Robertson Grant: New Zealand Superannuation and Retirement Income Amendment Bill — In CommitteeText is incorporated into the Bound VolumeRobertson Grant: New Zealand Superannuation and Retirement Income Amendment Bill — In Committee[Sitting date: 30 June 2015. Volume:706;Page:4889. Text is incorporated into the Bound Volume.]GRANT ROBERTSON (Labour—Wellington Central): Thank you very much for the opportunity to take a call on Part 1 of the New Zealand Superannuation and Retirement Income Amendment Bill. This bill went through the select committee with considerable scrutiny from members across the House and I would like to have been able to say when I took this first of several calls that I would like to take during this Committee stage debate that the committee came to some broad agreement about the bill. I could have said that because that is exactly what happened inside the committee.We were debating as members who have been following this bill will know the establishment of fund investment vehicles for the New Zealand Superannuation Fund. These are a new type of investment vehicle for the Superannuation Fund to enable it to take advantage of investment opportunities for New Zealand to enable the Guardians of New Zealand Superannuation to structure their investments in such a way as to maximise the returns provide efficient returns and also get some cost savings in terms of the management of funds.The issue that I want to spend a little bit of time on in this call and perhaps another one is around what was included by the select committee during our consideration of this bill and that was effectively the changes to the new section 59A which is covered by clause 7 of Part 1 of the bill. This was the bit where the committee took advice as we do from officials about what we should do in order to ensure that a new and innovative idea such as this is well managed.On this side of the Chamber we have no difficulty with the idea that the Superannuation Fund—a very successful fund; JP Morgan’s pension fund of the year we note—should be given some latitude some opportunity and some flexibility in how it makes its investments so that is a good thing. It is a mature fund now. It has reached a point where we believe this is a reasonable exercise. But in discussing the power to create these new fund investment vehicles we got into a discussion about what would occur if it was not what is described in the bill as a passive holding entity. So if it is a passive holding entity essentially in layperson’s terms that means that the guardians of the fund have very limited involvement in how it is actually run.But the opportunity is there for there to be another type of entity one that is more active in the style of investment that it might undertake. In order for the select committee to be comfortable with that kind of vehicle we as a committee agreed unanimously to include the idea that the Minister of Finance’s approval would be required not if it was a passive vehicle but if it was any other type of fund investment vehicle. So what would have been under new section 59A(1B): “The Minister’s approval under subsection (1A)(b)—(a) may be given for any class or classes of investments or entities; and (b) may set conditions as to the governance framework for the implementation and operation of the entities and as to the application of this Act to the entities.”What this was about was providing some security that as we entered this brave new world of fund investment vehicles—Chris Bishop: Ha!GRANT ROBERTSON: —that we should actually have—thank you Mr Bishop—some more security. Well Mr Bishop might as he laughs like to answer the question why when he was in the committee he was all in favour of the Minister being involved—he was all in favour of the Minister being involved.Chris Bishop: I wasn’t in Parliament.GRANT ROBERTSON: Ah! He is now saying he was not in Parliament. We know he was manipulating the members of the committee from behind the scenes. No I do not mean that—I do not mean that. I would like Mr Bishop then to ask the National Party members of the Finance and Expenditure Committee who were on the committee last time—perhaps David Bennett might be an example of that—why they were happy and in fact proposed the introduction of this clause because that is what happened. The committee on advice from officials agreed that this was a protection that should be included in the law when we are trying out a new type of funding mechanism for the fund. But magically on the Table tonight appears Supplementary Order Paper 89 in the Minister’s name removing that section. It removes the section that the committee put in.Hon Ruth Dyson: Unanimously.GRANT ROBERTSON: That is right. We need to track this through.The committee working in a very collegial manner in a manner that is responsible said: “We want to give the Superannuation Fund the opportunity to make use of a new mechanism for its investments but if it is going to be anything more than a passive entity then”—[Bell rung] Mr Chair?The CHAIRPERSON (Hon Chester Borrows): Grant Robertson.GRANT ROBERTSON: There was such competition! “If it is going to be anything more than a passive entity there should be a mechanism by which the Minister of Finance now may have some say.” Mr Bishop when he gets up will say that compromises one of the core aspects of the fund when it was initially established so that it should not have ministerial involvement in the fund. We continue to support the fact that the Guardians of New Zealand Superannuation have done a very good job of managing the fund but it is also important to note that this type of fund investment vehicle was not envisaged when the fund was set up. The idea that actually the guardians would have any active role themselves in investment was not envisaged when the fund was set up. When the fund was set up it was all to be arm’s length and the fund has done a very good job in terms of managing that investment.But the time has come and the guardians came to us and said that they wanted this change and it was accepted by the committee. But it was accepted by the select committee on the basis of a series of checks and balances that are now proposed by the Minister of Finance to be removed. On this side of the Chamber we are very disappointed that that is the situation that we have come to now when a committee can go through a piece of legislation and as a House we can come together and say that these are the appropriate protections that would be put in here. So that is to be removed under the Minister’s Supplementary Order Paper 89.I need to indicate at the outset that the Labour Party although remaining very supportive of this bill finds it hard to go against a consensus decision of the select committee on this matter because we do believe that this is an important change and we do believe that this is one that the guardians themselves were not uncomfortable with. That is my recollection. I was on the committee only briefly when this bill was being discussed but I do recall that the guardians themselves remained comfortable with the idea that this vehicle would work well with the ministerial oversight in the way we have suggested. It is important to note that allowing the guardians to run fund investment vehicles is an exception to the general rule proposed in section 59 of the original Act. What that said was that the guardians should not be controlling any other entity. They are there to invest they are there to do their best on behalf of the taxpayer but they are not there under section 59 as it currently reads to control any other entity.The committee when we discussed this agreed that the prohibition on control does not preclude the fund from 100 percent ownership of assets and there are examples of that where they might own a forest but they do not manage the forest. So that is fine. We understood that and that the guardians wanted to work to increase the proportion of the fund invested in the New Zealand assets and that they realised that in doing that they may have to take a more active role in the way in which these fund investment vehicles were driven. That is fine but what is not fine is when the select committee comes in and says: “We believe there is a way of managing this that will give confidence to the electorate that we are maintaining the integrity of the fund that we are maintaining the independence of the guardians. We are not giving them carte blanche to run and manage investments; we are putting in place a way in which the Minister of Finance will have some say on a very very limited class of investment.”I think that members on the other side need to get on their feet and tell us why it is that they are going against what was put in as an agreement by their members at the select committee. It is pretty extraordinary actually for a Minister of Finance to come to this House with a Supplementary Order Paper that contradicts what National Party members in a committee have agreed to. It may be that time has elapsed and those committee members were not able to convince the Minister when it went back to the National caucus but I would have hoped that they would be able to do that and ensure that New Zealanders could have continuing confidence that these new fund investment vehicles will be used in such a way as to be appropriate.One of the key elements that the Minister of Finance was to be involved in was in the question of what kind of governance arrangements there would be around these fund investment vehicles. So again this is not saying that the Minister of Finance will make any specific decision on a specific investment. It is about the Minister of Finance having some say in the governance arrangements around that some say in the role that the guardians will play and some say in the role that perhaps an independent investment manager might play in an investment that is effectively 100 percent controlled by the guardians of the fund. That is a very useful and important check and balance.