projects and I will announce results equal to a little over a third of those of the Project Aqua later this week. Thirdly details of a second larger tender for projects to reduce emissions will be in the next Budget. 
Jeanette Fitzsimons 
: Why does electricity consumption need to rise at all over the next decade or two when numerous assessments show that at least 20 percent of current electricity use could be avoided with the use of cost-effective energy-efficiency technology? 
Hon PETE HODGSON 
: I am sure it is true that we could improve our energy efficiency across the economy by about 20 percent; that is precisely the target that the Government sets. However under the auspices of this Government and particularly the Prime Minister and the Minister of Finance the economy has been consistently growing at greater than 2 percent and is likely to continue to do so. 
Mark Peck 
: Is the cancellation of Project Aqua a set-back in the development of renewable energy in New Zealand? 
Hon PETE HODGSON 
: At this stage it does not seem that the cancellation of Project Aqua will make it more difficult to achieve the Government’s renewables target as most of the alternatives to it between now and about 2012 are renewables—namely geothermal wind and small hydro. 
Hon Roger Sowry 
: Does the Minister think it will be easier for wind turbines to obtain the necessary resource consents given that the company Windflow Technology with Mrs Fitzsimons as a shareholder is facing objections from environmentalists to its Christchurch wind turbines on the basis that they are too noisy? 
Hon PETE HODGSON 
: I draw the member’s attention to the largest wind project undertaken in New Zealand a 90-megawatt programme behind Palmerston North. The application was lodged on a Monday the hearings were on the Tuesday the cross-examinations were on the Wednesday—all of this last year—and the consent was awarded on the Thursday. 
Peter Brown 
: Is the Minister aware that there are billions of tonnes of coal in New Zealand and that clean-coal technologies being developed here in the USA and in other places make coal much more environmentally friendly; if so why does he not encourage greater use of coal to generate electricity and put New Zealanders’ minds at rest? 
Hon PETE HODGSON 
: The answers are yes yes and because on average it is more expensive than alternatives. 
Gordon Copeland 
: Is the Minister prepared to explore the possibility of a win-win situation for both conservation and energy at the Dobson hydro project in an area of high rainfall and forecast high electricity demand? 
Hon PETE HODGSON 
: I invite the member to give up his preoccupation with favoured sites and favoured technologies and to look at the fact that if that project were to proceed it would give us an increase in our electricity sufficient for about 5 months. What would he do after that? 
Jeanette Fitzsimons 
: Will the Minister tell the country clearly that claims of clean coal are still a myth because no proven technology exists to reduce let alone eliminate the accelerated climate-change effects of burning coal? 
Hon PETE HODGSON 
: Clean coal tends to mean two things depending on which sort of audience one has. The clean coal that some people speak of is to do with sulphur nitrous oxide and particulates and we do have clean coal - burning technologies available to us. However the member is right that no one has even begun to invent how to get carbon dioxide out of coal combustion. 
Gordon Copeland 
: Is the Minister prepared to cut some slack to line companies to enable them to invest in local generation plants and schemes without limit and to sell that electricity directly to customers in their own areas thus providing some much-needed competition for the large electricity generators? 
Hon PETE HODGSON 
: I draw the member’s attention to a bill before a select committee at the moment in which existing thresholds for lines companies have been increased fivefold. If the select committee thinks that is a bit limited then it may want to make it tenfold. 
Jeanette Fitzsimons 
: What is the total expected time frame for Meridian Energy’s Te Apiti wind farm to be built and commissioned now that it has received its resource consent—in just 4 days—and how many such wind farms could be built and operating by the time Project Aqua would have generated its first unit? 
Hon PETE HODGSON 
: I think that a little less than 15 months is the correct answer to the member’s first question and that a good deal is the correct answer to the second. 
Unemployment Benefit—Trends 
10.  
MOANA MACKEY (Labour) 
 to the 
 Associate Minister for Social Development and Employment 
: What trends have been identified in the number of people receiving the unemployment benefit? 
Hon RUTH DYSON (Acting Minister for Social Development and Employment) 
: 
 There has been a nearly 50 percent drop in the number of working-age New Zealanders needing the support of an unemployment benefit since 1999. There are now under 79000 working-age people on the unemployment benefit and the unemployment benefit hardship—the lowest level since 1987. This reflects New Zealand’s historically low unemployment rate of 4.6 percent—the sixth equal lowest rate of unemployment in the OECD. 
Moana Mackey 
: What factors have contributed to the reduction in numbers receiving the unemployment benefit? 
Hon RUTH DYSON 
: A strong labour market Government support for job-rich growth through regional economic development and a dedicated focus on quality case management and real job placements by Work and Income have all contributed to the near 50 percent drop in unemployment benefit numbers. That is in stark contrast to jurisdictions that have implemented work-for-the-dole and time-limited benefits like Wisconsin where benefit numbers have gone up by almost 30 percent in the last 3 years. 
Katherine Rich 
: What trends have been identified in the number of people receiving the sickness and invalids benefits and can the Minister explain why the number of people receiving them has dramatically increased under this Government? 
Hon RUTH DYSON 
: The total number of working-age people on a benefit has dropped by over 55000 since 1999. That means that total working-age benefit numbers have dropped by a number equivalent to the entire population of Napier. That is a real total drop across all working-age benefits—unemployment sickness invalids and domestic purposes. 
Mr SPEAKER 
: I think the Minister should address the specific question that was asked. She can comment on that quite comfortably. The question can be repeated. 
Katherine Rich 
: What trends have been identified in the number of people receiving the sickness and invalids benefits and can the Minister explain why the number of people receiving them has increased dramatically under this Government? 
Hon RUTH DYSON 
: As I indicated in answer to the previous question the total number of working-age people across all benefits has decreased. However there has been an increase in both sickness benefit and invalids benefit numbers primarily due to improved diagnosis of mental health conditions—a strong contributor—and to our ageing population. That is exactly comparable to all other Western countries. 
Judy Turner 
: Has the Minister considered making eligibility for an unemployment benefit for those under the age of 25 more consistent with student allowances by assessing them on the basis of their parents’ income; if not why are students being treated differently by this Government compared to those on the dole? 
Hon RUTH DYSON 
: No that particular consideration has not been made. 
Peter Brown 
: I raise a point of order Mr Speaker. I want to draw your attention to the fact that Katherine Rich asked her question twice and the second answer was quite different from the first. Had the Minister not been pushed to answer it correctly the second time we on this side would have been working on a totally wrong assumption. We would have made the assumption that sickness benefits had gone down. In fact the reverse is the case. 
Mr SPEAKER 
: That is not a point of order. 
Peter Brown 
: That is quite frustrating on this side of the House. 
Mr SPEAKER 
: That is not a point of order. 
Family Court—Openness 
11.  
JUDITH COLLINS (National—Clevedon) 
 to the  
Minister for Courts 
: Does he agree “that the persistent labelling of Family Court proceedings as ‘secret’ was misleading and irresponsible.” and “There is nothing secret about the Family Court at all” as stated by Principal Family Court Judge Peter Boshier on 26 March 2004; if so why? 
Hon DAVID BENSON-POPE (Minister of Fisheries) 
 on behalf of the 
 Minister for Courts 
: The Minister understands that Judge Boshier was responding to criticism that consistently portrays Family Court judges as insisting on “secrecy” rather than merely following longstanding legislation that requires family proceedings that are of a personal nature to be kept private to the parties that are actually involved. To the extent that the criticism creates that misleading impression the Minister agrees with him. 
Judith Collins 
: Does the Minister also agree with the statement: “Its proceedings are open to scrutiny right now in a number of respects.”; if so can he explain to the House what scrutiny Family Court proceedings are under right now? 
Hon DAVID BENSON-POPE 
: Yes I do and I do not think I can do better for the questioner than echo the statement of Judge Boshier that judges have operated the court as they have been required to do to afford privacy to separating parents particularly with young vulnerable children. That is what Parliament has required of the Family Court and that is precisely what the Family Court has endeavoured to the best of its ability to do. 
Judith Collins 
: I raise a point of order Mr Speaker. The Minister made no attempt to answer my question which was about what scrutiny the Family Court is under in relation to the matters. The Minister gave absolutely no answer at all in respect of that. 
Mr SPEAKER 
: I disagree. I think the Minister did address that particular question. 
Georgina Beyer 
: What consideration is the Government giving to whether the Family Court could be made more open? 
Hon DAVID BENSON-POPE 
: The Care of Children Bill currently before the Justice and Electoral Committee gives some consideration to what changes might be made to the legislation governing some proceedings before the Family Court. In addition the recent Law Commission report  
Delivering Justice for All 
 also makes recommendations on this issue. The Government is giving careful consideration to the Law Commission’s recommendations and will respond in due course. 
Stephen Franks 
: I ask the question again: does the Minister agree with Judge Boshier that: “There is nothing secret about the Family Court”; if so why given that no one outside the case that the Hon Nick Smith got involved in has been able to see the Family Court decision despite claims that it vindicates that court’s order; and what is that if it is not a secret judgment from a secretive court? 
Hon DAVID BENSON-POPE 
: The current balance in existing legislation between protecting the privacy of sensitive and emotional family disputes and recognising the public interest in those disputes was determined by Parliament when the Family Courts were established in 1980. This is longstanding legislation and the Family Court itself should not be criticised for adhering to legislation enacted by this Parliament. 
Stephen Franks 
: I raise a point of order Mr Speaker. May I ask the question again as no attempt was made to answer it? 
Mr SPEAKER 
: The member can ask the question again and I will then examine the answer. I remember what the answer was. 
Stephen Franks 
: My question was a repeat of the original question: that is does the Minister agree with the Principal Family Court Judge Peter Boshier that: “There is nothing secret about the Family Court at all” when in fact the Family Court’s judgment in the case in which the Hon Nick Smith became involved has never been seen by anyone outside that case despite claims that it vindicates the order of the court; and what else can it be but a secret judgment from a secretive court? 
Hon DAVID BENSON-POPE 
: Yes I do agree. There is a considerable difference between the word “secret” and the appropriate privacy that should be accorded to the proceedings of that court. 
Rt Hon Winston Peters 
: How does the Minister think it helps public information and debate when in the case of the judgment in respect of the Nick Smith Nelson case the court decision does not disclose a very fundamental fact and that is that the boy was subject to extreme violence which is the reason he did not want to be returned to his parents? That is a fact. 
Mr SPEAKER 
: I do not know that that question is the responsibility— 
Hon DAVID BENSON-POPE 
: I am certainly not prepared to comment on the particularities of the case but I would like to make one other comment to the questioner and that is simply that the openness or otherwise of the Family Court will be considered subsequent to the release of the select committee’s report on the Care of Children Bill and as part of the Government’s consideration of the report of the Law Commission. 
Judith Collins 
: Does the Minister agree that the Family Court should be required to make available meaningful statistics on the number of cases delayed; if so why has he not required that to be done despite his 4½ years in the position? 
Hon DAVID BENSON-POPE 
: Not at this time. [ 
Interruption 
] 
Mr SPEAKER 
: Did I hear the member say: “Not at this time.”? That is an answer to the question. Whether members agree with it is another matter. 
Male Students—Underachievement 
12.  
Dr ASHRAF CHOUDHARY (Labour) 
 to the  
Minister of Education 
: What steps is he taking to address boys’ underachievement in schools? 
Hon TREVOR MALLARD (Minister of Education) 
: 
 This Government is committed to ensuring that all our children achieve to their full potential in education. We know that at secondary level boys are not doing as well as girls are. That is why I have put in place a programme to identify solutions for lifting boys’ achievement at secondary school. It includes research to identify programmes that result in improved achievement by boys and the establishment of an external reference group of experts in boys’ education. 
Dr Ashraf Choudhary 
: What information is available to schools and teachers to help them to identify and address areas of student underperformance? 
Hon TREVOR MALLARD 
: There is actually an enormous amount of material available now: data from the literacy and numeracy test asTTle from the National Certificate of Educational Achievement and from the National Education Monitoring Project. The New Zealand Qualifications Authority and the Ministry of Education both have international data available. There is quite a lot of existing research analysis. The research shows some really interesting patterns. There is not much difference in achievement up to the end of primary school but subject-based differences occur as boys and girls go through secondary school. It appears that the results start to come back together again at university. 
Urgent Debates 
Energy—Project Aqua Cancellation 
Mr SPEAKER 
: I have received letters from Gordon Copeland Jeanette Fitzsimons and the Hon Ken Shirley seeking to debate under Standing Order 373 the decision by Meridian Energy that it will not proceed with its planned Project Aqua development. This is a particular case of recent occurrence and it involves ministerial responsibility. Given the significance of the decision I consider that it requires the immediate attention of the House. I therefore give priority to the first application I received that of Gordon Copeland. I call upon him to move the motion. 
GORDON COPELAND (United Future) 
: 
 I move  
That the House take note of a matter of urgent public importance 
. I move that motion because Meridian Energy’s bombshell announcement yesterday that it will not be proceeding with Project Aqua creates new and significant risks for the New Zealand economy and in consequence for all New Zealanders and their households. A cheap and secure electricity supply is critical to all businesses and households in this country. I saw a graph presented to me last year that indicated that New Zealand could face a significant primary energy gap from around 2007 now just 3 years away—[ 
Interruption 
] 
Mr SPEAKER 
: When the House grants leave for an urgent debate to take place that indicates the matter is important. I am talking to Mr Mallard. I know that some members have to attend select committees but I want to hear this speech in silence apart from the usual sorts of comments. There can be the odd interjection but there is too much noise. I have not deducted time from the member’s address. 
GORDON COPELAND 
: I was making the very vital point that I was presented with a graph last year that indicated New Zealand could face a significant primary energy gap from around 2007 now just 3 years away because of the rundown in gas from the Maui field and the problems associated with the use of Waikato coal for electricity generation. The graph presented to me was truly frightening. It illustrated that without Project Aqua a gap between electricity supply and demand may begin in 2007 and rise to a massive 11000 gigawatts by 2017. That forecast should be of concern to all New Zealanders because it clearly indicates that unless we can bring additional generating capacity on stream within the next 3 years we will face an electricity shortage. 
Simply stated the cancellation of Project Aqua is an issue of very critical importance to New Zealand businesses going forward. We have a “wall of wood” to process and many new irrigation schemes coming on stream. We have new roads to build in Auckland and growth in the dairying industry. All those situations and all the other plans for expansion in the next few years of other New Zealand businesses—thus to grow the economy—are dependent upon electricity for that to happen. That is why I say this issue is of critical importance to our economy. Along with security of supply—that is electricity being available when needed businesses need cheap electricity. New Zealand is a long way from its markets and at the moment by world standards we have a comparative competitive advantage from being able to use not just electricity but cheap electricity. The switch that I think we are now forced to make from renewable energy sources such as hydroelectricity to energy sources such as coal—a switch that seems inevitable given the decision taken yesterday—means that we will not only go to something less environmentally friendly but also to something significantly more expensive. That has the capacity to erode New Zealand’s competitive economic position with regard to the rest of the world. My own vision however for the New Zealand economy is that it should grow and grow quickly so that we can deliver to New Zealanders and their households the material well-being and the good health and educational services we all desire going forward. 
I want at this point to address a few comments to Meridian Energy itself. I do so as a shareholder in that company for all New Zealanders are shareholders in Meridian Energy. I ask the company to be open to the possibility of seeing at least a residual hydro scheme proceed on the Waitaki River. I ask the company at least to work through the new water allocation framework that will come into being as a result of the passage of the Waitaki catchment legislation. It seems to me that even if Meridian Energy were not successful in obtaining the amount of water flow it would have ideally liked for Project Aqua it is still possible for it to see a smaller-scale project go ahead. If Meridian Energy is not willing to do that I think other major electricity generators in New Zealand should step into its shoes and look at that possibility. At the end of the day the situation that faces us as a nation is so critical that we cannot afford to say no to any significant low-cost way of generating electricity. 
I will also address some comments to the Government itself. I hope it will take heed of this development and ensure that there are now no ideological or regulatory barriers to allowing hydroelectricity schemes in New Zealand of all shapes and sizes together with schemes using steam wind coal or whatever else to proceed and proceed quickly so that we can have some of them on stream in time for the projected electricity shortage from about 2007 onwards. I specifically ask the Government to look again at the Dobson hydro scheme on the West Coast of the South Island. The Government’s position on that scheme is that it should not proceed because it will do damage to the conservation estate of this country. The Government says that the scheme will reduce the area of the conservation estate. My response is that the people of Greymouth have offered the Government Mount Buckley by way of exchange—a larger area—so in actual fact the conservation estate would increase not decrease if the scheme went ahead. 
The Government has said that the Dobson scheme would involve the loss of some kahikatea trees in the 500 hectares—and that is all we are talking about—that would be flooded by the new dam which would create a beautiful lake in a bush setting. If the Government were to ask TrustPower I believe that the company may well be prepared to buy some existing private kahikatea trees and gift them to the nation’s conservation estate. The Government says that there are birds living in the 500 hectares that would be flooded—an area by the way that is part of approximately 1.8 million hectares of conservation land on the West Coast just to put it into some sort of perspective—that need to be protected. I agree entirely with that and I say that if the Government were to speak to TrustPower it may well be that TrustPower would be prepared to cooperate with it with the Department of Conservation and with the people of Greymouth to create a bird sanctuary where our birds could flourish and increase in large numbers instead of having to compete daily for their very survival under the gaze of rather hungry stoats weasels feral cats and possums. 
The Dobson hydro scheme has strong local support. A few minutes ago in response to a question of mine the Minister of Energy said that it would provide only about 5 months’ supply for New Zealand. I think that answer misses the point of what my party has been saying in relation to those kinds of schemes. We believe there is potential for a number of hydro schemes to be developed on the conservation estate throughout New Zealand. It is time to start to think outside the box and for the Government to give away the false dichotomy that it has erected for ideological reasons between conservation on the one hand and hydroelectricity on the other hand. It is completely unnecessary. As I have pointed out there is a way through the projected electricity shortage and I was hoping very very much that Dobson would become a prototype for many other similar schemes right up and down this country that would continue to supply electricity to this nation at an affordable price using a source of energy that is renewable and sustainable in the long term. I say to the Government it is time to put aside the straitjacket. We can no longer afford the luxury of caving in to the kind of ideology that defies common sense. 
I will also bring up another point at this time—again something that I alluded to during question time—and it is the very strong submissions that the Electricity Networks Association of New Zealand has brought to my attention concerning the rules that presently prevent it from investing in new local electricity-generating projects. I think we need to give that matter very careful consideration. The situation arises from what I believe were the somewhat ill-advised reforms made by Max Bradford when the National Party was in Government. I cannot understand therefore why a Labour administration coming into that situation would be prepared to allow it to continue. The Minister makes the point and I agree with him that some new flexibility has been given. Local lines companies—and I want to stress here that those companies are owned by local communities are sensitive to local needs and are able to invest local money for the benefit of local communities within New Zealand—are saying we should take off the Max Bradford restraints let them invest in new electricity generation and give them the ability to supply that electricity directly to their customers. They want to know why they should be taken out of the retail loop and I believe that is a legitimate question. I believe that the Bradford reforms did not correctly understand competition law or the way that competition works. Allowing local lines companies to invest in new electricity generation would indeed provide the major electricity generators with some much-needed competition. Apart from that it simply makes sense. Why should we try to relay electricity all the way from Waitaki say to Whangarei with the significant loss that occurs in the transmission process when there is a lines company based in Whangarei that would love to get going and build a scheme to supply the people of Whangarei with electricity in their own backyard—with minimal loss on the way through. 
In 2002 the people of this nation by quite a significant majority elected the Labour Party and the current Government to be our Government and to provide leadership for this nation. With the cancellation of Project Aqua and given the critical issues I have outlined in my speech concerning not only the security of electricity supply but also the actual price of electricity and its importance in keeping the New Zealand economy going forward we now look to the Government to provide some real leadership in this situation. If the Resource Management Act is holding things up let us change it. If the Conservation Act is holding good schemes up let us change it. If the Max Bradford package of so-called reforms to create competition within the electricity sector is not working correctly let us change it. It will diminish the legacy of this Government in the eyes of future generations of New Zealanders and in fact of New Zealanders 3 years from now should we—and I suggest today this is a very likely scenario—encounter situations where we have to close down our factories and switch off lights in our homes which is beginning to happen. People will ask why on earth the Government did not act and act more quickly. 
 But I want to go one step further than that and make this point. We need those kinds of ideological and regulatory restraints to be removed and removed now. It is now that alternative energy projects need to be planned and it is now that decisions need to be made because of the lead time it will take to construct the new electricity projects needed in New Zealand so that we can continue to grow our economy strongly based on steady reliable cheap electricity and can provide the living standards going forward that we all expect—and indeed should expect—from this Government or any other Government. 
Hon PETE HODGSON (Minister of Energy) 
: 
 I want to thank the member who has just resumed his seat for what I thought was a really thoughtful contribution on what is an emerging issue of some consequence. There is no doubt that this country faces a challenge in the security of its electricity supply or as the member more correctly puts it its primary energy source of supply. That was created in part by the earlier rundown of Maui gas and in part by the fact that for the past three decades this country has had an ability to rely on one of the largest gasfields in the country—and I am sorry to say with the wisdom of hindsight to squander that—and it is now augmented by the fact that Project Aqua will not go ahead. 
As Minister of Energy for the past couple of years I have lived with two possibilities—one that Project Aqua would proceed and the other that it would not proceed. My position the Government’s position—the position we held right through that time until now until we knew—was as follows. Firstly if Project Aqua is to proceed please let it proceed on time and not 5 years after the event. People need to know with certainty what new generation is coming on and roughly in what new year. Secondly if it is not to proceed could we please know as soon as possible? Meridian’s somewhat surprising announcement yesterday has certainly achieved the second of those two aims. 
We have the ability as a country to rearrange the generation projects that are on the drawing boards—to bring to the front-burner those projects that were on the back-burner until yesterday. I am sure that over the next 12 months—in fact quite possibly over the next 24 hours—we will see various statements by various people as to what they intend to do. It is of critical importance to the economy that we have a reliable supply of electricity and a reliable supply of energy. It is critically important to any economy. The problem of not having a reliable supply has faced California a number of South American countries Western Australia a number of European countries—including Germany France and Italy—North America and Canada in recent months with a transmission outage and so on. Modern economies require a modern reliable high-quality security of supply for energy and for electricity in particular. 
The member went on to say that this country needs cheap energy. I suggest to the member that cheap energy is a good idea but it is not necessarily possible within the framework of security of supply. That is to say it is not possible to continue to build electricity generation and not have the price go up because the best sites and options have already been exploited. That is in the nature of the industry. 
I do not think the member is suggesting that the taxpayer should subsidise the electricity user. No he is shaking his head. I think we have to have fairly priced electricity. I do not think we should put up with anything that resembles overpricing of electricity or even the possibility of overpricing but I think we are starting to move beyond the idea of cheap electricity which is something that existed in this country in earlier times—probably in the second half of last century. 
In other words we have seen an increase in the last 4 or 5 years of from memory a little under 10 percent real. I think we are likely to see an increase of that ilk over the next 10 years or so as we move from being the very lowest in the world to nearly the lowest. That would be my best guess. It may be that some states in Canada will come under us that Queensland will come under us briefly as it moves into a relative oversupply situation but cheap electricity over the long term is I think unlikely. 
In respect of the Dobson scheme I will make two brief comments to the member. First it is an ecological area and the member needs to decide whether he thinks drowning ecological areas is a plausible idea. Secondly the larger area that was offered up is itself not threatened. So there is no gain. 
In respect of coal I decided to front coal because I am sure every ACT party member National Party member and possibly New Zealand First Party member will want to know why we cannot be nice and bad and dig a whole lot of coal out of the ground and set fire to it. I say that we are burning a lot of coal in this country at the moment at Huntly. Thank goodness because Maui has a shortfall. The Huntly power station is dual-fuelled and I am grateful for the fact that we are able to burn coal when we need to especially in wintertime. 
Further there are plans for more coal and electricity production all over the place. I have heard of them in Buller Canterbury Southland at Marsden Point—in fact I have heard of about three at Marsden Point—and in Huntly again. I say to members who will be asking why no new coal generation has been built that the answer lies in price. Generally speaking South Island coal which is a little cheaper than North Island coal is none the less a little more expensive with or without a carbon charge than other alternatives. North Island coal which we are using a little in extremis at the moment is more expensive still. 
It is true and it needs to be said nice and openly that some people disagree with the figures the Ministry of Economic Development has put out. Those people who have an interest in coal say that those figures are no good. I say: “Go and build the station.” We have very large amounts of coal in this country but the truth of the matter is that renewables are cheaper. When the carbon charge comes on that will put up the price of coal again by about 1.5c but think about the flipside of that. The idea of having a carbon charge through the economy is that it augments renewables but not only that one can use carbon credits to augment them further. 
Indeed that has already happened. Later this week I will announce the results of 4 billion tonnes of carbon dioxide going out as carbon credits. In fact I draw to the attention of the House that in the last Budget—for the first time—we had two currencies one was the New Zealand dollar and one was carbon credits. Those 4 million carbon credits were used to bring on a lower carbon dioxide future—for example through renewables—than we would otherwise have using plants that would not otherwise have been built because they are not economic because we have not internalised the externality of environmental damage. A great deal of generation will occur as a result of that project. I will announce the details later this week but roughly speaking we are talking about one-third of Project Aqua from 4 million tonnes of carbon dioxide. What is more we will do it again next year because I hope to secure further tonnes of carbon dioxide in the form of carbon credits in the forthcoming Budget. 
For those people who think that there is no energy resource in this country I refer them again to  
New Zealand Energy Outlook to 2025 
 produced by the Ministry of Economic Development. It states that we have an awful lot of resource available—that is to say not in conservation estates and in areas where one is unlikely to get the go-ahead. For example in the hydro arena about 1600 megawatts still remains to be developed excluding Project Aqua mostly in small hydro stations. 
In the geothermal area the estimate from the Ministry of Economic Development is 5200 megawatts. We use only 8000 now. Not all will go ahead—I acknowledge that this is potential. In the area of wind a further 4000 megawatts can go ahead so this country can look forward to a renewable future without having to go to the new technologies of wave tide photovoltaics and on it goes. There is no need to do that at least no need yet. By the time those prices come down this country will be able to augment its energy needs as necessary. 
The other thing I want to talk about is electricity demand and say in a fairly matter of fact way that California which ran into very serious problems across two summers—with blackouts right across one of the most advanced pieces of civilisation on the planet—has subsequent to that event achieved all its gains by conservation efficiency and renewables. I am advised that not one non-renewable plant has been built in California since then. That is a really interesting prospect because it means as the leader of the Green Party said during question time this country could improve its efficiency we think by about 20 percent. What is good about the inefficient use of energy? Is it remotely useful to waste the stuff? Regrettably we do. Why is that? It is because of a lack of a regulatory framework it has been cheap and we have not paid attention. There are all sorts of reasons so there are very significant gains to be made there. 
That said this country will always need more supply. Each year for as long as I can foresee there will need to be some supply. It is true that we currently think we need 150 megawatts. We should check the figures to see whether 150 megawatts a year is coming. In the 12 months ending this winter the new addition will be 220 megawatts. We need 150 megawatts and 220 are coming. Before next winter we will need 300 megawatts and 350 will come. If we go out 4 years we will need 600 and a total of 800—not including Aqua—will come already consented fuelled and on the front-burner. We need not be concerned about the immediate future but we should always think further out. If we think further out this country has many resources. However they will not be available cheaply. 
In respect of the reforms by Max Bradford I say to the member in relation to his comments that I have signalled very clearly that the threshold should come up. I have suggested five-fold. If the member wants to raise it ten-fold in the select committee I am open to that. That would become a select committee decision. In respect of gas exploration within a month this Government will answer the following question: should we or should we not further induce gas exploration? It is increasing quickly but it probably needs to increase more. 
This debate will no doubt degenerate before too long so let me get under way. In relation to Project Aqua Bill English said: “National cautiously supports Project Aqua.” Nick Smith said: “National opposes the special Project Aqua legislation.” Don Brash said: “No political party should be saying yes or no.” Those are the viewpoints of the National Party none of which has come from Roger Sowry. I have pages of National Party quotations. I learn that the Opposition spokesperson on energy is Mr Sowry but we do not have a quotation from him. We had hardly a question from him and in case Mr Shirley decides to get to his feet later on Mr Shirley said earlier that the Government’s “appalling” attempt at fast tracking the project was akin to its National Development Act Repeal Act. Believe it or not Mr Shirley said yesterday that for political reasons shareholding Ministers had directed Meridian Energy to drop Project Aqua. What sort of a viewpoint does that member have that lasts for about 5 minutes? Not much at all! We are talking about a 180-degree turn. 
I thank the member for introducing the debate to the House and I thank Mr Speaker for allowing it. It is an important debate. The Government is aware that the energy future of this country needs to be paid close attention to. It is being paid close attention to and I invite other members to take part in the debate—I hope without reaching for the calamity word or the hoary old chestnuts that have dogged the debate so far. Hope does spring eternal. 
Hon ROGER SOWRY (National) 
: 
 Why is it that the Minister of Energy seems to be the only person with knowledge of the sector who thinks that everything is OK? He is the only person who says that it is all right. This morning on  
Morning Report  
I heard him say: “Well Project Aqua has fallen over but listen Sean we’ve got lots of little bits that will come together and if you add up all the little bits then we’ll be OK.” No one in the sector believes him—not a person not an energy company not the Government’s own State-owned enterprises not the private sector not the gas industry and not the coal industry. No one believes this Minister. 
This Minister is showing no leadership. He has absolutely no plan for the future supply of electricity or energy for this country. This Minister is being dragged along by the select committee. The National members on the select committee are saying: “Let’s have a serious look at some of the limits that the bill imposes on lines companies around generation” and Minister is saying: “Well if you want to double it quadruple it so be it. Make a decision.” There are no decisions from this Minister. He never makes any decisions at all. He is being dragged along on gas exploration. After 4 years he has realised that no one is doing anything so he is out there saying: “We might do some drilling. I’ll make an announcement next week and we can have another look at it.” 
It is the same with the Resource Management Act. This project was scuttled because of the Government’s own refusal to address the Resource Management Act and the constraints that that piece of legislation puts on any major project. The Government and the Prime Minister were in the House today. She got up and said: “No it wasn’t the Resource Management Act; it was a whole lot of other reasons.” I went back to my office and what did I see? I saw that there was a Government announcement today at 3.12 and it states that the Government has appointed a Minister to review the Resource Management Act. At 2.12 today in response to question No. 1 we were told that it was all OK and that the Resource Management Act was not a problem. One hour later the Government had appointed a Minister to review the Resource Management Act. Unfortunately the Government is not that serious about it—it has appointed David Benson-Pope. So it is not taking this issue very seriously at all. 
Mr Benson-Pope has been put in charge of the Resource Management Act matters specifically—not the Minister in charge of the Resource Management Act the Minister for the Environment. The Government has not used her. This is another case of the girls not getting the jobs. They are using Mr Benson-Pope. They are putting him in charge of a Resource Management Act review when just an hour beforehand the Prime Minister had told the House that it was all OK and that there was no problem with the Resource Management Act at all. 
Also I want to tell this Government that the problem with energy supply will not be just around Project Aqua. This country is also facing a huge problem with the transmission of electricity around the country. Transpower is facing huge problems as it goes about trying to upgrade the lines around the country because of the Resource Management Act. Transpower has been to the Government and has talked about it at the select committee. It is a major issue and the Government has done nothing. Today must be a happy day for Mr Parker. He is so strong—as the MP for Otago he has been resolute for the last 12 months not to be on any side on this issue. He has been neither for it nor against it. That might have seemed really smart but I have to tell Mr Parker that our polling shows it was pretty stupid and the member will see that coming next year. There is a train coming down Mr Parker’s track. He will stand in the middle of the track not knowing whether he is for or against it and it will bowl him over. 
This is a serious situation. Project Aqua was going to meet somewhere between 4 to 6 years of growth in electricity demand in this country. Without that the Minister needs to come off the fence urgently and decide where we will get the electricity that we need to grow. The Government needs to be upfront and honest with New Zealanders about its plan. Is it the Government’s plan to get rid of Comalco and feed that 15 percent extra into the economy? Is that the plan? The scuttlebutt around the Government departments is that that is the unwritten agenda coming from this Minister and ironically from the Minister for Industry and Regional Development Jim Anderton. Will Mark Peck’s last act be to see the Comalco contract not signed and that company leave this country just like he is seeing his schools closed in that part of the country? Is that the grand plan for the future or is there a grand plan around extra development and extra supply? If there is we have not seen it. We are not seeing it with exploration. 
The Government has said no to the Dobson hydro scheme and the Minister reaffirmed that today. No it will not allow that hydro scheme to be built. So companies are saying: “Well the Minister was agreeing this morning on radio saying we are going to see more boutique hydro.” Perhaps the Dobson scheme is too big to be boutique. Are we allowed only little wee uneconomic hydro schemes now? Is that what will supply us? What about coal? The Minister has been very anti-coal when he talks to people around the industry—very anti-coal. He is adamant that it is not the way forward. Well I say to the House that National will not be imposing any carbon tax on coal. National will repeal any carbon tax that Labour imposes because we do not believe that placing New Zealand industry at a disadvantage with artificial taxes such as the carbon tax is the way forward to encourage a strong growing economy. 
Is it any wonder that companies do not take up the Minister’s challenge when he says: “Go and build a station.”? That is what he said about coal in the House today. He said: “Go and build a station and see how uneconomic it is.” Well of course no one will build a station. The Government has not even determined the level of the tax. We are told it is about 1.5c. How can anyone plan 20 years out? They cannot even plan 2 years out in the energy sector because the Government is determined that we will not have coal and the Minister is determined that he will make it uneconomic. So we come back then to a Government that is simply sitting there without a plan. It is putting all its eggs in the wind basket. It is basically saying that we need a lot more windmills around the country and that will solve the problem. But everyone we talk to in the energy sector— even the State-owned enterprise Meridian Energy at the breakfast it hosted a few weeks ago—was at pains to say that wind was not the answer. They are engaged in it but they are at pains to say that it does not will not and will never provide for all the growth in demand. 
Hon Annette King 
: Who said that? 
Hon ROGER SOWRY 
: Keith Turner said that. The Minister of Health should listen a bit. She did not come to the breakfast. It was for Wellington MPs but she was obviously far too busy to attend a breakfast like that and it would have been useful. In fact I do not think there were any Labour members at the breakfast which just shows how contemptuous they are of the whole energy sector. They do not do anything at all to plan for the growth we need if we are to build a strong economy and have a reliable reasonably costed source of energy. This Minister has done nothing to provide that for this country. 
JIM PETERS (NZ First) 
: 
 Just over a year ago New Zealand First along with other parties in the House wrote to every council every chief executive officer of territorial and regional bodies and several major institutions and businesses in New Zealand seeking from them support for a review of the Resource Management Act. We in New Zealand First believed that after a decade of the Act in law and in practice the time had come to review it. The answer from the Government and its associated parties was: “No dice.” 
I was therefore absolutely amazed when I picked up Mr Copeland’s press release because last year in committee and out of it United Future stated unequivocally—and that was not the only occasion; I will mention another one later—that support was needed to reform and review many of the issues covered by the Resource Management Act. However at that time we had no support from United Future. When I read the statement made by Mr Copeland that: “Not least there is a very clear need for an urgent overhaul of the Resource Management Act.” I was quite amazed. Last year United Future members sat on the select committee and in this House and had the opportunity to be part of a renewal and rethinking of the Act for the next decade but they did not take it. 
Secondly with regard to the Resource Management Act I also found some problems with the recent comments made by the current Leader of the Opposition Dr Don Brash about the issue that has caused this debate—namely the demise of Project Aqua and the associated power generation in the Waitaki valley particularly the lower valley. When Dr Brash was down in that region on 10 March he said he was very concerned that the Government was bypassing the normal consent process under the Resource Management Act. He said that a framework was needed so that competing demands for water could be evaluated achieving a balance that would maximise the wealth of the country. That is what he said when he was down there at the beginning of this month. Over the last 1½ months I have seen from my friends on the right consistent swings in attitude to the Resource Management Act and Project Aqua. That statement made by National’s leader was but one. 
 The issue really is that the Resource Management Act should by now have been in the last stages of review. That Act was not the reason for the demise and fall over of the project. In fact a month ago I was aware—and it has been mentioned in the statement made by Dr Turner—that the project having recently completed geotechnical investigations has provided information that requires design changes for the project with an adverse impact on project economics. “Adverse” is the right word because that is exactly what was being found down there about 6 weeks ago. But the real reason for the fall over is not that and since about 10 past 3 yesterday there has been a rush of information from various people and parties about why the project fell over. 
Let me state what the real reason is. People from the Aoraki Water Trust and Mackenzie Country farmers know the reason and this one was volunteered yesterday to the  
Timaru Herald 
 by Meridian Energy spokesperson Alan Seay who said: “The High Court action taken last week by the Aoraki Water Trust and the Timaru and the Mackenzie district councils was the catalyst for the canning of Project Aqua …”. Dr Turner said that the decisions made in the High Court last week with regard to litigatory judgment sought by Meridian—and it was unsuccessful—highlighted the “significant uncertainty around the nature of water rights which could be battled on for years to come”. He said: “Either side of that case is likely to appeal the findings of the High Court and it could take years to resolve.” That is the reason I was told in Otago last year that this would go through two elections. The real issue that has caused the fall over along with the other reasons enunciated by Dr Turner yesterday is that the uncertainty of water-use rights on Lake Tekapo has produced a remarkable change of mind. One can understand that uncertainty. There are other reasons as well all relating back to the economies the timing and the work already done. 
I pause for a minute to pay tribute to that taxpayer-owned company and to the fact that it has in this case exercised prudence and care despite having spent millions and millions of dollars on investigative work on behalf of the New Zealand taxpayer and hydroelectricity consumer. Sometimes we in this House forget what that means. This project was not started yesterday; neither was it started last year. Meridian worked on this project and developed it over a long period. I commend firstly the board which was headed by Dr Small and secondly Dr Turner and his staff for the work they did. We have heard comments in recent weeks about the nature of Dr Turner’s work. We know that Dr Turner having worked for ECNZ and having found there was a need for certainty with regard to the central North Island supply—which had been made uncertain because of court decisions—made the very realistic and proper decision in 1990 to seek certainty for his company. 
The next matter I would like to raise in the House and which concerned the committee my party and me greatly relates to the rights of existing consent holders. The bill we brought to the House last week properly reflected the need to recognise the rights of existing consent holders and it set up a framework to examine and carefully consider the rights of all potential and present water users. In other words the framework took into account the river. It took into account present users and potential future users. Contrary to what has been said about Mr Parker that the committee—and particularly Mr Parker the deputy chairperson of the committee—achieved in relation to Project Aqua and its demands a reasonable result for the people of the Waitaki catchment that was not the impression I gained last week. It is not proper for it to be debated in the House and my colleague Peter Brown will pick up on matters of energy which were thought to be the matters for this debate. It is not proper for members in the House to maintain that the Resource Management Act was the answer. The Act applied in respect of the consents in Waitaki and would have resulted in the priority right for Meridian Energy. That is the actual result. Whatever one has been told that is what would have happened in practice and that would have been particularly unfair to farmers in North Otago and in the Mackenzie country and lower Waitaki valley as well. 
The approach we took on the matter—and I did not have time to say this last week so I am pleased to say now—is that the overall needs of the community in the Waitaki catchment area particularly the farming community and its ability and potential to reticulate and use water was of prime concern to us. That is why New Zealand First having worked alongside our friends from the National Party and ACT last year in relation to the potential form of the Act took a stance along the middle line—that is the framework as enunciated and the input of local authorities. It is very very unfortunate that just a week later the prime catalyst for this whole operation—namely Meridian Energy’s applications—is not being considered. However 70 applications are still to be heard. Therefore there is ample cause for this House to proceed with the bill. 
Last of all and most important within the bill is the genesis of a potential change to the Resource Management Act. To that degree although we commend a belated attempt by the Government to set up a junior minister in charge of the Resource Management Act the power not being there is of concern. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 New Zealand’s largest braided river has had a reprieve and so have the people of the Waitaki valley. The Waitaki is one of our grand rivers. When one goes down it in a boat one senses its awesome power. It is home to a number of species of endangered wildlife. It has considerable wetlands of ecological value along its margins. It is an international fishery virtually the only one in New Zealand that has all species of trout and salmon in the same river and tourists come from the other side of the world to fish it. 
But there are some whose whole mission in life is taming nature. It is time we accepted that whenever we want more we cannot just carve another slice off the finite environment. Project Aqua would have taken 73 percent of the water in that river completely out of the river channel into a canal. It would have reduced it to a shingle bed with a trickle. The same runoff going into the river diluted with 73 percent less water would have seriously deteriorated water quality until it was unfit for human contact. Worst of all Aqua would have produced nothing in a very dry winter because there would have been nothing left to go into the canal leaving us even more exposed on security of supply. We cannot continue to put all our eggs in the same basket of hydro from the same catchments. Aqua would have encouraged the building of back-up coal-fired power stations for winter at considerably increased cost and discouraged the building of wind generation which needs to be able to sell its product year round. Aqua would have produced nothing at all not a single unit before 2009 and possibly much later. 
Renewable energy is getting a better press these days than it used to and that is good. However the next step is to understand that although water that falls from the sky is renewable braided rivers are not. The Green Party has been publicising this latest assault on a spectacular river and later today I will seek to table 111 copies of our leaflet on Project Aqua and the Waitaki River so that other members in the House may understand why it was important to stop this project and the raft of other opportunities we have instead. So we celebrate its withdrawal. We congratulate Meridian which has always prided itself on being a renewable generator on its determination to seek other sustainable options that will come onstream much faster than Aqua could have. 
 It is said that Aqua fell over because of the Resource Management Act but the Act had been in place for years before Aqua was ever planned. It is quite clear that Meridian Energy thought it could get Aqua though the Resource Management Act and that is partly because of a loophole. There was no water plan and therefore there was no minimum flow set for the river. It is clear that the Waitaki bill as amended by the Local Government and Environment Committee with a high level independent authority setting an environmental base flow to protect the river ecology and the values of the community would never have allocated 73 percent to Aqua—nor should it. 
I pay tribute to the local community which generated more than 6000 submissions on the applications of Meridian Energy to take water. I think that response may also have warned Meridian that this was a project that just did not have community support. Fortunately Meridian has reacted quickly and it has happened in time for New Zealand to make other plans. We are facing serious issues of balancing electricity supply and demand and I put it that way very deliberately. For 25 years we have relied to meet all possible shortfalls on very cheap energy from the Maui gasfield. Because it was cheap it was squandered on wasteful inefficient uses in just 30 years when actually it was large enough to have lasted us for 100. We also face the prospect of reduced rainfall in the current hydro catchments. 
This decision has of course been welcomed by the coal industry and by its cheerleaders—United National and ACT—as a green light for coal. It is not. The world has got enough accessible coal to raise the carbon dioxide content of the atmosphere tenfold. Scientists tell us that if the carbon dioxide content of the atmosphere even doubles we are in for serious climate change. We have to get to grips with the idea that just because the coal is there does not mean it is safe to burn it. New Zealand has got enough coal deposits to generate power for generations—if we turn a blind eye to the huge environmental damage it causes. We should not. Clean coal is a myth. Sure one can reduce the sulphur and reduce the particulates and that has been true for some time but one cannot reduce the carbon dioxide; one cannot reduce the climate-change effects of coal. Just replacing Maui gas with coal without any growth or increase would double the greenhouse emissions from electricity. Meeting our current electricity growth with coal makes our Kyoto Protocol commitment unachievable it holds back new technology for decades and it positions us in the 19th century instead of the 21st. But it is not just the emissions; it is the mining damage the acid mine drainage the land subsidence and all the other environmental effects that go with coal mining. 
The Green Party will continue to challenge the “Black parties” on coal. We will challenge the “Big Coal parties” of United ACT and National. We will challenge the “Little Coal Party” of Labour and the Green Party will be the “No-new-coal Party”. New Zealand can meet its needs without either coal or Aqua. 
I want to refer back to what I said about challenging the balance between electricity supply and demand. We know that for 30 years there has been the science of “gap-ology”—the gap that is always supposed to be opening up between demand and supply because demand keeps on growing. We have to address both sides of the equation. Remember it was only back in the 1970s we were told that if we did not have a nuclear power-station built by the late 1980s we would be freezing in the dark in the 1990s. Well it did not happen. One needs only live where one is responsible for generating power to realise fast that investment in efficient lights fridges and computers is far far cheaper than investment in more supply. That is also true for the country. 
New Zealand is rich with opportunities to invest in energy efficiency. Many assessments show that 20 percent of our total electricity can be saved—cost-effectively. When I put that question to the Minister at question time he interpreted that as a 20 percent improvement in the uptake of energy efficiency. That is the National Energy Efficiency and Conservation Strategy target—but I have never supported it—that gives us only 2 percent a year. Instead we should aim at a 20 percent reduction in the energy per unit of gross domestic product. 
The opportunities in commercial lighting and air conditioning are huge. Energy audits of businesses like sawmills regularly find that 30 percent savings are possible. How many motorways out in the country miles from anywhere—no houses no pedestrians no cyclists—have full-scale lighting down both sides of the motorway for miles and miles? Yet motorcars have lights. Some end uses of electricity are simply not worth the environmental cost they cause. Then there are all the supply options when we have dealt with demand—for example direct solar use of heat in new buildings direct use of solar heat for water heating. The Minister said that wind generation could provide another 4000 megawatts. That is a huge proportion—about 50 percent of our current electricity. It is much faster than Aqua and it is cost-effective. The “wall of wood” coming towards us from the maturing pine forests contains within it enough waste not usable by the forestry industry which contains energy equivalent to half a Maui gasfield—80 petajoules a year. That is useful in industry for co-generation of heat and electricity. 
The options are there. Cheap energy is a myth. Cheap energy is like a flat earth. Cheap energy we have had for decades and because of cheap energy we have wasted it and we have built up a culture of energy inefficiency. It is not actually cheap at all. We have paid for it in sickness. We have paid for it in loss of our environment. We have paid for it in climate change. It is time we changed our pricing structures. It is time we changed our balance of supply and demand. It is time we went for a sustainable energy future and although I do not agree with the current Minister on everything I congratulate him on being the first one New Zealand has ever had to try to tackle that challenge. 
Hon KEN SHIRLEY (Deputy Leader—ACT) 
: 
 Meridian Energy’s announcement yesterday to can Project Aqua has certainly focused the attention of most New Zealanders and highlighted the looming energy crisis that this country is facing. Project Aqua represented the first significant investment in new generation since the Clyde Dam some 20 years ago. We know and the experts remind us increasingly often that our demand is expanding at over 2 percent per year. That is as has been pointed out not 150 megawatts; it is actually more like 200 to even 300 megawatts per year and that is just to keep up with the expanding demand of a growing economy. 
I believe that New Zealand has three comparative advantages over our global trading partners. The first is our temperate cool climate and abundant rainfall. That allows us to be a major efficient agricultural producer and the key factor is the relatively benign climate that we enjoy in our temperate region. The second key factor though and one often forgotten is a reliable supply of internationally competitive energy—specifically electricity. In terms of all our production we often forget that we are not so much exporting milk-powder and wood product; there is often more energy in the form of electricity in those added-value finished products—which create the wealth for this country and the jobs for our people—than raw product. A particular example is a tonne of milk-power. To dry that takes more value in electricity than the value of the milk input. The Whirinaki mill in Napier is an example. We are actually exporting electricity there. There is more value in the electricity in that finished pulp than there is in the wood going into it. 
We must continue to have an abundant readily satisfactory supply of appropriately priced electricity. I am not talking necessarily about cheap electricity but it must be cheap relative to our trading partners. That is what concerns me about the policies of this Government. It is going down a path whereby it is abandoning our key comparative advantages and it wants for its own mantra to drive up the price of electricity so it can justify the winners that it sees in terms of wind generation and what it calls “renewables”. 
 Regarding wind generation the point has already been made that the most efficient state-of-the-art wind generator does 0.8 megawatts. To meet our expanding annual demand we would need to build 200 to 300 such windmills every year forever. What the Danish who have become heavily dependent on wind generators have found is that the wind sometimes does not blow. Denmark finds that 37 percent of the time there is no generation. At least water although it can be unreliable is seasonal and can be predicted. Wind is totally unpredictable and although it may be part of our future mix it is certainly not the answer this Government pretends it could be. 
The other disturbing thing with this Government’s policy is its foolish adherence to the fundamentally flawed Kyoto Protocol. New Zealand is the only Southern Hemisphere country to have ratified with an obligation. Our key trading partners Australia and the United States have had the sense and presence of mind not to bind themselves into that fundamentally flawed process. But oh no this Minister sees it as a way of driving up the price. He would put a carbon tax on things like coal and fossil fuels so that his precious little windmills would then become more efficient. That is nuts. It is taxing the most efficient and lowest-cost option in favour of a higher cost option and somehow pretending it is now a cheap option because one has taxed its competitors. That is “loony tune” economics but they are the messages we are getting from this Government. 
I am deeply alarmed with the process the select committee got into over Project Aqua and the Resource Management Act amendment which was the allocation model because on the one hand the Government was at pains to say it was not rushing through this “think big” national development - lookalike legislation specifically for Project Aqua. “Not at all” it was saying. Yet on the other hand the Government said the legislation had to go through urgently there was a very truncated select committee process and during the second reading just last week Minister Marian Hobbs said: “It is essential that we pass this legislation as soon as possible.” My question to the House is: why is it not on the Order Paper for the urgency motion this Government will take later this afternoon? If it was true last week that the Government had to pass this legislation as soon as possible why will it not include it in the urgency motion so it can go through its final stages this week? It makes one think that perhaps the Government knew that Project Aqua would have the plug pulled on it this week. It certainly raises that question. Could it be that the real concern of the Government was political and that we are seeing all this incredible crashing of gears and U-turns as it screeches to a halt to try to pretend that everything will change? There has been a whole run of U-turns this past month. 
Project Aqua was looming to be another Save Manapouri campaign. Those of us who are old enough will remember the Save Manapouri campaign and the political fallout from that. I predict that this Government saw it was heading for a Save Manapouri type of situation at next year’s election so it directed those shareholding Ministers to give a direction for Meridian Energy to pack it all up and pull the can on that project even though it had already spent $45 million or $50 million on all the scoping for it. One would have to think there has been political intervention to get that extraordinary result because unquestionably we need the energy Project Aqua would have brought. It could have produced energy at about 4c a kilowatt hour which is way below the average and certainly would have added to New Zealand’s energy mix. 
There have been other extraordinary policies from this Government. Mention has already been made in this debate of the Arnold River power scheme where TrustPower wanted to upgrade an existing dam and generator from a small 5 megawatt station to a 65 megawatt station. It was not a big block of energy relative to Project Aqua but it was certainly very significant and sited on the West Coast within a rain-abundant area. It made sense. It would have made the West Coast self-sufficient in power. It would have obviated the need to put two large upgraded transmission lines into the West Coast and there would have been additional power available for export to the national grid. But what did this Government do? It said it could not upgrade a small alpine valley add to the dam size and flood a small area which was substantially broom and gorse because the Department of Conservation would not approve. That is the nonsense of this Government. 
This Government has no strategy for energy planning. It has nationalised our generators instead of allowing market principles to operate so that about 70 percent of our electricity is now in State regional monopolies with Genesis Power Mighty River Power and Meridian Energy. Our national grid is totally nationalised and run by the Government. It is not the market causing the problem; it is actually a lack of market and too much Government. That is the problem. I predict that as this energy crisis deepens this Government will continue with its panic policies and we will end up in an incredible mess which will be bad news for the New Zealand economy. 
There was a foolish decision in recent months from the Minister of Energy. He threw $150 million of taxpayers’ money at a Whirinaki site for a single-cycle gas generator in the hope that we never have to use it and in the knowledge that if we ever do it will be the most power we ever use. It is essentially a 747 jet engine that is bolted down on a stand and requires its own storage bunker of fuel at Napier wharf to supply it. It was a foolish decision but the Minister did it for political reasons. What we are seeing across the board in the energy sector is an increasing politicisation and bad decisions coming out of that process. 
BRIAN CONNELL (National—Rakaia) 
: 
 This is a project that was never going to fly. We have all heard the different price tags. As little as 6 months ago it was reported that Project Aqua was to be built for about $0.9 billion and now the last report has said there is a price tag of about $1.2 billion. When I quizzed Mr Turner about this at the select committee a couple of weeks ago he confirmed that it would not be built for $1.2 billion. He had no confidence that it would be built for that price tag at all. He did not say it but my best guess is it would be more like $2 billion - plus. The project was not even tendered internationally and the reasons are either that it could not be built for $1.2 billion and the Government knew it or—and this is probably more likely—that no international bidder would look at it for that type of money in particular under the types of constraints that Meridian Energy would be putting them under through this Government. Much has been made of the fact that Project Aqua would provide cheap power. But I put it to the House that if the cost model was wrong then the price model must also have been wrong because the cost of capital must flow through into the price model. What that suggests to me is that at $1.2 billion this project was so marginally priced that in the end not only could it not be built for that figure but Meridian Energy just said “No way!”. 
There is absolutely no doubt that this country needs more electricity generation. That has never been in doubt and the National Party has never argued that Project Aqua was not worth its merits on the basis of generating more electricity. What we were concerned about was the way it was being cherry-picked by this Government to rush through legislation because it would not address the real issue of the Resource Management Act. In my view Project Aqua notwithstanding the fact that it would have solved a short-term problem was not going to be a long-term solution and there is no doubt that it would have done damage to one of our last great rivers. One year in three there would still have been a crisis given that that is when there would be dry years. Given that the project would have taken at least 5 years to build—if it ever got consent in the first place—demand would have already outgrown supply by then and the question would be: “What do we do now—dam another river?”. Well I for one was not keen on that nor was the Government despite the fact that there was a reasonable alternative on the West Coast. 
 The Minister took a call before and told us that Dobson was not a goer because it was a pristine environment. The reality is that what has been protected is not a pristine environment but is gorse scrub and lupin. That is what the Minister is trying to protect and that is why he would not even look at this area. 
Hon Brian Donnelly 
: Wouldn’t even look at it. 
BRIAN CONNELL 
: Would not even look at it—would not even go there. He did not even leave his Wellington office. He is just too petty to consider this even on a commercial basis. What are the alternatives? Wind? Mr Shirley has already addressed that issue and exposed some of the shortcomings. I would add that some of the technology is still to be proven. Gas? The supplies of gas are limited. Coal? It is really the only other alternative. The Minister knows that which is why he tried to steer the conversation away from coal in the first instance. 
New Zealand has over 1000 years of coal reserves and we will simply have to use them. Burning coal using new technology is doable. Yes there are some emissions but we can reduce those dramatically. If we want a secure profitable cohesive nation then we must guarantee generation supply and this is the only way we can do it. Better still if we burn coal we can site the constructions exactly where we need them and we will not lose huge amounts of coal from transmission losses. For example the Christchurch to West Coast railway line—and we have huge amounts of coal on the West Coast—is only 36 percent utilised. The infrastructure for getting coal where we need it is already in place in some places. Coal is affordable. If we backed out of the stupidity of the carbon tax that this Government imposed on us by rushing in to sign and ratify the Kyoto Protocol then coal would be affordable and more important would guarantee a constant supply of generation. 
Let us be clear. The real reason besides the cost that Project Aqua fell over is the Resource Management Act. Meridian Energy said in its own press release that one of the reasons it walked away from this project was uncertainty concerning resource consents—in particular whether Meridian Energy could secure a consent what the conditions of any consent might be when the consent might be available and how much water the consent would provide. Meridian Energy had absolutely no surety that the Resource Management Act would deliver this project for it. The Government has belatedly accepted that it has to do something about it. At least I thought it would do something about it. It transpired that the Government put Mr Benson-Pope in charge of this. People will stop in their tracks when they hear that press release. When that goes over the sound waves of New Zealand people will stop think about it and say: “Wow electricity issues are solved now. Bring it on!”. I can tell members that this Government has suddenly lost all semblance of credibility. 
The other person in the House who has been a big winner today the person who is most relieved is—wait for it—Mr Parker. He has showed absolutely no leadership whatsoever on this issue. In fact people in the Waitaki valley can never find him to take on a leadership role or to ask his opinion on this. They have actually coined a nickname for him. They call him the “Parker pimpernel”. That is what they call him. They search for him here they search for him there but they can never find that dastardly “Parker pimpernel”. That is what they are saying about him down there. I am relieved because he is in the House and I know that he will get up take a call and tell us exactly what we need to do now in this country to guarantee a constant supply of electricity generation. If we believe his press releases we know he is the one with all the answers. I cannot wait to see this guy get on his feet to take a call. 
The other reason that Project Aqua fell over was the attitude that Meridian Energy displayed toward the local community. It really adopted a “bull in a china shop” mentality and in particular its attitude towards local farmers was nothing less than appalling. Meridian Energy wanted all the water for itself. That should have told us something in the first place about how marginal this project was. Meridian Energy would have us believe that of the 73 percent of water that needed to be diverted down those canals it needed at least 95 to 97 percent to make the project fly. The local farming community had news for Meridian Energy. By Order in Council the community protected 15 cumecs of water that were guaranteed for irrigation. 
Meridian Energy thought it could thumb its nose at those folk so the people got coordinated. They got organised. They got a legal opinion from one of the leading legal firms in the country which said: “You guys have a very strong position.” Meridian Energy was essentially outmanoeuvred. In the end Meridian Energy because of the costs the Resource Management Act and its attitude to the local farming community around Kurow—the community said it had to be more reasonable—threw up its hands and said it was all too hard. 
That we must secure a supply of energy is not in doubt. It is absolutely essential but we need to plan for it long term. We need to use a strategic approach and look at the resources we have in abundance—which is coal. I cannot abide the fact that we will continue to dam rivers willy-nilly. We need to use a strategic approach use our resources and use the technologies available to us if the electricity crisis that we are now facing is to be avoided. 
DAVID PARKER (Labour—Otago) 
: 
 Mr Connell has done it again. Whenever he or other National members get up to talk about this issue do they deal with the substance of it? No they attack me. I hold the electorate of Otago—having taken that formerly safe National seat at the last election—because the electorate knew that the Labour Party would treat it fairly and so it does. We have had two contributions from National members today. First of all we had Roger Sowry who amongst his inventions suggested that he first learnt today that the Government appointed David Benson-Pope responsible for a review of the Resource Management Act. All the rest of us in the House know that that was tabled on 26 February when Mr Benson-Pope was appointed Minister and his delegations announced. Sorry Roger Sowry wrong again! 
Then we heard from Mr Connell again. Mr Connell last rose to attack me soon after he had put out a press release claiming that I had not been to any of the meetings in the electorate that Ministers had called in relation to these Project Aqua issues. I actually chaired the meetings. Obviously he was not there. Obviously he did not read the newspapers either because they reported that I chaired the meetings. 
Then on the one hand we heard that Mr Connell thought the project had been pulled because the cost had in his opinion ballooned to $2 billion yet 30 seconds later we heard him say that it was all because of Resource Management Act problems. What a load of cobblers! Project Aqua was a massive project. It was a $1.2 billion project would have had a 60-kilometre canal—virtually all of which would have been in my electorate—and would have had six hydro stations about the size of the Beehive. The 60-kilometre canal would have been as wide as this building including the batter. Up to 70 percent of the Waitaki River would have been put through the canal and 32 million cubic metres of earth would have had to be moved. This was a big project. 
John Key 
: So? 
DAVID PARKER 
: So Resource Management Act principles ought to be applied to decisions like this. I am absolutely proud of the position the Government has taken. The Prime Minister said it well yesterday. She said we are not in an era when Governments legislate for specific projects. We do not “think big” them. Who would? Despite its claims to the contrary recently National would. Last year Gerry Brownlee said the Resource Management Act ought to be truncated so that there were no delays before Project Aqua went ahead. So did Gerry Eckhoff from ACT. 
John Key 
: That’s true. 
DAVID PARKER 
: Mr Key says that that is quite true. So they do now acknowledge that despite the seriousness of this project they would have truncated proper Resource Management Act processes and let the interests of my electorate just be overridden in favour of the national interest. I am proud my Government did not do that. 
 I pay tribute to the members of the community who have participated in processes to date. Small communities facing applications like this are always challenged. There is an element of unfairness in that which is in the nature of any big decision. I take my hat off to those who stood up and shouldered those responsibilities on behalf of their community. Many in my electorate are pleased that Project Aqua is off. Some are disappointed but the vast majority of people—be they for or against it—are satisfied that the Government listened to their concerns and did not override due process. They are grateful that the Government did not “think big” this project—as National at times proposed it should. 
In terms of the decision to call Project Aqua off the  
Otago Daily Times 
 summed it up pretty well today when it stated that basically Meridian’s hand has been forced by growing uncertainty about the project and increasing costs—costs that Meridian understandably did not foresee when it began its investigations. Then it went to state something that I would like to record: “To give Meridian its due it has usually played with a straight bat.” That is true and I agree with Mr Jim Peters’ comments earlier that Meridian has behaved honourably throughout this and that it has complied with its obligations at law. 
I also say that I defend and applaud its decision to take a decision now to proceed no further. It has spent $45 million on the project in addition to some of the land acquisition costs—it will largely get the land acquisition costs back when it sells the land if it does. The $45 million spent on planning the project and engineering advice etc. is equivalent to 3 percent at most of the project cost. That 3 percent was wisely spent and I ask listeners and members to consider that compared with the last time a Government approached a big project which was the Clyde Dam. Hundreds of millions of dollars of taxpayers’ money was wasted because there was inadequate planning at the time in addition to years of delay in the commissioning of the dam which had consequences in terms of the availability of electricity from the project. 
The Minister of Energy is being totally upfront when he says that the most important thing to him in terms of energy planning was getting a decision early rather than late so that alternatives could be pursued in the event that Project Aqua did not proceed. The worst outcome here would have been 2 further years of planning for Project Aqua and then Meridian deciding not to proceed with it because of the costs at that stage. Had that happened we would have lost 2 years in terms of the creation of other sources of generating capacity. 
I want to say something about energy generally in New Zealand. When the Hon Pete Hodgson took over this portfolio about 4 years ago we had come through Max Bradford’s so-called reforms. Since then of course the Government has had to intervene through the regulation of natural monopolies—the lines companies—and we have also had to intervene in terms of reserve capacity. We have also done some central planning of likely demand for electricity. There is a very good document that is available to people on the web at www.med.govt.nz under the energy section which looks at the New Zealand energy outlook to 2025. 
Reading that document dispels a few myths. Firstly we are not yet at crisis point for electricity generation. Secondly there are a number of alternatives. Thirdly coal is one of those alternatives that is being considered but at the moment it is more expensive. No one is prevented in New Zealand from building a coal-fired power station. A company can apply for and get a resource consent if it thinks it can make money from doing so. Companies do not think they can make money from doing so as evidenced by the fact that there have been no applications for such stations. It is not the fault of the Resource Management Act that Project Aqua or other coal stations have not proceeded. 
That is evidenced by some of the large consents that have been granted under the Resource Management Act. For example there are gas plants at Stratford and Otahuhu C that have been consented under the Resource Management Act. Various smaller hydro stations have been consented in my own electorate. There is also the wind farm near Palmerston North that has recently been consented. There is the Tauranga bridge and the pipeline. So it is not the Resource Management Act that has got in the way of Project Aqua it is the underlying economics and risks—as Meridian has said—in the upper catchment concerning whether other people can get some of the water that is already going through those dams which would threaten the viability not only of those dams according to Meridian but also of Project Aqua. Those are uncertainties that were not created by the legislation recently promoted to try to deal with planning deficiencies in the Waitaki but were consequences of the underlying law. 
In terms of the question that has been asked of me as to whether we will see any large-scale hydro in the future I think the jury is out on that. One of the things that became evident from Project Aqua was that there is change in the relative value of water for hydro compared with other uses like irrigation. For the first time in New Zealand we have a widespread water shortage. Produce prices have pushed up land prices. The economics of irrigation in comparison have improved. Technologies have changed through the likes of K Line irrigation making irrigation of rolling country now permitted. At the same time we have seen a narrowing of the gap between hydro and other sources of electricity like wind which has meant that there are choices for renewables that were not there 10 years ago. 
I am absolutely confident that the Government has the future energy needs of our country under control. I am sure that the Minister is dealing competently with managing demand-side issues so that we do not waste our energy as evidenced by the fact that we have a target over the next decade of increasing energy efficiency by 20 percent. I am confident that we will not have blackouts or brownouts. I am confident that this Government has properly protected the interests of my electorate against the calls for “think bigging” Project Aqua that were made by other parties. 
The debate having concluded the motion lapsed. 
Income Tax Bill 
Instruction to Committee 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I seek leave for the Committee stage of the Income Tax Bill to be a single debate on all the provisions of the bill and for the preliminary provisions parts and schedules to be put as one question at the conclusion of the 3-hour debate. 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: Is there any objection to that course being followed? There appears to be none. 
In Committee 
Clauses A1 and A2 Parts A to Y and Schedules 1 to 23 
JOHN KEY (National—Helensville) 
: 
 I rise on behalf of the National Party to address the Income Tax Bill which National is supporting. National started the genesis of this work back when it was in Government in the 1990-99 period. I doubt I will be the only speaker to mention the sheer size of this legislation which is thousands— 
Hon Member 
: Over 2000. 
JOHN KEY 
: —over 2000 pages—the largest bill introduced to the House. It is an absolutely enormous bill and an enormous amount of work has gone into it. I want to pay tribute to the advisers who have been helping the Finance and Expenditure Committee and the officials who have worked very hard on it. The simple idea behind the bill of course is a rewrite of the Income Tax Act 1994 and to put into simple language—if there is such a thing—the tax code that operates in New Zealand and the basis under which New Zealand taxpayers will be required to adhere to tax law. 
There are some interesting elements of the bill to which I want to make reference but I want to make one very simple comment. The size of the bill and the huge number of clauses contained within it in some part are of the Labour Government’s own making. I say that because the top personal tax rate was increased when the Labour Government came into office in 1999 from 33c in the dollar—a fair reasonable level of taxation if I do say so myself—to a 39c rate. Why was the top personal rate of taxation increased? It was not because the Crown accounts required it. Last year alone the operating balance excluding revaluations and accounting changes was $5.6 billion; this is truly a Government awash with cash. It was simply because there was a degree of envy—the Labour Government felt it was inappropriate that the entrepreneurs of New Zealand should enjoy such a lower level of taxation so it increased the top personal tax rate. 
 Lo and behold once the Minister had scuttled off to Cabinet with that wonderful idea of increasing the top rate of personal taxation he was then besieged in his office with mountains of paper on how to address that change and we now see it reflected in the Income Tax Bill. There are literally hundreds of clauses that have to reflect all the complexities added to our system by an increase in the top personal tax rate. All sorts of areas will be addressed during the debate this evening no doubt by numerous speakers on the concept of what impact that increase will have—for instance on the split-rate fringe benefit tax and the like. 
I want to draw a reference for the Committee on one point which is that in the 1999 Labour credit card one of the claims made by the Labour Government was that by increasing the top rate of personal taxation only 5 percent of taxpayers would be affected. Well we know that that has proved to be incorrect. Figures now released by the Inland Revenue Department show quite clearly that one in five full-time taxpayers now pay the top rate of personal taxation and bracket creep—or fiscal drag as it is otherwise known; the situation where inflation drags people into a higher level of taxation—has caught out so many New Zealanders who maybe earlier on had not thought they would be affected by it. 
Clayton Cosgrove 
: Where is the member on this bill? 
JOHN KEY 
: I will come to that in a moment but this is a long and drawn-out debate so let us enjoy it while we are in the early stages. That is quite an amazing statistic—that one in five full-time taxpayers will now be caught by the increase in the top rate of personal taxation. 
This is a very wide-ranging debate and I want to spend some time in talking about tax rates in New Zealand. They are applicable because Part B of schedule 1 talks about the basic tax rate. Very interestingly on Friday that wonderful international accountancy firm KPMG listed its world tax survey. It made very interesting reading for those who like to look at that type of data. The first thing I noted from that survey was that at the time the National Government left office in 1999 the average company tax rate paid in the OECD—that is right by the top 30 rich nations of the world—was around 35 percent. Former treasurers in that National Government like Bill Birch and Bill English can look back and reflect on what a wonderful position they left New Zealand corporations in because the company tax rate at that time was 33c in the dollar. We can compare that with the average company tax rate in the OECD as shown in the KPMG survey of 35 percent. 
What was released on Friday in that report was very interesting. The average rate of company taxation in the OECD now is 29.96 percent—that is it is under 30 percent. What is the average rate of company tax in New Zealand? It is still 33 percent. So under a National-led Government business had a competitive advantage with other countries in the OECD; under a Labour-led Government business is at a disadvantage to other OECD countries. It is a pretty simple message and it is one of the reasons Don Brash boldly went out and told the business community a few weeks ago that we would lower the rate of company taxation when we regained the Treasury benches in 2005. That statement was greeted with such a warm response from companies because they know that company tax is a withholding tax they know that company tax pays a significant role in encouraging investment in New Zealand and they know that company tax is a cost on a business. 
Secondly when we look at that rate of company taxation we note a very interesting fact that 87 percent of all companies in New Zealand are small businesses. When those businesses are built the building cannot be done with easy equity issuing on the stock market. They rely on their own capital and their own hard work and on the reinvestment of profits that are earned in the business. So to allow New Zealanders to keep more of that income in their businesses and to grow their businesses we are allowing them to take an entrepreneurial spirit—to take a progressive approach to building a brighter and fresher New Zealand. I for one am quite happy to declare that I would like to see the company rate of taxation in New Zealand even lower than 30c in the dollar. 
Darren Hughes 
: What rate? Give us a number. 
JOHN KEY 
: The lower the better I tell the member. That is what I would like to see for the rate of company taxation in New Zealand; the lower the better. Let us look at Ireland which boldly took the step of reducing the rate of company tax to 12.5 percent and what have we seen? The Irish miracle—the Gaelic miracle! It has been unbelievable. I suggest that in one of Mr Hughes’ long recesses he wanders off to Dublin and has a look at the economic miracle that has taken place through that great and bold step. If New Zealand could look at doing that I suggest that the New Zealand business community would be so much better off so I want to make particular reference to it. 
I further want to make reference to the Minister of Finance’s comment when National declared that it would lower company taxes to 30c in the dollar: he was very scathing. I was quite surprised. Rather than welcome that as a wonderful and progressive idea for building a better New Zealand he told the people of New Zealand that it would simply deliver all the benefits off shore. Of course he was talking about foreign ownership of New Zealand companies. Quite surprisingly when I sent him a couple of parliamentary questions that asked why he thought all the $600 million that would be released into the economy by the reduction of the level of company taxation from 33c to 30c in the dollar would take place off shore he came back to me and told me that less than half would go off shore—and that it is not clear that even half would go off shore because so many foreign owners of businesses in New Zealand want to retain that income in their businesses and want to grow even stronger and better businesses in New Zealand. 
So I think that that is quite a spurious argument. It really just goes on to tell us that the general fundamental belief under a Labour-led administration is that higher taxes are better—they allow more redistribution—and there is no progressive agenda along the line. 
The next point I make is in relation to company taxation and why company taxation rates should be coming down. I know that Mr Hughes is a bit confused about the fact that taxes actually can go down— 
Darren Hughes 
: What number? Give us a number. 
JOHN KEY 
: When one grows up in an environment where taxes only go up of course one will think they can only go up. But we on this side of the Chamber have seen people who have taken the bold step of believing that any form of taxation can be lowered. I know that it has not actually happened on that side of the Chamber but it has certainly happened on this side. We believe in and have demonstrated a lowering of the tax rate. Sixty percent of all New Zealand businesses earn under $38000 and therefore are paying a higher level of taxation by paying the company rate than they would pay if they were taxed on a PAYE basis—and they themselves are over-taxed. That is another very good reason why the rate of company taxation should be lowered in New Zealand. 
When we look across the specifics of this bill and look at the general impact of taxation on New Zealand we see that a very interesting question is raised about whether New Zealanders are over-taxed. I do not think it takes a helluva long time to work out the answer to that when we look at the size of the surpluses the Government is running. Why is the Government running such significantly large surpluses? 
Hon David Carter 
: Greed. 
JOHN KEY 
: That is right. 
Hon RICHARD PREBBLE (Leader—ACT) 
: 
 The ACT party has voted against the Income Tax Bill we are now debating in its Committee stage and let me give members 2307 reasons why the ACT party is opposed to this tax bill. The first is the number of pages of tax law that we are about to implement—2307 pages of law are required for this Government to collect income tax. Why do we need so much law? The reason is quite simple: the Government is now taking 40 percent of everything produced in this country. The citizens of New Zealand would never voluntarily hand over 40 percent of everything earned so we need 2307 pages of what really are police State measures in order to be able— 
Clayton Cosgrove 
: Oh! 
Hon RICHARD PREBBLE 
: The member says “Oh!”. Under this bill the Inland Revenue Department can enter private property; it does not need any sort of permit from the courts. It can open up a person’s records. These most certainly are police State measures. The ACT party is opposed to the Government taking that amount of tax. 
But let me give reason No. 2308 and it can be found on page 2026 which states: “The basic rate of income tax for the taxable income of a Maori authority is 19.5 cents for every $1 of that taxable income.” The rate of tax for a non-Maori company is 33c so not only do we have two laws in New Zealand but we have two different tax rates depending on race. 
Hon Harry Duynhoven 
: The rate of tax and the average rate of tax. 
Hon RICHARD PREBBLE 
: I ask the member who is interjecting to run in New Plymouth on the basis that Maori ought to pay a lower tax rate than the general population and see what happens to his majority in the next election. 
Hon Harry Duynhoven 
: Mr Prebble you know that is a fallacy. 
The CHAIRPERSON (Ann Hartley) 
: If the member speaks across the cross benches it is very hard for the member to hear. 
Hon RICHARD PREBBLE 
: I say to Mr Duynhoven that he should read page 2026 and he will see that I have quoted the bill accurately to him. 
But if he would like to turn to page 2029 he would see the next reason that we should vote against that. It says—and I will read it to him given that he says this issue is a fallacy—that the rate of tax for every dollar of taxable income on so much of the taxable income as is more than $60000 a year is 39c. That is the so-called “envy tax” and is the way that this Government has increased income tax that it said would not be increased. Labour promised: “No rise in income tax for the 95 per cent of taxpayers earning under $60000 a year.” Twenty percent of all full-time workers are now paying the 39c tax rate. The “envy tax” was never needed. We have had a surplus every year yet the Government tells us that it is not its priority to cut income tax and unfortunately so does National. 
I say to this Committee that that rate of income tax should be cut and should be cut right now. One of the reasons for that is it is the investment rate; it is the rate paid by people who are actually investing and creating the jobs and the growth that the two major parties say they want. The jobs and growth come from people investing yet this Government hits those people with a 39c tax rate. 
The ACT party makes no apology for pointing out that people on $60000 a year are not rich; they are on a middle income. We also point out as Don Brash did before he was an MP that a couple on $100000 a year with children pay 100 times more in tax than a couple on $25000 a year who qualify for family support. Who thinks that is fair? Obviously the Labour Party does. 
CRAIG McNAIR (NZ First) 
:  
There were some submissions that the Finance and Expenditure Committee felt would enhance the Income Tax Bill. I will share with the Committee just one or two of the submissions that were very important to me and that I am very happy to see accepted and taken on board. 
I will share just one submission with the Committee this evening and that was the one from Business New Zealand PricewaterhouseCoopers the Institute of Chartered Accountants of New Zealand and the New Zealand Law Society. They submitted that a transitional provision should indicate that the provisions of the rewritten Act must be interpreted in the light of the corresponding provisions of the Income Tax Act 1994 and associated judicial interpretation other than intended policy changes. They submitted that the transitional provision should also make clear that the rewritten Act is not intended to change the meaning and effect of the Income Tax Act 1994. 
The officials agreed that the bill should contain transitional provisions and indicate that no change in the effect of the law is intended. Where the meaning of a provision in the rewritten Act is unclear or gives rise to absurdity the old law is to be used as an interpretive guide to ensure that no unintended changes in law occur. Transitional provisions should not apply to notified changes in law arising in the rewrite nor to subsequent amendments to provisions in the rewritten Act. The officials agreed with this approach as it ensures that the plain words of the rewritten legislation have full effect from the commencement of the new Act. In conjunction with the Government wanting to promote retrospective legislation to correct unintended changes these further transitional provisions will provide the level of protection sought by practitioners. I believe that was a critical provision in order to give certainty and that the old law should be an interpretive guide in some way shape or form. 
In speaking in the Committee stage of the Income Tax Bill I will take a moment to mention in relation to the last couple of speeches the amount of time we have sat in the Chamber listening to different parties—namely the National Party and the ACT party—say that income and company tax cuts are basically the answer to all of our problems in this country. I say to those members John Key and Richard Prebble that I believe that their way of thinking is just a little bit lazy. As a nation we have exports of roughly only US$3600 per person. Mr Key mentioned how much of a success story Ireland is but that country has an export strategy as well and that is something we do not have and we need. So we need to look at Ireland’s US$19000 per man woman and child and at Singapore’s US$34000 and I say that because we need to have tax incentives for exporters rather than always thinking that the answer to our problems is tax cuts for the rich. I firmly believe that. 
I have to ask myself after hearing John Key and Richard Prebble whether the National Party and the ACT party have a vision. 
Clayton Cosgrove 
: No. 
CRAIG McNAIR 
: Members of the Government say they do not have a vision. I believe that the only vision the National Party and the ACT party have—mainly the National Party because this is what its leader said once—is to have 10 million people living here in New Zealand and to sell the rest of our State-owned assets the last that we have. One asset that I am talking about is Kiwibank. New Zealand First has a bigger vision for New Zealand than that. The National Party needs to think about tax incentives for exporters rather than just chopping the highest tax rate from 39c to 33c—and it does not even really want to do that. We want to encourage this Parliament and this Government to think outside the box. Instead of just thinking about tax cuts for the rich let us give a 20 percent tax rate on new export net profit. 
With regard to National’s thoughts on tax cuts for the rich and not helping the Kiwi battler I will read a question that National’s associate spokesperson on finance asked the Minister of Finance. He said to Dr Cullen in respect of Kiwibank: “… why does he not just admit that the people most happy with New Zealand Kiwibank are the other banks in the New Zealand system which have managed to give that bank the poorest most unprofitable worst accounts?”. I agree with Dr Cullen when he said: “That was certainly a very revealing question. New Zealanders who do not have large wealth and large incomes—according to the National Party’s deputy finance spokesperson—are people not worth having in one’s business.” I say that New Zealand First members have a better vision for the New Zealand Kiwi battler—not the Kiwi battler with three Jaguars in the garage but the Kiwi battler who is earning $50000 a year—and we have a better vision for this country as far as our tax system and our tax laws are concerned. 
In closing I say that New Zealand First does support this bill. One would have to question whether with more than 2000 pages the bill is simplifying the legislation but it is; tax legislation obviously is so complicated. New Zealand First supports the bill. 
JOHN KEY (National—Helensville) 
: 
 I want to go back to the point that Richard Prebble first raised in his speech. It was the very interesting issue about the special rate of taxation applied to Maori trusts at 19.5 percent. We live in a world where the Government wants us to believe that there is one rule for everyone. Well I have been flicking through all 2307 pages of the bill looking for the rate of taxation for another sort of New Zealand business at 19.5 percent. I have looked at clause after clause and I cannot find it because the rate of taxation for a company in New Zealand is 33 percent. 
When someone sets up a company in New Zealand the Inland Revenue Department does not ask: “What do you think your average income will be?”. The department does not come to someone and ask: “Do you think you will be earning less than $38000 a year and therefore your income might be less?”. The department does not come to someone who sets up a personal trust and ask: “Excuse me Mr Key do you think you will be earning less than $38000 a year in your trust and therefore the rate will be a different rate from 33 percent?”. No the Inland Revenue Department taxes a company whether it is small or large a trust whether it is small or large and a partnership at 33 percent. Readers of the bill may be just a little bit shocked at why there is a special unique rate of taxation for Maori trusts at 19.5 percent and that is a very good question. I ask Mr Cosgrove why that is the case. 
Clayton Cosgrove 
: You’re telling a story. 
JOHN KEY 
: Yes I am telling a story and I will be turning the pages as well. I will tell members the reason. It is because it is deemed that the end-users of those trusts are unlikely to have income greater than $38000 a year. Therefore it is deemed that in the hands of the receipt holders it is pretty likely that their rate of taxation will be 19.5 percent. Rather than make them go through the hassle of having company tax withheld at 33 percent and therefore having to make a claim on the Inland Revenue Department at 19.5 percent and receive the benefit we may as well just get on with it and tax them at 19.5 percent in the first place. That sounds pretty logical to me. It is logical if it is a Maori trust. It is OK to assume that Maori trusts will earn less than $38000 a year and therefore be taxed at 19.5 percent. But if I wander down to the Inland Revenue Department in my home seat of Helensville and say: “Can I please be taxed at 19.5 percent?” they will laugh. They will show me the door. They will say: “Mr Key yours is not a Maori trust. You can’t have a special rate of taxation. We’re not in the process of dishing out special rates of taxation to anybody who wanders in the door. If you were a Maori trust then you could be taxed at 19.5 percent.” 
When the Coordinating Minister Race Relations the Hon Trevor Mallard does his review I wonder whether this special rate of taxation will be on his radar screen. I predict that when this is exposed for what it is as it truly will be—for the unusual position shall we put it that way compared to other trusts in the country including other community trusts—I suspect that a very sensitive Labour Government will change the position. That is my prediction. If we start setting rates of taxation on what we believe the final end-user to be—incorporations and trusts—that is fine. I do not necessarily disagree that that cuts down on the paper work the administration and the hassle but I say let us have it for everyone. Let us have that for the John Key family trust if he thinks that that rate of taxation will be lower than 19.5 percent. [ 
Interruption 
] I am happy to pay my fair share of taxation. But if my earnings will be less than $38000 then I welcome the opportunity to tax myself at 19.5 percent. 
Jill Pettis 
: One ornament on your mantelpiece would keep us in clover. 
JOHN KEY 
: I am sorry; I cannot hear all the screeching that is coming from the other side of the Chamber. There is a whole lot of noise going on. What did Mrs Pettis say? 
Jill Pettis 
: I have seen a picture of your mantelpiece in the paper. 
JOHN KEY 
: I am sorry but the Inland Revenue Department does not tax mantelpieces. That is not what it looks at when it is taxing things. 
CLAYTON COSGROVE (Labour—Waimakariri) 
: 
 That was an astounding speech from the member. I thought the member was better than that. I think that in National Party terms he is the moderate branch of the National Party. But we saw in that speech that his boss has pumped him up and punched him full of research notes and he has made a speech that he does not really agree with in his heart of hearts. They pumped him up punched him out there as the Opposition associate spokesperson on finance and told him to run the race line which he did. I am a bit disappointed because I think that bloke is not the worst National Party member in the Chamber. I think there are a helluva lot who are worse than him but he disappoints me. If he does not know why the Inland Revenue Department would not accept a tax return in which he claimed 19.5 percent on his income alone then he should not be Opposition associate spokesperson on finance. I think the Lexus the BMW and the mansion in Helensville or wherever it is would put paid to that. 
Let me dispel the usual National Party line. Its members tried to raise this argument in the debate on the Taxation (Maori Organisations Taxpayer Compliance and Miscellaneous Provisions) Act when they talked about why it is that Maori authorities are taxed at 19.5 percent. They ran an argument as did Mr Prebble that this was outrageous that it should be changed and that they would change it. Why has the National Party not changed it since this scheme of arrangement has been in place since the 1950s? How many National Governments have been in place since the 1950s? There is silence. Who was in power during most of that period? The National Party. There is silence again. 
I will tell members why that scheme of arrangement was put in place in the 1950s and endorsed by National Government after National Government. It is because the assets of a Maori authority unlike a private or public company are communally owned. Maori authorities are restricted in terms of their activities. They cannot sell those assets. They are restricted in what they can do with them. Also 90 percent of the recipients as Mr Key pointed out are on the lowest rate of tax. But the National Party would have the listeners in this country believe that any recipients of dividends from a Maori authority pay only 19.5 percent and if they earn extra income and go up into the top bracket they pay only 19.5 percent whereas the rest of us have to pay a different tax rate. That is not true. If they get a dividend from a Maori authority they pay 19.5 percent and if they earn extra income and move to a higher tax bracket then like any other Kiwi white yellow black or brown they pay the same rate of tax at the end-of-year wash-up—the same as everybody else. That is the truth for the benefit of Mr Prebble. That is the truth for the benefit of the National Party. I make this point again: it has been around since the 1950s because it acknowledges the special arrangement the communally owned and restricted arrangement that Maori authorities have over their assets. So that put paid to that little bit of spice from the National Party corner. 
 As chairman of the Finance and Expenditure Committee I want to pay tribute to committee members. I see that Dr Lockwood Smith is in the Chamber. He was on the committee throughout this tax bill which I believe is the biggest bill to come before this Parliament if not Parliaments in the Commonwealth. It seeks to do something that is relatively logical in taxpayer terms—that is to simplify. I acknowledge Mr Prebble’s point though. It is a bit ironic that we get 2000 or 3000 worth of pages of tax law that is designed to simplify but it is. It does not rewrite tax law in terms of new policy. It does not attempt to promote any new policy areas. It attempts to simplify and make things easier for taxpayers. 
I want to quote from that venerable tax commentator from PricewaterhouseCoopers tax partner John Shewan. He likens the process to repiling a 100-year-old house. He said: “Sooner or later the old framework has to be rebuilt as it just doesn’t cope with current circumstances. That is the position the old Income Tax Act had got to. While the new Act will be a shock to fully depreciated tax advisers it is a necessary exercise.” I think it is a necessary exercise. The process predates this Government. The process I believe to rewrite these tax laws to make them simpler and to give some certainty was started in 1994. The committee’s recommendation that the bill come into force on 1 April 2005 instead of 1 April 2004 was in order to give some transition and certainty. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 The Committee stage of this bill is very very important for New Zealand. I am not 100 percent sure people will have gathered that yet. This bill is a complete rewrite of our Income Tax Act; some 2000 pages of it. This particular bill deals principally with Parts C D and E of our Income Tax Act. Part C of the Income Tax Act sets out what income is Part D of the Income Tax Act spells out the deductions that are allowed from income prior to payment of tax and Part E of the Income Tax Act spells out the rules in respect of timing of income because obviously decisions have to be made as to whether income relates to this year next year last year or whatever. So this is hugely important. 
This is a huge fundamental rewrite of our Income Tax Act and there have been many changes. I guess that hundreds of thousands of words have been changed in our Income Tax Act. If any of those changed words produce a different outcome in a court of law our taxpayers may be caught out. This rewrite of the Income Tax Act started under the previous National Government but Parts C D and E which are fundamental parts dealing with income deductions and timing have been dealt with by this Labour-led Government. If the thousands upon thousands of changed words change the Act’s meaning then there are serious consequences for New Zealand taxpayers. 
The Finance and Expenditure Committee heard from major submitters including the Institute of Chartered Accountants and the Law Society. The committee heard that both those major organisations were deeply concerned about unintended changes to our law. They explained it this way. Let me try to make sure that the Committee understands what I am getting at. Let us say a taxpayer relies on this new bill when it becomes an Act. If that produces a different result from the previous Act that this replaces and the Government enacts retrospective legislation to change it back—because the Government has said that it does not intend to change any of the meaning—what happens to that taxpayer? Will the taxpayer face penalties? Will the taxpayer face use-of-money interest requirements? What will happen to the taxpayer if he or she relies on this new Act as passed by this Parliament with all the hundreds of thousands of word changes in it and in fact it produces a different outcome from that which the old Act would have produced? The Government I understand has made a commitment that it will act retrospectively to change it back. But there is a further complication. This Parliament cannot bind a future Parliament. So who can give the taxpayers of this country an ironclad assurance that there will be retrospective legislation? If after the next election we have a different Parliament here how can— 
Hon David Carter 
: And we will have. 
Dr the Hon LOCKWOOD SMITH 
: I am sure there will be a very different Parliament here. Half the members opposite those Labour Progressive Green United Future and New Zealand First members will be gone. That is pretty clear. 
Let me come back to the very serious issue. I see Minister Duynhoven is now the Minister in the chair and I would like him to comment on this. It was the specific concern of the Institute of Chartered Accountants and of the Law Society and it is this: if taxpayers rely on the new law that will pass through Parliament—not tonight but once it receives its third reading—to establish their tax liability and if in fact it is different from the old law the Government has said that it will retrospectively make an enactment to change things back to the old law. A prudent taxpayer may therefore say: “Well hang on I’d better not use this new Act because if this new Act according to my lawyers changes things the Government has promised to change it back to what it was. If I use the new law I may face use-of-money interest charges. I may face penalties it if takes a couple of years to sort out the issue.” So the prudent taxpayer says to his lawyers: “We had better use the old law.” That does not solve the problem either because this Parliament cannot bind a future Parliament. So no matter what this Government has said about retrospective legislation to take things back to the old Act in fact we cannot bind this Parliament. 
I would like the Minister in the chair—I see that Minister Cunliffe is now back in the chair—to explain how a taxpayer should handle that dilemma. I will repeat it for him. The taxpayer is faced with using this new law and his lawyers say that in their view it changes the requirements from the old law that this replaces but in fact the lawyers say: “Hang on the Government has said that if it does change the outcome it will retrospectively legislate to change it back to the old law.” But then the wise lawyer says: “But hang on I can’t advise you that because obviously this Parliament cannot bind a future Parliament. So maybe the law won’t be changed back.” What law does a prudent taxpayer use? This new law or the old law? I would like the Minister to explain how the Government plans to overcome that dilemma. 
Secondly I would like the Minister in the chair to address this particular issue. According to my notes on 14 May last year in front of the select committee the Inland Revenue Department agreed to a schedule of intended changes. There are a limited number of changes that are intended that this bill should make to the tax law. According to the notes I took that day at the select committee the Inland Revenue Department agreed that it would establish a schedule of the intended changes. I accept that it may have been done and I have not been able to find it. I have looked through Supplementary Order Paper 195 but it might be buried somewhere in the final version of the bill before the Committee. I would like to see exactly where it is so we can clarify for taxpayers the schedule of intended changes under this law. 
The third point is that the major submitters—the Institute of Chartered Accountants and the Law Society—believe it would make sense to establish a formal committee to assess whether the law was changed; to try to establish with experience a consensus as to whether this bill that we are debating in Committee tonight has changed the law—because there are big changes. There were also last minute changes. 
 If we look at the bill as it was introduced and the way it treats income compared with the bill finally before us tonight we see there are big changes. The bill as introduced talked about counted income. We were told that counted income was a hugely important way of simplifying it all. Counted income is now gone out of this final version we have before us tonight. Now there is just income under subpart BD 1. There is just income—nothing to do with counted income. And now we have a whole extra range of steps in sorting out what income of a taxpayer will actually be taxed. All those changes were made at the select committee. 
The argument of both the Institute of Chartered Accountants and the Law Society that a formal committee should be established to examine unintended consequences I thought made a lot of sense. I think that no members of this Parliament intend that this bill should change the law beyond those specific changes that are intended—the limited number of specific changes. The dilemma for taxpayers is that they need to know exactly what those intended changes are. I want to know where the schedule of those intended changes is in the bill. I want to know what has been done to establish this committee that would be able to form a consensus of the unintended consequences of the complete rewrite of the Act. 
But I come back to the first point I made a moment ago and that is I believe the dilemma a prudent taxpayer is in for two reasons. I want to make sure that Minister Cunliffe can explain what should happen. The taxpayer is caught with the dilemma: does he or she use this new Act or the old Act? We are told the new Act is not intended to change anything yet it might and a court of law must presumably use the new Act. It was suggested that there should be a transitional provision. It was suggested for example that a simple transitional provision would state that as a matter of statutory construction the words and meaning of the 1994 Act can be used as an aid to interpreting the provisions of the new Act. This point I believe is very serious for taxpayers. If there is no such transitional provision as was suggested—I think it was KPMG who suggested to the select committee that wording I used a moment ago; that as a matter of statutory construction the words and meaning of the 1994 Act can be used as an aid to interpreting the provisions of the new Act—how do legal advisers advise their taxpayers in using this new Act? 
I want to be clear that this is understood. The dilemma is this: they have to use the new Act because that is the Act the courts will use in determining whether ultimately they are complying with the law. If in fact the new Act does change something the Government has said it will introduce retrospective legislation to change it back. So legal advisers may say: “Hang on if this looks like it’s changed things use the old Act because the Government is going to change it back anyhow. So we should base it all on the old Act because if you use the new Act and don’t pay enough tax you’ll face penalties or use-of-money interest.” But the dilemma is the lawyer might say that the Government may not change it back because this Parliament cannot bind a future Parliament. 
How can the Minister in the chair assure taxpayers that they are protected when this Parliament cannot bind a future Parliament? When these matters come into being next year most of this Labour Government may well be gone and this Parliament cannot bind a future Parliament. So taxpayers really must use this Act and they face that jeopardy of use-of-money interest penalties and that kind of thing. I see no way around that. I think the Minister is prepared to answer those serious queries because they are serious for taxpayers. I am very happy to sit down if the Minister is prepared to answer those serious concerns. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I am pleased to rise and take a brief call at this point. Firstly on behalf of the Government may I congratulate the Finance and Expenditure Committee on its extensive consideration of this bill and note that its recommendation to the House was indeed unanimous—all save the ACT party and we look forward to hearing some more from ACT members as to their reasons. But the object of the bill has certainly been agreed. 
There is no doubt that the original bill going back to the last century and early part of this century is vastly outdated. In its initial form it was only 200 pages long; it is now over 2000 pages long. It has been layered over like the seabed being laid down by the tides and its structure has become somewhat tortuous. So I think it has been accepted all around this Chamber that this exercise is not before time. It represents a very very major input of expertise by officials and tax professionals bringing us to the point we are at today. 
I will reply in two groups to some of the issues the Opposition has raised and I begin by addressing the points raised by my colleague Dr Lockwood Smith. The first question he raised was: what would happen if any word was different in this Act that would lead to a different outcome from the intent of the original Act? I note that the select committee has really done its work on this point because there are a number of protections for taxpayers here. The first one is that the transitional provisions that have been implemented by the Government guarantee that in an area of ambiguity the intent of the old Act will prevail and should be read in by the courts. Secondly that clarity in terms of any intended policy changes has been set out in the schedules and I refer the member with regard to his second question to schedule 22A. The third point is that this whole bill has been scrutinised by an independent group of experts and unanimously approved—and they are experts of some standing. They include the Institute of Chartered Accountants of New Zealand and the New Zealand Law Society—a panel chaired by no less than Sir Ivor Richardson. 
So the Government is comfortable with that assurance that no legal loose ends remain. However in case anything has slipped past this panel of independent and reputable experts we have made several additional guarantees on the basis of the recommendations of the select committee. The first is that no penalties shall apply to any taxpayer who is disadvantaged. The second is that we would retrospectively change any inadvertent difference in meaning so that the original intent prevails. This is a “tidy-up” bill; it is not designed to change policy. Finally we would ensure that there is an appropriate education programme so that the industry is fully conversant with the changes that have been made. 
Dr Smith of course raised that old chestnut that no Parliament can bind its successors and he is quite right. Under our constitutional conventions no Parliament can bind its successors and that is true of the Westminster system from which this House springs. But there has been nothing new in that across successive Parliaments. Those are the constitutional constraints under which the previous Government operated as well as this one. What is material here is that we have a near unanimous select committee report. We have support from all around the Committee save one increasingly minor soon-to-be extinct party. That gives a very good basis of assurance for members of the public looking forward—that our assurances repeated here today from the chair shall be upheld. 
There are a number of other issues that have been raised by Opposition members and this brief intervention allows me the opportunity to address some of the more egregious of them. Mr Key mentioned the fact that Labour’s pledge card in 1999 stated that only 5 percent of taxpayers would pay the top rate of 39c in the dollar. That was certainly true based on the data available at the time. I think it was 1997-98 data which was the most recent available to us. Then Mr Key went and dropped himself right in the proverbial by saying that one-fifth of full-time taxpayers now went over that threshold. Now that was not the Labour pledge was it—full-time taxpayers? That excludes beneficiaries and it excludes part-time workers. So I am afraid that it is no counterargument to take a completely different data set from that to which the pledge applies and then to assume that one has rebutted it. Mr Key will have to do a whole lot better than that as he continues his apprenticeship. 
Mr Key then went to the next argument that the Opposition has been trotting out; that this debate is really about tax rates not about the simplification of the Income Tax Act. Well the presumption is wrong. This bill is in fact a simplification of the Act. But let us take the rates argument for a moment just as those members have said. The latest OECD tax wedge data shows that for the average full-time worker we have the third or the fourth lowest combined tax wedge. That is a very interesting point because it rebuts the presumption that we were as Mr Key suggested at an advantage when National left office and are now at a disadvantage. Quite the contrary we are still at a considerable advantage. It is also interesting to note that in seeking to drop the company tax rate from 35 to 30 percent of tax we are advised that the net effect would be that about 75 percent of the tax rebate would go to offshore investors. Now why should New Zealanders who need that money for schools and hospitals end up providing a cross-subsidy to foreign investors? I cannot see the point in that. 
Of course the fiscal cost of $500 million would need to come from somewhere. I am intrigued to know from Opposition spokespeople as this debate goes on where indeed it will come from by the time they have paid for that strike aircraft wing scrapped the New Zealand Superannuation Fund and done everything else they have been talking about. I think it was Mr Sowry who wanted to build a motorway from Auckland to Wellington. Just exactly where will their numbers balance? It remains to be seen. Mr Key also said that 60 percent of all New Zealand businesses have a net profit of less than $38000 so the incentives are wrong. I am afraid that that is quite incorrect. The data shows that 60 percent of all New Zealand individuals earn less than $38000. He has his numbers wrong as usual and he will have to do a lot better than that. 
We moved on to an intervention from Mr Prebble. He argued that the tax burden was 40 percent of gross domestic product (GDP). I am informed that in fact the net tax burden is 32 percent of GDP excluding rates or 34 percent including rates. It is good that we are having this debate. However I would just urge the Opposition if it could use reason and evidence to support its arguments the public listening in would be able to get further with its arguments. There is no point in accusing the Government of imposing a 40 percent of GDP tax burden when in fact it is only 32 percent. As National said there is no point arguing that we have a higher-than-average tax burden when in fact ours is near the bottom of the OECD. Could we please stick to the facts if we are to indulge in the area of general tax policy debate? 
I conclude with the point about Maori trusts. My colleague Mr Cosgrove has pretty well answered that; that this issue has been around since the 1950s. I warrant it was brought in by a National Government. Certainly it was endorsed by successive National Governments and the last one did nothing about it. Now in these post-Orewa days National is having an attack of “holier than thou”. That is absolutely fascinating. National did nothing about it when it was in office because it is there for very good reason. Ninety percent of Maori taxpayers earn on the 19.5 percent rate. The compliance costs of dealing with them as if they were on the 33 or 39 percent rates would be prohibitive. However the 10 percent of beneficiaries not included will pay the full rate of tax just like anybody else when it comes to the end-of-year wash-up. There is no tax discount to Maori beneficiaries. There is no benefit to Maori taxpayers that any other taxpayer does not enjoy. Let us be specific: the Maori authority Dr Smith refers to has its purposes limited by the fact that it holds assets on trust. Therefore the distributions that the authorities make to beneficiaries are quite rightly treated as a special case and it is the net income of beneficiaries that counts for the end-of-year tax wrap. So we are agreed on the structure of the bill. We are agreed on the policy. 
RODNEY HIDE (ACT) 
: 
 The ACT party rises to oppose this huge Income Tax Bill. I have to say that the one bit I do like is on page 2026 schedule 1 which states that the basic rate of income tax for taxable income is 19.5c for every dollar. That is a good policy; let us have it. It would be good to tax everyone at 19.5c down from 39c and down from 33c. The bit that gets me is that when members read that they will suddenly realise that only Maori authorities get 19.5c. My question to Harry Duynhoven who is not prepared to take a call but has plenty to say is that if 19.5c is good for Maori why is it not good for the rest of us? Year in and year out Michael Cullen has said that tax cuts were not a good idea for the economy and were not good for business. 
Hon Harry Duynhoven 
: Are you suggesting raising the rate with a whole lot of associated compliance costs because that’s what you’re suggesting—unless you have that. The Minister just explained it. 
RODNEY HIDE 
: Poor old Harry Duynhoven all the way from New Plymouth— 
Hon Harry Duynhoven 
: No not poor old I’m not even old. 
RODNEY HIDE 
: He is old; look at him. 
The CHAIRPERSON (H V Ross Robertson) 
: Order! 
RODNEY HIDE 
: If he interjects on me and takes up my time I am allowed to have a wee whack at the old man from New Plymouth. Harry Duynhoven asked about the compliance costs. If we all went to 19.5c and had a flat rate of tax what do people think would happen to the compliance costs? This bill would go from 2500 pages back to 200 pages would it not? I ask Mr Duynhoven whether that would be fair. 
Hon Harry Duynhoven 
: If you believe in a flat tax system. 
RODNEY HIDE 
: He says it would. 
Hon Harry Duynhoven 
: If you believe in a flat tax system yes. 
RODNEY HIDE 
: It would be fair if one believed in a flat tax system. Now we have the Chair telling Harry Duynhoven to pipe down and not to speak. I tell the Committee that I agree with that clause; it is great. I would just like it expanded to every authority and to every person being taxed in New Zealand. I ask the Hon Harry Duynhoven and the Minister in the chair the Hon David Cunliffe what is wrong with taxing at 19.5c in the dollar. 
Hon Harry Duynhoven 
: You want a flat tax? 
RODNEY HIDE 
: I want a flat tax. 
Hon Harry Duynhoven 
: Well that’s your view; that’s fine. 
RODNEY HIDE 
: Harry Duynhoven said that it is fine to have a flat tax. Is it not fair that if a person earns twice as much money that person should pay twice as much tax not four or five times as much? In fact it is quite odd that if a person earns twice as much that person has to pay twice as much tax. That does not happen when a person buys his or her groceries. That person is not asked how much he or she made last week and is then charged double his or her grocery bill. But let us say that it would be fair that if a person earned twice as much he or she would pay twice as much tax. I would like the Minister in the chair to explain why a person who earns twice as much should pay three times as much income tax. Harry Duynhoven the Labour Government the National Party New Zealand First and United Future all say that we should have a progressive tax system; that as a person earns more not only does he or she pay more tax but he or she would pay proportionately more tax. The ACT party says phooey to that. I tell Harry Duynhoven that we agree with a flat tax or it could be called a proportional tax. 
Brian Connell 
: What about flat Earth? 
RODNEY HIDE 
: I do not know about taxing a flat Earth but if Helen Clark hears that there is a flat Earth I am sure she will tax it. They have taxed everything else including my little cow that was farting which was going to get a tax under this Government—flat or otherwise. Why not have a proportional tax that is the same no matter what income a person is paid? 
CRAIG McNAIR (NZ First) 
: 
 I want to share with the Committee a little bit of background on the 19.5 percent tax rate for Maori organisations. Last year during a debate on finance legislation New Zealand First put up a Supplementary Order Paper proposing that the 19.5 percent tax rate specific to Maori trusts should be available to all New Zealand organisations. We were the only party to do that. The National Party is the one that implemented this tax regime back in the 1950s. 
Rodney Hide 
: Ha ha! 
CRAIG McNAIR 
: As has been said earlier the National Party has supported it year in and year out—[ 
Interruption 
] 
The CHAIRPERSON (H V Ross Robertson) 
: I just remind members that as longstanding members here they know the convention about interjecting across the cross benches. It muffles the microphone and I am having difficulty hearing the honourable member. 
Rodney Hide 
: I raise a point of order Mr Chairperson. The member is talking about the National Party of the 1950s. His own mother was not even born then. 
Hon Harry Duynhoven 
: I think you are absolutely right Mr Chairperson and your ruling should be enforced. Mr Hide cannot have it both ways. He cannot mention me in the debate challenge me then raise a point of order when I answer him then interject complaining to you then interject on Mr McNair. He simply cannot have it both ways. 
The CHAIRPERSON (H V Ross Robertson) 
: Politics as we all know in this place is the art of the possible and the possible that we will explore this afternoon is good order. There are over 400 Standing Orders and Speakers’ rulings that we have to work with and I am craving the indulgence of members to understand that. 
Rodney Hide 
: I raise a point of order Mr Chairperson. You are quite right about the 400 rules—comparable to this Income Tax Bill—but I think we may assist matters in this way. If people want to call out and interject and all the rest of it there is an expectation that they should take a call rather than try to make a speech by way of interjection. Maybe you should point out that we are on a 3-hour slot and that Mr Duynhoven can stand up at any time take a call and explain his views on income tax. 
The CHAIRPERSON (H V Ross Robertson) 
: I thank the member. He is absolutely right and Speaker’s ruling 56/1(3) applies. If members wish to take a call they can do so. 
CRAIG McNAIR 
: I remind Mr Hide that though I was not born in the 1950s I can look at history and that is what history tells me. I point out that year in year out when National Governments have been in power they have supported this tax regime. National also started the treaty grievance industry of today. I remind the people of New Zealand that the National Party is a party that would sell the last of the State-owned assets— 
Lindsay Tisch 
: I raise a point of order Mr Chairperson. The member should concentrate on the issue under debate and not comment on National’s position because he is way out of line. He does not understand what has gone on of recent times. We are debating the Income Tax Bill and it is appropriate that you invite him to concentrate on the substance of the debate. That is what we are here for. 
CRAIG McNAIR 
: Speaking to the point of order Mr Chairperson I outline the fact that I was reminding this Parliament and the New Zealand public who are listening— 
Jill Pettis 
: You’re not allowed to refer to the listeners. 
CRAIG McNAIR 
: Thank you. I was reminding the Committee of what the National Party is really like; I am talking about something that a National Government implemented. 
The CHAIRPERSON (H V Ross Robertson) 
: The member was OK in the point he made initially but he started to stray when he brought the National Party into it. I ask the member to come back to the debate. 
CRAIG McNAIR 
: Basically I want to outline the fact that New Zealand First was the only party that last year put up a Supplementary Order Paper to make that specific 19.5 percent tax rate for Maori trusts available to all New Zealanders. 
Hon DAVID CARTER (National) 
: 
 I accept the challenge made by the junior Minister in the chair the Hon David Cunliffe that National should front up with examples showing that if the New Zealand company tax rate were lower than Australia’s it would affect the behaviour of international companies looking to come to New Zealand and the behaviour of current New Zealand companies looking to go to Australia to take advantage of its lower company tax rate. I can give no better example than Air New Zealand and I would be very grateful if the Minister would take this up with the Hon Dr Michael Cullen on the 7th floor at the 6 o’clock tea break. Air New Zealand is a very good example of the way that companies adjust their business and where they operate. The Minister of Finance is now an 85 percent shareholder in Air New Zealand. Mr Cunliffe should be aware that Air New Zealand is currently involved in a tax dispute—it has been signalled on the front pages of all business papers in New Zealand—with the Hong Kong authorities. 
Lindsay Tisch 
: He doesn’t read them. 
Hon DAVID CARTER 
: Well the member should read these papers because the majority of Air New Zealand is now owned by the taxpayers of New Zealand. Following some very poor decision-making by Dr Cullen in not accepting interest from Singapore Airlines the New Zealand taxpayer is now saddled with Air New Zealand. Air New Zealand restructured its affairs and based a company to lease aircraft in Hong Kong for one reason only—namely a tax advantage. 
Dr Wayne Mapp 
: 15 percent. 
Hon DAVID CARTER 
: There is a 15 percent tax rate for the company leasing aircraft in Hong Kong and that is why Air New Zealand structured its business affairs that way. I tell Mr Cunliffe that is just one example of a company adjusting its affairs to make sure it gets the most advantageous tax rate it can. For Mr Cunliffe to argue that that will not happen if our tax rate is set at or below the current corporate tax rate in Australia is ignorance in its extreme. 
I also want to pick up on the special tax rate for Maori authorities. I heard Mr Duynhoven interject across the Chamber saying it is a fallacy. I want the member to open the bill at page 2026where it talks about the tax rate for policyholder income being 33c in every dollar for trustee income being 33c in every dollar for companies being 33c in every dollar and for trustees of group investment schemes or funds being 33c in every dollar. Yet when we look at Maori authorities it reads as follows for the benefit of Mr Duynhoven: “The basic rate of income tax for the taxable income of a Maori authority is 19.5 cents for every $1 of that taxable income.” Nothing could be clearer for the benefit of Mr Duynhoven or Mr Cunliffe or every other member of the Labour Party that this legislation cements in place a tax rate that is advantageous to Maori authorities. Nobody can argue against that. 
But the question I have of the Minister in the chair as I look through the 2000-odd pages of the tax bill is that I do not find a definition— 
Hon Harry Duynhoven 
: Quote the next sentence I said if you are not that ignorant. 
Hon DAVID CARTER 
: Mr Duynhoven can take a call if he wants. What I have said is absolute fact and if he had bothered to study the bill he would know that. I know that the bill is big but he should look at page 2026. My question to the Minister is where in this tax legislation will I find a definition of “Maori authority”. I have looked for it and cannot find it but I did not have the opportunity of working on the Finance and Expenditure Committee and I accept that it may be in the bill. But it would be advantageous to have that answer. 
BRIAN CONNELL (National—Rakaia) 
: 
 I am exhausted just looking at this bill let alone reading it. I have to admit that I did not have the strength to carry it all down here—2307 pages of it—but I was compelled by Mr Hide’s argument so I looked at the page and Mr Carter has also brought it to our attention as well. Mr Hide said the rate of tax for Maori authorities was 19.5 percent which is a flat rate. I thought that was a pretty good idea. If Mr Hide said it I thought that was good enough. Then Mr Carter said it and I thought I had better look for myself. So I went to page 2026 and looked at Maori authorities in Part A “Income tax” of schedule 1 and I do not know what the debate is about. I do not know why Mr Duynhoven is calling out because clause 2 states—and I will read it for Mr Duynhoven and others; it is quite clear—“Maori authorities. The basic rate of income tax for the taxable income of a Maori authority is …” 
Rodney Hide 
: 19.5. 
BRIAN CONNELL 
: Thank you. Mr Duynhoven also confirms it so he knew about it all the time. So he concurs. The provision continues: “… 19.5c for every $1 of that taxable income.” 
This legislation really is an epic. I was looking through some of the background notes before I came here and I see that not only is it a huge undertaking but it started with a rewriting of the Income Tax Act of 1976 and the first component was finished in 1994. I assume that was under a National Government. 
Hon Harry Duynhoven 
: So was 1976. 
BRIAN CONNELL 
: I thank Mr Duynhoven because he has just called out what I was going to go on to say. The second stage was completed in 1996 but— 
Hon David Carter 
: Good days—they were good days. They’ll come again. 
BRIAN CONNELL 
: They were good days but in the intervening time it has not been done. Now we are getting to the third stage and hopefully we will try to bring it to a conclusion. 
I congratulate the Labour Government on introducing legislation that will have a flat tax of 19.5 percent provided it applies to everybody. The Minister might want to take a call and clarify that point. I am sure that is what he meant when he shook his head in acknowledgment saying it would be for everybody. 
Hon David Carter 
: The Minister’s agreeing with it. 
BRIAN CONNELL 
: He is agreeing with it. I think that would be an outstanding outcome. 
Hon David Carter 
: An amendment should be made. Move an amendment! 
BRIAN CONNELL 
: Oh no—the Minister can clarify that. I will not need to. 
I go on now to see that the key aim of the rewrite of the project is to produce tax legislation that is clear uses plain language and is structurally consistent. That sounds pretty good; I concur with that. I do not think there is much argument in the Committee about that: our tax legislation and the wording around tax is extremely confusing. It is so confusing that a huge number of people become non-compliant because they are either ignorant of our tax laws or they simply do not understand them. What this creates is an industry for lawyers and accountants to work a vortex system where a lot of activity is going on in a sub-economy which is not growing this economy for the folk of New Zealand. 
In framing this legislation I also see the Government saying that it has been involved in public consultation. If that were the actuality of this Government’s process then I say that that is sensible and timely but I have severe doubts about this Government’s commitment to consultation. It says it consults but the reality is that in most cases it is found wanting. I have found press release after press release from business community interests saying that this Government has not consulted them when it says it has. 
I see that the bill rewrites Parts C D and E and aspects of Parts A and B and I have a genuine question for the Minister as the commentary states it “re-enacts” but does not “rewrite” the remainder of the Act. I really do not understand what that means. Maybe the Minister in the chair could take a call and explain to us exactly what he means by that. I just find that a little confusing. 
I notice that the Act will come into force on 1 April 2004 and I hope that is not an April Fool’s Day joke. If the Minister says it will happen on 1 April I believe it will. The bill applies to income derived in the 2004-05 tax year and in later tax years or in the corresponding period. The explanatory note goes on to state: “Care has been taken in the development of the bill to ensure that it has the same outcomes as the current Act.” This is a very important issue. 
Hon DAVID CUNLIFFE (Associate Minister of Revenue) 
: 
 I do appreciate the support of members opposite including the National Party members. The only thing is that when they give support they sometimes have a funny way of showing it. I understand that they will be voting for this bill and I appreciate that because the content is worthwhile. But I guess that also means they will be voting for the provision on Maori trusts—and why would they not? They did not change it the last few times they were in power. It has been around since the 1950s. 
Hon David Carter 
: What is the definition of a Maori trust? 
Hon DAVID CUNLIFFE 
: I really wish Mr Carter would read the bill for himself but it is on page 1878 in clause OB 1. 
But let us get back to what is really being said here. I am afraid it is another example of “Brash disease” spreading throughout the Opposition caucus. It is really another attack on Maori and I must say I am getting rather sick to death of this. People are using very generic legislation and even legislation for purposes with which they agree and provisions for which they will be voting but it does not stop them attacking people because of their ethnicity. 
Now if we are talking about who is actually paying tax and who is not paying tax then I think we need to be talking about— 
Rodney Hide 
: I raise a point of order Mr Chairperson. I just ask you to caution the Minister. I think he has broken the Standing Orders already. He has talked about the “Brash disease”. I do not think you would allow us to talk about the “Clark disease” which is far more virulent and dangerous. I do not think you would allow us to attack members of Parliament for attacking people on the basis of their ethnicity. That has not happened here today but what Mr Cunliffe is doing is accusing us on this side of the Chamber of racism by using cute words to get around it and I ask you to caution the Minister in the chair against going down that chute. In fact my speech was that I loved the 19.5c; I just wanted it for everyone. 
The CHAIRPERSON (H V Ross Robertson) 
: I thank the honourable member for his contribution. I had been thinking along those lines so I am glad he drew it to my attention and it has been drawn to the attention of the Minister. 
Hon DAVID CUNLIFFE 
: This Government does believe that the same rates should apply to organisations in the same situation. There is no parallel for the situation of Maori trusts whose uses of the funds they hold in trust are limited. There is no parallel for the fact that 90 percent of beneficiaries have an income that is in the lowest tax rate. That is why they are being treated appropriately and at the end of the year people pay the full tax wash-up. 
If the ACT party wants to talk about who is and who is not paying full rates of tax then they might wish to think about some of their own supporters. They might want to think about things like trust funds or complex tax structures using series of shelf companies. I would be quite interested to hear Mr Prebble come back to the Committee and tell members about complex company structures that might not provide full information about people’s tax liabilities. 
I would be interested to hear someone talk about how much tax the major banks are paying for example. I would not want to say anything that was taxpayer-specific but I would be very surprised if any of them were paying 19.5c in the dollar and that is a matter that the Government—as Dr Cullen has said—has under investigation. 
Before members start talking about Maori—and members opposite have mentioned the foreshore—let us remind ourselves about the substantial holdings of coastal land that some very high-wealth Pakeha individuals have. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
PANSY WONG (National) 
: 
 I am glad to see the Minister of Finance in the chair because I am sure that he will be very happy to enlighten us on a few questions. We are here to debate the 2000-odd pages of the rewritten Income Tax Bill. Not only is that the case but Supplementary Order Paper 195 has also been tabled. I would like the Minister of Finance to take a call to address some concerns that I did not originally have until during one question time the Minister said that the Inland Revenue Department was conducting a tax investigation into some New Zealand trading banks. We were assured that this bill which the Finance and Expenditure Committee members put a lot of work into deliberating on would not change taxation policy but obviously the implication of what the Minister of Finance said during question time a few weeks back is that some of the income tax provisions we are now currently debating may in effect not be watertight. If that is the case should the House hold back from passing the 2000-odd pages of this bill? 
Why waste a golden opportunity to make some changes to the legislation? After the Minister raised the issue of a tax investigation into the trading banks I think it cast doubt in the public’s mind as to how watertight our income tax legislation is and how law-abiding our trading banks are. I think that to be fair to both the public and the trading banks—and apparently our Inland Revenue Department has been carrying out the investigation for a year—the Minister should take a call to persuade the National Party as to why it should continue to support this bill. Dr Cullen promises that the bill will not change taxation policy but at the same time it seems to me that the Minister and the department have some doubts about the activities of the trading banks in terms of whether they have been paying their proper tax bill. I think that is quite a serious issue and that the Minister should take a call to tell us why the legislation is being rewritten and to reassure us that the bill is not intended to change taxation policy. Some doubts are being cast on whether the provisions of the legislation are adequate to ensure that New Zealand taxpayers are getting good value and on whether our trading banks are observing the tax legislation. 
The Minister may also like to take a call to address this legislation in the light of the cancellation of Project Aqua by Meridian Energy. We heard representatives of the petroleum industry say on the news that they are very happy to come in and help in this situation by taking up more exploration activity and will look to the Government for some encouragement to do so through a fiscal or tax provision. I wonder whether the Minister will take a call to say whether in light of the looming energy crisis that faces New Zealand the Government is to miss that golden opportunity to address some of those issues. 
I took this early call firstly to ask the Minister to address in particular my first question relating to the investigation into trading banks in New Zealand—when that investigation may be concluded and whether this legislation will be subject to very early amendment. Should we rush to pass 2000 pages of tax legislation or wait for further amendments to come? But I have another question that the Minister may want to address. One of the provisions in this legislation relates to film production. I guess it relates to the very famous producer Mr Peter Jackson and to  
The Lord of the Rings 
. There has been some debate in public between Mr Jackson and the Minister of Finance with regard to how generous a tax concession Mr Jackson’s company received. I have read the provision that relates to the film industry and to film production and I want to know what is deductible within it. I want the Minister to address that and say whether the current provision within this tax— 
Hon David Carter 
: You’ll get another call. 
PANSY WONG 
: Exactly. I will continue to take calls and ask these serious questions until the Minister stands up to address them. Mr Jackson reckons that the tax concession given to his film production company was not very generous. I want to know whether the Minister can assure us that the provisions relating to film production in this bill apply to everybody and can tell us how generous they are. 
The Labour Government always loves to claim credit— 
Hon David Carter 
: King Kong. 
PANSY WONG 
: Yes he is King Kong. I want to know whether this legislation will be an encouragement for Mr Peter Jackson who has started to work towards his next Oscar award with regard to  
King Kong 
. The Labour Government has claimed much credit for the success of New Zealand films so has the provision been generous or was the tax concession —as Mr Jackson has said it was as far as he was concerned—really chicken feed? 
I remind the Minister that I have asked two questions. I have a third one so it is really worthwhile for this Minister to take a call. My third question relates to Maori authorities. We know that last year the National Party voted against this yet— 
Dr Wayne Mapp 
: We voted against it. 
PANSY WONG 
:—none the less the Government with the help of United Future passed legislation to allow Maori authorities to claim a tax rate of 19.5 percent. The 19.5 percent was meant to apply only to Maori authorities because there were restrictions on what they could do with their assets and on the way they could distribute profit. But I have been told some people believe that wholly owned subsidiaries of Maori authorities which were not supposed to be entitled to claim the 19.5 percent tax rate were restructured to take advantage of it. I say to the Minister that that is a very serious issue because wholly owned commercial subsidiaries of Maori authorities are competing on a commercial basis with other private enterprise and if they are claiming that tax advantage then it is not a level playing field. I think the public deserves to hear from the Minister that the 19.5 percent tax rate is applied only to Maori authorities and he should categorically assure the public that wholly owned commercial subsidiaries of Maori authorities cannot take advantage of that rate. If they do then it is not fair to other private businesses that have to pay income tax at the 33 percent rate. 
My fourth question—this is why it would be worthwhile for the Minister to answer my questions—concerns the Minister’s championing of one economy between New Zealand and Australia. Maybe he would like to take a call to tell us why it is not desirable for New Zealand’s company tax rate to be the same as that of Australia. 
I am pleased to see the Minister of Finance diligently scribbling things on his writing pad. I am sure that the public will be delighted to know that he will indeed take a call to address the four questions that I have raised. After all we are debating a tax bill that is over 2000-odd pages long and I would like to think the Minister appreciates hard-working members asking appropriate questions in order to get his reassurance that this bill will not change any taxation policy. 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 I want to respond to one or two of the matters raised. I outline the fact as Mr Carter will be aware—and I am very grateful to him as one of my predecessors for the work that was started under the previous National Government in terms of this rewrite programme and to Mr Dunne who was also a part of it—that there has been a very clear rule applied by successive Ministers that the kinds of issues the member has raised are not dealt with in the rewrite programme. If we wait to try to deal with every taxation issue that somebody wants to have addressed by way of legislation before we do a rewrite we will never do the rewrite. Indeed a large part of Supplementary Order Paper 195 actually incorporates the last taxation bill passed into the rewritten Income Tax Bill. The purpose of that is to make life easier for taxation practitioners who will have access to one up-to-date full version of the legislation. 
I will just take up a couple of points that the member raised. On the last point as I have said many times to some leaders of business if they want New Zealand to have a lower company tax rate—much lower than Australia’s—they should give me the other parts of the Australian taxation system which they do not want to pay either. For example the Commonwealth of Australia has a 6 percent payroll tax. If we had a 6 percent payroll tax in New Zealand we could probably halve the company tax rate. If we also had the Australian state payroll taxes we could more than halve the company tax rate in New Zealand. That is without counting the capital gains tax the inheritance tax and the various other taxes that Australian businesses have to pay directly or indirectly. Of course New Zealand business wants to just cherry-pick one little bit here and leave all the other bits off. The offer is open; it is on the table for New Zealand businesses. They can come and talk to the Minister of Revenue and if they want to have a really low company tax rate they have to give me the other bits that are paid in Australia. I have to say that in terms of tax design they are not as good as our system is. The design of our taxation is better than Australia’s in that respect. But if that is what is really important to businesses—if that is the teddy bear they want to take to bed with them at night—then they have to give me the little eyes and the funny nose to put on it as well in order to make the thing up and make it look proper when they go to bed with it. 
I will also deal with the issue of films. I am not allowed to know the total tax deduction that the financers of the film not Mr Jackson received. The financiers actually got the tax deduction which is why Mr Jackson may well not know the total value of it—it was not his company that received it. All I know is that when National introduced legislation to remove that taxation loophole by grandparenting the existing provisions—it was then amended by the select committee of which I had the honour to be a member—the Inland Revenue Department advised that the cost of the grandparenting provisions was between $300 and $400 million. The largest part of that is almost certainly in relation to  
The Lord of the Rings 
. When I see the Oscars lined up I see about $30 million for each of them. Will  
King Kong 
 benefit? That film will not benefit from the taxation loophole because it was wiped out in 1999 by Mr Carter myself and various others. But  
King Kong 
 will benefit from the Large Budget Screen Production Grant Scheme which is much easier to control than the taxation loophole I must say in terms of its cost. Probably without the Large Budget Screen Production Grant Scheme we would have  
King Kong 
 without the ape so to speak and without everybody else appearing within the film. [ 
Interruption 
] The start will be the hard bit to do really. I suppose the BNZ building—“Darth Vader’s tower”—is the most appropriate place to do that in Wellington. 
In terms of the banks that matter is all under the existing law and remedial measures are not and should not be part of this bill. If we were to mix up remedial legislation base protection legislation and other changes with the income tax rewrite we would never get the income tax rewrite done. 
Hon PETER DUNNE (Leader—United Future) 
: 
 I was not going to take a call in this debate but I listened very carefully to the member who spoke immediately prior to the Minister. One of the things she said that aroused my attention was that she was concerned this bill was being rushed. I should tell the Committee that this bill’s genesis goes back to the time when Robin Oliver who is sitting to the right of the Minister in the chair Michael Cullen was a callow youth. Many of us have aged considerably during the genesis of this legislation. I was the Minister 8 years ago and it was on my work programme at that stage so it is hardly rushed legislation that we see in the Chamber this evening. In fact if one thinks back over the tax reforms that have been made over the last 20 years one realises this rewrite—which is effectively a rewrite of legislation first passed in 1913—is long overdue. [ 
Interruption 
] It goes back to the genesis of income tax in this country in 1913 and the legislation has been repeatedly amended. This is the first substantive plain-English rewrite in the history of that legislation. By my calculation it is some 80-odd years since income tax began so claims that this is rushed legislation are ever-so-slightly exaggerated. 
I want to speak briefly about the issue of film tax. The Minister made some comments about that and I recall the situation in 1999 particularly well because I was the chair of the Finance and Expenditure Committee at the time. I recall the claims made to that committee by a variety of people in the film industry that if we dared to tamper with the existing regime which provided for the most generous write-offs previously known to humanity then the film industry in New Zealand as we knew it would die. The select committee was to put it mildly somewhat sceptical about those claims. We called together the representatives of the film industry of the Inland Revenue Department and of Treasury. Mr Oliver and others—Dr Cullen certainly—will recall that we had a round-the-table morning when we actually sorted out with the Minister’s concurrence the regime that we have now. All the dire threats that that would be the end of investment in films in New Zealand look a little hollow today when we celebrate the success of Peter Jackson and  
The Lord of the Rings 
 because that was at the time that  
The Lord of the Rings 
 project was getting off the ground. The issue being raised was not just related to  
The Lord of the Rings 
 and the grandfathering provision but to the message that it would send thereafter. Since that time we have had  
The Last Samurai 
 and we are talking about  
King Kong 
. I see there is talk now of  
The Lion the Witch and the Wardrobe 
 which has been announced in the last couple of days as being another film likely to come to New Zealand.  
The point I am making is that the film regime we now have may not be perfect but it is a vast improvement on what we had previously and there is certainly no great evidence—contrary to the member’s claims—that it acts as a disincentive to investing in New Zealand. In fact the evidence is quite to the contrary of that. All the evidence we see and hear—at the Oscars in Los Angeles and from other producers—is that New Zealand is a very attractive destination in which to make movies. That has nothing much to do with the tax system and a lot to do with the scenery the cost of labour and the expertise of our film makers. So I think that that argument is a little spurious as well.  
Pansy Wong made some other points that I do not intend to go into. But I do find myself having to rise to defend the honour of a variety of past Ministers including my immediate predecessor the Rt Hon Wyatt Creech who—I am sure—would be horrified at the accusation that he was party to rushed legislation in the Chamber tonight given that he ceased to be the Minister in charge of the bill about 9 years ago. This is a long overdue rewrite. Our taxation laws were a mess because of the complexity of the changes that have been made over recent years. The fact that the law and the drafting of it have not kept up with changes in style and form and the fact that we could have arguments about form and substance in another context all demonstrate that the rewrite is long overdue.  
This bill has been through the Finance and Expenditure Committee; it has been considered ad nauseam. A Committee of the whole House process of this type is not unreasonable. The myriad number of taxation practitioners and those who follow these matters with interest will be desperately keen to see this project which has had a “mists of time” feel about it finally enacted. We are embarking on that process this evening and I am delighted at last to see work that I thought would never be completed coming to fruition. 
DEBORAH CODDINGTON (ACT) 
: 
 I will follow on from the Hon Peter Dunne because he brought up the subject of  
The Lord of the Rings 
. I ask the Minister to take a call and tell us whether at the time he actually supported that arrangement for  
The Lord of the Rings 
. We all know that the true story about the financing of that trilogy has yet to be written and I remember the Minister—I am sure it was the Minister at the time—saying something like: “Every New Zealander should get a free ticket to this movie because it was made on the backs of New Zealanders. We were very lucky it was a success because if it had not been a success we would have been taking a bath.” There are a number of questions to be answered and the Minister knows exactly what I am talking about. Was the film signed off in the correct time frame in order to be entitled to those tax breaks? There are a number of things— 
Darren Hughes 
: This is from the sleuth journalist. 
DEBORAH CODDINGTON 
: Those members over there on the Government benches might jeer but the Minister knows what I am talking about. He was not in favour of that. Of course we are all pleased about  
The Lord of the Rings. 
 Peter Dunne said that it is nothing to do with tax breaks that movies are made here. If that is the case why has Peter Jackson lobbied this Government so hard for more tax breaks for film makers? Why does he say he will take his films somewhere else if it has nothing to do with tax breaks? If that Minister is so informed on economic matters why does he think that incentives do not work? Of course incentives work. Everybody knows that. One needs only half a brain to know that incentives work. 
The ACT party is not supporting this bill because we cannot support legislation that has in it such an “envy” tax—such ideological tax rates as that of 39 percent for any income over $60000. There was no need to bring in that rate when this Government came into power. There was no need for that extra money in the coffers of the Government—as we have well seen with the operating surplus. It was just a way for this Government to say: “We will punish you because you are successful.” If people work hard the Government will punish them instead of rewarding them and celebrating them. If people run a company that is doing well the Government will not celebrate that either. Why does the Government not give everybody a tax cut right across the board? Why should there be a progressive tax rate at all if not just to punish the successful—those who work hard? 
There is however one clause I can support—that is clause 2 in Part A of schedule 1 “Maori authorities”. I applaud the Minister for that provision: 19.5c for every dollar of taxable income. That is a really good start a very good start. I urge him to take that rate and apply it everywhere else. The Minister when he took a call before based his argument on the status quo of spending but he has not taken into account the fact that this Government is spending far too much already. We have huge spending on “Nonsense Castle”. How many people are employed by the Ministry of Education? There are 360 Maori employees for a start and they are just 12 percent of the total number of employees in that ministry. Why on earth do we need to have as many people as that on the payroll at the Ministry of Education when we can give funding directly to students and pupils? We should let parents choose and let communities decide and take the bulk of funding which after all is taken from taxpayers to educate children. We should let the bureaucracy have what filters up through the system rather than the other way around as it is at the moment where the Government hands out all the money to the bureaucracy and what is left—what filters down through the system—reaches the schools and the children who need the education. 
Why should there be a Ministry of Women’s Affairs? If this Government supports that ministry so much why does it not have a “Ministry of Men’s Affairs”? Why not? If a Ministry of Women’s Affairs is so good why not have a “Ministry of Men’s Affairs”? It is of course just to keep people on the bureaucracy payroll. Women have gone so far now we do not need to be pandered to thank you very much with a Ministry of Women’s Affairs. 
Dr WAYNE MAPP (National—North Shore) 
: 
 Listeners tonight will be interested to know that National is supporting this bill. The reason we are doing so is that it is a consolidation and rewrite of the legislation. That is an important project. For instance a former colleague of mine currently teaching about tax has written a book of some 1200 pages—I have written a small portion of it—and he will be incorporating the outcome of this legislation which I presume will have its third reading next week. So the professional community—accountants lawyers tax specialists and tax agents—are looking forward to the passage of this bill. I am certainly conscious that it has been the work of many many years to bring it to fruition. 
Mr Dunne referred to the fact that it is the outcome or outgrowth of legislation from 1913. I must confess that I was under the impression that legislation went back to the 1890s for the first income tax Act. But the remarkable thing is that that early legislation had about 100 clauses and was about 30 pages long. Today we are faced with two massive volumes of well over 2000 pages yet every tax practitioner would be able to tell us that the core of the Act is still contained in just 20-odd clauses at the beginning of the legislation. 
However just because we are supporting the legislation that support should not be interpreted—as the Government is most unjustly doing—as supporting its unreasonable and irrational policies. I refer members to an example of that. I was frankly amazed to hear the Minister of Revenue trumpeting about why New Zealand’s corporate tax rate had remained at 33 percent. That is quite remarkable at a time we have a surplus approaching $6 billion. Some might indeed liken the Minister of Finance to Scrooge sitting on his piles of money unwilling to let any part of it go and wanting to amass and accrete more and more. Is he considering perhaps an $8 billion surplus next year but is unwilling to let any part of it go? 
I have news for the ideologues of the left—those people represented by the personage of Dr Cullen—it is not the Government’s money; it is the product of hard-working New Zealanders firms and businesses and the money the Government takes off those firms and businesses is money not available for investment. Now the Minister of Finance says that people can have their 30 percent tax rate provided they have every other part of the Australian tax system—capital gains and so forth. He has forgotten about the accelerated depreciation allowances which I can tell him many people would like to have. 
But the real point is that the Minister is completely unaware of the concept of comparative advantage. Why does the Government not give New Zealanders and New Zealand companies a head start? Does it not realise that in many respects we are disadvantaged in New Zealand? We have a smaller economy a smaller market and a location further away from our markets—all of those things add costs to New Zealand businesses. Why not give those businesses a head start? That is the way to growth. The Minister must surely know of the experience of Ireland which gave precisely that advantage to its businesses. Ireland is off the coast of Europe isolated and having to deal with the disadvantages of that so the answer was to give people a special advantage and if the 30 percent rate leads to an advantage for New Zealanders over Australians frankly I say: “Well and good.” That is actually what New Zealand business needs to sustain investment jobs and growth. I urge the Minister to take the message on board. 
Hon DAVID CARTER (National) 
: 
 I will take the opportunity while Dr Michael Cullen is the Minister in the chair to get some answers to questions that I asked earlier when his junior Minister David Cunliffe was in the chair before the dinner adjournment. My issue was around this argument that has just been developed very well by my colleague Dr Wayne Mapp: the advantages of a tax rate of 30 percent which is at least as good as Australia’s. David Cunliffe challenged us to give examples of why that would affect the behaviour of various companies. 
He argued it seemed to me that if there were a difference in the tax rate then companies would not be inclined to make decisions that mean they accept the generosity of Australia. Of course I do not think that is right and I quoted to Mr Cunliffe an example which I think the Hon Dr Michael Cullen might also like to comment on. 
My simple question is why his airline Air New Zealand established its leasing arrangements in Hong Kong if it was not simply to gain the advantage of a far better tax rate. Would Dr Cullen like to explain to the Chamber tonight why Air New Zealand took the opportunity to establish its leasing company in Hong Kong if it was for any other reason than that it saw it as tax advantageous? If he accepts that that is the reason and I cannot see how even our Minister of Finance could argue that it was for any other reason then it is surely logical that there are companies now in New Zealand that are considering Australia as a base for production because of advantageous company tax rates and equally that there are Australian companies that might be tempted to come to New Zealand if we had a similar tax regime. 
The second question I want answered relates to the definition of “Maori authority”. We had quite a debate before the dinner break on the advantageous tax rate that is available to Maori authorities with Harry Duynhoven initially interjecting that this Income Tax Bill did not give an advantageous tax rate to Maori authorities. That is clearly wrong and I think Harry Duynhoven has accepted that. I then asked the Minister to point me in the direction of where “Maori authority” is defined and I thank him for pointing us to page 1878. As I read it a Maori authority means a person who has made an effective election under clause HI 3 “Election to become a Maori authority”. I have to say not having had the opportunity to work through the select committee that I am none the wiser as to who has the ability to elect to be classified as a Maori authority and therefore enjoy a substantially advantageous tax rate. 
I refer to my own area and the performance of Ngai Tahu and I would be grateful to know whether its commercial entities could be classified in an advantageous way to be described as a Maori authority. I certainly think that if that is the case we need to have an understanding of where this definition extends. For instance—and I see the Minister taking an interest in this—Ngai Tahu has just been involved in a full takeover of a publicly listed company Shotover Jet. I would be horrified if that particular entity were now able to structure its affairs so that it was paying tax at 19.5 percent when a similar operation on the Kawarau River for example was facing a corporate tax rate of 33 percent. 
The final point on which I want clarification from the Minister is that I note in the report from the select committee—and I acknowledge that I was not at the select committee and I have not been through the 2300 pages in detail—that the work took place through 2003. At that time the Minister whether or not he wishes to recall it was part of a Government that was promoting the “flatulence tax” and I just want to make sure that nowhere in these 2307 pages is there hidden away the wonderful idea that Mr Hodgson came up with regarding the “flatulence tax”. 
Hon Dr Michael Cullen 
: Open it up and have a sniff. 
Hon DAVID CARTER 
: I hope it is never to be seen again and I look forward to the Minister’s comment and his confirmation of that. 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 On the member’s last point—yes I can assure him about that. On the other point he raises I will look into that and come back to him on the question of the subsidiary because I do not have that information to hand. I thank the member and indeed all colleagues for their cooperation on this bill. It would otherwise have been impossible to get this bill through and the huge amount of work that has been done by successive Ministers the department the Parliamentary Counsel Office and others would really have been for nothing. 
Dr MURIEL NEWMAN (ACT) 
: 
 I take a call with regard to the Income Tax Bill and in particular I will draw the Committee’s attention to clause CB 1 which deals with the amount of money that people derive from a business. In particular it states that the amount that a person derives from a business is regarded as income of that person. There is an exemption for amounts of a capital nature. The Minister in the chair Dr Michael Cullen can correct me if I am wrong but this is the clause where if section 2 which is the exclusion were removed it could be used to introduce a capital gains tax as I understand it. The exclusion is there so this clause does not include capital and therefore this bill does not introduce a capital gains tax. 
But I will use this opportunity to talk a little about the fact that when a rewrite bill like this Income Tax Bill is in front of Parliament it is an opportunity for people to put up ideas and suggestions. A little while ago under the Official Information Act we asked the Minister whether anybody had been recommending capital gains taxes or any other such mechanisms. We received a response indicating that Mr Copeland from United Future had written to the Minister of Finance to suggest that a capital gains tax on residential rental properties would be a good idea. 
At the time Mr Copeland was very concerned that people’s investment in rental properties was crowding out their investment in other business opportunities so he suggested that the Minister of Finance might like to consider the idea of introducing a capital gains tax on rental properties. That would of course be of enormous concern to hundreds of thousands of New Zealanders who invest in rental property these days often as part of their superannuation investments to help fund their retirement. 
I am pleased to say that when the Minister’s advisers at Treasury looked at this request from Mr Copeland and considered the pros and cons of introducing a capital gains tax they said it would be difficult because it would be quite hard to establish whether when somebody invested in a rental property he or she was investing in the long term—in other words with no intention to sell it—or in the short term with a desire to turn it over realise the capital gain and maybe reinvest that money; in effect to trade in property. So the officials advising Dr Cullen suggested to Mr Copeland of United Future that at this stage a capital gains tax was maybe not the right thing to do. 
 But then they did go on to say that the depreciation rate on properties might be a more fertile area for the Government to look at if the Government was going to consider trying to gain more income from the rental property investment market. So I understand that the Minister is looking at depreciation rates. He is now looking at halving depreciation rates on rental property investments—the amount they can claim back. I wonder whether the Minister wants to comment on whether this was partly stimulated by Mr Copeland’s suggestion but I am pleased to see as this very large Income Tax Bill goes through that the spectre of a capital gains tax has been put in the coffin. Mr Copeland might like to reflect on whether raising these issues is sensible given that it is discoverable under the Official Information Act. 
GORDON COPELAND (United Future) 
: 
 I was somewhat surprised suddenly to find Muriel Newman talking about correspondence with Michael Cullen and subsequent Treasury advice in the context of the Income Tax Bill. However I think I probably should take a right of reply just to cover some of the misinformation that is contained in the remarks she made. 
First of all let me say I think it would be a very sad day if people came to this Parliament with completely predetermined positions on tax issues. If we are endeavouring as I am to create a situation in New Zealand where we do not have investment distortions where we do not have tax-driven investment coming into the economy in the wrong places—into places that are not productive—versus places where according to market signals that money should be going then it is quite right and proper and responsible for a member of Parliament to raise those issues with the Minister of Finance. 
I might say to put the record straight that United Future has no policy in relation to bringing in a capital gains tax on residential rental properties. I do think though that capital gains tax on share schemes on share investments on various trust funds and on various insurance policies should be revisited if we are to get some kind of level playing field and to avoid investment distortions in terms of where people put their money. 
I would like to make something else clear. The claim has been made not only in this Chamber but also to the media and to property investors in this country that somehow my letter to the Minister of Finance resulted in the Inland Revenue Department deciding to undertake a review of depreciation rates. The release given under the Official Information Act to the ACT party made it very clear that that was already on the Inland Revenue Department’s work list prior to my correspondence coming in and I do not think the two are directly connected in any way. 
It is important to clear up that little matter and to say that the problem however still remains—that in my view we do have great investment distortion in this country. New Zealand’s economy and its companies could benefit if the existing anomalies around capital gains tax on investments on the stock exchange could be removed so that we could see a greater proportion of the nation’s savings going into that area. That is just a brief comment but I thought it would be good to clarify those issues. 
The question was put that the amendments set out on Supplementary Order Paper 195 in the name of the Hon Dr Michael Cullen be agreed to. 
Amendments agreed to. 
A party vote was called for on the question  
That clauses A1 and A2 Parts A to Y and Schedules 1 to 23 as amended be agreed to. 
Ayes 111 
New Zealand Labour 52; New Zealand National 27; New Zealand First 13; Green Party 9; United Future 8; Progressive 2. 
Noes 9 
ACT New Zealand 8; Independent: Awatere Huata. 
Clauses A1 and A2 Parts A to Y and Schedules 1 to 23 as amended agreed to. 
Bill reported withamendment. 
Third Reading 
Hon Dr MICHAEL CULLEN (Minister of Revenue) 
: 
 I move  
That the Income Tax Bill be now read a third time 
. 
Mr SPEAKER 
: The debate is interrupted and set down as an agreement from the Business Committee for resumption on Thursday 8 April 2004. 
Debate interrupted. 
Urgency 
Hon Dr MICHAEL CULLEN (Leader of the House) 
: 
 I move  
That urgency be accorded the introduction and first reading of the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill the first reading of the Charities Bill and the passing through the remaining stages of the Education (Disestablishment of Early Childhood Development Board) Amendment Bill the State Sector Amendment Bill (No 3) the Maritime Security Bill the Crimes and Misconduct (Overseas Operations) Bill the Radio New Zealand Amendment Bill the Telecommunications (Interception Capability) Bill the New Zealand Symphony Orchestra Bill and the Sale of Liquor Amendment Bill (No 2) and of any bills into which those bills may be divided. 
 This motion is moved first of all to enable the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill to proceed to its first reading and to a select committee without the standard 3-day separation. In relation to the other matters the motion is moved to ensure that they are dealt with before the House rises for the Easter adjournment. 
A party vote was called for on the question  
That urgency be accorded. 
Ayes 62 
New Zealand Labour 52; United Future 8; Progressive 2. 
Noes 58 
New Zealand National 27; New Zealand First 13; Green Party 9; ACT New Zealand 8; Independent: Awatere Huata. 
Motion agreed to. 
Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill 
First Reading 
Hon MARGARET WILSON (Acting Minister of Justice)  
on behalf of the 
Minister of Justice 
: 
 I move  
That the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill be now read a first time. 
 It is my intention to move that the bill be referred to the Law and Order Committee for consideration with a report-back date of not later than 3 May 2004 and that the committee have the authority to meet at any time while the House is sitting except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 191 and 194(1)(b) and (c). 
The commission of inquiry into police conduct has been given the task of inquiring into the adequacy of investigations carried out by the police on behalf of the authority with regard to complaints alleging sexual assault by members of the police and their associates. An urgent legislative amendment is required to the Police Complaints Authority Act to allow the commission to fulfil its terms of reference. 
 Investigation files held by the Police Complaints Authority are currently subject to blanket secrecy provisions. This is likely to include information gathered by police conducting investigations on the authority’s behalf. These secrecy provisions in the Act exist for good reason and must be retained. They allow the authority to obtain frank information from members of the public and the police during its investigations. Information that might be self-incriminating personally embarrassing or be feared to invite retribution might therefore be withheld if confidentiality was not assured. However it is the view of the Government the police and the commission of inquiry itself that the commission’s task will be hampered by its inability to consider authority files. It is vital for public confidence in the commission the police and the authority that this impediment be removed. 
The extent to which the Police Complaints Authority Act secrecy provisions may hinder the commission is to be the subject of a hearing on 8 April. However the Government has decided to introduce this bill ahead of this hearing in order to provide an assurance to the public that the commission will be able to carry out its mandate in full. It is also important to prevent any possible delays in the inquiry—delays that would not be fair to the complainants who need to see these matters concluded as quickly as is reasonable. This bill therefore provides an exception to the secrecy provisions to enable certain types of information to be disclosed to the commission. The public will be able to consider this bill through a select committee process including any potential privacy concerns. Necessity dictates that the select committee period be truncated to allow the commission access to this information as soon as possible. As I have already said it is important to avoid possible delays in the inquiry. The privacy interests of the individuals police officers members of the public including complainants in cases of alleged sexual offending who have provided information must be taken into account. 
Commissions of inquiry have the same powers as are available to courts to protect witnesses. These powers may be able to be exercised to address the privacy interests of individuals. The bill will be limited in scope to allow for evidence to be provided only for the current commission of inquiry into police conduct. It will not apply to any future commissions of inquiry. The bill will come into force on the day after it receives the royal assent and expire 1 year after the commission finally reports to the Governor-General. The expiry date will cover any possibility that further material is required for any subsequent proceeding such as a redirection from the Government back to the commission. 
Part 2 sets out the exception to the secrecy provisions to allow the authority to disclose any matter other than a restricted matter to comply with the direction from the commission. A member of the police who was involved in investigating a complaint is also able to disclose any matter other than the restricted matter in evidence before the commission. The existing prohibition on the authority and any staff member from appearing in any proceedings of a judicial nature remains. In conclusion the objective of this bill is to amend certain provisions of the Police Complaints Authority Act to ensure they do not prevent the current commission of inquiry from gaining access to information needed to carry out its functions. It is vital there is public confidence in the commission the authority and the police. This legislation assists in achieving that. I commend this bill to the House. 
Hon TONY RYALL (National—Bay of Plenty) 
: 
 Before I address the quite serious substance of the bill I would advise that the Opposition parties are disappointed that the Government did not see fit to brief us on the contents of the bill with sufficient notice. The National Party received a briefing that was emailed to our senior whip late afternoon and forwarded to us. At 20 minutes to 8 tonight we still had not actually sighted the bill the Government proposed. It was only when our junior whip approached the Leader of the House Dr Cullen that we were given the generosity of an advance copy of this bill. 
Hon Paul Swain 
: You never did that when you were in Government I suppose. 
Hon TONY RYALL 
: I have to observe that on a bill of this import such a courtesy would have been extended to the Opposition because the Government would have wanted to have multiparty support and it is important for multiparty support that the parties feel as though they were appropriately briefed. Don McKinnon was quite clear that bills of such import should be given in advance to the Opposition. So I comment on that disappointment. 
We believe it is vital that this bill be referred to a select committee. The bill makes substantial changes to the nature in which evidence is given to the Police Complaints Authority. Currently police officers are compelled to make statements and to give information to a Police Complaints Authority investigation. Every other New Zealander has the right to deny the police a statement—in fact Ministers have denied that previously I understand although I stand to be corrected. The point is is that every other New Zealander has a right to deny making a statement to the police. However when it comes to Police Complaints Authority investigations police are compelled to make a statement—even a self-incriminating statement—in order to assist the Police Complaints Authority in its investigations. 
Police make those statements knowing that their evidence cannot be used against them and that is part of the process. What this bill seeks to do is uncertain. It is unclear what the status is of that evidence that was given and how it can be used. I do not think the House objects to a clear indication that those who were involved as investigators for a Police Complaints Authority matter should be able to answer questions of the commission of inquiry but we would like to pursue in the select committee the status of the evidence that was given by police officers to the commission. 
This has the potential to set a quite uncomfortable precedent in that police officers may believe that the evidence they give to the Independent Police Complaints Authority may be used against them or come to public scrutiny in a level that they had been assured would not happen. Those are the sorts of matters that we seek to discuss further in the select committee process. My colleague Richard Worth will be talking about further concerns we have in respect of this bill and some conclusions we have drawn. 
The National Party in Opposition fully appreciates the concerns that the commission of inquiry may have about this. We are prepared to work with the Government to facilitate appropriate disclosure to the commission. We too believe it is fundamental to the integrity of the New Zealand Police that the public sees that inquiries were conducted appropriately or if they were not what can be done to remedy those concerns. Finally I repeat that with a bill of this nature we would have expected an advance copy because the advice we received by email in the late afternoon was not sufficient to draw the conclusion that we would be willing to support the bill. However having read the bill the National Party is prepared to support its referral to the select committee. 
MARTIN GALLAGHER (Labour—Hamilton West) 
: 
 As the chair of the select committee to which the bill is to be referred I have listened very very closely to the previous speaker and to his concerns. Obviously there will be very rigorous questioning of officials during the select committee process and we will want to expedite that reasonably hastily. Notwithstanding that I will also be discussing with and seeking leave from senior members opposite in terms of the ability of the select committee possibly to meet for 5 minutes during an appropriate lunch hour in order to start the advertising process for submissions. My understanding in terms of some advice is that I may need leave from the Opposition to do that as we had resolved not to meet this urgency week. I will obviously meet with the Hon Tony Ryall to pursue that particular item. 
 Certainly we will as a select committee do our very best. Obviously we will want not only to afford all members of the committee the opportunity to thoroughly scrutinise this bill and then meet the appropriate report-back deadline but also to give adequate opportunity for submissions to be made. I think the Minister has more than adequately gone through the details of the bill in terms of its content and why we need it. My role as chairperson of the select committee is to work with all members particularly the senior members opposite to see how we can work through the processes of the bill and to meet the report-back deadline as has been proposed to the House. 
KEITH LOCKE (Green) 
: 
 The Green Party will be supporting this bill but I would like to echo the complaint of Tony Ryall that this legislation is too rushed. Just because we are now moving into an urgency week is not a good reason to short circuit the normal process whereby a bill is deposited in the House and time is allowed for members of the House to come to grips with it talk with colleagues check out some of its deficiencies and look at its main and subsidiary purposes so that we can come to this first reading debate somewhat informed. 
It is just not good enough that we are discussing this bill with the ink hardly dry—it having appeared only a few hours ago at most. I do not think there is any need for that. Sure we all want the commission of inquiry into the allegations against the police to get into its work as quickly as possible. We do not want to hold it up that is true. But we do not need to panic in this way introduce a bill have the first reading during the urgency period and avoid the normal procedures particularly when the issue behind this—the issue of the commission of inquiry—is one of justice being done and investigations being done thoroughly. The legislation is about thoroughness and getting justice at the end and we should set an example as a Parliament in treating the legislation relating to that commission in the same spirit of doing a thorough job. That cannot be done if the first reading is rushed in this way. Rushed justice is not good justice. There was a case a couple of years ago in urgency of I think— 
Mr SPEAKER 
: Would the member please come to this bill. 
KEITH LOCKE 
: I think the context of this bill being introduced does qualify the extent to which we can discuss it— 
Mr SPEAKER 
: Not very far. 
KEITH LOCKE 
: Given the huge problems that this wrong procedure has led to I will discuss the bill as best as I can. 
The purpose of the bill which is to enable the commission to have adequate evidence is quite important because one of the issues at the heart of the inquiry is the inadequacy or seeming inadequacy if we go by the press reports of the investigations back in the 1980s particularly those of Mr Dewar. If one looks at the press reports of that police officer with regard to how he dealt with the inquiry—and he was working for the Police Complaints Authority—it seems that he did not do a proper job and that his report was ticked off without proper consideration by the people at the top of the Police Complaints Authority at that time. The Independent Police Complaints Authority legislation that is before Parliament now has been put on hold while this commission is taking place—and as we deal with this legislation we want to improve the workings of the Police Complaints Authority so that it does not rely so much in my opinion on police investigators but has its own independent investigators and is much better resourced to conduct its activities. 
I think that the purpose of this bill—to give the commission more information from the Police Complaints Authority inquiries into the incidents it will be considering—is very important. It means as I read this bill that police reports as part of those inquiries will be brought before the commission. That is very good. There are a couple of definitions in the bill—about what are called restricted matter—that exclude matters from this commission. The first one seems to make sense. It is that the communications of the people who are holding office with the authority are still privileged. I think there is a reason behind that although I would be willing to be challenged on that question. I am for as much openness as possible. 
I am a little more concerned about the second part of the restricted matter definition. The bill states in clause 4 that restricted matter also “(b) includes any communication by a person to the Authority—(i) in which that person made a complaint or raised a concern about the conduct of the police or any member of the police; and (ii) in respect of which that person has not agreed that it may be disclosed to the Commission.” I think the purpose behind that is not to disclose the identity of somebody who may have been in a very difficult situation at the time and does not want to be harassed or to have the public attention that might flow if his or her identity was disclosed in the proceedings of the commission. So I think there is a good reason there but I think the basic principle is keeping the identity hidden and that maybe information provided by that person can still be provided to the commission without that person’s identity being disclosed. That would be a good thing to happen. 
I think that perhaps some amendments can be made to this bill as it goes through the select committee and I hope it will have enough time to do so. I have not even got to grips so far with the time that the select committee will have to discuss this bill but I think it has to have adequate time to seriously look at these matters. They are difficult matters: considering confidentiality; how the commission operates; how it can be as public as possible; and how to get to the bottom of the matters concerned which are very serious matters. 
DAIL JONES (NZ First) 
: 
 New Zealand First is alarmed that it has received this bill so late in the process. It is such a serious matter that one would have thought the Government might have been in contact with us much earlier and that we could have seen the legislation a lot earlier. But finally when we look at what is happening out in the public arena and particularly my reaction I do not want to see the legal process abused. On the face of it there might be an abuse of legal process here. As a lawyer it really goes against the grain to allow the legal process to be abused. On the other hand public concern has been expressed on this issue so from the point of view of allowing the bill to go to a select committee New Zealand First will agree. 
At the select committee we expect that members of the public who are associated with the evidence at issue might be forthcoming and give us some indication of the basis on which they made the evidence available—which was about 16 years ago—and what their attitude would be to that evidence being regurgitated all over again before the commission. It suggests in many ways that no one can quite remember what happened 16 years ago and the best evidence is what might have been recorded 16 years ago. I can hardly remember what happened this time last year. Of course being a member of Parliament I find it hard to remember what happened this time last week let alone what might have happened 16 years ago. I was almost a member of Parliament 16 years ago but I cannot remember whether I was or not—it is so long ago. In 1984 I was a member of Parliament. 
I may be making a joke of it but that is really how serious it is—to have the commission going now and then have people trying to remember what was said all those years ago. As a lawyer it is very hard to cross-examine somebody on evidence as old as that. At the same time lawyers would have been advising the people who gave evidence in 1986 and would have told them that their evidence would be protected under the Police Complaints Authority legislation. 
As the bill states in the explanatory note the provisions of the Police Complaints Authority legislation “… are designed to facilitate the free flow of information essential for the effective conduct of investigations in compliance with the statutory functions of the Authority. Members of the public are able to approach the Authority in confidence with matters that may be personally sensitive or embarrassing if made public. It also enables the Authority to obtain free and frank information from members of the police regarding complaints. Secrecy is important to encourage witnesses to be frank by providing a climate in which evidence can be given without fear of self-incrimination retribution by alleged offenders or associates or defamation proceedings.” 
That is the basis on which lawyers would have advised people to give evidence to the Police Complaints Authority—the basis on which people would have gone there—and now it is all being overturned by this one-off piece of legislation. The explanatory note quite properly sets out that “It is necessary for the Commission to have access to that material in order to complete its task. Accordingly it is vital for public confidence in the Commission the police and the Authority that this uncertainty be removed.” 
When one looks at it all one wonders whether any human beings will be called to give evidence and whether the files will just be read as they existed all those years ago. What weight will be given to those files and what weight will be given to human evidence? It will create quite a lot of problems. New Zealand First will be very interested in the select committee process. 
I appreciate Mr Martin Gallagher the chairman of the Law and Order Committee talking to me about this matter. He indicated the helpful way in which he intends to proceed in the select committee and that is most appreciated. New Zealand First will take that into account as well. We must make sure that all people are protected particularly the person who has laid the complaint that is now the subject of the commission of inquiry but also all those people who might have expressed views one way or the other. There might be people whose names have not come before the public and who have been shielded up until now. 
On balance New Zealand First will support the legislation to a select committee and we look forward with considerable interest to what will happen there before we finally make our decision on this matter. We have a great deal of support for the New Zealand police force. We look forward to the submissions that no doubt will be coming from the Police Association and will be very interested in the way the public conducts this matter in the select committee. 
MARC ALEXANDER (United Future) 
: 
 This bill is deemed to be required so as to allow the commission of inquiry into police conduct to fulfil terms of reference that amongst other things include the scrutiny of any investigations carried out by the Police Complaints Authority. In every sense the bill is an evaluation of the adequacy of a process that represents the very means by which the integrity of the Police Complaints Authority must be assessed. It goes to the heart of how the public can have confidence in our police. 
The bill is aimed at liberating—and I use that term euphemistically—files that are held by the authority and under section 32(1) of the principal Act are subject to blanket secrecy. Those files include information mostly gathered by police conducting investigations on behalf of the Police Complaints Authority access to which is necessary if the commission is to inquire into the operations and processes of the Police Complaints Authority. 
We have heard much particularly recently on alleged police activities that have not been investigated to public satisfaction. Rape allegations against police seemingly dismissed by initial evaluations do nothing for public confidence and nothing to reinforce the police ethic of service to the community. The real point is that without this enabling bill the commission would in all probability be stymied in carrying out its much-needed function. In short access to Police Complaints Authority files is a necessary condition to the fulfilment of the obligations of the commission. 
Although it might seem that the bill is at least 1 week premature given that the question of the extent of the Police Complaints Authority Act secrecy provisions is to be heard on 8 April it will nevertheless allow the select committee to address speedily the inevitable privacy and Bill of Rights concerns. Invariably those concerns will be raised by those who for the most part want to protect the guilty over the legitimate rights of the innocent. The privacy interests of those who can provide valuable information—be they complainants or police officers—should not hinder and blind us to ascertaining the culpability of those police who have abused the public trust. 
I understand the reasons for the bill. I also understand why its review through the Law and Order Committee needs to be truncated but why has the bill taken so long to get to the House and deny other parties the ability to look at it as it was presented? In itself it is hardly a rival for  
War and Peace;  
at 7 pages it would not break one’s foot if it were dropped on it. Why was this bill not brought to the House sooner so that there could be fair examination by other parties? It could have been introduced in tandem with the commission. The Law and Order Committee would then have had a bit more time to consider the bill before returning it to the House. That fault lies firmly at the feet of this Government. 
Nevertheless United Future will support the introduction of the bill not only to empower the commission to do its work but also to help restore public confidence in both the Police Complaints Authority and the police. But we give that support advisedly and only to the extent that the bill be passed over to the Law and Order Committee. After that all bets are off. 
Dr MURIEL NEWMAN (Whip—ACT) 
: 
 I rise on behalf of the ACT party to speak on the introduction of the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill. I add our party’s voice to the complaints that have been raised in this debate about the shambles of the Government’s introduction of this bill. This is the sort of bill that the public of New Zealand expects a Government to have talked to other parties about. It is not a bill that parties vote for on political lines. It is one of those rare bills—I might add—that all parties usually agree on because it is in the best interests of the country that we agree on some parts of our law. But this Government did not even have the courtesy to inform Opposition members that the bill was coming or provide us with an advance copy. In fact I picked up my copy when the Acting Minister of Justice stood up to make her speech. That is a total disgrace. 
One of the things that Parliament operates on is goodwill between parties. We see it at the Business Committee every week where all parties agree on how the business of the House will be conducted. In general we do see that goodwill on bills like this. I would like to find out whether that situation was because the Minister’s office is in a complete shambles. I see that the bill is under the name of the Hon Phil Goff although the Hon Margaret Wilson moved the motion so I do not quite know which Minister is responsible. 
 The other point is that we have just heard from United Future and although the member did not spell it out it sounds to me as though United Future was given an advance copy of this bill. So why on earth was this bill introduced under urgency? Why was it not given the normal period of 3 sitting days to lie on the Table so that the parties have a chance to look at the bill take it back to their caucuses seek advice on it and come to this House and debate the real issues in an informed manner? This bill is one of the worst examples of disorganisation by the Labour Government in my time here while Labour has been in power. 
I share the disappointment expressed by other members. When we see such a shambles going on either we have to realise there is a shambles—in other words the Government is not governing properly because it is too disorganised—or we have to be sceptical about its motives in including this bill in the urgency motion and avoiding giving it to members until the debate had started. That is the real worry and I stand here right now not knowing the answer. Is it because the Government is in a shambles or is it because for some reason or other it wants to ambush the Opposition parties? I do not know the answer and it is a real shame for New Zealand when a bill like this has to be questioned in such a way. 
This bill has been drafted because of the Commission of Inquiry into Police Conduct with regard to sexual assault cases. The bill will allow the commission to have access to files that are held by the Police Complaints Authority. This is actually a really profound piece of legislation because all those people who gave evidence to the authority would have done so knowing that their confidentiality was absolutely assured. It was like their evidence would be taken from them and put in a steel box which would be locked with a big key and buried in the ground somewhere and the key would be thrown away. That is how people have viewed the Police Complaints Authority. They have known that the information cannot be used against them that the information can never find its way out into the public arena. That has been one of the success stories of the Police Complaints Authority—the fact that confidentiality has been assured. We now have a bill that is going to dig up all those metal boxes that are buried in the ground. It will marry up all the keys that everyone thought had been thrown away and will open up those files and make them available to a new commission of inquiry. 
Because we have not had a chance to vet the bill thoroughly and understand its intention—certainly our party was not briefed on it—we do not know where else that information will go. Who else will find out what is going on or what people have said in the past? That information until now has been locked away in a confidential manner by the Police Complaints Authority. This is another example where people out there listening to this debate may be worried about the police worried about the Government and worried about things like assurances of confidentiality and we as members of Parliament cannot tell them exactly what is going to be involved in this case. So the bill undermines not only the Government and its intentions but the police as well. Why would people comply with requests made to them when they can say they will not give evidence? Why would they comply if the people who tell them that any evidence would be kept secret and confidential are later seen to break their word? 
That is the problem with retrospective legislation which is what we have now. We have a bill that is overturning assurances that have been made to the people of New Zealand over the years. The ACT party does not believe that retrospective law is good law and in general we do not support retrospective legislation. But in this case given the nature of the inquiry that is going on given the nature of the concerns about the allegations that were swirling around the police we think it is only right that we cooperate in the manner that is possible so that we can try to put all of this behind us and restore confidence in the police. So our party will not vote against this law now even though given the treatment we have received we are tempted to do so. I just remind the Government that goodwill is a two-way street in this Parliament—in fact in life in general. We will not vote against the bill going to a select committee because we do want to hear the advice of the officials we want to hear the advice of the police and we want to hear the evidence given to the select committee by the public. 
We are very concerned that the actual period of time that this bill is open for submissions is very very tight. It is just over a month and as everyone here knows by the time it is advertised and the people who need to know find out that this bill is before the select committee we will probably find that the cut-off date has already arrived and many people will be denied their opportunity to have a say on something that could affect their whole life. We are talking about serious matters and about people who had been assured of confidentiality. 
I finish by saying that first of all we will support the referral of the bill to the select committee but we do expect the Government to do better. This process is simply disgraceful and shameful. It is an arrogance from this Government that it expects goodwill on a very very serious matter and does not treat members opposite with the respect they deserve. 
RICHARD WORTH (National—Epsom) 
: 
 With reluctance National supports the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill. I say that it is with reservation because for reasons I will refer to in a moment there seem to be a number of drafting shortfalls in the legislation. 
But more significant I would assert that the Standing Orders do not contemplate the process that has been followed in connection with the introduction and speedy passage of this bill. That is quite clear from looking at the Standing Orders. Standing Order 273 relating to the introduction of Government bills notes: “A Government bill is introduced by the Leader of the House informing the Clerk on any working day or by 1 pm on any sitting day of the Government’s intention to introduce the bill.” That may or may not have happened in this case—we do not know—but what we do know is that just over an hour ago was the first time that National saw this bill and was able to reflect on its implications. 
It is clearly contemplated by the Standing Orders that there be a space of time between the introduction of a Government bill and the bill being set down for first reading. That is made manifest by Standing Order 280 which provides that “After its introduction a bill is set down for first reading on the third sitting day following.” This bill was introduced perhaps an hour ago and instead of that planned 3-day pause—which may be longer than that because it is 3 sitting days—we are now involved in the first reading of this bill. 
So it is little wonder that Opposition members are concerned about the course of process that has been followed here and it is not surprising that one of the Opposition members should say in such a bold way—if in fact United Future counts itself as being in the Opposition—that all bets are off. We have seen eroded an important convention that should characterise the conduct of this House and that is that where practicable the process of legislation should be accompanied by a degree of goodwill and comity. That has certainly not happened here. 
The work of this commission of inquiry is clearly important and critical work. I do not believe that in the lifetime of most members of this Parliament a state of affairs has occurred where significant reservations are looming large in the public mind about the conduct and integrity of the police. As all members would accept it is absolutely critical in a legal system that there be a high measure of confidence in the police and support for their activities. I suggest that recent newspaper publicity has put that issue clearly at risk. If it is the case that the Crown Law Office the New Zealand Police the Ministry of Justice and the commission of inquiry believe that the commission may be hampered in carrying out its task through inability to access material held in Police Complaints Authority files then quite clearly that material should be delivered up subject to appropriate safeguards. It is absolutely vital that the work of the commission not be impeded and that there emerge from its deliberations support for the conclusions that follow from its consideration of the issues. But I do not believe we should have been put in the position of having to hasten this legislation through Parliament. This was a readily identifiable issue at an early stage. The moment the commission reflected on what its task was to be it should have been immediately apparent that issues touching the work of the Police Complaints Authority would arise. 
The bill itself is deceptively simple. It is in two parts but from looking at those two parts I think a host of issues arise that need to be considered by the select committee. For example in clause 4 there is a definition of “member of the police” that seems to run into an immediate drafting problem. It provides: “member of the police includes a former member of the police (other than a person who is currently a staff member or employee of the Authority)” and I fix on that phrase “staff member or employee of the Authority”. Surely staff members are employees of the authority. How could that be otherwise? 
Then there are issues that other speakers have referred to relating to the scope and intent of the definition of “restricted matter”. There is a sunset clause that provides that the bill expires 1 year after the commission finally reports and that clearly is an appropriate provision. 
In Part 2 where the substance of the bill is contained other issues arise. It is quite clear that the two critical sections are sections 32 and 33 of the principal Act. For myself I have no quarrel with the changes proposed to section 32 but if one looks at the thrust of the drafting of the changes proposed to be made to section 33 one finds that the same cannot be said. That particular clause which is more concerned with aspects relating to the authority sits singularly uncomfortably with what is planned in subsection (2A) of section 32. 
There is a section in the Police Complaints Authority Act that has not been altered by this bill and that is section 25(4). So it seems to be the case that evidence that has in the past been given to the Police Complaints Authority will not be allowed to implicate by way of admission the officers or persons who gave that evidence. That is not absolutely clear and needs to be considered because quite clearly complainants and police officers who gave that evidence to the authority did not contemplate on the then state of the law that that material might be used against their interest. 
Finally could I say that in supporting this bill going to a select committee the National Party should not be assumed to be assenting to the details of the legislation. We take the view that it is appropriate that it go before a select committee so that consideration can be given to dealing with the excrescences in the drafting and to aiding the commission to do what is clearly critical work. 
Bill read a first time. 
Hon MARGARET WILSON (Acting Minister of Justice) 
: 
 I move  
That the Police Complaints Authority (Commission of Inquiry into Police Conduct) Amendment Bill be referred to the Law and Order Committee 
referred to Law and Order Committee 
 for consideration and the committee to report back by 3 May 2004 and that the committee have the authority to meet at any time while the House is sitting except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 191 and 194(1)(b) and (c). 
Motion agreed to. 
Charities Bill 
First Reading 
Hon MARGARET WILSON (Minister of Commerce) 
: 
 I move  
That the Charities Bill be now read a first time. 
 At the appropriate time I propose to move that the bill be referred to the Social Services Committee for its consideration. 
The Government both recognises and highly values the significant contribution the voluntary and charitable sector makes to New Zealand society. Since June 2000 when my colleague the Hon Steve Maharey the first Minister for the Community and Voluntary Sector publicly acknowledged the importance of community voluntary iwi and other Maori organisations to the health of our country the Government has been working to improve its relationship with the sector. Following on from the Hon Steve Maharey’s acknowledgment came the signing of a statement of Government intentions for an improved community-Government relationship in December 2001. The report of the Community-Government Relationship Steering Group was published 8 months later. Last year saw the Office of the Community and Voluntary Sector established. The Government’s commitment to improving its relationship with and strengthening its support to the community and voluntary sector is ongoing and the tabling of the Charities Bill in the House today is further evidence of that commitment. 
This bill provides for the establishment of a new Crown entity the Charities Commission. The commission’s primary function will be to administer a registration and monitoring system for charitable organisations and approved donees. The commission will also be responsible for educating and assisting registered charitable organisations approved donees and other people to comply with their regulatory obligations and duties. Also the commission will consider report on and make recommendations on any matters relating to charities will stimulate and promote research into any matter relating to charities and will carry out any other functions the Minister may direct it to perform. 
Creating a registration system will help to foster a culture of philanthropy and giving in this country by increasing the public’s trust and confidence in charitable organisations. The bill provides that all organisations wanting to register will need to supply details of their activities and purposes. The commission will then assess those details against the requirements of the charitable purposes test which are the advancement of education and religion the relief of poverty and any other purpose beneficial to the community. All registered charitable organisations will be issued with a unique registration number. That number will need to be displayed on any materials used when money is being collected from the public so that people who make donations can be assured of the organisation’s charitable purpose and financial solidity. 
Registration with the commission may be voluntary but only those organisations that choose to become registered can continue to access tax exemptions or be classified as approved donees. Registered organisations will have to file an annual return showing that they are undertaking charitable activities. In addition they will have to provide the commission with basic financial data when completing their annual returns. That will also help to increase the sector’s transparency and accountability to the donating public and to those to whom it provides assistance. All information filed with the commission will be publicly available and accessible on the commission’s website. That will increase transparency and promote good governance. The Government hopes that it will in turn encourage more people to support charitable organisations. The ongoing monitoring provided for in the bill will mean we can make sure that tax exemptions are being appropriately used by the organisations entitled to them. 
The registration and monitoring system will also provide more information about the charitable sector. Currently there is no general collection of information about the activities or funding sources of charities. For example one of the main forms of assistance available to the charitable sector is the exemption from paying income tax. However the exact extent of that assistance is unknown. The information collected by the commission will provide a better indication of the size and scope of that support in the charitable sector. It will place us in a much better position to assess whether assistance to the sector is as well targeted as it could be or whether it should be improved and if so how. 
The establishment of the Charities Commission will also help to bring New Zealand into line with other Commonwealth countries where registration and reporting regimes for charities are commonplace. It is also the first step towards instigating measures to satisfy New Zealand’s international obligations under the Financial Action Task Force’s Eight Special Recommendations relating to the financing of terrorist organisations through not-for-profit entities. 
As I mentioned earlier the commission will be a new Crown entity. The board will be made up of five to seven members. The responsible Minister will appoint the board members in consultation with the Minister of Revenue and the Minister for the Community and Voluntary Sector. We will be actively calling for expressions of interest from people wanting to be commissioners on the inaugural board. That will be carried out by contacting key groups in the sector as well as by advertising in the media. As a Crown agent the Charities Commission will be required to give effect to Government policy. However it will be fully independent when using its statutory powers—for example when making a decision on whether to register a charity. The Inland Revenue Department will continue to have an audit function and to have the authority to deny a tax exemption to a registered charity if it is not satisfied that the purposes of the organisation are charitable. 
I intend to move that the Social Services Committee consider the Charities Bill. 
RICHARD WORTH (National—Epsom) 
: 
 National is absolutely opposed to the Charities Bill and would wish that it take not one further step. This is the second major challenge that the Government has launched against charities. The first was substantially abandoned following a discussion document dated 2001. Members may recall what the Government then proposed to do to charities. There were a number of planned steps and a detailed time frame for the implementation of the legislation. It was planned that the trading operations conducted by charities were to be taxed in the same way as other businesses. The Government’s intention was to tax charities that put their tax-free profits back into the business rather than distribute those profits for charitable purposes. The effect would have been to tax the retained earnings of charities. That was the first element of the plan. The second element was that charities would have had to pay fringe benefit tax on fringe benefits provided to employees. 
Unsurprisingly there was an uproar from the charities. There are 37000 charities in New Zealand and they range from entities like cancer research foundations and the National Heart Foundation to kindergartens and sporting clubs. The Government backed off but now it has come again and I suggest that what it proposes is equally inappropriate and is to some extent sinister. The latest plan is to register charities and to collect information about their activities and funding sources. I took those words from the first three lines of the explanatory note of the bill. There is no Charities Commission in Australia. Why is it necessary to have a Charities Commission here? 
There are three reasons why National opposes this legislation. The first is that it is utterly unnecessary. The Inland Revenue Department is currently responsible for the oversight of charities and the regime it has established works well. Whether an entity has charitable purposes and is therefore entitled to the income tax exemptions provided for under the various sections of the income tax legislation depends on its constitution the trust deed or the other rules under which the entity chooses to operate. There is no statutory requirement to apply to the Inland Revenue Department to secure tax-exempt status. However many entities choose to do so in order to gain an assurance that they are entitled to an exemption. When entities seek Inland Revenue Department advice as to their charitable status they provide the department with a copy of their constitution and/or the rules governing the entity. The department reviews those documents to ensure that the aims and objectives of the organisation are charitable and that no person is able to derive any personal gain from the organisation. The department confirms in writing the sections of the revenue Acts that apply to the organisation. The system is working well. If it were not working well that would be an indictment on the Inland Revenue Department. There is no suggestion that the system is in other than sound working order so the first argument is that there is no need for a Charities Commission. 
The second argument which has been articulated by a number of people in the media is that there is a real threat to public debate and advocacy. The Green member of Parliament Sue Bradford has said—I suggest correctly—that there is a danger that community groups performing advocacy will not be eligible for charitable status. I suggest that she asked a very legitimate question about whether this legislation is an attempt to control or kill off groups that carry out lobbying outside their service function. I assume the Government has the numbers to pass this bill. I assume this is another case where United Future the so-called Opposition party will lend its support to the Government to provide the necessary numbers. I commend the Greens for the principled stance they have taken in connection with this legislation and I urge United Future to carefully consider the stance that it plans to take. As Sue Bradford said any non-profit organisation worth its salt should be involved in advocacy. I would say that advocacy is a natural consequence of charity. It always has been; it always will be. 
 Why is the Charities Commission to be entrusted with a tasked function that may well see the advocacy role of charities disappear? 
Lianne Dalziel 
: Ha ha! 
RICHARD WORTH 
: There was a snigger from one of the Government members in response to the comment I have just made but anyone who has worked in charitable organisations will know it is really important to advocate for the cause. To cut off that possibility I suggest will further weaken the philanthropic frameworks that should be a critical part of the New Zealand system. 
The third matter I would like to deal with has a constitutional aspect. If one looks at the explanatory note of the bill one sees a very clear omission. The omission is that for some reason there is no regulatory impact statement or business cost compliance statement. Those statements are required by the  
Step by Step Guide 
 to Cabinet processes. It is a precise and clear obligation that such statements are required to be reproduced in the explanatory note of a bill. Heading 3.36 in the guide makes that crystal-clear. It states: “The RIS/BCCS”—the regulatory impact statement or the business cost compliance statement—“will also be included in the Explanatory Note to Bills that are introduced into the House.”. 
I raise the question of why the Cabinet guide has been breached in this particular case. It is true that there are a number of exceptions contained within the guideline document but no exception is relevant in this case. The exceptions are clear on their face. This particular bill does not create an exception to the requirement so we should have seen a statement of the net benefit of the proposal including the total regulatory costs—administrative compliance and economic costs—and benefits including the non-quantifiable benefits of the proposal. I know why we have not seen that material. The reason we have not seen it is that the Government is ashamed to publish it. The compliance costs of setting up this commission will be substantial but more significantly the impact for the 37000 charities in New Zealand will be out of all proportion to the benefits that can possibly be gained. 
New Zealand has not actively encouraged a philosophy of private philanthropy in stark contrast to countries like the United States where charitable giving is widely accepted and encouraged with a range of incentives. 
DAIL JONES (NZ First) 
: 
 When I was recently in legal practice I helped to create a number of trusts under the Charitable Trusts Act. As I did so from time to time I asked myself what sort of control exists for those charitable trusts. Who knows anything about them? So I made some inquiries about what type of regulatory measure exists for charitable trusts and I discovered that way back in 1979 there had been a Property Law and Equity Reform Committee report on the Charitable Trusts Act of 1957. I got a copy of that report in the early 1990s. Of course I misplaced it a long time ago but I got the library to get it for me again because I was still concerned about the way in which those trusts had been operating. 
In paragraph 1 the report states: “The committee has been asked to consider the comments made by T A Gresson J.”—Justice T A Gresson—“in the case of Re Goldwater Deceased [1967] NZLR 754. Subsequently it was suggested that the whole of the Charitable Trusts Act 1957 called for a general examination. In particular the question was raised of the desirability of establishing more effective means of control of charitable trusts perhaps by means of a charities commission along the lines established in the United Kingdom.” So way back in 1967 concern was being expressed in New Zealand about the way in which those trusts were operating and the lack of control on them. Again in paragraph 13 on page 7 the report states: “The committee was asked to give particular consideration to the questions raised by the Rev. R M O’Grady the associate-general of the National Council of Churches in a newspaper article in which he said: ‘The public has no protection against charities in New Zealand. It would not be difficult for a skilled promotional person to raise $10000 or more for almost any appeal one cares to name. Simply by national advertising and a small mailing to selected persons any charity can get itself established in a few weeks. Raising really big money for a charity requires time and planning. By far the best method is the house-to-house collection.’ ” 
Concern was expressed in this report published in 1979 with quotes from the Rev. O’Grady of the National Council of Churches and Justice Gresson a High Court judge about the way in which charities were operating in New Zealand way back in 1967. All I can say on behalf of New Zealand First is that I am delighted to see the Charities Bill before the House. It is long overdue. There are far far too many rip-offs in our society in so far as charities are concerned. 
I thought I would do a little bit of research. I put “charities” into a search engine on the Web as I am wont to do with various things and I got the UK website. There are 1 million registered charity trustees in the United Kingdom. My friend from the National Party told us vaguely about the situation in Australia. He circumvented any reference to the United Kingdom but I am sure his research department also checked the United Kingdom situation. There are 1 million registered charity trustees in the UK! There do not seem to be any problems in the UK with that. I have never heard any complaints about it. What is suggested in this report is that there should be a charities commission along the lines of that established in the United Kingdom. I cannot see any particular reason why there would be problems in the UK; it all seems to work well. 
Richard Worth 
: The problems are on the Web. Tell us about them. 
DAIL JONES 
: I am surprised that my colleague from the National Party who is interjecting now did not tell us about the situation in the United Kingdom and I suspect the reason was that the process is working very well there and he was unable to come up with any problems associated with it. 
The Green Party issued a press statement that stated: “The definitions of a ‘charity’ are almost unchanged from the 1908 tax law.” In fact the definition of a charity is almost unchanged from that of 1601 in the Statute of Elizabeth. That is the basis of a charity. It is for looking after the poor their education and suchlike. Charities have never been designed for the purposes of political parties. Political parties should not expect to get support as a charity. [ 
Interruption 
] OK the National Party is upset now that it has been exposed but political parties should not expect to get support as a registered charity. That is very very clear. Of course the National Party needs some financial support. [ 
Interruption 
] As my colleague said I doubt it very much. It is well and truly established that looking after the poor the sick the unwell and suchlike is the basis for establishing and supporting a charity and has been from way back in 1601. 
We had a case in the House around 1979-80 relating to CORSO. Remember how CORSO went? It was a classic example of an absolutely wonderful New Zealand icon of a charity that looked after the poor. I remember that when I lived in Grey Lynn and used to walk down the road towards Hobson St CORSO had a wonderful building there where it collected clothes and sent them overseas. But it drifted away from its course—what it was set up for and intended to do—and effectively became a political organisation. 
Hon Richard Prebble 
: A bunch of radicals. 
DAIL JONES 
: A bunch of radicals absolutely. They were deregistered with regard to charitable purposes and out they went. I suspect perhaps that the Greens are saying they do not support that idea. That is very good. My colleagues from the National Party who are here support the Greens. Well in this bill there is a clause stating that people with convictions punishable by imprisonment for 2 years or more should not work for charities. I think that is very very important. 
Richard Worth 
: That won’t rule out all the Greens. 
DAIL JONES 
: That is a very unkind comment from Mr Worth—very unkind indeed. But he is supporting the Greens. He is working with the Greens and cannot quite make up his mind whether he is for them or against them on this particular provision. As far as the Greens saying that people with those criminal convictions should be allowed to work for charities and suchlike I do not agree with them on that matter. I am consistent in my difficulty in agreeing with the Greens on many issues. Generally speaking however in so far as this provision is concerned I think it is important and long overdue that people whose role is to make money available to charities have the minimal degree of registration that is required by this legislation and that there is some degree of confirmation— 
Richard Worth 
: Minimum of $20000 a year. 
DAIL JONES 
: —$20000 yes absolute nonsense—that charities have some degree of supervisory attention from the Government of the day and that not any Tom Dick or Harry can be involved in charities. They should have a number and suchlike so that when collectors go by at least on the face of it they have a number. We know that the unscrupulous will give themselves a name and number and will still try to collect money illegally and the like. But on the whole I think this legislation is a very good idea. 
So far as the tax side of it is concerned—and I do not think my colleague has been associated much with charities—for every charity I have registered I have tried to have in its rules a provision that has been approved in advance by the Inland Revenue Department using the wording required by that department for the way in which the funds can be utilised in a liquidation and for the way in which the staff of the charity can be paid. Those are the two things the Inland Revenue Department is concerned with. 
To repeat for my friend on the right from the National Party the mischief that could be done was set out by Justice Gresson in 1967. It was set out by the National Council of Churches in the late 1970s. I am sure that anyone associated with charities knows there are unscrupulous people out there who are willing to rip off the New Zealand public. Doing it by way of a charity—or so-called charity—is one of the best ways possible. This was a little hobby horse of mine when I was in practice—to have something done about tidying up the situation. All I can say is that on behalf of New Zealand First I am delighted that this type of legislation which seems to have worked so well in the United Kingdom is being introduced into the House today. 
SUE BRADFORD (Green) 
: 
 On the surface of it the Charities Bill is unexceptional legislation put together in response to long-held concerns by people in both the State and private sectors as well as in the voluntary sector that the existing law dealing with the registering of charities for taxation purposes is out of date and inadequate. The overall purpose of the bill is to establish a Charities Commission for the first time in this country which will register organisations for tax exemption purposes and monitor the financial returns and activities of groups. The bill has been a long time in gestation finally emerging after a 2-year review and consultation process and a drafting period first with Treasury then with the Ministry of Economic Development. One would have hoped that after all that time and work they would have got it right but I fear that that is not the case. 
First of all the definition of what constitutes a charity remains almost unchanged as my colleague Mr Jones said from that contained in the archaic 1908 tax legislation on which this bill is based—which in turn is based on very very old law from England. I take one example from clause 4 “Interpretation”. In subclause (2) “charitable purpose” is still principally defined as that which relates to “the relief of poverty the advancement of education or religion”—words that will be familiar to all the poor souls who have struggled to explain to the Inland Revenue Department why their trust or incorporated society should receive charitable status at any point in the last hundred years or so. Surely in preparing this bill the Government could have done more to modernise and update the wording in a political social economic and cultural climate that has changed significantly since 1908—especially when there is a lot of academic and political work happening in this area not only in New Zealand but also all around the world on which the drafters could have drawn for inspiration. 
Secondly the Green Party is concerned that as the bill is written there is a real danger that if any community group carries out any kind of political advocacy it will not be eligible for charitable status. That is highlighted in clause 26(1)(b) which states that an organisation can be removed from the register of charitable organisations if it “(i) has any purpose that is not a charitable purpose; or (ii) is not being maintained exclusively for charitable purposes;”. Because the bill as drafted relies so heavily on the existing legislation and on the history of how “charitable status” has been defined and interpreted by the Inland Revenue Department up to now which excludes political advocacy I am therefore very wary that if this legislation was passed as it stands it would open the way for Government to control and possibly kill off groups that carry out any kind of political advocacy lobbying or campaigning as part of their functions. I welcome the understanding of the National Party on that point. However its members themselves used that sort of thing against political groups I might say during the early 1990s. 
That danger becomes particularly apparent in an environment like the one we are in right now with things like the threats to the funding of groups that carry out any kind of health advocacy the Auditor-General’s report last year into the funding of groups associated with Donna Awatere Huata the current National and ACT attacks on many community sector initiatives and individuals and the Government’s response which includes for example the clamping down on Community Employment Group funding announced today. Most non-governmental organisations do have an advocacy role whether it is making submissions to select committees or local councils on relevant legislation or bylaws putting out newsletters that critique Government in their particular policy areas making statements in the local media or taking part in a host of other activities. I would contend that those and many similar functions are an absolutely valid part of community sector work and that the clauses that open the way for groups to have their charitable status revoked for carrying out a non-charitable function must be changed and clarified during the select committee process so that they cannot be used as a method of political control of the voluntary sector. 
Some people will say that what I am on about here does not matter because groups do not have to register for charitable status—it is entirely up to them. They can be free of all the controls this bill will bring if they simply choose not to apply to become a charitable entity. Although that sounds fair enough underneath there lies a further threat. I am really concerned that once the Charities Commission is up and running and all groups involved have their registration numbers—which they must by the way display on every written communication they send to anyone ever—donor organisations will use those registrations as a shortcut to decide who will get funding and who will not. I know that funders in this country are always under pressure to take shortcuts to decide which groups they will support and who is deserving and who is not for their particular purposes—especially in a climate where groups are chronically underfunded and there are usually far more applications than even the most well-intentioned of donors can ever meet. My worry is that once this bill is in force donors whether they are Government local government private philanthropists or community trusts will almost automatically exclude groups that do not have registration from eligibility for funding. Groups that do not fit the criteria under this bill or who want to maintain their independence from Government and do not wish to register could miss out altogether from most sources of funding and therefore in quite short order die. 
Thus I believe that the bill has much wider implications than might be immediately apparent. I hope every non-governmental organisation in the country will be considering the issues carefully and making submissions to the select committee over the next couple of months. I think it is critical that even those groups that might think they will never apply for charitable status give consideration to making submissions because of the possible implications of this legislation for them—which are substantial and threatening. 
For the majority of groups which will want charitable status under the new regime there is a further issue to consider. It now appears that key reporting requirements under the charities legislation will actually be introduced by regulation after the bill is passed. That means that neither political parties considering the bill in the select committee and in the House nor community groups making submissions will know what level of compliance will be required. I am beginning to wonder whether the Government is actually using this bill as a kind of Trojan horse to bring in a very high level of financial and organisational accountability with associated extra compliance costs to be dragged out of groups that are mostly substantially underfunded anyway and many of which are struggling right now for financial survival. I commend the National members for understanding this matter. It will be a perverse outcome if with the passage of this bill Labour introduces a compliance regime that is so expensive that it will further undermine the ability of groups to survive. 
That will be exacerbated by the ongoing attitude of most funders that they will not support infrastructure—only frontline services or projects—and that organisations should as a rule of thumb meet a substantial percentage of such costs by external fund-raising which again takes time away from the real work of the group. Ironically on top of this new reporting requirements could well compel groups to reveal more than they do at present about what proportion of the funds they raise themselves from the public are used for administration and infrastructure costs thereby risking in some cases even more difficulty in attracting external public support. 
I also question to what extent the compliance measures to be introduced in the bill and by regulation will be geared to playing a controlling role in the actual day-to-day running of organisations. There are already measures in the bill that allow the Charities Commission to examine and inquire into the activities and proposed activities of any group into any of the people involved into the management and administration of the group into the outcomes achieved and of course into its use of income and property. On top of this clause 87 says that the Minister may direct the commission to perform any additional function consistent with its broad objectives. People less paranoid than me may not be worried by this but I do urge awareness of the sensitive environment in which groups are currently operating and recollection of the traditional hostility of Governments towards the political advocacy functions of the voluntary sector. 
The way that this bill has been written and devised overall appears to fly in the face of a lot of the good work that has been done over the last 4 years through the Community-Government Relationship Steering Group the  
He Waka Kotuia 
 report and other processes that are still happening around the country. The bill does not reflect a particularly sound understanding of the principles that have been brought out through those processes or of how the sector works. It appears that the bill arises from Treasury and the Ministry of Economic Development not from the Ministry of Social Development which has actually been that part of Government engaged in the cooperative processes initiated soon after the 1999 election. I may be wrong but I think that perhaps if the Ministry of Social Development had written this bill it might have been a more creative responsive and courageous piece of legislation. 
However it is of course not too late to turn this bill round. The Green Party will be supporting the Charities Bill through at least its first reading in the hope that during the select committee process we will be able to work with other parties to improve the legislation in a whole range of ways. We are keen to work with community sector organisations to ensure that this bill ends up having a positive rather than a negative impact on a sector that has been incredibly politically battered over the last 14 years and does not need a Labour Government taking further steps to colonise and control what is left. 
Hon RICHARD PREBBLE (Leader—ACT) 
: 
 I rise on behalf of the ACT party to speak on the first reading of the Charities Bill. The principal purpose of the Charities Bill is to set up a new Government organisation called the Charities Commission which will register all charities and donees. [ 
Interruption 
] Having given one speech why does the Green Party member want to give another? The Charities Commission will register 37000 charities in New Zealand and it will then require all those charities to present annual returns. It will then educate those charities then provide advice to the Government. 
As has been observed in Parliament charities are an important part of our community. Charitable law goes back a very long way. The definition of a charity was established some 400 years ago and when I hear Green members saying that they have a new idea of what a charity is I am somewhat sceptical. I say to them and to the National Party that charity as understood by the community is looking after the sick looking after the poor looking after education and the promotion of religion. That is the core understanding of a charity. 
 I do not accept that the community should be financing advocacy. I am in favour of advocacy but when it is said to be charitable they are asking those who do not agree with those views to subsidise it. 
But let me turn to the essential reason that I think the Government is putting this forward. Clearly there needs to be some public confidence in charities. Public confidence in charities in New Zealand has been shaken. We have had some spectacular cases of people setting up charities and engaging in fraud. We know that. There have been cases mentioned in the newspapers. But that is not a new factor. There have been frauds for 400 years. How has this Parliament dealt with frauds in charities in the past? We have very strong law and it is very old law on how to deal with it. The Attorney-General has statutory duties to pursue corrupt charities. They are set out in section 58 of the Charitable Trusts Act. 
The Attorney-General has the power to pursue people who have taken money wrongly from charities and get it back from them. I draw it to the attention of the House that in the 4 years Margaret Wilson has been the Attorney-General she has not pursued one of those cases that members would have read about in the newspapers. Even those cases where people have been prosecuted where people have taken money and gone on overseas trips bought cars and other things for their friends relatives and girlfriends—[ 
Interruption 
] The member is referring to that particular member whose case is before the courts. The Government has not pursued that member either. I say that the idea that the Government should set up a new bill because it has not carried out its present law is wrong. 
Let me make this clear to the House. This commission is going to be a huge quango. It will have seven commissioners and they will all get paid. But if the British experience is anything to go by they will have an army of bureaucrats. There are 37000 charities. Who is going to pay? In the first instance it will be the charities themselves. If members pick up the bill they will see that there is a requirement for the commission to be sustainable. What is meant by that is that all the expenses have to be got by registration fees. At the moment 37000 charities do not have to pay a registration fee but when this bill goes through they will have to pay. This is an extra cost. Who is actually going to pay that? It will come in two ways. It will come from the public who thought they were donating money to a charity but will find that Margaret Wilson and the Labour Government have taken the money for bureaucrats and for their girls and boys they appoint to this commission. That is who will have to pay. Who will be the real losers? It will be the poor. It will be those who are not educated. It will be the sick. They will not actually receive the money because Margaret Wilson and the Labour Government think the money should be spent on bureaucrats. 
I also object to this. Margaret Wilson said to the House that this was a partnership between the Government and the community sector. The Government is the unwanted partner of the community sector. The Government takes all the credit and none of the risk. The Government imposes all the rules and pays none of the costs. It is the unwanted partner. I have not had a single charity write to me and say: “Mr Prebble I want the Labour Government to be the partner of my charity and to start imposing bureaucratic rules upon me reporting requirements that I have not been asked to pay and have not been asked for by those who donated to my charity. And I want to give the Government money for an army of bureaucrats to supervise me.” I have not received one such letter. If Margaret Wilson has received one from any charity I challenge her to table it. 
But it is a more serious problem that underlines this Government’s whole principle of Government. When we have a case of a few rogues this Government regards that as an excuse to apply penalties to the law abiding instead of holding those who break the law accountable. If Margaret Wilson had actively in a high-profile way pursued those rogues who took money from the public and then spent it on colour TVs overseas trips and the like and if she had extracted the money and bankrupted the trustees that would have done more for public confidence in charities than any other measure. The reality we all know is that of the 37000 charities in New Zealand almost the entire number of them are doing good work with no assistance from the Government. They have not asked the Government to assist them and this Government because it will not enforce old laws that previous Attorney-Generals have had no difficulty in enforcing has instead decided to impose its socialist views on charities. 
I say to the Green Party that it is not so much my concern that the Government will start to take action against advocacy groups. I am not sure whether advocacy groups are entitled to be charities. However I worry about the Government setting up a quango of this sort giving it the powers to advise the Government and then starting to mould the charitable groups to their making. I agree that it is quite extraordinary that every charity will now have to have a registration number—a sort of tattoo that will be placed on every charity and must be on every single publication they put out. We then read that if they do not do that this commission can fine the charities $2000. That is an abuse of power. 
This bill has not been asked for. It is not needed. All that is required is an Attorney-General who is prepared to carry out her real role instead of thinking that her job is to advocate for the socialist republic of Aotearoa. This is another step on her socialist agenda. The ACT party—which believes in charity believes in the concepts of charity and thinks that charities in New Zealand are doing a good job—is opposed to this bill and we will vote against it at every stage. 
GORDON COPELAND (United Future) 
: 
 I am really delighted tonight to be able to rise to take a call on behalf of United Future on the first reading of this bill. I say that because I have now been involved in this issue for more than 16 years. My involvement began in December 1987 when on a now rather infamous occasion Roger Douglas and others lined up in the Beehive and amongst other things announced their intention to place a tax on charity. Charity is an old-fashioned word. It means love of one’s fellow human beings. So for whatever reason—a reason that I subsequently was never able to really get to the bottom of—the Hon Roger Douglas suddenly decided that it was a good idea to put a tax on love. 
I might say that the response from the charitable sector was one of immediate and absolute fury. Five hundred years of division within the Christian churches for example was quickly swept aside and an inter-church working-party on taxation representing all the churches in New Zealand was formed in short order. Two thousand years of division was put aside when the Jewish congregations then joined in. The group extended to all the voluntary welfare organisations in the country all the major charities and eventually to all the sporting clubs as well until there were so many people involved from so many sectors that when we went to visit Roger Douglas it was impossible to get all the people into his office. That is how I began to get involved in this issue. 
The Government had to back down basically in the end. It had to as David Lange famously said at the time give New Zealanders a bit of a break so we could all go away and have a nice cup of tea. In the process of doing that the Government decided it would like to kick this matter into touch and in 1988 it appointed the Spencer Russell working-party which reported in 1989. It recommended to the Government of the day that a commission for charities be established. That initiative did not proceed following the change of Government in 1990. During the years since 1990 until I guess about 2001 I trekked across to Parliament on many occasions and spoke to all the successive Ministers of Revenue. I was seeking greater assistance for the charitable sector in terms of better tax rebates for individuals and companies gifting funds to charities and in more recent years accessibility by charities to imputation credits attaching to dividends received from New Zealand companies. However all those submissions essentially fell on deaf ears. Successive Ministers of Revenue from both the Labour Party and the National Party made agreeable noises but continually verbalised their unease about more generous donation rebates because of anecdotal evidence that “some charities were involved in tax avoidance arrangements.” 
However undaunted we continued to trek across to the Beehive following the changes of Minister as they occurred over those years and in 2000 we made our concerns known to Dr Michael Cullen. Those meetings were refreshing because they resulted in some positive go-forward. Essentially Dr Cullen expressed a willingness to look at a more generous donations regime the question of imputation credits and a number of other issues provided a means could be found to ensure that those benefits extended only for bona fide charities. In other words he sought an assurance concerning the protection of the Government’s revenue base. 
A Government discussion document on tax and charities followed in short order and more than 1700 submissions were received from affected organisations and charities from the length and breadth of this country. That in turn persuaded the Government to set up a working-party to look at the establishment of a registration annual return and monitoring system in relation to all New Zealand charities. In early 2002 prior to being elected to Parliament I was part of that working-party. By now all in this House are probably aware that the working-party recommended the establishment of a Charities Commission which would have responsibility for the establishment and maintenance of a registration reporting and monitoring regime for New Zealand charities. The Government accepted those recommendations and has been working since through an establishment group to set up the commission. 
This bill is therefore the climax as it were of a 16-year attempt by the charitable sector in New Zealand to bring about a fundamental change in its status within New Zealand society. United Future of course now supports the first reading of this bill and its referral to a select committee. I encourage all charities to take the opportunity to make submissions during the select committee process with a view to finalising the law so that the commission can commence its operations as soon as possible. I think the target date is 1 October 2004. 
All of this in my view represents a major step forward for the charities of New Zealand. The commission is designed to become a one-stop shop and will adopt a whole-of-Government approach to bring together the interface between the charitable sector and the Government something that currently involves much contact with the Inland Revenue Department and a number of other Government departments and agencies. I can speak for many many charities when I say that their contact with the Inland Revenue Department in trying to get their charitable status established has been completely unsatisfactory. At the moment it can take 18 months to 2 years and the most inane exchange of correspondence one can imagine to get that done. All of that will disappear once this commission is established. 
Primarily the commission will be there to assist charities in their establishment their ongoing operations and where necessary their disestablishment. Eventually however tax-free status will be reserved for registered charities only. I want to clarify a situation that was mentioned by Sue Bradford and that is to do with the definition of charities. This bill will in no way alter the current definition of charities. That will continue to be defined by the courts. 
Debate interrupted. 
Sitting suspended from 10 p.m. to 9 a.m. (Wednesday)