Debate on Crown Entities Public Organisations and State Enterprises — In CommitteeText is incorporated into the Bound VolumeDebate on Crown Entities Public Organisations and State Enterprises — In Committee[Sitting date: 14 May 2013. Volume:690;Page:9879. Text is incorporated into the Bound Volume.]Debate on Crown Entities Public Organisations and State EnterprisesIn CommitteeThe CHAIRPERSON (Eric Roy): The House is in Committee for consideration of the performance in 2011-12 and current operation of Crown entities public organisations and State enterprises. The debate on the performance of Crown entities public organisations and State enterprises is a series of debates on the individual financial reviews of Crown entities public organisations and State enterprises as reported by select committees. A total of 3 hours is dedicated for this debate. The debates on the individual financial reviews should be relevant to their performance in the 2011-12 financial year and their current operations and any member may have no more than two calls on each financial review. The financial reviews available for debate are available on the Table. Reports on entities that are not yet reported cannot be debated. I understand members have indicated the Crown entities public organisations and State enterprises that they wish to debate and I understand the first entity members wish to debate is the New Zealand Tourism Board.New Zealand Tourism BoardTE URUROA FLAVELL (Māori Party—Waiariki):Tēnā koe. In the short time I have got available I did want to put a Māori Party point of view and that is that it was pretty disappointing to read the report of the Commerce Committee about 2011-12 and see the extent of the 2011-12 performance summarised in one sentence: “no matters to bring to the attention of the House.” That is what the committee said: “no matters to bring to the attention of the House.” With that the report of the New Zealand Tourism Board presented on 9 November last year and the deliberations of the committee on 6 December are now on record as comprising no matters for our attention.I have to say that one would have expected a little bit more from the committee. I mean I would love to see this House debating a whole range of issues including the current tourism focus which has been on the “100% Pure New Zealand” brand. That is great. It reflects our environmental values a concept central to Māori Party psyche and what we commonly call kaitiakitanga. But I wonder what consideration has been given to for example the unique value of our cultural tourism in Aotearoa. What indeed has been given to nurture our Māori operators in the tourism industry?Sometimes I think that we need to challenge ourselves about the things we do as a country by not recognising some of the things that are actually right under our noses. In that regard I am talking about things Māori. This was discussed I think by a woman by the name of Pania Tyson-Nathan when she at the recent Trenz event encouraged tourism operators and said that Māori tourism is not about just entertainment value. Māori culture and the tourism product are important to our economy and to the cultural social and psychological frame of our country.Tourism is an industry where Māori are moving up the management chain from being just performers in the old days to managers owners and entrepreneurs and are developing Māori models of tourism business collaborating off the leverage of the Māori edge and integrating—The CHAIRPERSON (Eric Roy): I am so sorry to interrupt the member. He will be able to conclude his call at 7.30 p.m. when I resume the Chair for now is the time for the dinner adjournment.Sitting suspended from 6 p.m. to 7.30 p.m.Report noted.Reserve Bank of New ZealandDr RUSSEL NORMAN (Co-Leader—Green):I rise to speak briefly on the Reserve Bank. The reason why this is important is that the Reserve Bank gave a very important report to the Finance and Expenditure Committee last week about financial stability. The key point that it was making in its report was that the out-of-control housing market is threatening the financial stability of the financial sector and the banking sector in New Zealand. When I asked the Governor of the Reserve Bank directly whether the New Zealand economy had rebalanced which the Government set itself as its top economic priority when it first came into office the governor gave a very direct answer that the New Zealand economy has not rebalanced under this Government—that is if you look at the relationship between the internationally competitive sector of our economy or the tradable sector versus the non-tradable sector the non-tradable sector is once again growing dramatically. That means that our current account deficit is growing as we spend a lot more than we earn. Eventually as Treasury projects it will increase our overseas debt very significantly. The key criterion that this Government set itself when it came into office was to return the economy back to balance between the tradable sector and the non-tradable sector and what the Reserve Bank has been saying very clearly is that this has not happened.This is very important for people to understand in Budget week. In Budget week the Minister of Finance will make a big deal about the fact that after borrowing around $40 billion Bill English might stop borrowing money in the next couple of years—that is return to a fiscal surplus. This does not mean that the country stops borrowing money. In fact New Zealand is borrowing money hand over fist. We are currently running a current account deficit of 5 percent of GDP. This means that either we have to borrow 5 percent of GDP per year which is about $10 billion or we have to sell assets worth that much per year. And any country that persists in borrowing or in selling assets at that magnitude every year is a country that is on a path to a crisis. If you persist with a massive current account deficit like that as this Government projects to do and as the Reserve Bank shows that we are projected to do then you have not rebalanced your economy and in the long run there will be a very significant adjustment.The problem is that the Government has focused in its rhetoric purely on the fiscal surplus which is significant and important—after borrowing about $40 billion it is about time Bill English stopped borrowing so much money and putting future generations into debt. After borrowing that much money it is time to go into a fiscal surplus. But the point is that the country as a whole has been thrown into a massive deficit as a result of the policies of this Government.Bill English told us that he would fix this problem. In fact he told us that it was his No. 1 economic priority to rebalance the New Zealand economy away from consumption and debt. In fact he has done the exact opposite. What we are seeing in New Zealand now is that the tradable sector is shrinking and the non-tradable sector is growing. The result of that is that the current account deficit is growing according to Treasury’s and the Reserve Bank’s projections.Treasury’s projections are that the current account deficit will increase to about 6.5 percent of GDP. The Reserve Bank itself says that the current account deficit could increase even more than that as a result of the overvalued New Zealand dollar. Unfortunately the Government will not do anything to intervene against the currency. We have seen that the Reserve Bank itself has recently told us last week that it is intervening against the New Zealand dollar to try to bring it down using its reserves. That is not likely to be very successful because the quantum involved is pretty small whereas what we are seeing with other central banks overseas is they are using very large amounts of recently created money quantitative easing in order to reduce the value of their currencies and make their tradable sector more competitive. In New Zealand our Government is not doing anything about the overvalued exchange rate with the result that the tradable sector is suffering and the result that we are now running a very very large current account deficit. It is the second-largest in the OECD—second only to Turkey—and is projected to increase.If future generations want to have a country that is not owned from overseas if future generations want to have a country that is not highly indebted they will not simply be looking at the question of whether the Government is running a fiscal surplus though that is significant. The much bigger question the question that Bill English himself identified as the much bigger question is what the balance is between the New Zealand economy as a whole and the rest of the world. On that question what the Reserve Bank said very clearly is that rebalancing has failed. When I asked the Governor of the Reserve Bank what would happen if we continued down this path he said ultimately there would be a correction that would be forced on us by our creditors and by the foreign currency markets. The choice before us is whether we make that adjustment ourselves or we leave it for someone else.DAVID BENNETT (National—Hamilton East):It is very disappointing to see the Green Party coming in here and trying to use the Reserve Bank Governor in that way. The Reserve Bank Governor has clearly said to the Green Party that its economic policy of printing money is not one to be favoured by this country going forward.Andrew Little: When did he say that?DAVID BENNETT: At the select committee. If Mr Little was a member of the committee he would know that. Mr Jones is a member of the committee. He is here and he will be able to set Mr Little right. But the Labour-Green policy around economics around printing money just will not work. It is fairly rich for the Green Party to come into this Chamber tonight and talk about an economic policy that it believes is the right one when it is actually the last resort that any country in the world should want to undertake at this time.It is also sad for the Labour-Greens Opposition that economic policy has been ceded from the Labour Party to the Green Party. The Opposition talks about issues such as the high New Zealand dollar. Well the dollar is high but that reflects the strength of the underlying value of the New Zealand economy. If you went out there and printed money and if the Government of the day went out there and nationalised its power industries you probably would end up with a 40c dollar because the rest of the world would look upon the economic policies of this country as being substandard and not in the best interests of the country going forward. That is not rational economic planning.This Government has made a very strong movement towards increasing the tradables sector of the New Zealand economy. The Green member Russel Norman in that last speech talked about a reduction in the tradable part of the economy. The Green member needs to put the facts on the table because I would like to see the facts from the Green Party rather than just rhetoric. Can it actually put those facts on the table to show a reduction in the tradable economy under this Government? No it cannot. The Green Party cannot produce the information that it uses for its rhetoric.I do not know why a strong Labour Party its history based in economic policy as well as social policy would cede such an important part of its election planks to the Green Party; to the Green members who come into this Chamber and spurt facts and figures that they have no basis for who talk about things around economic policy that the Reserve Bank Governor says it is not in the interests of New Zealand to continue with and that are not the policies that the New Zealand public wish to see. That will be the demise of the Opposition at the next election those far-left economic policies that will not work.On the contrary this party the National Party is delivering strong economic policies that are in the best interests of New Zealanders going forward. There will be a strong Budget delivered this week that will show that. Compare that with our neighbours across the Ditch who are going to deliver a very poor economic Budget tonight. That shows what happens when you get a left-wing Government running a country. The left wing does not understand the economy of this world. It does not understand how to run a domestic economy. The result—well look at the result tonight. I say to the public of New Zealand: compare the Australian Budget tonight with the Budget that we will present on Thursday. Compare that and it shows what will happen if you have got economic vandalism done by the left wing against good strong economic management by the right wing. That is the difference that New Zealanders will see this week. That is the difference that is out there. The political divide is quite easy to see.The Labour Party gets very upset when we talk about the deficits that their colleagues and brothers in Australia will be presenting tonight. That is because the Labour Party understands that that is a direct reflection of what their policies would do.Dr Rajen Prasad: Oh that’s rubbish.DAVID BENNETT: That is not rubbish it is the truth and that is what happens when you have got left-wing policies. The Reserve Bank of New Zealand has a very important role in our economy and the left wing takes a very dim view of that. They do not see the independence of that organisation. They do not support that organisation in giving it the tools to do what it needs to do. They are coming up with policies that are just not effective. This Government is delivering the right policies for New Zealand going forward. We are delivering that infrastructural investment that New Zealand needs as well.Report noted.New Zealand Transport AgencyDAVID BENNETT (National—Hamilton East):The New Zealand Transport Agency—that is a great one. I wish to start with a speech from last week by a Mr Iain Lees-Galloway the Labour member for Palmerston North. This was a speech that I found very very helpful when writing my column for my local paper. I just want to read to you some of the words that have come from the de facto spokesperson for the left on transport—not the real spokesperson. The real spokesperson is Julie Anne Genter. Mr Iain Lees-Galloway is the puppet of the Green Party in a Labour dress. Congratulations to the Green Party on taking over another major plank of economic policy in transport. It is a shame that the Labour Party had to give up transport as well as economic policy.But listen to these words. These are the words from the spokesperson from the Labour Party: “the National Government’s … determination to waste taxpayers’ money on monster motorways that serve no real purpose”—determination to waste taxpayers’ money on monster motorways that serve no real purpose. I want to see that member and that party come to the Waikato and come to Hamilton and say that. They will not come to Hamilton and say that.Tim Macindoe: You bet they won’t.DAVID BENNETT: You bet they will not as Mr Macindoe says. The next line from Mr Iain Lees-Galloway is that this represents “the 1950s era of sprawl and motorways.” I remember a Labour Party that was proud of its heritage in the 1950s a Labour Party that goes back to its time in the 1950s and talks about how that was the formation of the real Labour Party but we do not see that real Labour Party in here today. It has moved away from its history. It has moved into bed with the Green Party and has forgotten about what it truly represents and that is very sad for Mr Iain Lees-Galloway.But there is more. There is more in this speech from Mr Iain Lees-Galloway that really defines Labour Party policy. Another line: “so that it can pay for its unaffordable monster motorways—its roads of national significance.” It says here: “this Government does not believe in different modes of transport; it believes there is only one way to move people and freight around New Zealand and that is cars and trucks.” That is simply not true. We have the KiwiRail Turnaround Plan. The future of rail is in freight in places like Hamilton. When you look at that freight development in Hamilton it shows a true future for rail. If you look at rail in Auckland the investment that the National Government has made into rail in Auckland it is something that we should be very proud of.But there is more—there is more. This is the best line. This is the line that I think he must have taken all day to think of: “Well we know that the least sustainable form of transport is the car especially the car carrying a single occupant.” This is the member from Palmerston North who is saying that the least sustainable form of transport is the car and that is a shame. It is a shame for a member of this Parliament to say things like that. When we look further we see that he calls it “ideological madness” a “fossilised approach” a “1950s vision of transport”. That is the Labour Party policy. It does not want the roads of national significance. For everybody in New Zealand—from the far north where the roads of national significance give a hope of a lifeline for that economy of the far north to the people of the Waikato which produces most of the exports of New Zealand—the roads of national significance are seen as very important and to the people of Auckland who have gained from the roads of national significance in the last few years. The Labour Party does not believe in that. It does not believe in the golden economic triangle of Auckland Hamilton and Tauranga. It does not believe in that economic growth heartland of New Zealand going forward. The Labour Party has been consigned to the policies of Julie Anne Genter. The Labour Party will follow Julie Anne Genter through the trenches and blindly follow their approach for rail.Andrew Little: What are you going to do with State Highway 3?DAVID BENNETT: There we have Andrew Little the man from New Plymouth. Andrew Little was the next Labour speaker after Iain Lees-Galloway and his whole speech was about how he wants State Highway 3 to be developed.JULIE ANNE GENTER (Green):Last year we saw a huge funding gap developing because of the Government’s single-minded focus on throwing the vast majority of the transport budget at a few motorways. For the benefit of the previous speaker David Bennett who appears to erroneously believe that his Government is taking a balanced approach to transport funding I have this pie chart that shows the New Zealand Transport Agency’s forward funding for 3 years. On this pie chart is all the new infrastructure spending for the next 3 years under the National Government and the entire purple part is for a few new State highways. You have got this green bit that shows the local roads and this tiny tiny bit here that is the red bit for new public transport infrastructure and an even smaller bit here in blue that is for new infrastructure for walking and cycling.The reason the National Government has such an unbalanced transport budget is that it campaigned on a few very poor business case motorways. Those were the Waikato Expressway the Pūhoi to Wellsford motorway—the “Holiday Highway”—and the Wellington Northern Corridor. These three motorways had such terrible business cases that the National Government had to invent a category called the roads of national significance so that they could get funded because otherwise they never would have been funded because their benefit-cost ratios are so low. The benefits that they will provide to the New Zealand economy are not greater than the cost that they will incur. They never would be justified by any rational economic analysis. The Government tried to hide the poor benefit-cost ratios of these three projects by lumping them together with other projects like the Victoria Park Tunnel which was planned by the previous Labour Government. Although it was completed under National’s watch the truth is it was not National’s idea. It was a project that actually had some merits and it has been completed on time under budget and that is fine. But it does not mean that these three motorways which most of the transport budget is going to be paying for over the next 10 years make economic sense.The Government has an opportunity to make much smarter investments in transport infrastructure. There has never been a better time to invest in walking cycling buses and trains because vehicle use has been falling for years now. If you look at the New Zealand Transport Agency’s traffic volume data it shows that daily traffic volumes on State highways are still down at 2003 and 2004 levels. Freight volumes on State highways are also down even though freight volumes on rail have been increasing in the past few years. Public transport boardings per capita according to the New Zealand Transport Agency and the Ministry of Transport all across the country are way up. They are growing.New Zealanders want to walk and cycle. They want to be safe. They want it to be safe for their kids to walk and cycle to school because it is good for their children’s health. It reduces congestion. Not everybody has to walk cycle and take the bus or train. If only a small portion of people were able to do this that frees up the roads at peak times.That is what smart Green transport is all about. We already have a road network and we already have a rail network and we want to use them better and we want to use them smarter. The next best dollar of investment is going to be on those modes that are the most cost-effective giving New Zealanders the choice that they have been denied by successive Governments obsessed with increasing road capacity which made it impossible to walk cycle and take public transport.So what we saw last year is that although the revenue from petrol taxes and road-user charges was down because there was less road use than was predicted the National Government was so obsessed with building these really poor-value motorways that it decided to put up the petrol tax in addition to allowing borrowing—in addition to going to the private sector to take out a loan for Transmission Gully which we will be paying back for many years. The National Government if it cares about New Zealand’s economy and about New Zealanders having choices should really take advantage and reprioritise the transport budget.As you can see here on this graph traffic volumes and freight volumes in Auckland are much higher than they are for Ngauranga Gorge State Highway 1. So where the Government is planning to spend $5 billion on these few—only 20000—vehicle trips a day on Transmission Gully in 10 or 20 years from now it could instead be funding the city rail link which would move 100000 Aucklanders by rail taking the equivalent of 12 motorway lanes of traffic off Auckland’s roads. That is smart Green transport and it is a shame that the Government is not willing to get behind it.The CHAIRPERSON (Eric Roy): I do have another National member if someone is seeking the call.Simon O’Connor: Mr Chairman.The CHAIRPERSON (Eric Roy): Simon O’Connor. Sorry I am not trying to lead members but I do have a script here and I am just making sure that we—I gave similar encouragement to this side of the Chamber. There is no favouritism here.Tim Macindoe: We thought there was a Labour call.The CHAIRPERSON (Eric Roy): So did I at one point. I call Simon O’Connor.SIMON O’CONNOR (National—Tāmaki):For the record I am not standing on behalf of the Labour Party as a plenipotentiary or anything I just think it is important—I know it is going to be a terrible disappointment to the other side of the Chamber.It was interesting just now listening to the speaker from the Green Party Julie Anne Genter. If you listened to the undertone of what was being said there it was a completely pro-Auckland approach. Those members are prepared actually to drop the roading projects in other parts of the country in order to build a central rail loop for Auckland. If you listened once again very carefully to what was said there it was: “Let’s drop this project let’s drop that project and let’s focus it all on Auckland.” Even I as an Auckland MP think that that is a little bit weird because at the end of the day this is the Parliament for New Zealand not the Parliament for Auckland. I think when we look at what the New Zealand Transport Agency is doing particularly through the roads of national significance it is an array of projects that are regional operational national and significant. I know that my colleague Mike Sabin from up north and Mark Mitchell as well along with what the New Zealand Transport Agency is suggesting—the Pūhoi to Wellsford project is very important. As someone who has originally come from Whangarei I am all for that. That is not about a “Holiday Highway”; that is about a highway of prosperity and opportunity. In fact I can see here across the Chamber engagement from New Zealand First’s Tracey Martin. She understands it as well.Projects through the Waikato and projects throughout the country are incredibly and vitally important—things like Transmission Gully. I was just driving back from Whanganui over the weekend and ran into the usual traffic issues in Nathan Guy’s electorate through Ōtaki and that. Of course the Green Party will stop that project. We have heard that very clearly: it is against Transmission Gully. A challenge that has to come of course is to the likes of the Labour Party. Is it going to stand and fall according to the principles of the Green Party?It was really important when the Transport and Industrial Relations Committee went through the review with the New Zealand Transport Agency to understand that the agency needs to be responsive to what New Zealanders want. Some of us are quite prepared to walk and to cycle in Auckland and some of us are happy to take the buses and the trains but there is also that reality check that kicks in that a lot of Kiwis take their cars. So we need to be able to respond to that appropriately. When I look at somewhere like Tāmaki Drive in Auckland I think that is a very good example of what the New Zealand Transport Agency is dealing with. You have got people who want to walk you have got people who want to cycle and you have got people who want to take the bus—in fact some people are even suggesting Julie Anne they want to take a ferry from St Heliers. There are people who want to take their cars.The challenge for the New Zealand Transport Agency and the challenge for this Government and all Governments is how you balance those needs of people. We even have the walking buses—a great initiative including from one who was my former lecturer in geography. It is a great initiative. But this is not an initiative that is an absolute. If we fall into the thinking of the Greens and if Labour follows that too we are falling into transport fundamentalism. At the end of the day the New Zealand Transport Agency is working across the board—Andrew Little: Ha ha! “Transport fundamentalism.”SIMON O’CONNOR: Transport fundamentalism—there is the phrase for the night: transport fundamentalism. This Government and the New Zealand Transport Agency as it reported back to us in the financial review are there working for what New Zealanders want. I know that Kiwis listening in tonight do not want to buy into that fundamentalism because they understand: they want to drive their cars they want to park them in the cities and they want to get around. It is the same for freight as well. They want to move around. We are going to avoid this fundamentalism.We applaud the work that the New Zealand Transport Agency has done and is doing. It was an excellent review process. I think the agency gave a very strong indicator of why it is implementing the projects it is doing. I just urge those looking at this review not to fall into that fundamentalism not to take approaches like the anti - Transmission Gully anti-roads approach but to take the approach that the New Zealand Transport Agency and this Government are following which is about roads about rail and about cars.Report noted.National Institute of Water and Atmospheric Research LtdThe CHAIRPERSON (Eric Roy): I believe the next subject of interest is the Education and Science Committee’s report on the National Institute of Water and Atmospheric Research Ltd. The question is that the report be noted.Dr CAM CALDER (National):I am ready and waiting Mr Chairman to do your bidding.The CHAIRPERSON: Thank you.Dr CAM CALDER: As you are aware the Education and Science Committee did do a financial review of the National Institute of Water and Atmospheric Research (NIWA). I have to say that the results were outstandingly good. This is from the auditors: the management control environment was noted as “Very good. No improvements are necessary.” and financial information systems and controls for the year 2011-12 were noted as “Very good. No improvements are necessary.” The comment was made: “Based on the areas we reviewed during 2011 and 2012 we found that appropriate policies systems and controls were in place and appeared to be operating effectively.” I was just speaking to a colleague on the committee and we have the pleasure tomorrow of visiting Greta Point seeing NIWA in action and visiting the Tangaroa. It is unfortunate perhaps that we are not making these speeches after that visit.But just to recap NIWA is a Crown research institute. Its purpose is to enhance the economic value and sustainable management of New Zealand’s aquatic resources and environments to provide understanding of climate and the atmosphere and to increase resilience to weather and climate hazards. In 2011-12 NIWA earned $121.4 million in revenue for research and applied science. It made a profit after tax of some $5.5 million which was up $1.3 million from the previous year. It received a lot of its revenue—51 percent in fact—from the Ministry of Science and Innovation as it then was 17 percent from the Ministry for Primary Industries and the remaining 32 percent from work for governmental organisations and the private sector. Since July 2012 the science skills and innovation group of the Ministry of Business Innovation and Employment has been the primary modelling department for NIWA and the Treasury Crown Ownership Monitoring Unit has taken a secondary role in relation to the financial performance thereof.The gain in total revenue between 2010-11 which is noted in the report is largely due to the gain in applied science revenue. In the previous year the Tangaroa was out of the water for 6 months so that explains to those interested the difference in the revenue of about $4 million that we noted. The key policy areas in which NIWA worked in 2011 taking into account its core purpose outcome—which of course is to increase economic growth through the sustainable management of use of aquatic resources—were natural resources and environmental science services; the sustainable use of aquatic resources; renewable aquatic and atmospheric energy; resilience to weather and climate hazards and tsunamis; climate vulnerability and change; and stewardship of freshwater and marine ecosystems.With that being the core purpose as we have noted it is not surprising that there are a number of vessels that are owned by NIWA and as I said the committee has the opportunity to visit the Tangaroa tomorrow. NIWA owns and operates three purpose-built research vessels: the Tangaroa the Kaharoa and the Ikatere which provide the principal platforms for marine-based research and surveying in New Zealand. There are a number of small vessels as well. The book value of these NIWA vessels as of 30 June last year was almost $27 million. Revenue to support the vessels is received from the Ministry for Primary Industries the Ministry of Business Innovation and Employment Land Information New Zealand—so there is cross-sector support of the vessels—and the private sector. NIWA made the comment to us that all these sources of revenue are needed to maintain the validity of the vessels’ operations.As many of you may know Tangaroa is a deep-water research vessel with an ice-strengthened hull. It was built in 1991 and is the only ice-strengthened research vessel in New Zealand. It undertakes work in four main areas: oceans research fisheries research hydrographic work and other commercial contracts such as for mineral exploration. It is a key source of revenue for NIWA and NIWA aims to have it at sea for at least 300 days of the year. It looks like it is all on track to exceed that expectation for the year ended 2012. NIWA invested $26 million recently in the installation of a dynamic positioning system and upgrade of Tangaroa between 2009 and 2011 to broaden the vessel’s capability and extend its useful life by another 20 years.Report noted.Accident Compensation CorporationMIKE SABIN (National—Northland):It is a pleasure to take a call on this. Can I firstly commend the Minister for ACC who shows an immense amount of robust leadership not only in this portfolio but across—Andrew Little: Why has she left the levies artificially high?MIKE SABIN: I thought that might get the members on the other side excited. I thought they had fallen asleep for a minute there.In all seriousness of course the ACC is a very very important part of the New Zealand fabric and provides assistance to many New Zealanders and there has been some significant work going on in this department in the last 12 months. There were 1.7 million claims per annum and 97 percent of those claims were accepted. There was $20.4 billion invested. There were 49000 client interactions each day $7 million a day paid out on average and 925000 general practitioner visits. There was weekly compensation for some 53500 people and over 80 million documents are held on file. It is a considerable department. Of course one of the very important focuses of the ACC is managing people back into the workplace because as we all know—certainly not only from this particular portfolio—work is something that provides health both mental and physical in many ways. The agenda of the ACC is rehabilitation performance trust and confidence injury prevention and financial performance.If we look across the past 12 months we see the 70-day rehabilitation rate has remained steady at about 70.6 percent despite some more complex claims and an ageing population leading to longer rehab durations. Fewer claims went on to weekly compensation and there was a greater use of abated compensation. The 273-day rate was also steady at 93.9 percent the highest recorded level and this contributed to helping longer-term clients back into work. A strong focus on management of all claims but particularly more complex claims substantially reduced growth in the long-term claims.The effectiveness of rehabilitation ultimately is where the rubber hits the road. There will always be those who will spend a long time perhaps a lifetime on ACC—my family knows that only too well—but for the most part many will be effectively rehabilitated back into work back into a full and healthy life. The ACC is exceeding most targets in this area with more serious-injury clients achieving their goals. The overall quality of treatment is improving. There is good management of health care costs.Client satisfaction is however slightly behind target. I think it points to the fact that there has been a change of focus that we do not want to see. Certainly this Government does not want to see people languishing on ACC and so by putting the support around them and by moving the boundaries—massaging the continuum at the edges if you like—there will always be an element of discontent. Having said that of course the aim is very much about returning people to work in a fit and healthy condition.Going on for the early resolution of disputes there is good progress being made here: 79 percent of reviews were withdrawn settled or decided in the ACC’s favour. A total of 1159 reviews were withdrawn or settled over that 12-month period.Andrew Little: The settlement could be in the worker’s favour.MIKE SABIN: I am sure that that member would very much enjoy taking the call to speak on this. Injury prevention initiatives—it is one thing to treat the injury it is another thing of course to prevent it in the first place and ActiveSmart—Report noted.Electoral CommissionSCOTT SIMPSON (National—Coromandel):As chairman of the Justice and Electoral Committee it was a great pleasure—Simon O’Connor: Fine chairman.SCOTT SIMPSON: —thank you Mr O’Connor—to hear and go through the financial review of the Electoral Commission. Although the Electoral Commission is of course accountable to the Minister of Justice it is not in any way subject to ministerial direction in the discharge of its duties nor should it be because in a democracy such as ours the independence of such organisations as the Electoral Commission is fundamental to the very basis of what we take as so important and sometimes sadly take for granted in terms of our democracy.The 2011-12 financial year was a very busy one for the commission. Not only did it have to organise monitor and control a general election but there was of course also the MMP referendum. I note that during the year reviewed the commission produced a deficit of $1.25 million from total revenue of $39 million which was not a bad effort. But I also note that the deficit was really attributed to the costs of conducting the MMP review for the Minister of Justice which was in addition to its normal budgeted activities. The deficit was funded from the commission’s reserves.It was also a year of change for the commission because it took over the statutory responsibility for the enrolment of voters as well as carrying out its other activities from 1 July 2012. The enrolment function was previously carried out by New Zealand Post Ltd through what we used to know as the Electoral Enrolment Centre. The Justice and Electoral Committee heard that the transfer process had gone well and that even though the change for the commission was quite significant the commission and its offices had handled it in their normal efficient way.We were also very pleased to learn that the commission was keen to further improve electronic access for enrolment. Currently voters can update their details online but cannot actually complete the entire enrolment process online. For that change to occur as the commission is seeking to achieve it would mean that a legislative change would be necessary. It is worth stressing that we are talking about electoral enrolment rather than electronic voting. I agree with the commission’s cautious approach to exploring options in regard to electronic voting.E-voting raises some very serious concerns and issues around security and the individual voter’s right to complete privacy. It is an absolute fundamental bedrock of our democracy and our democratic process that the ballot should be a secret ballot. Overseas experience the commission has reported to us shows that with e-voting the results are patchy to say the least. Some jurisdictions with e-voting have actually abandoned the process after one or two attempts but really the real issue is security. It is fair to say that currently no system of electronic voting yet devised can absolutely with certainty guarantee secrecy of the ballot.We take our democratic institutions pretty much for granted in New Zealand and that can be both a good thing and a bad thing. Most of us New Zealanders just accept that every 3 years there will be a general election it will be conducted and run efficiently and smoothly and it will be a result that no matter what happens we will as a nation abide by and get on with the job once the election is conducted.Sadly too many of our fellow New Zealanders do just take that for granted. So I just want to record as I speak tonight my thanks to the commission to its staff to its board and to its team members for the job that they do in ensuring that as I say the bedrock of our democratic process is secure is safe and is efficient and we can rely on it as New Zealanders when we go and vote every 3 years. In the heat of a general election I think that is an important aspect that we need to take absolute care to protect to enhance and to ensure continues without any undue influence by politicians or outside influences whether it be from this House or by anybody else.So I think that we are well served by our Electoral Commission. I think it does a good job on our behalf and I think we can congratulate it on the work that it has done over the last year or so. I look forward to the changes ahead.Report noted.Independent Police Conduct AuthorityJACQUI DEAN (National—Waitaki):The Law and Order Committee undertook the financial review of the Independent Police Conduct Authority noting that Sir David Carruthers took over as chair of the Independent Police Conduct Authority at the end of the reporting period replacing Justice Lowell Goddard. In his evidence to the committee Sir David Carruthers commended Justice Goddard for the work that she had done for the authority in the previous 5 years generating several significant reports which came to public attention in this reporting period.The Independent Police Conduct Authority provides an independent check and scrutiny on police which Police Commissioner Peter Marshall acknowledges as having a very positive impact on both the trust and the confidence ratings of our New Zealand Police and that is a matter that is of the utmost interest and importance to us in New Zealand and us in Parliament.The Independent Police Conduct Authority gets around 2000 complaints a year. Those complaints are triaged within the authority which means that it has a look at the potential severity of each and every complaint and those complaints are then allocated a rating between 1 and 5. The flow of complaints to the Independent Police Conduct Authority ranges from being not really complaints at all and a little bit marginal about whether the authority should indeed look at them any further in which case they are referred back to the police through to categories 1 and 2 which are the most serious. Those categories might be incidents of death serious injury or serious misconduct which take the majority of the Independent Police Conduct Authority’s time and resources. I believe that something like 80 percent of the authority’s time and resources are given over to those most serious complaints.Having said that the Independent Police Conduct Authority acknowledges that it frequently conducts an extended assessment of any complaint especially when that complaint comes from someone who appears to be perhaps vulnerable to them in one way or another. These people are frequently those very same people who turn up in our electorate offices and their complaint or concern can be in need of independent scrutiny. That is a most valuable function of the Independent Police Conduct Authority. Personally I have had a number of people through my electorate office whose complaints I have referred on to the Independent Police Conduct Authority for further investigation—I am not the judge. It is encouraging that those complaints are taken seriously.Highlights of the year in review include the opening of 47 investigation files on the most serious matters brought to the Independent Police Conduct Authority’s attention. There were 14 public reports released during the year as a result of those investigations. These reports include the major thematic review on the police detention of young people. New Zealand Police has accepted all of the recommendations made in that report and the Independent Police Conduct Authority has set up a review team from within its body and will review progress against those recommendations. That is a really useful and focused approach to these reports which do not merely sit on police shelves. The Independent Police Conduct Authority takes a continuing interest in them as indeed does the Office of the Auditor-General and the Law and Order Committee.There was also a major report on deaths in police custody. Again this is another report authored by the Independent Police Conduct Authority that is being looked at with interest not only by New Zealand Police but also by agencies such as the Law and Order Committee. There have been a number of major reports—12—into individual fatal police pursuits a police shooting and an incident with a member of the public and a police vehicle. Another highlight of the year in review includes the fact that less than 1 percent of complaint files were reopened due to an expression of dissatisfaction with the result of that case. That is a pretty good result.Financially the Independent Police Conduct Authority showed a surplus of $0.106 million. Thank you.Report noted.Privacy CommissionerANDREW LITTLE (Labour):It is a great pleasure to talk on the report on the financial review of the Privacy Commissioner. It has been a difficult time for the Privacy Commissioner. When she spoke to the Justice and Electoral Committee she prefaced her remarks with this I think somewhat cryptic but very telling statement: “It’s obvious to a blind bantam hen of course that there is an awful lot going on on the privacy front …”. We did not get around to asking whom she had in mind as the bantam hen but I do not think it takes too much imagination. We think the bantam hen should be called fully to account for her ongoing blindness.The truth is that the Privacy Commissioner’s office has had a funding freeze for 8 years—5 of those years under this Government—and in the same time it has had a 42 percent increase in the number of complaints it has had to process. That is 8 years—5 years under this Government—of a funding freeze and a 42 percent increase in its workload. Of course the telling thing about the workload is that the nature of the complaints is getting more complex and more sophisticated because they are no longer just single and individual breaches; they are multiple breaches. They are systemic failures and systemic problems and as the Privacy Commissioner herself noted in her report to the select committee they are issues of culture in the workplace.The way she described it in terms of her challenges in the future is that “… the moment has come where we’ve got to very much remember that we shouldn’t go for sort of band-aid solutions.” She is saying that just trying to crimp and squeeze a little more blood out of this very difficult stone is no longer good enough. The problems are too challenging the problems are too great and she needs more support and better resourcing. That is a challenge for this Parliament to get to grips with. When she describes an information and data climate that is now a revolution we have to take seriously the risks of data breaches and privacy breaches that that poses and ensure that our last bastion of oversight and assurance for the general public is properly resourced in order for her to do her job. That remains a major challenge for her office and indeed for the Government.She said in her comments to the select committee: “I have to take a measured approach within my resources and capabilities and assess which of those breaches will require more action.” She is basically saying that she now has regular trade-offs to make about which matters she inquires into and which matters she simply has to let go of. It was interesting the way she described it. The metaphor she used—not to be confused with the bantam hen of course—was: “… I feel a little bit like the little red tugboat that hasn’t got enough fuel: we’re there but we can’t always go out into the harbour and do something about it and help. It’s like MSD or ACC are like big ocean liners full of people’s information and there’s only so much the little tugboat can do.” Well I think that is a very telling metaphor that she has used and it is a cry for help. The very professional way that our present Privacy Commissioner conducts herself is something for which this House should be and I know is particularly grateful.We had in the year under review some major privacy breaches in our Government departments not to mention the private sector but certainly the Government departments. The ACC breach is foremost amongst them. Over 6000 ACC claimants had their information improperly disclosed. We had breaches at Work and Income and at the Ministry of Social Development and the very chilling prospect that somebody can go into a Ministry of Social Development kiosk a publicly accessible kiosk and get information that ought to be confidential—likewise at the Inland Revenue Department.Another I think very frightening and chilling experience was with the Ministry of Justice only this year when a member of the public went through a publicly accessible channel and got access to confidential information about legal aid payments made to lawyers. The Government’s response was of course to accuse the good citizen who revealed that of being a hacker. Not only that but it referred the matter to the police and we now have an MP on this side of the House under a police investigation because we have a Minister of Justice who wishes not to deal with a very serious issue.The CHAIRPERSON (Eric Roy): I note that the Greens are seeking the call. Speaker’s rulings 16/3 and 16/5 expressly forbid the displaying of any slogans in the House and no Green member will get a call while that is there.Hon LIANNE DALZIEL (Labour—Christchurch East):The Privacy Commissioner is one of the Crown entities that is finding itself under increasing pressure as we have heard from my colleague Andrew Little. I think my comments are going to follow on quite neatly from what he had to say. It will not be surprising for the Chamber to know that after the Privacy Commissioner’s reference to the “blind bantam hen” which I think has been appropriately identified by my colleague she went on to talk about the fact that she anticipated that we would be interested in asking her questions about data breaches. She said: “I have to say to the committee that unfortunately the sorts of data breaches that we’ve seen in recent months are actually nothing new. We have data breaches being reported to us all the time right across the public and private sectors. The intense media and public interest is however relatively new.” I think that is because of the scale of the breaches. We heard Andrew Little talk about—what was it? There were 6000 included in the ACC breach. There were 98000 claims affecting 83000 claimants. That was the extent of the breach for which we did not get a snap debate in Parliament. I find that absolutely extraordinary.But anyway the Privacy Commissioner said: “I’ve noted that in terms of Government responses to these breaches there’s an element of resignation perhaps an impression that human error is to blame”—and yes we heard that from both the Prime Minister and the Minister for Canterbury Earthquake Recovery—“and that nothing can be done about that. Of course we cannot eradicate human error.” says the Privacy Commissioner. “That will always be a feature of every incident that involves human beings or human systems. No system can be error-proof and it would be unreasonable for me or the public to expect such a standard from the Government or from business all the time. However I think the answer is bigger than that. It’s not a simple answer. These recent events have formed a cluster. OK some of it arises from intense public and media interest but they definitely form a cluster that we should pay attention to. And I believe it’s inappropriate to blame the staff at the front line in every case.”I just want to comment on that because that is what we got from the Prime Minister and that is what we got from the Minister for Canterbury Earthquake Recovery. They put up the straw man and then they knock it down. Not once ever did the Opposition call for anyone’s resignation from the front line on the breaches of privacy in the Earthquake Commission in ACC or in Work and Income—any of those. We expect Ministers to be accountable for their departments and they are the only ones for whom that call would be made. I just want to make that crystal clear. It is inappropriate to blame front-line staff. Human error always occurs. You cannot have a systems breakdown in the IT sector without human error. The trouble is that human error occurs when you are dealing with computers because computers actually do not do anything that they are not required to do by somebody who is feeding it. It will always be a programmer an analyst a user or any combination of the above that will mean that there will be a breakdown in the systemic operation of the system.The problem is that the spin doctors want to take it away from the reality and that is that there has been inappropriate and inadequate attention paid to the culture of privacy. That is what the Privacy Commissioner went on to say: “What’s become clear following the ACC inquiry which was a very useful case to look at is that human error is more likely to occur in an environment where privacy is not given the weight or attention that it deserves. There needs to be a culture of privacy through every organisation. Staff need the tools the systems the support required to protect them and the personal information they work with every day. We need leadership we need good management we need good technology and good systems at every level to protect citizens’ data and the customers’ data in the private sector.”And I believe that that statement from the Privacy Commissioner is what is unprecedented about our consideration of this matter. It is a criticism of the Government because that Government is responsible for ensuring that there has been no leadership that there has been poor management and that there has been hopeless technology and systems which the Privacy Commissioner has to address.JAN LOGIE (Green):In a lot of the annual round-ups for 2012 privacy was at the top of the list of items of importance for this country. The Privacy Commissioner plays the critical role in terms of this country’s basic protection of privacy. So it has been very disturbing in this financial review to hear so directly and so clearly from the commissioner herself of her concerns about the Office of the Privacy Commissioner’s ability to fulfil that role. The office’s baseline funding has remained static as has already been said for the last 8 years and it has been told to expect it to remain static for a while longer. It has funding of around $3.5 million a year to fulfil all its functions except that it has told us that it cannot. It has told us that it does not have the capacity to do everything and that it is having to prioritise protection of our basic privacy. That I think is something that most people in this country would not want compromised or not prioritised.While in office this Government has had the oversight of multiple significant privacy breaches within Government departments—namely the Inland Revenue Department ACC Work and Income the Ministry of Justice the Immigration Service the Ministry of Education and the Earthquake Commission. If you think about the people whom those different departments deal with it actually occurs to you that that is potentially pretty much everyone in this House. It is pretty much everyone in this country who has potentially had their own private information shared inappropriately or their privacy breached. That is quite an extraordinary situation. The Privacy Commissioner has noted that there has been a 42 percent increase in complaints to the office. We have been told of course that it is about human error and front-line staff but the Privacy Commissioner herself—a very very diplomatic woman—said that it was inappropriate to blame staff that the answer is bigger than that and that there are systemic issues.People require a sense of security if they are to feel comfortable within this society. One important facet of security is the capacity to control information about oneself. If we cannot control information about ourselves it is very difficult to operate in this world and therefore the principles of privacy as a means of controlling that information are vital contributors to an individual’s sense of security and to our collective well-being. The Privacy Commissioner also pointed out that it is incredibly important for our economic development and security because business is increasingly being done online. There is an element of business and information sharing that happens in that engagement and we need somebody with the resources to be overseeing that to protect us and our economy.So what has this Government’s response been to what I think can pretty fairly be said to be a systemic crisis of privacy systems? Well it has decided to continue to freeze the funding to the Office of the Privacy Commissioner to our knowledge; it has introduced new legislation with increased legislative responsibilities for the Privacy Commissioner without an increase in funding; and it has decided to establish a new Government data hub. The new legislation you could say may have some good elements to it and may increase the protection of privacy but unless there is somebody who is resourced to be able to actually secure that you really have to question what the value of it is. You could say that a Government data hub is a great idea on lots of levels—and there was discussion on this just this morning on Radio New Zealand National—but if there is no resourcing of the commission to properly input into that process to ensure that the systems are secure and that privacy is central in this process then again we have to question whether our rights and our information are being adequately protected.ALFRED NGARO (National):The wonder and the beauty of select committees is that you get the checks and balances of the different views and I want to acknowledge the view of Mr Little who is over there. I did not quite hear the story about the blind bantam hen though I did hear the comment about the little tugboat that said: “I know I can. I know I can.” I think he might have been recanting his own story and journey around defamation but we are talking about the Office of the Privacy Commissioner and what is important is that we know that the fact is that information is important.The Privacy Commissioner talks about personal data becoming a critical area for business and for the Government. We know that Opposition members were interested in the Office of the Privacy Commissioner because they possibly would hear some meaty stories which they could use in a press release about all the things the office was doing wrong. But what the commissioner said was quite clear. In fact she actually started off with the comment that what we have is equivalent to an ecosystem that is mutating and multiplying constantly before us. She was talking about the whole aspect of information technology and the challenges that it faces to us.The Privacy Commissioner also said—and I want to put this in context—that data breaching of confidential information is nothing new. As the Hon Lianne Dalziel said it is nothing new. In other words it has been happening for a long time. What is new—and the commissioner is correct in saying this—is the intense scrutiny from both the media and the public. We are really clear about the fact that we like the Privacy Commissioner believe that it is important to protect information and to ensure there are rights and responsibilities in terms of protecting information. But at the same time data sharing is important in terms of the needs that are out there and in terms of ensuring there are opportunities for services.The other question is about the aspect of funding being static for over 8 years. In fact what the commissioner actually said is that over consecutive Governments—it is not one Government to blame in one sense—there has been no increase in funding. But what there has been is an increase of 42 percent in applications—8465 inquiries from members of the public and organisations seeking advice on privacy matters and 1142 complaints. That is an increase of 42 percent. But here is the statistic that the Opposition does not quote and it is in commissioner’s the annual report. The Privacy Commissioner said that 95 percent of complaints have been closed—Simon O’Connor: How many?ALFRED NGARO: —within a period of 9 months—95 percent. How do we judge an organisation on its efficiency and its effectiveness? We ask whether it meets its outcomes. [Interruption] Ninety-five percent Mr Little is what the Office of the Privacy Commissioner declared to us. So it does meet its outcomes. It is meeting the needs that it sees.Look when you ask an organisation whether it needs more money whether it would like more money of course it is going to say yes. But what the Privacy Commissioner said was that the fiscal constraints have been positive. This is what the Opposition does not say. The Privacy Commissioner said—and this is what the Opposition does not say—that the fiscal constraints have been positive as they have allowed the commission to focus on its core business. And she said they are doing the business with a completion rate of 95 percent.It is quite clear that the commissioner also commented about information technology. It is a revolution as she said. It is a global ecosystem that is both multiplying and mutating with incredible speed so what we need to do is to take into account and be cognisant of the needs that we face in this. She also talked about—again which you will not hear from the Opposition—shared responsibility and accountability. While the Opposition was looking for somebody to blame and was looking for someone to hold to account she was saying that this is about shared responsibility and shared accountability.Andrew Little: It’s our job. It’s our job to hold you to account.ALFRED NGARO: She wants a culture—and you are absolutely right Mr Little—in New Zealand whereby when we find information that does not belong to us we return it to its rightful owner and where there is a sense of integrity about this. [Interruption] You will not talk about this but it is about shared responsibility and shared accountability.What we heard from the Privacy Commissioner was actually a balanced view. It was not all about the sense of concern—the horses were not getting frightened outside; there was no issue there. However we also share the concern about the vulnerability of people’s information. That is highly important to us. So what we are doing working with the commissioner is ensuring that she is focusing on her core responsibilities and that she is meeting her key performance indicators—a 95 percent completion rate. She is also working with us on the Privacy (Information Sharing) Bill and on the other legislation that we are putting through. We have confidence in the Privacy Commissioner.Report noted.Genesis Power LtdHon SHANE JONES (Labour):Rest assured that I have no slogans that might earn your ire. I want to point out to the Committee that this is actually a sad evening for this company Genesis Power. It is a company that has enjoyed an improvement in its turnover. It is a company that holds strategic holdings in gas. It is a company that has a vested interest in the transmission of that gas. I am disappointed to hear very little from it in public about the security of that transmission capacity but that is another matter because this company will soon disappear from New Zealand control and New Zealand’s strategic oversight.It may not be known but in the actual Tainui settlement the iwi of that area hold a concession over the Huntly power station in the sense that the owners are obliged if they do decide to move on from that site to offer it back to the iwi. But it will never come to that because very few people in this Parliament will ever exercise a level of oversight and control which is a key part of the sovereignty of our House over such strategic assets.But I want the Committee and the various members of the public listening to these presentations this evening to know that this side of the Chamber will never ever resile from making a step forward and intervening in markets where there is failure. Whether that market represents the social negative impacts of gambling or whether it represents the imperfect market that we call the wholesale electricity market this side of the Chamber will not be cowed by threats from merchant bankers or future owners of this energy company and it will ensure that this House and future Governments from this side are never hobbled in having the ability to use the democratic basis and tools of governance that we have by dint of being in a position of privilege called a position of a parliamentarian. We will never ever tolerate a small narrow group of Genesis owners in the future seeking to prevent this side of the Chamber passing regulation and fashioning rules and laws for public weal purposes. That is a broad principle that lies at the essence of our constitution.Although Genesis Power may seem to be somewhat unrelated to these deep principles it is a reflection of how seriously we treat the role and the oversight responsibilities. The oversight is going to be weakened in relation to Genesis Power but I can tell you that it will be non-existent as a consequence of that foul deal entered into today that actually strips New Zealand parliamentarians of their right as a consequence of the Prime Minister entering into that deal but that is another matter. Let me come back to Genesis Power.Customer-oriented technology is something that is boasted about by Genesis Power. There will be no customers. There will be only commercially enslaved marginalised users of this essential service called energy because in the future although we are keen to effect an operational separation we know that a consequence of selling off this valuable asset will be to surrender a large degree of the control and power that it is the inherent right of us as parliamentarians to exercise.Without a doubt once this company is dismembered once it joins others on the chopping block—we will continue to fight against that but it will represent a very bleak day in our role in relation to parliamentary oversight.This company ended up with some assets in the South Island. It was a kind of a deckchair rearrangement believing that it would lead to more competitive prices. The only thing that is going to lead to more competitive prices in the context of Genesis Power and its soon to be Australianised sibling companies—whether it is Mighty River Power or whether it is Meridian Energy—will be the unstinting focus from this side of the Chamber to ensure that with a clever regulatory intervention gouging and other sort of profit-orientated—Report noted.Mighty River Power LtdGRANT ROBERTSON (Deputy Leader—Labour):When the Commerce Committee did its report on Mighty River Power it was owned 100 percent by New Zealanders. As I stand here today we know that only 2.5 percent of New Zealanders have bought into the shares of this company.Hon Dr Nick Smith: Rubbish.GRANT ROBERTSON: Nick Smith says “Rubbish.” This asset sale is one of the greatest transfers of wealth away from all New Zealanders to Nick Smith and his mates. That is what this is all about—taking away from New Zealanders an asset that has been built up over generations and putting it in the hands of a small minority.Mighty River Power is a company that can be proud of its record. It is a company that has done good things in its time as a State-owned enterprise and has returned significant dividends to New Zealanders. This National Government says: “We will take that. We will take that out of the hands of all New Zealand taxpayers and put it into the hands of 2.5 percent of New Zealanders”. Do not let anyone say that if the National Government could have got away with it it would not have been a 100 percent sale. Of course it would have been a 100 percent sale. We know that is what the National Government wanted. It could not get away with it so it has gone for selling off 49 percent of what all New Zealanders own and giving it to those 2.5 percent.We have seen from the Mighty River Power chief executive officer Doug Heffernan some interesting behaviour both in the select committee itself in the financial review—John Hayes: Oh what a diatribe.GRANT ROBERTSON: What was that? Mighty River Power actually failed to answer the questions that had been put to it by the select committee—and that is just the beginning because we know that under the model that this Government has put through there is no role now for the Official Information Act with these companies. There is no role for the Ombudsman. New Zealanders might think that they have still got some say in this company but no this National Government has taken that away and said that there will be no transparency anymore for these companies. It is absolutely disgraceful and we saw the beginning of that from Doug Heffernan.Doug Heffernan is paid over $1 million a year to be the chief executive of Mighty River Power—$1.5 million a year. He came out when Labour released its New Zealand power policy and described it as socialism. He was running the National Party’s lines. That is not what we would expect of a chief executive. But what is more it is so wrong because if the National Party actually believes that it is saying that all the states of America that have a single buyer model are socialists. That is what the National Party is saying. What the National Party does not want to acknowledge is that currently Mighty River Power has been part of an uncompetitive electricity market in New Zealand. There is no competition in the New Zealand retail market. We have the generator-retailers that dominate the market. We have the super-profits that have been taken out time and time again and there is no competitive market.So when the Labour Party says it is time to introduce some proper competition—and we know that that will happen; we know that there will now be competition in the retail sector and consumers will now come first—the National Party says no. The National Party says it does not want a bar of consumers having lower power prices. I will tell you that on this side of the Chamber that is our priority to give New Zealanders a fair go when it comes to their electricity system to be able to say that we can actually lower power prices for consumers and for small businesses—by 5 to 7 percent for small businesses. That will help generate wealth in this country. That will help generate jobs in this country. The National Party does not want a bar of it. It wants to keep power prices high. I challenge any member over there to get up and tell me whether under the current settings for the electricity industry power prices will come down. Because the answer is no they will not. They will keep tracking up and New Zealanders will keep having super-profits gouged out of them by companies.What we want on this side of the Chamber is a fair rate of return. Companies like Mighty River Power will still be able to get—John Hayes: Communist!GRANT ROBERTSON: —a fair rate of return. But what they will not be able to do is get the super-profits. John Hayes says it is communist. Well I want John Hayes to go to the state of Virginia and to the state of Texas and tell those people that they are communists because what they have is a single-buyer model for power that actually puts consumers at the centre and says that electricity is important. Electricity is something that everybody needs and there is no choice in that. We need to make sure that consumers are getting a fair go instead of having super-profits ripped out from under them. National does not care about high power prices. Labour does and we will be reducing them.Hon Dr NICK SMITH (Minister of Conservation):I have to take on the economic lunacy that we have just heard from the deputy leader of the Labour Party. Let us first nail him on the facts. He just claimed that only 2.5 percent of New Zealanders now own shares in Mighty River Power. Well let me tell the member this: 14 of the 17 KiwiSaver managers bought shares in Mighty River Power. That is 1.7 million New Zealanders. Why is it that the Labour Party opposes hard-working New Zealanders involved in KiwiSaver being able to own shares? I will tell you why: because it wants a dependency culture. It cannot stand the idea of ordinary New Zealanders investing in their own country.The second point I want to make is this and this is really important: everybody needs to understand that for the New Zealand economy we need to broaden the investment base and we need to broaden it so that we do not invest just in residential property. I have heard Labour speaker after Labour speaker acknowledge that fact about our economy and yet we see them now in an exercise of sabotage against the economic interests of this country. I have been in this Parliament for 24 years and never have I seen an Opposition directly act against the interests of this country such as what I have seen in the last fortnight and it is truly disgraceful.Hon David Cunliffe: I raise a point of order Mr Chairperson. I take offence at that questioning of our integrity as an Opposition. Whatever the member may feel about the policy in question there can be no question of disloyalty to the country.The CHAIRPERSON (Lindsay Tisch): No no no. This is a robust debate and there was nothing untoward in what the Minister was saying.Hon Dr NICK SMITH: And then I heard the deputy leader of the Labour Party say that the Labour Party is very concerned about power prices. Well how come they went up by 72 percent in the 9 years that you were the Government Mr Robertson? Seventy-two percent—absolutely disgraceful.Here I want to come to the true economic lunacy of Grant Robertson. He said that Labour will base the power price on a fair return on the historic investment—a fair price on the historic investment. Well let us apply that logic to housing. Let us say that I have got a house that was built 30 years ago and cost $4000 to build. What Labour is saying is that you base the rent on it being worth $4000 from all those years ago. Could a housing market possibly work like that? That is what your policy is. That is what these members somehow believe is sensible. It is lunacy.The last point I would make is this: in the 9 years that Labour was in Government there were three occasions on which it had to come to this House because of problems with security of supply. Interestingly last year we actually had a dryer year than any of the last 20 years. What members opposite are being reckless and irresponsible about is in terms of security of supply. I say this to the Committee: there will be absolutely no investment in new generation under this economic lunacy and if we want to compromise the future of New Zealand you go down that track of reducing investment in power. The policy is lunacy. Labour is playing politics. It conducted an act of economic sabotage. Those members should lower their heads in shame.Hon DAVID PARKER (Labour):You know the National Party is on the wrong side of an argument when Government members stand up and say that the only way that capital markets can succeed in New Zealand is if we let them trade what the Government created. That is the National Party’s economic plank for these 3 years—sell off what the Government has created in order that the capital markets can succeed and trade.Dr Smith has had 24 years in politics and 15 of those years have been since his colleague Max Bradford intervened in the electricity market. Since then electricity prices have gone up every year by twice the rate of inflation and National is still doing it. Dr Smith sits there and still defends it as if it is correct. What the Government says is: “Oh look Labour you should have kept these plans to yourself. You should not have told New Zealand investors. You should have actually done that. If you wanted to do it just do it in the future.” Because to do it now according to Dr Smith is economic sabotage. What that would have been doing would be underhand. We have actually been open to people and we said: “Look enough is enough.”What have the commentators said? New Zealand Herald Bernard Hickey says that robber barons in the power industries are not going to get away with it this time. What have the other commentators said? A lot of them have acknowledged that we have not got a competitive electricity market. We know that. What is this Government trying to do? It is trying to cement in these excessive profits from the old hydro stations by capitalising them into the balance sheets of the likes of Mighty River Power. That is what we are discussing right now. What does the National Business Review say in respect of Might River Power’s future profits Dr Smith?Hon Judith Collins: Who cares?Hon DAVID PARKER: What does it say? “Who cares?” says the National Party. Well I care because if Mighty River Power’s profits go up it implies yet more increases in the price of electricity. So what did the National Business Review say last week on 10 May: “Mighty River Power projects in its prospectus a jump in its profitability in the current year to $94 million up from $67 million last year. In the 2014 year it’s predicting those profits go up to $160 million.” Well there are a couple of points there. If this is so fantastic why is it that we have got to give that to the private sector that the Government has created and secondly—Simon O’Connor: Labour hates profits. They hate the private sector.Hon DAVID PARKER: Actually I do not hate the private sector. I actually want to do lots of things that improve the private sector. I want to have a decent investment signal into the economy through a capital gains tax so that we have less speculative investment in Auckland housing that the Government tickles along. It really likes it really. I want to have a neutral investment signal so that we have investment in productive enterprises not in speculation. I want a universal KiwiSaver so that we have deeper capital markets. I want to change monetary policy so that we can actually earn our way in the world from our exports with the currency. But National does not want any of that—no no no.National has got this old-fashioned merchant banker view of the world. We should not be surprised; that is what John Key is—he is a merchant banker. He is not interested in growing jobs or growing the real economy. He could not care a toss about that because he looks at the world through his merchant banking lens that is the same as it was 20 years ago which is what led to the global financial crisis and yet what have we got the Government doing? Here we go: the answer to New Zealand’s woes is to sell off what already exists. It does not want to increase New Zealand’s output one iota. It is not worried that New Zealand has now got the biggest current account deficit in the developed world—bigger than Greece’s. Is that not an atrocious thing? Last year this year and according to the IMF not just next year but the year after that and the year after that. We have the worst current account deficit in the world and the Government’s central economic plank for these 3 years is to sell off Mighty River Power Meridian Energy and Genesis Energy.What a pathetic narrow vision this Government has. No wonder since National took office we have had 200000 people going to Australia. “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” is what National said and what have we had instead? We have had 200000 people going to Australia. We have got incomes—except for the people at the top—dropping as shown by what has happened with the Inland Revenue Department’s PAYE figures and all those members say is “Flog off Mighty River Power and put up power prices.”KANWALJIT SINGH BAKSHI (National):The Commerce Committee reviewed the annual report of Mighty River Power. Mighty River Power had a total revenue of $1.5 billion in the year 2011-12 with an after-tax profit of $67 million. The Office of the Auditor-General issued an unmodified audit opinion which was very good and no improvement was required.I would like to share a quote from Baroness Margaret Thatcher: “The trouble with socialism is that eventually you run out of other people’s money.” This Government does not believe that it should keep on borrowing money from overseas volatile markets and persist in adding debt to our future generations. We are doing better than other countries but even in New Zealand over the next 3 years the Government’s net debt will be about $70 billion up from $10 billion 4 years ago. The debt is growing and we cannot afford for that to continue to happen. This is the formula of the Opposition parties towards growth but not for this Government.In 2011 when the National Party went out to campaign for the general election it was made clear that we would sell minority shares in some of the State-owned entities. We also made it clear that the Government would hold the majority shareholding and would not lose the control of these entities. Every 3 years at the election the public gives a mandate to the policies of the party that they think is in favour of the country and such a mandate was given to the Prime Minister John Key to form a Government to govern this country and implement this policy.What this Government is doing is rearranging its assets. It is investing the rearranged money in hospitals schools and infrastructure.Let us talk about the Mighty River Power share float. One hundred and thirteen thousand investors secured the opportunity to invest in Mighty River Power making this the largest share registry on the New Zealand Exchange. Over the weekend I met a young entrepreneur who was very excited that his family went together for their applications which were all accepted. He told me that his family had invested about $40000 as they felt it was safe to invest in that company in comparison with the private finance companies.Another interesting fact I would like to share with this House is that apparently 77000 investors did not have a common shareholder number which indicates that they all were first-time investors. This Government has given an opportunity to small investors who have small savings and want to invest but do not feel it is safe to invest anywhere else. This is one of the opportunities for such small investors to invest in companies that have track records.The Government has banked $1.7 billion which will be invested in a Future Investment Fund and we do not have to borrow this money. Let me reiterate: the Opposition does not have any plan for economic growth. The National Government led by the Prime Minister is focused on attracting new investments and that will benefit this country whereas Labour and the Greens have plans exactly opposite to this.MOANA MACKEY (Labour):I do want to respond to some of the extraordinary comments made by the Minister in the chair in his very animated contribution to the Committee. I think you know you have really touched a nerve and you are on the right track when you get those kinds of speeches from the Hon Dr Nick Smith. It is kind of like our canary in the coalmine. If the Hon Dr Nick Smith looks like he is going to blow we are on the right path. Certainly that was the tenor of the response we got from the Minister. Well the Hon Dr Nick Smith and the National Government can continue to drink the Kool-Aid if they want and try to convince themselves that we have a competitive electricity market but they know that that simply is not true. It simply is not true.I want to concur with the comments made by my colleague David Parker in terms of the announcement of our policy. I assure you that the screaming and the hysteria would have been far worse if we had held off announcing this policy until after the float than it was announcing it beforehand so that investors could know exactly what they were going to get at the change of Government next year.Let us be clear: 2.5 percent of New Zealanders bought shares in Mighty River Power—2.5 percent. One hundred percent of New Zealanders owned that company in the year that we are discussing—100 percent. That is not going to be the case in the future and that is a tragedy.Mighty River Power owns nine hydro stations on the Waikato River. It has five geothermal stations in the central North Island and a gas-fired station in Auckland. If you look at those hydro stations these are assets that were built by the taxpayers of New Zealand—built by the taxpayers of New Zealand. They have been paid off in full so why is it that New Zealanders are not getting the benefit of cheap hydroelectricity generation? We have one of the highest levels of hydro generation in the world. Why is that not reflected in our power prices to consumers and to small and medium sized businesses? Why? In a time of flattening demand a surplus of generation and a collapsed carbon price why are power prices continuing to go up? If there was ever a time that you would consider—Paul Goldsmith: Transmission.MOANA MACKEY: It is not transmission. Paul Goldsmith says it is transmission. That is the go-to response. It is completely untrue—completely untrue—that transmission and line charges have been responsible for the driving up of electricity prices. It is the wholesale electricity market. You only have to look at the report in 2007 that confirms that. All the evidence confirms that it is not transmission and line charges that have driven up electricity prices; it is the wholesale electricity market and that continues to be the case to this day. I am very pleased that Paul Goldsmith raised that so that I could—[Interruption]; do not tell people that—absolutely refute the single biggest fallacy in this debate which is that it is transmission charges that have driven up electricity prices. It is not.So when it comes to Mighty River Power I pose the question again. Electricity prices for consumers and households went up on 1 April. Within weeks of that the chief executive of Contact Energy was saying that they were going to go up again. If power prices do not go down when we have flattening demand a surplus of generation and a collapsed carbon price when are they ever going to go down? Silence. The answer is that we do not have a competitive market. It is interesting that the chief executive of Mighty River Power Doug Heffernan came out and said that it is socialist. Apparently he thinks that a mechanism that will deliver an actual competitive retail market is socialism and he defends the status quo—Simon O’Connor: No he said it’s communism.MOANA MACKEY: Communism—no he actually said socialism. To be fair to him he said it was socialism. So this is defending an uncompetitive market which is what National is doing and what the chief executive of Mighty River Power decided to do. Well Labour’s policy will deliver real competition and choice in the retail market. We will still have competition in generation. We will still have competition in the retail market. That is what the mechanism will deliver. This is not regulating right across the board. This is a system that is used all around the world like in the United States of America. Does the National Party think that the United States of America is communist? Because that is what National is out there telling the people of New Zealand. The United States of America Mr Hayes is where this model is also used and I do not think any of us would claim that it is—Hon Dr Nick Smith: No it’s not true.MOANA MACKEY: Well the fact that Dr Nick Smith says “No it is not.”—this is the wonderful thing about Nick Smith. He just shakes his head and says no to things that are absolutely factually correct hoping that people will believe him.The reality is power prices are too high. Yes they went up when Labour was in Government. That shows that the model does not work. The Bradford reforms have not provided the decrease in power prices that were promised at the time. It has failed. As I said the National Party can continue to drink the Kool-Aid if it wants and pretend that it has not failed—Report noted.New Zealand Railways CorporationRICHARD PROSSER (NZ First):I am pleased to rise on behalf of New Zealand First to call the Minister for State Owned Enterprises to account with regard to the performance of KiwiRail. Rail is a critical part of New Zealand’s infrastructure. Some of us in this House—some no small few I would contend—will remember KiwiRail from the days when it was known as New Zealand Railways Department when it was its own Government department when sober administrations from both sides of the political divide took it seriously and afforded it the respect and the resourcing that reflected its importance to the nation and the economy. Even today the shadow of its former self that KiwiRail has become still employs some 4100 people. That number does not take into account the many people in support industries who owe their jobs to rail. But the National Government has made it clear that it does not care about the livelihoods of those people just as it does not care about rail.We can see this in a number of decisions that KiwiRail has made under the Government’s Turnaround Plan. The Minister for State Owned Enterprises Tony Ryall admitted last year that KiwiRail was unlikely to find the $3.85 billion needed from its own operating budget to finance the plan itself. This is why it has had to cut 300 jobs. This is why the Hillside railway workshops in Dunedin have been starved of work run down and hocked off while the Napier-Gisborne rail line has been mothballed. The Government has an obligation to stump up with the capital if KiwiRail is unable to fund itself. The Government simply cannot cut and run when the going gets tough—not when an essential service provider like rail is at stake. There needs to be an emphasis on regional development and jobs not simply bottom-line savings. The Government’s approach is reckless. It has no regard for the public good or social cost. This is a Government that would flog off the railways again if it could. It has an ideological disposition towards profit over people.Some of the $158 million of extra spending on tourism in Budget 2013 could have gone to financing KiwiRail instead. Bringing in ever more tourists is all well and good but we have to have ways of transporting them as well. Rail is the only sensible alternative we have to the ridiculously costly process of upgrading the Third World goat tracks that pass for State highways in this country. Some of the $158 million could have gone a long way to resolving the seemingly endless issues KiwiRail has with its Cook Strait ferries which were bought on the cheap and are riddled with problems. Last week all three of them were laid up with breakdowns at the same time—three lame ducks all in a row.That $158 million will deliver no benefit to the people of the East Coast or Northland where vital rail links are being mothballed. These are some of the most depressed regions in the country and they need all the help they can get. Even in their depressed state these regions are making a contribution to the economy to our foreign exchange earnings and that contribution needs to be recognised by the Government through investment in KiwiRail. The Napier-Gisborne line alone would have cost only $4 million to repair. The community and businesses on the East Coast have voiced support for the rail link and they say they would be able to increase the amount of freight carried on the line in the future. Why not listen to the people who would be most affected by this decision?The Turnaround Plan has also led to the compromising of public safety standards. Rotten sleepers from South America and rotten rolling stock from China—that is what this Government’s penny pinching has given us. Poor finish second-rate welding steel that if rumour is to be believed does not always even meet international standard ISO 9000 specifications and wheel gauges that are not the right size and that are flogging out the inside of the tracks themselves—it is probably only a matter of time before someone dies as a result of it. What will they say then?The decision to source locomotives and wagons from overseas has also been short-sighted in that it has cost the country hundreds of jobs and associated economic benefits. Documents obtained under the Official Information Act show that the closure of Hillside could have been avoided if only the Government had chosen to put New Zealand jobs and industry first. A difference of $6.4 million pales in comparison to the somewhere between $232 million and $250 million that Business and Economic Research says it would have added to New Zealand’s GDP. Quite apart from the inferior quality of locomotives and freight wagons imported from China’s Government-owned slave-labour sweatshops when compared with the high standard that our own engineers and tradesmen produce and the fact that the lower cost is a false saving—because these cheap nasty imports will wear out and break down and have to be replaced many years sooner than their local counterparts—no one in Government seems to have calculated the cost of not building KiwiRail’s wagons in Dunedin. There will be unemployment. There will be the loss of skilled tradespeople who will disappear to Australia never to return. There is the loss of yet more of our wealth-generating manufacturing base.KiwiRail is a shambles. It is poorly run poorly managed poorly resourced and poorly regarded by a poor Government. New Zealand First’s report on KiwiRail is not a “Must do better.”; it is a “Go back and start again.” We sincerely urge the Minister to take this lesson on board and change track accordingly. Thank you.JULIE ANNE GENTER (Green):We heard from KiwiRail at the Transport and Industrial Relations Committee and looking at its financial report is very very interesting. What we can see is that KiwiRail’s business is actually very sound. Freight volumes moved by rail have been increasing rapidly even though overall freight has not increased over the past few years. So we have not had an increase in freight volumes moving around the country or into and out of the country as was anticipated but on the rail we have seen a massive increase. This is good for our exporters. Recently I actually visited the Fonterra dry-store and cool-store at Wiri. Forty percent of Fonterra’s exports move through this store and 95 percent of what moves through there comes in and leaves by rail. So rail is incredibly important for our exporters.What also became very clear during the financial review is that KiwiRail is simply not able to deliver the full transport benefits that it could deliver because the Government is not providing it with sufficient capital although it has through the turn-round plan agreed to $250 million a year for a couple of years. But let us look at the transport budget. We have over $1 billion a year each year going on new capital expenditure just on new State highways. The problem with these duplicating links in our State highways is that they have diminishing marginal returns. We already have a State highway network. It is working pretty well. We could have some cost-effective safety improvements that would result in great benefits but putting in a duplicate link is not going to have a very good benefit for the transport system.The problem for KiwiRail and the problem for New Zealand is that the National Government does not understand how a transport network works. If you invest in the rail network that directly affects how the road network is used. In fact our transport network is entirely full of cross-subsidies. So the line that we often hear from the Government that roads are user-pays and rail does not pay its way and is subsidised is completely erroneous and does not take into account the fact that we have massive cross-subsidies going on. This is clearest in the Government’s capital expenditure priorities. So the highways that it is prioritising like Transmission Gully could never be paid for by direct user charges. That is the reality. If you tried to fund them through direct user charges the tolls would never cover the cost. So it is road users all over New Zealand who will be paying for a road that is used by only about 10000 people in the case of Transmission Gully so that is a big cross-subsidy. But if we were going to take an economically rational approach to the transport network what we would do is put the money in the projects that have the greatest benefit and the next dollar that we spend on transport infrastructure would be on rail because it allows more efficient use of the entire transport network.So for example already rail freight is paying for itself despite the massive capital investment that is needed in New Zealand’s neglected railway system because of 10 years of privatisation. But the passenger service is making a very tiny loss of about $3 million a year. To put that into context $3 million is probably the cost of one intersection or one roundabout. It is a tiny amount of money that might be put into the State highway network to get some safety benefits—supposed safety benefits. But if we were comparing it on an equal footing and treating rail as part of the transport network we would take into account the safety benefits of moving more freight off the roads and on to the rail network. It has benefits for consumers it has benefits for exporters and it has safety benefits. It is an entirely economically rational approach that most countries around the world are taking.If you look around the world most countries are investing significantly in rail because it makes economic sense. It is highly energy-efficient and it would reduce the amount of money that the transport sector has to spend on oil to move things around. We are spending $8 billion a year on oil that we are importing which is bad for our current account deficit. So investing in the rail network is good for our current account deficit it reduces the dependency of our freight sector on oil and the vulnerability to high oil prices and it reduces the amount of money that we have to spend on maintaining and improving the safety on the road network. This is an economically rational approach to transport that we do not see coming from the National Party and it is really a lost opportunity. The Green Party would invest in rail.SIMON O’CONNOR (National—Tāmaki):We have just heard a supposed discussion or lecture on economic rationality but I am struggling to see either the rationality or the economics in it. We have heard from the Green Party tonight that we just need more money in rail and that they will find it somewhere. An earlier speaker was talking about the Privacy Commissioner and saying we just need more money and they will find it and put it in there. We heard from others in the Opposition that one way we will reconcile some of the economics is to move into a monopsony approach towards the electrical market because that will be good.Paul Goldsmith: Monopsony?SIMON O’CONNOR: Monopsony. Have you not heard of a monopsony? We have to give you some education. It is a great word. On the one hand we have got all these extra expenses—[Interruption] Monopsony—yes it is a great word. We have got all these ideas of all this extra spend and yet we are hearing all these anti-approaches. We hear from New Zealand First that we have got to invest more and then—Jonathan Young: It’s not their money.SIMON O’CONNOR: Exactly. It is not their money as my colleague points out. It is someone else’s money. It has been photocopied. It has been taken off someone. It is the “bribe people with their own money” approach which we have seen before. We heard then from New Zealand First that we have got to put money in and then pursue uneconomic approaches. So we are going to buy rail systems be it carts or whatever. We are going to build lines that are uneconomic. And somehow that is rational economics—we are just going to keep putting more money in.What I think is important is to move into context because this Government has invested over $750 million—$750 million of New Zealand taxpayers’ money—into KiwiRail over the last 3 years. This Government has shown a very strong commitment to the rail network over 10 years to turn it round and to put it on its feet. Those of us who were there at the review heard that the board of the New Zealand Railways Corporation is working constantly readjusting its numbers to move KiwiRail into a position where it can stand alone.I suppose that is an element of where the National Party comes in because we heard from Labour and the Greens that they want a hands-on Government. I said it before in another speech—they really want their hands on your wallet and around your throat. National wants to empower KiwiRail to be able to stand on its own two feet. You would think the Greens would be all about actually wanting to stand on your own two feet because that is what National is all about—standing on your own two feet. Is that not good for the environment? [Interruption] They want to stomp on other people’s feet as the honourable Minister points out. It is just crazy crazy economics.As I said $750 million has been invested into KiwiRail and this is investment we have not had for over 50 years. The board came before us and discussed what was occurring. The board noted in respect of buying the new trains and the new locomotives in 2010 which the Government facilitated that it was 35 years—35 years—since such things had been bought. This is a Government committed to building up and strengthening KiwiRail and we have got some great successes.We know that freight is up. Julie Anne Genter is right. It works really well in some places. It works really well when the rail line runs past your business. But in this modern-day economy—not some sort of socialistic or communistic utopia—we live in a “just in time” dynamic where importers and exporters want to be able to move their products just in time. It means they want their product off the ship and brought to the supermarket just in time. They do not want it to be stored in warehouses waiting for a rail network to go in that direction. It works well for elements of Fonterra. I notice actually that New Zealand Rail is working I think towards Darfield to put in a rail line there. It is responsive. But once again we are coming back to a fundamentalism around the rail network—the idea that this is the only way that things are done. That is not the way the economy operates.But I come back to the $750 million that has been invested in KiwiRail. We were told at the Transport and Industrial Relations Committee that we have seen a growth of freight in KiwiRail of over 25 percent. We have noticed that about 17 percent of the income for KiwiRail is through its Interislander service and that is an increase of about $5 million in the last year. KiwiRail is building its capacity it is building its strength and it is doing that on good rational economics. It is not making things up and it is not engaging in economic or transport fundamentalism. It is good economic policy. You invest and then you allow the board and its individuals within the company to work their best for all New Zealanders.Report noted.Solid Energy New Zealand LtdHon DAVID CUNLIFFE (Labour—New Lynn):It is a pleasure to take a call in this Crown entities debate on the very serious situation in Solid Energy Ltd. Firstly may I compliment the members of the Commerce Committee in particular my colleague the Hon Clayton Cosgrove who cannot be in Parliament today on the quality and thoroughness of the report that we have before us. It makes for very sobering reading because it is an absolutely textbook case of how not to govern and manage a State-owned enterprise.If this National Government does not believe in the State-owned enterprises model—quite obviously because it is trying to privatise many of them—it is because it considers itself incapable of exercising the proper governance over it. The Government has been asleep at the wheel of Solid Energy. It has built up $400 million in debt it has cost to date over 400 lost jobs and it has seen a once-proud and innovative company brought to its knees.Let us consider how this occurred but firstly can I just comment on behalf of my colleagues on the difficulties that the Commerce Committee had in bringing Solid Energy to account. Indeed my colleagues believe that Solid Energy misled and obstructed the committee in regard to the availability of Dr Don Elder the former chief executive of the company to be able to testify to the committee. As I understand it from the committee report it was only when Dr Elder’s lawyers wrote to Solid Energy instructing it that if he was not able to appear the company must declare that he was available to appear. Only then did the company relent and allow him to perform his constitutional duty and testify to the committee. By all reports he did so with a straight back as did the outgoing chairman John Palmer.That leaves us with a riddle to solve—a riddle that is very important to New Zealanders because they want to know how come this Government oversaw the loss of half a billion dollars of their taxpayers’ money. Half a billion dollars is a lot of money in real New Zealanders’ terms but this Government—[Interruption] There goes the chairman. There goes the chairman of the Commerce Committee. He is a decent bloke but he was encouraged to stand aside from this hearing because of a potential perceived conflict of interest. His sister had been appointed to the board by the previous Labour Government—a very bipartisan manoeuvre. He was invited to consider and he took advice on whether he should stand aside. He chose not to. That does not mean he is in a position to shout down the Opposition on this matter.Here is the riddle: a company that had a billion dollars’ worth of projects in the pipeline and was carrying less than 35 percent debt suddenly found itself in the situation where the Government was encouraging it to up its debt levels at the very same time that the coal price was plummeting to historic lows. How was that possible? Well it so happens that Treasury was in fact intensively monitoring Solid Energy at the time but Ministers did nothing. Indeed Ministers insisted that the gearing be increased so that the dividend could naturally be increased. And that is like a sailboat sailing into a storm not sheeting its sail but putting up more sails more debt even though it was getting rougher and rougher.It was not bad enough to load up the company with debt at the Government’s behest but the company completely lost control of costs. Do not take our word for it. Here are the facts: $1.8 million was spent on overseas travel—$1.8 million which is more than the Cabinet—in 2011-12 and there was $336000 spent on advertising over a million dollars on communications nearly $200000 on spin doctors and public relations and one that really gets me $200000 on private investigators to run investigations on ecological campaigners. That is a travesty and all at the time—[Interruption] Yes and it reflects this Government’s view of civil rights: “Got a problem with spying? Change the law. Got a problem with sleazy deals? Bind future Parliaments.” Members may smirk. It is not going to take long before the public has a gutsful of that carry-on.JONATHAN YOUNG (National—New Plymouth):Following that speaker the Hon David Cunliffe it is very important to understand that through this process there have been a lot of numbers bandied about. We know that Solid Energy ended up in February in a situation where $390 million of debt was carried on its balance sheet yet we hear from the previous speaker that no it is $400 million and then within seconds it is half a billion dollars. How can we trust anything that comes out of those members’ mouths when such exaggeration takes place in debates like this?Page 5 of the report of the Commerce Committee says: “We asked Dr Palmer whether during his time as chair of Solid Energy the Crown had requested that Solid Energy increase its gearing. He confirmed that it had and that the aim of doing so would have been to ‘ensure that there was more cash available … which would ultimately increase the dividend yield.’ ”—through a process. “We asked Mr Palmer ‘Has ever a shareholder asked you to borrow to pay the dividend?’ He replied ‘No. There was no request for that.’ ” The next sentence says: “Labour members do not accept Mr Palmer’s explanation.” So even when it came out of the horse’s mouth these guys would not accept it.We know from further on that they ignore the international economic context. They want to lay all the blame at the Government’s feet. They want to do all of that. They said in their minority view report: “The brief amount of time given to the appearance of the current management of Solid Energy as well as that given to Dr Elder and former chair John Palmer meant that many questions about Solid Energy were unable to be asked by the committee.” They went on to say: “The hearing of just two hours of evidence meant that many questions from committee members were not able to be addressed”. We have the recorded transcripts which show that we had 3 hours of hearings yet Labour members put in their minority view that there were only 2 hours. Answer that.There were “many questions from committee members [that] were not able to be addressed in full.” Listen to this. How many questions do you think the Labour members submitted to the Commerce Committee to be sent to Solid Energy in that review? Two hundred and eighty-five.Hon Member: What?JONATHAN YOUNG: Two hundred and eighty-five. This was the thickest biggest longest select committee report of a financial review probably ever in the history of this Parliament and we had tremendous answers. Yes a straight bat yet the members of that committee from the other side of the Chamber distort the truth. They distort the facts. They come up with all sorts of things that make it unclear for New Zealanders to know exactly what happened.After Mr Palmer and Dr Elder talked about the international global situation regarding coal prices the lead member of the committee from the Labour side said: “Now I want to ask you some substantive questions.”—after we had understood all about shale gas from the United States of America and how that had caused coal companies to collapse after we had heard everything about how in China a 33 percent reduction in steel milling had taken place and after we had heard all about how coal companies in Australia had lost 50 percent of their value when the stock market had increased and how in the United States 42 percent of the value of coal companies had dropped when the Dow increased at the same time. We understood that there are significant global pressures around the price of coal how this had affected the market and how everybody around the globe was taken by surprise at what happened yet all of this is completely ignored—all of this is completely ignored—and we have a tremendous lot of information put in that report from those members’ point of view that is incorrect. I would say that we have seen a very biased attitude and that we have not seen an attitude from some members of this committee who have wanted to look at the facts and report justly so.I think that we need to understand that Solid Energy has been and is going through some very difficult times. I believe that the Commerce Committee has sought to serve this Parliament well in presenting a very thorough report with the exception of those instances that I have raised of blatant inaccuracies and blatant refusals to believe what the former chair brought to the committee. Why? Because it did not suit those members’ agenda. Their agenda was to try to lay—Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman):If you ever want a perfect case study of incompetent National Government oversight then this is it. In 1998 when the last National Government was in power it was determined to start selling off State-owned assets. It indicated to Solid Energy that it wanted it sold and this company was brought to its knees. It was bailed out by the Government in 1998. Labour came in in 1999 the Labour Government said “Get on with the job of mining.” and this company became an export leader with prizes and recognition for its export growth. And 5 years into the next Tory Government this company is on its knees because the Tory Government the National Government refused to provide proper oversight.Yes there are challenges in the coal industry. There are a number of coalmines operating profitably surviving on the West Coast but not Solid Energy. The problem with it is that the miners are the ones who have paid the dear price for the incompetent oversight by the National Government. We had a company running around like a bunch of drunken sailors spending money all over the place—bonuses for example—when there were clear indicators of challenging times in the international coal market. This is a classic case of Tory oversight.Bonuses were offered to employees—a fact that was told at the Commerce Committee. Where did that money go? Well $1.3 million went to employees on collective agreements. Who are they? They are the miners risking their lives day in and day out. What about the $9.7 million that went to employees on individual contracts? The managers the people sitting on their chuffs in the palace in Christchurch got the $9.7 million and that Minister and the National Government approved that and signed it off. No wonder the company is almost $400 million down the gurgler because the Ministers were asleep at the wheel.We had the chairman of the Commerce Committee quoting Mr Palmer and Mr Elder on what they told us at the select committee. The only reason they were there is that the Labour members on the committee insisted that they turn up. It was Mr Ford and Mr Diack who came along to the committee first up and said that Mr Elder did not want to come along. That was a lie. That was a lie and the Labour members do not accept the explanations given. Mr Palmer also said that they were not setting up Solid Energy for any sale process. Well clearly in the documents that was one of the objectives of the shareholding Government and Ministers and Mr Palmer has been a long-time champion of part-privatisation. I like John Palmer and I respect him and he has been out on the front foot in the media championing part-privatisation. I do not believe for a moment that that objective was not part of the problem that Solid Energy got itself into.It was trying to do two things. Firstly the Ministers insisted on gearing the company up so they could get a greater dividend which put pressure on a mining company. That is not traditionally the way you run a mining company. The board objected the Ministers insisted and so the gearing went up. At the same time it was trying to—had been told to—set the company up for part-privatisation. That formula was disastrous. The chief executive and the company were trying to diversify at a time when again the National Government stepped in and took off the mandatory obligation of biofuels and undermined what could have been a good initiative. It was admitted by the chairman the former chairman and the chief executive that biodiesel might have worked if the mandatory obligation had not been taken away by the National Government.There was $400 million down the gurgler. Almost 500 miners have lost their jobs on the West Coast and a few managers have lost their jobs. In fact the last announcement was 109 people. Half those people lost their jobs in the regions of New Zealand where they mine. Only half of those about 59 lost jobs in Christchurch. I feel sorry for those people but the reality is that the West Coast and the miners the people who risk their lives in Spring Creek Mine and all the other mines were the people who were not getting the bonuses. They were the people who got kicked out of work—[Bell rung]—and the chief executive and—The CHAIRPERSON (Lindsay Tisch): Order! [Interruption] Order! Otherwise the member will take another call.Report noted.Learning Media LtdCatherine Delahunty: Mr Chair—The CHAIRPERSON (Lindsay Tisch): From my reckoning the Green Party has used the four calls it has been allocated in this 3-hour debate. If you are getting a call from another party that has been allocated to you by negotiation that is fine. But at this stage your party has had four calls.Metiria Turei: I raise a point of order Mr Chairperson. Yes I understand that we have been allocated calls at least from Mana and our records indicate that we are entitled to five at this stage—and Brendan Horan’s call.The CHAIRPERSON (Lindsay Tisch): Is that five—Metiria Turei: Six including Brendan Horan’s.The CHAIRPERSON (Lindsay Tisch): Well I have four including Mana’s call so I will look at that. At this stage if you were to take the Mana call I would accept that if Catherine Delahunty wishes to take the call. Before you start we will check out whether you actually have six in total including Mana’s call but at this stage I call Catherine Delahunty.CATHERINE DELAHUNTY (Green):Thank you Mr Chair. The Green Party is keen to support this organisation Learning Media who came before our Education and Science Committee and indicated that it was having considerable difficulty with the new environment in which the Government had placed it.In order to place this in context I think it is important to remember who Learning Media is. It is part of a jigsaw of support that provides us with excellent educational materials including one of the most iconic ones the School Journal which is 106 years old. It was quite concerning to hear at the select committee that Learning Media is facing some considerable difficulty. Up until 12 September last year it had what is known as a preferred provider arrangement and it was actually doing a fine job particularly in targeting some of those who have been identified as some of our more vulnerable learners. It has been providing extremely good support to schools through what it calls “deliberate design principles” including catering for the diversity of students in New Zealand schools supporting Māori students to achieve success as Māori enabling alignment between texts and student needs building student capacity supporting reading and writing and many other things. It is very well known in the education sector as being a highly successful model.So it really was unfortunate to hear that after 12 September last year Learning Media had been forced to enter into a new contested environment. Through that contested environment it is competing with a whole lot of people who do not have its overheads. This State-owned asset has proved its worth not only through the School Journal but through many other educational materials that it has provided. It has made a particular feature of recognising that Māori students and Pacific students benefit from very specific and culturally responsive programmes.But no the market must dominate. Unlike Solid Energy it was not that it was spending millions of dollars on bonuses and it was not that it had been over-rewarding its top echelon in a random and unacceptable manner. The people at Learning Media have worked very hard to adjust to the changes that Government keeps requiring but unfortunately they are actually suffering from this new competitive model. The model means that Learning Media is no longer able to guarantee that it can do what it was set up to do. So basically what is happening is it has been forced to produce all its work in a whole new expensive layer of business. Everything has to be directed towards pitching for contracts. So instead of doing the job and using the expertise that it has accumulated over many years of practice as a State-owned asset it now has to compete. It now has to direct time energy and resources into pitching for contracts.Interestingly and this is actually relevant I was at a mayoral forum the other day in the Waikato region near my home and some of the mayors were talking about how they had discovered that constantly contracting out everything that they do is costing them more money than they are able to justify and they are taking contracts back in-house for a range of issues. Obviously that is not education; that is other types of issues but the contracting culture they had realised does not always work.If you want a sustained quality in education and this applies to the Education Amendment Bill as well which we debated in the House this afternoon the Government needs to commit to State-owned assets that are capable of providing that consistency. Throwing it to the wolves and asking it to be part of a contestable environment has not worked for Learning Media. It is not in huge debt it is not collapsing but it is finding that it is not able to focus. If it spends all its time trying to get contracts competing with organisations with hardly any overheads and who have flavour of the month ideas but do not have a sustained commitment then our children are going to lose out. That is what this is supposed to be about. It is about an educational provision that is going to work.It was with great concern that we heard what we heard from Learning Media because we think that allowing this to disintegrate in a hands-off way is going to be a disservice to children. Generations of Kiwi kids grew up reading the stories of many great authors. If we know anything about it it is that these authors have relied on the School Journaland the School Journal has relied on them. There has been a tradition of attracting quality because those people at Learning Media who are providing it know what they are doing they know why they are doing it and they know how it works. Having had conversations with some of the people at Learning Media—offline if you like—outside the select committee what I heard was a very deep commitment to Māori and Pacific learners. It would be a disgrace if Learning Media does not survive this. It is part of an overall belief system that contracting and competing—Report noted.New Zealand Qualifications AuthorityTRACEY MARTIN (NZ First):Kia ora Mr Chairman. Just with regard to the report for the 2011-12 year I would like to address my comments to outcome 3 which is about the preserving of and building on New Zealand’s reputation as a high-quality education provider and increasing the portability of qualifications gained here which will make New Zealand a more attractive place for students to come to and study in. I also want to address key initiative No. 6—enhancing the international recognition understanding and portability of New Zealand’s qualifications.The New Zealand Qualifications Authority was charged with key outcome No. 3 in the year under review. We recognise that the authority is in the somewhat unenviable position of having to try to uphold the integrity of the international reputation of New Zealand qualifications while at the same time having its Government market and kick open a door to everybody on the planet as if to say: “Come here come here. This is the goose that lays the golden egg. A free-for-all—our education system is up for sale.” So the authority has been flooded with international students and it is its job to maintain the integrity and the international representation of our qualifications. One of the things that we have seen in the last few days is the side effect of a lack of resources for the authority—a lack of time and resources—with which to create and enforce those systems needed to protect our international representation so that the goose itself does not end up cooked.The Government was aware over 2 years ago of the current issue around cheating in the period that we are talking about because it was in 2011 that the authority was given the powers to prosecute anyone advertising or providing cheating services. At this stage the authority has not used those powers. We are not surprised that there have been no prosecutions of individuals or organisations that have advertised cheating services because although these organisations might be crooked they are not stupid. But the review has highlighted that although the authority has these powers it does not necessarily have the resources to properly investigate such cases or pursue such cases through the courts.New Zealand First believes that a recent article in the Sunday Star-Times probably sums up the risk that we are looking at through the failure to have resources appropriately allocated to the authority to address the risks that these fraudsters represent to the New Zealand education system. It said: “The students who handed in work that was not their own have [fleeced] not only our universities but … other students who have worked diligently and honestly to get their degrees.” Particularly that has lowered the status of all degrees awarded to the international students. It went on to say: “The real damage is to New Zealand’s tertiary education sector. This story should [send shock waves around] our universities and raise red flags over the Government’s drive to bring in more Chinese and other Asian students here to study. If nothing is done to rectify the blight of this cheating all we’ll get is more students with phoney degrees and a greater degree of distrust about our education system.” Sadly as the Sunday Star-Times sources said New Zealand is now widely known in the Chinese community as the easiest place to get a Bachelor’s degree or a Master’s degree in any Western nation.Although we take on board those comments we also want to acknowledge that the Chinese embassy is working very closely with the New Zealand Qualifications Authority and Education New Zealand to investigate this matter. It recognises just as we do that all students are at risk of having their education and degrees not valued at the level that they should be and particularly it risks the reputation of the honest and hard-working Chinese students who are in our tertiary institutions.So we will be looking to see that in the next reviews that we will do at the Education and Science Committee around the New Zealand Qualifications Authority. We will be putting a particularly close eye on the mechanisms the affordability and the investment that it is making to work out solutions to this problem. It is probably timely to do so.House resumed.The Chairperson reported progress on the debate on the performance and current operations of Crown entities public organisations and State enterprises and no progress on the Immigration Amendment Bill.Report adopted.