Volume 693 Week 52 - Tuesday 27 August 2013(continued on Wednesday 28 August 2013)Text is incorporated into the Bound VolumeVolume 693 Week 52 - Tuesday 27 August 2013(continued on Wednesday 28 August 2013)[Sitting date: 27 August 2013. Volume:693;Page:12881. Text is incorporated into the Bound Volume.]Tuesday 27 August 2013(continued on Wednesday 28 August 2013)Bail Amendment BillThird ReadingDebate resumed.Hon JUDITH COLLINS (Minister of Justice): Good morning Mr Deputy Speaker to you and to the House. The Bail Amendment Bill also strengthens the ability of police and courts to deal with young defendants on bail. The current law includes a strong presumption in favour of bail for defendants aged 17 to 19 years. The original bill removed this presumption for those who had previously been imprisoned as the data showed that this group had a high rate of offending on bail. The Law and Order Committee questioned the justification for the presumption for bail for 18 and 19-year-olds. This provision seemed to have rather obscure historical origins and the committee recommended that it be removed. The Government has agreed to this change although the original provision for 17-year-olds remains. This recognises the need wherever possible to avoid the incarceration of those under 18 in keeping with New Zealand’s international commitments.The bill includes a statutory regime for electronically monitored or EM bail. This has been a useful aspect of our bail system for several years but until now electronically monitored bail has been granted by the courts under their generic power to impose bail conditions. The Government believes that the time has come to make specific provision for electronically monitored bail in the legislation to ensure that it is applied consistently and effectively.The original bill provided for electronically monitored bail to be administered by police as it is at present. At the Committee of the whole House stage I tabled Supplementary Order Paper 339 to allow the Department of Corrections as well as the New Zealand Police to administer electronically monitored bail. The Department of Corrections already administers a number of other programmes involving the electronic monitoring of offenders in their homes such as home detention and parole conditions involving residential restrictions. It makes sense to take advantage of this expertise by allowing corrections staff to assess defendants in their homes for their suitability for electronically monitored bail. Police however will retain primary responsibility for the oversight of defendants on bail.The member Richard Prosser has tabled two Supplementary Order Papers to bring in what would have become known as Christie’s Law. This started from a petition put together by Mrs TraceyMarceau signed by about 58000 people and that petition is currently with the Law and Order Committee. Can I just thank the member Richard Prosser for providing me with copies of the Supplementary Order Papers prior to the Committee stage so that I was able to consider them. That is a matter that we would look forward to considering after the Christie’s Law petition has been dealt with by the committee and sent back to the House.I have also taken note of comments made by some members in the debates regarding the slowness of matters passing through the criminal justice system. I could not agree more. It is absolutely ridiculous that people are on bail for 18 months and that we wait in some cases for years for these serious matters to come through the court system. I can say that there is some hope already and that is around the implementation of the Criminal Procedure Amendment Act the Criminal Procedure Act Implementation Project legislation—or the “CPAI Act”—which is now in place. But also I look forwardto the support of other parties for the Judicature Modernisation Bill which I intend bringing to this House in the very near future to speed up the system and have justice not only being seen to be done but being seen to be done in a prompt and efficient manner. I commend this bill to the House.Hon PHIL GOFF (Labour—Mt Roskill): Labour is supporting the Bail Amendment Bill as a relatively modest but nevertheless constructive way of dealing with the problem of offending while on bail. I say “relatively modest” because the measures in this bill will tackle the problem around the edges but will not tackle the fundamental problem of why the level of offending on bail is so high. I want to come to that in due course.There is naturally in this country a presumption of innocence until proven guilty and I do not think any member of the House would seriously want to challenge that presumption. It is embedded in our system of justice. If we have a presumption of innocence then we have a presumption that people will be granted bail. That presumption cannot be absolute. It would be crazy for it to be absolute because you also have to take into account public safety when you are dealing with defendants who are charged with committing in some cases very serious offences.Right now the judge has the presumption and then takes into account firstly whether the defendant is likely to continue offending. If that is the case then the person needs to be locked up. The second thing is whether the person is likely to abscond. Again if there is evidence that that is likely then remand in custody is appropriate. And third the judge takes into account whether the defendant is likely to do anything that might pervert the course of justice such as interfering with witnesses while on bail. This bill does not fundamentally change the discretion of the judge or the decision that the judge makes—presuming innocence but weighing it up against public safety factors.The reason why change is needed I think has become very obvious in recent years. In the course of the Law and Order Committee hearing we heard from traumatised people who had lost family members—murdered by defendants who were at that point on bail having faced other charges on sometimes quite serious offences.The particular case that achieved a lot of publicity was the case of ChristieMarceau. It was a tragic case of a young woman murdered by a man who had previously kidnapped her abused her and then was given bail to live in close vicinity to theMarceau household. That family understandably wanted to know why. Why was bail given when the police had come out against the giving of bail? We heard from other families who had suffered similar losses.Those individual cases are backed up by statistics. Seventeen percent of those who are on bail go on to reoffend while they are on bail. Often it is for relatively small offences—relatively minor ones—but not in every case. In the 5-year period from 2006 to 2010 23 people on bail went on to commit murder; 21 went on to commit homicide; about 763 went on to commit acts of a sexual nature including serious sexual offending; and a whopping 7146 went on while they were on bail to commit acts with the intent of injuring other people.Those statistics look huge. I guess you have to see that fairly in context. Those statistics represent a relatively small percentage of the 450000 people who were bailed over that period. But it is not small if a member of your family is the victim of a crime committed by somebody on bail. Therefore we needed to look at that and we needed to do something to try to ensure that greater scrutiny is applied by judges in respect of people with a high likelihood of offending.That is what this bill basically does. This bill focuses on a reverse burden of proof. At the moment the norm is that if you do not want somebody to get bail the police have to prove to the court that that person is not safe to bail. The reverse burden of proofturns it on its head and says that the defendant needs to demonstrate to the court that they are safe to release. The net impact of that as we discovered in questioning people before the select committee is that basically the judges will look more carefully at cases on the margin.I do not want to exaggerate the impact this bill will have. That would be unfair to the people who made submissions to it. We learnt that it will probably mean an increase of 50 prison beds. We are talking about more than 90000 people being bailed each year. It will affect about 350 people because of the flow-through effect and that has an impact. It is much more significant than Simon Power’s ludicrous piece of legislation which this Government put through before the last election that had an effect on 10 people—10 people. That was as an eminent professor of law said simply window dressing.It will not have the same impact as the fundamental law that it is amending the Bail Act which I put through in 2000. That Act lifted by 200 percent—210 percent actually—the number of people remanded in custody. That had a fundamental effect. I believe that it was necessary at the time but again I do not want to create the impression that the answer to offending on bail is simply locking up more and more people. Every year we remand 43 people per 100000 in custody while their trials are awaited. That compares with Australia where the number is 30—our 43 against 30—with the UK where it is 25 and Finland where it is 10. So we are locking up a relatively high proportion of people on bail and that is why I say that this bill just deals with things around the margins.What we have got to do is make some fundamental changes to the way in which bail works. These are the sorts of things that the Labour Party is considering. I am pleased that the Minister picked up the fact that if you have got somebody waiting 18 months before their case is heard then of course there is going to be an increase in the likelihood of that person offending while on bail. Justice delayed is justice denied and the increasing length of time before cases can be heard in court particularly before the District Court in Manukau and Auckland is where you have got to tackle this problem at its fundamentals. Let us look at making justice swifter so that the cases are not waiting month after month after month when the person who is bailed and more likely to be bailed because of the length of time they are waiting is likely to reoffend.The second thing that we looked at was the ability of the police in practice to appeal a case where they applied for bail to be withheld so that the person would be remanded in custody and the judge came to a different decision. I am not saying that the judge was right or wrong but if the police really believed that the person should be remanded in custody they needed to have a way to appeal that decision swiftly. Otherwise it is theoretical. The person is let out and the police say: “Well the person is out now. We won’t bother.” The sense that we got at the committee was that police were not actually appealing cases even when they thought the judge had basically got it wrong.The third thing we need to do is give the judge better risk assessment tools. You have got to say that when you sit in the court and you watch the judge making decision after decision those decisions are made in minutes. They are not decisions that are made after great contemplation. They cannot be if you have got 91000 bail cases a year so you have got to do more to assist judges in terms of risk assessment. We need to look at that. Fourthly and I think quite important is that we need a better review process of where the bail decision in hindsight was wrong.I want to make something very very clear. That is not about interfering with the judicial process. The review process needs to occur within the judicial system maintaining judicial integrity and judicial independence. But the head of bench perhaps with the task of looking at cases like theMarceau case could say: “We got it wrong in hindsight. It had tragic consequences. How did we get it wrong? What can wedo about it?”. I think that that review system could be considerably strengthened and made more transparent.So what I am saying is that this bill does things on the margin. I am comfortable about extending the reverse burden of proof in murder cases and cases of serious violent and sexual offending. We had that in the original Act. Expand it by all means. I think that it makes sense where you have got serious class A drug charges. We know that more than a third of the people bailed on serious class A drug charges are out dealing again while they are on bail. Yes of course a reverse burden of proof should be there with the alleged offender having to prove to the court that it is safe to put them out.I want to touch on young defendants briefly. Look if you are 18 or 19 you are an adult in every aspect of the law and therefore a special presumption—Mr DEPUTY SPEAKER: Order!Hon PHIL GOFF: —of bail is not warranted in that case. If you are 17 and I will finish on this point—Mr DEPUTY SPEAKER: No you will finish now. [Interruption] Order! The member’s time has expired.JACQUI DEAN (National—Waitaki): I am very pleased to speak in the third reading of the Bail Amendment Bill. Firstly I want to answer some of the claims that the lack of efficiencies that have been identified in the court system by Minister Judith Collins and by some members of the Opposition are somehow not being addressed by this Government. In fact in the 5 years of this National-led Government there has been an aggressive programme in this area to refine and make efficiencies in our court and judicial system.The first one I want to talk about is the Criminal Procedure Act which came into effect in July this year. It does relate to the Bail Amendment Bill because the gamut of this bill falls within the judicial framework. The Criminal Procedure Act which has only just come into effect is already having an impact on reducing the backlog of cases that are waiting to be brought to trial. Of course you have to acknowledge that it is not just the criminal system that causes some delays. There are always occasions where defendants or people accused of a crime need to take counsel from their lawyer. There are many reasons for delays but this Government is aggressively addressing the issue of justice delayed.The Judicature Modernisation Bill is also a very comprehensive piece of work to be brought to the House by the Hon Judith Collins. It is designed to speed up court processes. It will allow for more powers to be able to manage judicial resources so there will be efficiencies within the judicial system and it will allow for better administrative efficiencies. Knowing my local courts and having visited a few courts it is a system that up until very recently has been paper-based and is still making the transition through to using audiovisual links. The Hon Chester Borrows is leading that work in our court system and already it is having a beneficial impact on court waiting times and access to justice.Talking about the bail system is about deciding what is going to happen to a defendant who is charged with an offence while their case goes through the criminal justice system. If a decision on bail is required the basic decision that the court has to make is whether the defendant should be imprisoned or whether they should be allowed to be returned to the community with some conditions. The Bail Amendment Bill contrary to what the Opposition might want you to think makes some significant refinements for the better around those decisions about whether to award bail and under what conditions. The main provision in the bill is around reversing the burden of proof. So those charged with serious class A drug offences such as the manufacture of P will on the enactment of this bill be required to convince the judge as to why they should beallowed bail. Similarly in respect of people who are charged with murder the current list of specified offences which has not been reviewed for some time since the Bail Act was enacted has also been reviewed. So the bill expands the list of violent and sexual offences that result in a defendant being subject to a reverse burden of proof. It will be harder for those people accused of a serious offence to get bail in New Zealand.I want to pay tribute to TraceyMarceau and the 84000 others who signed the Christie’s Law petition. I want to pay tribute first of all to theMarceau family. They have lost their beloved daughter in the most awful of circumstances. I want to commend them for having the courage to bring the Christie’s Law petition to this House. The decision was made in the Law and Order Committee that we would not consider the Christie’s Law petition at the same time as the Bail Amendment Bill. That was done for very good reason. The reason we decided not to consider those two items together is that we need to give the petition the petitioners the parents of ChristieMarceau and the other people who have been the victims of murder the due consideration of the matters they have brought to us. We considered that some of the items brought to us in the petition were out of scope with the provisions of the Bail Amendment Bill and we would not have been able to do justice to the petition had we put them together. I want to assure the petitioners on behalf of ChristieMarceau and the other victims of serious crime and murder that the Law and Order Committee is giving very serious consideration to their petition and we will be reporting to the House when we have considered our deliberations.The Bail Amendment Bill goes a long way to protecting New Zealanders. The Bail Amendment Bill goes a long way in National’s programme of making New Zealand safer for New Zealanders. I commend the bill to the House.ANDREW LITTLE (Labour): I rise to speak in this third reading of the Bail Amendment Bill. I will just start with some first principles when it comes to criminal justice. There are two things we look to the criminal justice system to do. The first is to convict and to deal effectively with the guilty—those who have committed crimes those who have been found guilty after a consideration of the evidence and a decision made whether by a judge or a jury. The second thing we require of the criminal justice system is to protect the innocent because the truth is that the enforcement authorities can get it wrong and they can get it horribly wrong and catastrophically wrong.Over the years over generations indeed over the centuries rules have been built up in respect of those who face serious allegations of criminal wrongdoing from the State—with all the resources that the State brings to bear upon that process—to ensure that there are rules to consider the evidence and to ensure that those who are innocent those who are not guilty are properly safeguarded and protected. Part of that process is the time between when an alleged offender is charged and when they are tried. As other speakers have already noted—Phil Goff the Minister Judith Collins and indeed the last speaker Jacqui Dean as well—actually we do have delays in our criminal justice system in New Zealand at the moment and we have had those delays for some time now. This is not new. That has made the decision about how to manage an alleged offender in the meantime a very important one. The longer the time between a person being charged and the time they get tried that weighs against incarcerating them because if they are subsequently found not guilty then they themselves have experienced an injustice that we should not take lightly.So the bail decision is a very important decision. But as my colleague Phil Goff has pointed out what we have seen in more recent years is that some who have been released on bail free to move about the community but under conditions have continued to offend on bail. So the balance has had to berestruck to ensure that when judges are considering what to do with alleged offenders particularly those who have aprior track record and especially when that prior track record includes convictions for the same or similar offences judges are now more alert to the risk assessment needed to make a decision on whether bail should be granted. That is a healthy response to growing community concern about that particular issue. This bill I think seeks to strike that balance. I think notwithstanding some ongoing reservations that we have particularly about the treatment of young people by and large this bill gets the balance about right.For serious offences and where there are alleged offenders who have previous convictions for serious offences it is no longer a matter of the police having to demonstrate why bail should be denied and why they should be incarcerated. It is for the defendant in the matter to demonstrate that they do not pose a risk to the community. I think that is an acceptable trade-off to make in our criminal justice system where a track record of convictions clearly elevates the risk that an alleged offender poses and therefore is a matter for the judge to take into account and to say “Well all right. You’ve had these convictions. You’ve offended again. Clearly the risk is heightened so the presumption would be to detain you but you have an opportunity to demonstrate to this court why you should not be detained and why you should be released on bail.” This legislation does not deny bail or at least it does not automatically deny bail to alleged offenders but it does heighten the hurdle if you like for them to jump in order to continue to enjoy their freedom until such time as they are tried on the charge that they face. It heightens the obstacle if you like for those on very serious offences and those on serious drug offences. I have to say in light of events over the last few years that I do not find that objectionable. When considering public safety and community safety particularly the management of offenders and those with a track record that is an acceptable standard to legislate for.It is for the same reason that I think it is going too far to say that just because you have been charged with an offence even if you do not have any prior convictions that should lead to a presumption that you should be detained rather than being granted bail. I think that was the conundrum in the dreadful ChristieMarceau case where the judge—dealing with a young offender who had no previous conviction and was facing a serious charge one of kidnapping—had no information about what subsequently became known about that offender’s mental health and made the decision to release that offender on bail with the tragic consequences that it had for theMarceau family. The reality is that this law would not change that situation in terms of the judge’s discretion and what the judge has to do when dealing with an application for bail.I think that highlights another very important point too and that is that in the end it is the judges sitting in court with the information provided by the police and the defendant who are in the best position to make judgments about the management of the offender or alleged offender as the case may be. There are repeated calls to limit reduce and in some cases eliminate judges’ discretion when it comes to these matters of human frailty and humankind. I just register my strong objection to that. We charge judges with a very difficult task and I do not know of any judge who when dealing with a bail application or a sentencing and the possibility of incarcerating a person does not take great care with that decision. Most of the applications for bail that judges deal with are on minor matters and do not need to be particularly taxing of a judge’s time and intellectual effort but in the very serious cases judges do need to have the means the time and the resources to pay very careful attention to the matters before them. For that matter I think anything more that can be done to assist judges and give them the means the tools and the methods to undertake a proper risk assessment of an offender or an alleged offender appearing before the court is all for the good. That is the sort ofthe thing that we should be encouraging when it comes to the effective administration of our criminal justice system.Notwithstanding the reservations that we have had from the outset because of a pattern that we have seen over many years now in our law of just shifting that balance and while trying to secure public safety through the effective management of the guilty and those who act anti-socially we have to make sure that we do not also in that process capture the innocent and treat them unjustly. That is always the difficult balance that the criminal justice system has to deal with.One of the good things that this bill does is it elevates bail applications in cases of serious drug offences to be considered by judges only and that is as it should be.I am going to conclude by just simply commenting again on one of the matters that appeared in the Minister of Justice’s Supplementary Order Paper 339 which was tabled only yesterday and that is the issue of the management of electronic bail. Although the Minister gave an explanation today that she had not hitherto given even after I requested an explanation from her office yesterday that explanation still does not deal with the mechanics of how the Minister’s discretion on who will be responsible for electronic bail is going to be exercised. It is all very well allowing it to be done by either the police or the Department of Corrections or both of them. But how is a decision going to be made on who is best equipped to do it?The Minister says that the Department of Corrections is best equipped to do it. So why not give the job to that department? It already monitors those who are sentenced to home detention and to sentences that carry electronic monitoring. Why not give the department that job? Why provide in the law for either the police or the Department of Corrections or both? We still have not had an adequate explanation of the way in which that discretion by the Minister might be exercised and the grounds that the Minister might take into account on making that decision. Is it going to be done on a regional basis? Is it going to be done by simply just saying yes both departments can do it and you sort it out amongst yourselves.”? That remains an unsatisfactory element to this bill and no doubt this House will have to monitor very carefully its application and implementation. But notwithstanding that as I have said we will continue to support the bill.JAN LOGIE (Green): I would like to start my speech today just by questioning the use of urgency for this Bail Amendment Bill. The first reading of this bill happened 3 days after the bill’s introduction in May of last year and then there was 6 months between the Law and Order Committee’s report back and the second reading. Now we find ourselves in urgency. It is hard to see actually what the urgency is and it does seem to be that this is possibly more a case of poor House management than the actual urgency of this bill.For more than a decade the Green Party has stood in this House and spoken up for a justice system that is consistent with our human rights obligations based on the best evidence fair and principled. We have often been in a minority taking this position and it seems that today again there is no exception in this situation as we are in a minority opposing this Bail Amendment Bill.This bill is another dog whistle to the “Get tough on crime” brigade who have been feeding the myth that getting tough on crime will make us all safer. If only it were that easy I suggest that we probably would have eliminated crime altogether back in the Dark Ages but it did not happen. This bill has an admirable purpose—to improve public safety and ensure the overall integrity of New Zealand’s bail system. It is hard to argue with that as a purpose but sadly by examining the evidence we know that it is not going to achieve these goals. These piecemeal reactive changes do not serve theintegrity of the system. We need a much more strategic integrated approach to ensuring justice and safety in this country.Despite the small likelihood of success this bill does considerable mischief to some key tenets of our judicial system such as the presumption of innocence until proven otherwise. It also erodes the importance of judicial discretion. These erosions of the central tenets of the legal system must be resisted. This bill seeks to further erode these tenets so we will continue to oppose it.We oppose this bill because it is another ad hoc measure that is not supported by evidence or sound principles. We oppose this bill because it reverses the burden of proof so that now someone with a previous conviction will have to prove to the court that they will not offend while on bail. I ask this House: how do you prove a negative? It is really a very difficult thing if not impossible. We oppose this bill because it significantly reduces judicial discretion when hearing bail applications despite the exercise of discretion being a very basic principle of judicial practice. We oppose this bill because it compromises the presumption in favour of bail for those aged 17 to 19 who have previously been sentenced to imprisonment.This reverse burden of proof is a breach of the New Zealand Bill of Rights Act and this was noted by the Law Society. Within the New Zealand Bill of Rights Act it states that there is “the right not to be arbitrarily … detained.” There is a right when charged with an offence “to be presumed innocent until proved guilty”. There is the right when charged with an offence to “be released on reasonable terms and conditions unless there is just cause for continued detention;”. This bill undermines those core rights. It changes the goalposts. There is a provision in this lawmaking process to override those rights but there needs to be a strong justification for doing so and in this case there is not.The Human Rights Commission noted in its submission that the case for changing this law effectively relied on a reverse onus preventing less than one instance of serious violent offending a year—less than one instance of that. When I say that I am not undermining the huge impact of that one instance on those families and clearly that person themselves but we do need to hold that in balance with the rights that are being taken from all the other people who will be affected by this law change. I need to remind this House that currently 60 percent of people remanded on bail are found not guilty. By extending this provision of not providing bail to people we are denying them liberty and freedom when they may not be found guilty. That is a very serious matter.Removing the strong presumption in favour of bail for 17 to 19-year-olds who have previously been sentenced to imprisonment breaches a raft of our international obligations: the United Nations Standard Minimum Rules for the Administration of Juvenile Justice the United Nations Guidelines for the Prevention of Juvenile Delinquency and the United Nations Convention of the Rights of the Child. All of these conventions emphasise the well-being of the young person and the avoidance of detention wherever possible.We signed up to these agreements as a country because we recognised that they are in the best interests of our children and young people and our society as a whole. Yet this bill seems to have forgotten that and it has forgotten all of the research that we have done as a country and that has been done around the world to find out what actually works to reduce youth crime. In 2000 the Ministry of Youth Affairs as it was then commissioned a meta-analysis of all the research that had been done into the causes and solutions of youth crime. This research found that persistent young offenders started young and started committing serious crimes fairly early and were likely to keep offending.The dog whistle brigade will say “Well that is just cause for this bill. We need to lock them up.” but what that research found was that persistent young offenders comefrom families overloaded with problems and under-equipped with coping skills. Young offenders show a range of problems that include “substance abuse criminal behaviours accommodation difficulties poverty unemployment mental health problems violence neglect and abuse of every type imaginable poor education and more.” and I am quoting from the report when I give that list.With so much going on they found that effective solutions need to use multiple techniques and touch on the four corners of a young person’s life: family school/work peer group and neighbourhood. They need to provide these young people with skills in how to avoid offending. This “lock ’em up throw away the key” attitude does nothing towards that vision.That same research found that residential interventions—of which locking them up is clearly an example—have to work so much harder to succeed and that getting tough with young offenders almost always fails. The Law and Order Committee already verified the failure of the prison system to address youth offending when it noted that young defendants who have served a prison sentence offend while on bail at a much higher rate than those with no history of offending. So why—why—when we have a chance to intervene and actually make a difference in the lives of these young people and reduce their chances of offending would we forget everything that actually works and respond by removing the fairness from the system and keeping them locked up longer?MARK MITCHELL (National—Rodney): The previous speaker Jan Logie said that the Government and the National Party have moved the posts and that is right. We have moved the posts and I am actually very proud about that.I want to acknowledge the Hon Judith Collins because for too long in this country—yes we have a system that is built on the presumption of innocence and that is important and we will never depart from that—I do not think we have actually given proper care and consideration to victims’ rights. It is important that a victim is actually brought into the process and I do not see anything wrong with actually putting the victim’s rights ahead of an offender’s rights.I would like to acknowledge the families that appeared in front of the Law and Order Committee because that was a tough process for them to go through. It was critically important for us as a committee because sometimes we can sit in this sanitised environment down here and to actually hear the stories and to be able to understand the huge impact that they make on these people’s lives—and they will always have a huge impact on their lives—was really important to us.I want to acknowledge Tracey and BrianMarceau. They are the parents of ChristieMarceau. I met with Brian and Tracey shortly after the tragedy when Christie was murdered. Of course it would be fair to say that they were still stunned at that point. Of course Tracey has gone on with the support of the Sensible Sentencing Trust to campaign on Christie’s behalf. I want to acknowledge them and I want to acknowledge the submission that they made to the select committee as well because it was compelling and I know that it sits in the forefront of our own minds when we are dealing with this Bail Amendment Bill.I want to acknowledge the Hon Phil Goff and of course Kris Faafoi who were on the select committee with us. I feel that we worked really well together on this bill. I want to acknowledge the chairperson Jacqui Dean and of course Richard Prosser who took the time to put those Supplementary Order Papers 334 and 335 together and as the Minister said to get them out there early for review. Of course I am disappointed in the Greens’ position. David Clendon always has some interesting contributions to make in the committee. It appeared that the Greens had already taken a position on thebill and that was to oppose it which was disappointing but in some ways it does not surprise us.Mr Goff made an interesting comment about making sure that the process in terms of getting offenders back to court was important because offenders out on bail if they are on bail for too long are likely to offend. Well to me that is almost counter-intuitive. If we are worried about that then that is probably a good test to say that an offender should be remanded in custody if the clock is ticking in terms of when they are going to offend.In terms of the numbers that are going to be affected by this bill it does have some real meat in it. All I would say to that is that if we can save one ChristieMarceau—save someone from having that happen again—then this bill is actually doing the job it was designed to do.I just want to say that this is a very very good bill. It was a pleasure to work on it. It is certainly in line with the programme that has been implemented by our Minister of Justice and Minister of Police and I am very happy to commend it to the House.RICHARD PROSSER (NZ First): I am pleased to rise on behalf of New Zealand First to speak to the final reading of the Bail Amendment Bill. New Zealand First has supported this bill from the outset and we continue to do so. I do not intend to impose too greatly upon the time of the House simply to go over old ground yet again. As I have stated several times throughout these debates New Zealand First’s only quibble with the bill is that in some respects we do not believe that it goes far enough.This we have attempted to address through the introduction of Supplementary Order Papers 334 and 335 and by restating several times that we hope that the Government will not regard the culmination of this process of lawmaking as being the end of the problem. Rather we hope and trust that the Government will come back to this issue once again as soon as it is practical to do so to apply the lessons that have been learnt through the process of this bill to incorporate the information that submitters have brought to the knowledge of the Law and Order Committee and to address the concerns of all those very fine people who signed and were involved in the petition initiated by the tragic and avoidable case of ChristieMarceau.The passage of this law has been a moving process for the select committee members. Under the very able chairpersonship of Jacqui Dean we listened to a number of very impassioned submitters some of whom had experiences to recount that I am sure no member here would want to repeat. The commission of crimes against the person crimes of violence crimes against property sexual crimes and others are particularly obnoxious and the stories that were told bore that out. There is raw emotion connected to this subject and people have an expectation and I believe a right to expect that the Government will pay it adequate regard and will craft laws that will protect innocent people from the actions and the degradations of criminals.The commission of crimes by offenders who are on bail is particularly difficult for ordinary people to stomach and I believe it behoves this House the Government and all of us here to do our very utmost to ensure that the risk to the public is minimised. No system can be absolutely perfect of course. This we know and to a large degree we regret that fact. But laws can always be made better when there is will on the part of parliamentarians and when all parties and members from across the House resolve to work together for the common good put aside petty differences and work in the best interests of public safety.When this House next addresses the issue of bail—and I hope it will be sooner rather than later—I look forward to working constructively with the Government and with members of other parties to ensure that as much as is humanly possible is done to ensure that those offenders who pose a danger to other people are removed from theopportunity to express that danger. It is a balancing act; we accept this. Against the need to ensure public safety we must measure the right of those who stand accused to the presumption of innocence. Somewhere in between those two competing priorities a value judgment—an informed judgment—must be made by those who are learned in the ways of criminals the criminal mind and the likelihood of criminal behaviour. It falls to this House to provide those learned judges with the very best of tools—with the direction and the guidance and the ability to set bail or refuse it based on an accurate and informed assessment of the likelihood of further offending.We hope and trust that this bill will be a stepping stone on the way to that situation being resolved. New Zealand First supports this bill.IANMcKELVIE (National—Rangitīkei): It is a pleasure to speak in support of this bill the Bail Amendment Bill in its third reading. I was a little concerned I suppose or I thought that it was unfortunate during the Committee stage yesterday when I heard a speaker refer to this piece of legislation as populist. I do not really think that “populist” is a term that I would apply to it. I think it is a very structured piece of legislation that moves the bail system with the times and I think it is really important that we do that. It is going to make quite a lot of difference to the way the system works. This bill is one of a suite of legislation introduced by National in a comprehensive programme of law and order reform that is unquestionably working and I will touch on a little bit of that shortly. It is achieving much better results that one could have hoped for.This bill improves the integrity of the bail process. It gives the police the ability to make positive decisions in respect of people who fail to answer to police bail it tightens significantly the bail arrangements for defendants under 20 years of age and it reverses the onus on those people to prove that they are capable and worthy of release on bail.Again we heard from the Greens. Unfortunately it was from a member of the Greens who was never at any stage present during the submission process. I think that if one had been present during the submission process one would take a very different view of this. When someone has proved that they cannot be trusted surely the onus must go back on to them to prove that they can be trusted and I think that is the simplest way of looking at the reverse burden of proof. It is really putting people who have proved in the past that they cannot be trusted in the position of having to prove they can be trusted before they can in this case receive bail. I do not think that is unreasonable or unjustifiable and I certainly do not think it breaches people’s rights. I think that once you have breached that trust the onus is on you to sort yourself out.Phil Goff during the debate on this bill has mentioned a number of times the 50 more beds required as a result of this bill. That figure takes no account of the great results that this Government’s policies are achieving in reducing both reoffending and youth crime. We are seeing youth crime rates significantly down. Of course youth crime is the area that applies particularly to this bill and particularly where we might have seen the significant increase in bed use because that is the part of the bill that has the most impact—the area of the younger people.At the conclusion of the select committee process we had the opportunity to visit the courts to get a better understanding of how the bail system works in practice. I was both surprised and impressed at the efficiency and have a much better understanding of the pressures on both police and judges. I also understand the need for speed in the bail system. Information processes are essential to an effective efficient bail system through our courts. Although there are always going to be issues with bail and the way it is granted—there is certainly always going to be pressure on the courts because of the need for speed—I think this bill has followed a really good process. It achieves a good position given the situation that we are in and given the need to protect people’s rights.I want to congratulate the chair on what at times was a very difficult process. The chair Jacqui Dean and deputy chair Mark Mitchell have both appropriately acknowledged theMarceau family and other families who contributed to the submission process on this bill. It was a pretty testing time for many of them. So I have great pleasure in supporting this bill as it passes through the House.KRIS FAAFOI (Labour—Mana): Thank you very much for the chance to take a call on the third reading of the Bail Amendment Bill. I do want to address some of the comments made by the Green Party member Jan Logie because as a member of the Law and Order Committee—and I acknowledge the others who are here today—I know that this is a very complicated issue.I also want to just touch on something that Ian McKelvie has just said as I think I was at the same session as him when we visited the Wellington District Court to see the process when judges are making the decision around granting bail. To an extent and I think it would probably be for about 85 percent of those decisions they are very fast decisions made in a kind of factory floor way. But there are a number of offenders who are coming into the court system and as we have seen what has unfortunately happened is that the decisions made by judges have not necessarily been the best ones and there has been reoffending while someone has been put out on bail. Although we support this piece of legislation with reservation as my colleague Andrew Little has said we think—and we have supported it because of this—that this piece of legislation is trying to get the balance right between the rights of offenders and the rights of victims. It tries to address the public mood of discontent of people out there and victims of offenders who have been put out on bail and the growing unrest that that just was not good enough.I also want to acknowledge some of the submitters who came to the Law and Order Committee. There was one particular session that Mark Mitchell from across the other side of the House has mentioned when we were all in Auckland about a year ago. That was a particularly tough day sitting through those submissions and obviously much much tougher for those people to come and give their submissions to us. I do want to acknowledge theMarceau family—TraceyMarceau the mother of ChristieMarceau—and also one submitter who for me stuck out and whom I still remember quite vividly and that is CharlieBorrell the father of AugustineBorrell a young teenager who was killed in Auckland. Those two submissions I think brought home to a lot of people in that select committee the real pain that is caused by offenders who are going out there while on bail and in those two cases committing the ultimate crime.I do not say that the concerns that Jan Logie has are unfounded and are not passionate but I think as a member of the select committee that we needed to do something to appease or to please those families out there who came to the select committee not just because of their own personal pain but to make sure that they prevented that from happening to other families as well. I do not think I could let that go without a response and I say that certainly on the Labour Party side of things although this is a National piece of legislation we do support it because we do know that there needs to be greater protection for the public out there especially when you are looking at the types of offenders who were being granted bail. I just wanted to make that comment.Again to those families and friends and the people out there who submitted to us thank you because it took a lot of courage to do that. There were some very emotional moments and I thank them for making those submissions. I also acknowledge Ian McKelvie and Jacqui Dean from the other side of the House and—who else is here today; that is probably breaching the Standing Orders—the other members of the Law and Order Committee.The headline clauses in this piece of legislation are clauses 7 and 8 and they are where we have got the reverse burden of proof for those people who have been convicted of previous crimes and who are charged with murder and other serious offences. One of the things that has already been mentioned here today is giving the judiciary better tools to be able to make better decisions when it comes to these bail applications. We certainly heard from the police about their processes around when they are opposing bail but there was some suggestion—and hopefully the Minister of Justice might be able to address this in the piece of legislation that she said will be brought to the House—about giving our bench much better risk assessment tools so that when a tricky case does turn up judges might be able to make much more informed choices. We heard about the ROC٭ROI system that the Department of Corrections uses to be able to assess how dangerous an inmate is and whether or not they will offend while they are incarcerated and heard that might be able to be taken and used in a court setting. There was one submitter—if I am reading my notes here correctly—Susan Platt who had done a bit of research internationally into some kind of risk assessment tool. She said that nothing had been done as of yet from all the international research and stuff that she was looking at and that New Zealand could be a world leader if it took the case to be able to have a risk assessment tool for our judiciary. Hopefully that might be something that New Zealand can do because if we were able to do that and able to use the technology that we could pioneer and have in place other countries could look at us to be able to make their communities much much safer as well.As I said earlier there are some reservations that we do have around this piece of legislation. One of those reservations has already been touched on by members on this side of the House but also by the Minister of Justice Judith Collins and that is the delays in the court system. At this stage I am not going to traverse that too much because I think what has been said has already been said. I think it is good that the Minister of Justice has acknowledged that that is a problem and hopefully that will be addressed in the piece of legislation that she will bring to the House.I do not think I need to take up much more time of the House. I just want to acknowledge once again the submitters who came to the Law and Order Committee. Although we do have some reservations we do support this legislation.Hon TAU HENARE (National): I am pleased to take a quick call on the third reading of the Bail Amendment Bill and I want to congratulate the Law and Order Committee on all its work on what was a traumatic experience for all of the select committee members. I do not wish upon anyone the sort of evidence and hearings that they had to go through so my hat goes off to the select committee for doing a pretty good job of shepherding this bill through.I have never in my political career ever used the words “soft on crime”—never. I have tried to steer clear of accusing anybody of being soft on crime apart from today when I do so reservedly and I do so in the face of one of the Green members actually being a friend of mine until today. Unfortunately the talk that I heard from the Green member Jan Logie basically said to me that the Greens are soft on crime and that is a term that I do not use lightly.When we consider what has gone before we see that this bill and even the bills before it on the criminal justice system are about protecting the community. They are about protecting the victims from more tragedy and more trauma. This bill is specifically in front of us to deal with those two situations. It is about protecting the person in our community who has been visited by crime. Whether it is a punch a kick a murder or whatever we have to do all we can to protect that citizen from more trauma and more crime. Look I am not saying that if we had had this bill before ChristieMarceau’s tragic demise it would have stopped that happening. Who knows? But wemust always do our best to make sure that we protect those in our community who have been visited by such trauma and crime.I once again say and I do not make this point lightly that that is what you get if you vote for the Greens. I have a message for the Labour Party and yes that includes the “deputyDeputy Speaker”—Assistant Speaker Robertson. If Labour wants to hitch its wagon to the Green Party then it had better be very very careful where it does hitch that wagon.Again I say to everybody on the select committee that it was a job well done. I think that New Zealand will congratulate the committee and congratulate the House on the passage of this bill.A party vote was called for on the questionThat the Bail Amendment Bill be now read a third time.Ayes102New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; United Future 1.Noes19Green Party 14;Māori Party 3; Mana 1; Independent: Horan.Bill read a third time.Public Finance (Fiscal Responsibility) Amendment BillIn CommitteePart 1 Amendments relating to responsible fiscal management and reporting requirementsDr DAVID CLARK (Labour—Dunedin North): Kia ora Mr Chairman. Thank you for the call. I rise to speak to this bill the Public Finance (Fiscal Responsibility) Amendment Bill. Labour will be opposing this bill and we do so with some concern given that generally there is a history of bipartisan conversations on these bills and given that it is about the long-term health of New Zealand’s finances. We had hoped that an agreement could be reached between the two sides of the House which have over many years shared concern for fiscal responsibility.I have a number of questions for the Minister in the chair the Minister for the Community and Voluntary Sector so I hope that she will take a call on some of the finer aspects of the bill. They relate directly to Part 1 because that is the part that we are now debating. Part 1 lays out the principles of responsible fiscal management. These principles in one sense are motherhood and apple pie. It seems to me to be a complete nonsense to say that past Governments have not had an eye or regard to these issues.I can hold up this graph to the Committee. I am not sure whether members will be able to see it and whether you would be able to see it from there Mr Chair but it is a graph of New Zealand’s debt track. It has a particular cut on it and I might like to cut it differently but the general trend shows that the National Government in the early 1980s had brought New Zealand’s debt very high up. It dropped down over time as the Labour Government intervened in the 1980s and the National Government of the 1990s brought the debt down a little further. Of course we know that the last Labour Government ran 9 years of surpluses and really brought New Zealand’s debt under control. Then at the end we have this flick in the tail where we see the global financial crisis kicking in. We do not blame the Government for all of the irresponsible borrowing that has gone on. Some of it in fact was quite responsible and as Bill English said of the Labour Government’s efforts this was the rainy day that we werewaiting for. This is why we saved—so that we could indeed spend when we were in a difficult spot.That spending though seems to have gone on without a real plan for the economy and we do not see the growth that we might have expected from it. But it seems to me a nonsense that these principles in Part 1 were not considered by the previous Governments that brought this debt track down—Governments of both stripes actually. I mean the real concerns that we have are at the beginning with the National Government of the 1980s throwing the debt up and the current Government throwing the debt up both without a real plan for the economy. But it is true that in between there was one National Government that was more responsible in terms of the debt track and two very responsible Labour Governments.These principles as we read here in clause 4 include from new paragraph (e) of section 26G(1): “formulating revenue strategy having regard to efficiency and fairness”. We can debate whether efficiency and fairness are being adhered to and what precisely those words mean. That would be a political debate I suspect because I would not find that the tax cuts in 2010 were particularly fair. Forty percent of the value of the tax cuts that the Government brought in went to the top 10 percent of earners and those at the bottom—the bottom 20 percent—got just 2 percent of the value of the tax cuts and then all that was swallowed up in the cost of living and GST increases. We all remember GST going up to 15 percent after the Prime Minister said it would not go up. So we can debate what efficiency and fairness mean in new paragraph (e) but these same principles were being I am sure debated by various previous Governments as we observe in that debt track including the predictability and stability of tax rates.This current Government may be an exception and it may be that Treasury with this legislation and other drivers of this legislation is trying to rein in the current Government. It may have concerns behind the scenes and it may be trying to impose a little discipline on this populist Government by saying: “Look if you are going to spend this money you must have a forward picture. You must”—not you Mr Chairman but this Government—“have a forward picture in respect of the predictability and stability of tax rates.” Let us move through to the next principle in new paragraph (f) which states: “formulating fiscal strategy having regard to the interaction between fiscal policy and monetary policy:” and particularly the principle about the impact on future generations in new paragraph (g). I think that what perhaps sits behind this wording is actually a concern from Treasury as to how this Government is performing. That is wonderful and ironic but I do not think this piece of legislation will stop that.The provision about having likely regard to the impact on present and future generations is a genuine concern that we in the Labour Party share. However again this Government has taken some calls on superannuation. The Prime Minister has said that he will not increase the superannuation age while he is the Minister in charge of the Government. That is appalling—that is absolutely appalling. We know that the cost of superannuation is overtaking the cost of education in our country and that is education before school education in the compulsory sector and education in the tertiary sector. It will soon cost more for our superannuation requirements.We need a superannuation scheme in this country that is affordable and has longevity. On this side of the House we are concerned that everybody can have a fair retirement where their basic needs are looked after. We encourage other people to save more—there is no doubt about that—but we have a regard to the long-term impact on future generations. This current Government ironically seems to be the one that does not and that is why I say that maybe this legislation is an attempt by Treasury to rein it in. We used to talk about the debt anchor when I worked at Treasury—the idea that Government debt would go down through 20 percent and the last Government prettymuch got there and left zero net debt for the current Government. So there is some irony that these are the objectives being put forward by the current Government.I would ask the Minister in the chair for her view on whether these particular principles have been ignored by past Governments because I think facts suggest that they have not and I think this legislation brings nothing new. In fact the Government is using parliamentary time to pass legislation that does not add much that is new and that does not have agreement across the House. That to me seems wrong. That does not seem like what we should be doing here as parliamentarians. It ought to be in my view that we can agree a long-term strategy for the health of the country in order to take this forward.The other thing that needs mentioning certainly in respect of this is that part of the proposal—in terms of the sustainability of spending over time that the Government was bringing along with its support party ACT—considered putting in a spending cap across Government finances. That spending cap should it be implemented would have devastating consequences. I am very pleased that that was thrown out along the way as a ludicrous idea. I am sure that it was considered further at the Finance and Expenditure Committee but I am glad that it has not made its way back into the bill because that type of cap has been demonstrated overseas to lead to a lack of investment in infrastructure education spending social infrastructure and those other things that are actually about that long-term sustainability. I am sure the Minister in the chair would agree that that long-term sustainability does not warrant that kind of spending cap or at least I hope she would. It does seem possible though that there is an expediency thing here. Peter Dunne was the man who stepped away from that clause. It was something that National and ACT had agreed before the election in their proposed arrangements the confidence and supply agreements. So again there is a bit of an irony in these principles sitting here when the kinds of suggestions that have been put forward by the Government in its confidence and supply agreements would undermine these exact principles. So that covers the principles that are there.The last principle is in new paragraph (h) which states: “ensuring that the Crown’s resources are managed effectively and efficiently.” Well who would disagree with that? I do not think anyone in this Committee would disagree with that. I do not think again that the previous legislation would have precluded such a thing from taking place. I think that that is again what this graph I held up earlier for members demonstrates—that various Governments of different stripes both Labour and National have had concern for the long-term debt track of New Zealand. Of course the National Governments that have sent us in the wrong direction outnumber the Labour ones that have sent us in the right direction I would argue. But I am not making a blanket statement here. I am saying there are good National Governments and bad National Governments and that it does not matter what has been in the past legislation—that has still happened.So with those thoughts I will take my seat and look forward to what the next speaker has to say.Hon DAVID PARKER (Labour): The issues that David Clark who has just taken his seat referred to were all relevant but I want to hear from the Minister in the chair the Minster for the Community and Voluntary Sector why it is that she thinks this bill the Public Finance (Fiscal Responsibility) Amendment Bill has the credibility to introduce a provision that says in clause 4 new paragraph (g) of section 26G(1): “when formulating fiscal strategy having regard to its likely impact on present and future generations;”.First point: is the Minister saying that her Government until now has not done that? Because if she is saying that well that shows you what an irresponsible Governmentthis is. Secondly if she is saying it has already done it does that not show that this legislation is meaningless? Thirdly if you want an example of irresponsible failing to take into account the effects between generations look no further than the Government’s head-in-the-sand attitude in respect of the age of eligibility for superannuation. The cost has gone from $7 billion to $10 billion per annum since 2008 till this year. That is more than the cost of education within the next—Paul Goldsmith: What are you going to do about it?Hon DAVID PARKER: We are going to increase the age of eligibility to 67 over time.Paul Goldsmith: It doesn’t solve the problem.Hon DAVID PARKER: It does not solve the problem says Mr Goldsmith another Luddite on the other side. What an absurd statement that actually increasing the age of eligibility does not have a substantial effect on the fiscal consequences further down—Paul Goldsmith: Look at the Treasury report.Hon DAVID PARKER: I have read the Treasury long-term report and it says that if the age of eligibility is not put up then unless Mr Goldsmith cuts other services he would have to increase GST from 15 percent per annum to 17 percent per annum. That is what the Treasury report says Mr Goldsmith. So that is the first point to be made.The second point is that it is very very interesting that the genesis of this bill was with the confidence and supply agreement with Mr Banks. I want Mr Banks to take a call to explain how he has got any credibility on fiscal sustainability. When he was last Mayor of Auckland City he tripled council debt—tripled council debt when he was last Mayor of Auckland City. That is quite apart from the extra debt that was taken on as part of the formation of the so-called super-city. A fiscal cap is a nonsense. The Christchurch earthquakes showed that if you had a fiscal cap the Government could not have paid for the rebuild or part of the substantial cost of the rebuild in Christchurch because of a fiscal cap in legislation—what a nonsense. What a nonsense.We have seen the effect of that on things like education services in California. It once had amongst the best State-based education systems in the United States. It had a fiscal cap and as a consequence it could not keep increasing spending for education in the way it needed to and indeed it had to cut its spending on education because it spent so much money on prisons. As a consequence the Californian State-based education system is a shadow of its former self. That is the sort of policy that we get from the ACT Party—ill-thought-out and it would take this country backwards even faster than this current National Government is.The third point I want to make is that in respect of this sort of legislation there should be agreement across the major parties if it is possible. We asked for some pretty minor concessions in respect of this. We thought that the wording around monetary policy was one-sided and showed how ridiculous it has become that Treasury and the Government think that the only thing that is relevant in respect of monetary policy is what the Reserve Bank does. We said: “Well that’s ridiculous.” We think that there are obviously parts of monetary policy that are delegated to the independent Reserve Bank and they should be but there are other parts relating to monetary policy including policy advice that the Government should get from Treasury—Dr David Clark: They don’t believe in contestable advice.Hon DAVID PARKER: Well that might be the case Dr Clark. I cannot understand the Government’s unwillingness at a time when monetary policy is in a state of flux around the world with these enormous trade surpluses in some countries and big trade deficits and current account deficits like New Zealand has—currently the worst in the developed world. Yet the Government will not conceive that in respect of fiscalresponsibility you have to have an eye on that as well because fiscal settings do affect monetary policy and trade balances. But the Government refuses to agree.The second area where we thought we should be making an amendment if the Government wanted cross-party accord on this was something like the Australian equivalent legislation which refers to adequate national savings. Of course New Zealand has nationaldissavings through our current account deficit—the worst in the developed world. So I would like the Minister to respond as to why those issues could not be accommodated.Hon CLAYTON COSGROVE (Labour): I too want to pick up where my colleague David Parker left off. Looking at Part 1 in clause 4 new paragraph (e) of section 26G(1) of the Public Finance (Fiscal Responsibility) Amendment Bill the other interesting thing here of course is that it says: “when formulating revenue strategy having regard to efficiency and fairness including the predictability and stability of tax rates;”. Well again as Mr Parker said is this Government so bereft that it needs a piece of legislation to ensure that it achieves fairness? It may well be that it does given that in the so-called tax switch we know that the top 10 percent of income earners got a massive 40 percent of that tax switch and the bottom 20 percent got 2 percent. So maybe it actually is important that there is a clause in here that reminds this Government that formulating revenue strategy should have fairness should be predictable should have stability of tax rates and should be fair. I am glad the word “fairness” is included in this because of course nowhere in the Government’s tax cuts has there been any fairness.I have got to say coming from Christchurch that the ludicrous idiotic proposal that was originally in this bill—the henchman from Epsom “Brown Bag Banks” trebled expenditure in his time as Mayor of Auckland City as my colleague David Parker said and the biographer Mr Goldsmith who wrote the book about the great man Mr Banks is over there. Mr Banks trebled expenditure in his time as Mayor of Auckland City yet comes to this Committee trying to gain some credibility before his problem with Dotcom and demands a spending cap which is then torpedoed by the other sort of termite-ridden leg of the stool Mr Dunne—who of course has no credibility either—who actually to be fair to him realised that that was a load of bunkum and completely unworkable. You know we had a thing called an earthquake in Christchurch. If you have a spending cap what happens there with a natural disaster? It just shows that this Government is reliant on two rotten piles—rotten piles—in the form of Mr Banks and in the form of Mr Dunne and it plays them off against each other like Tweedledumb andTweedledumber to try to navigate through what it needs.This bill is simply a political pamphlet. If a Government needs a piece of legislation that says it is to ensure the Crown’s resources are managed effectively and efficiently if it really needs a piece of legislation to tell it to do that then something is wrong. But as I say I am pleased that the word “fairness” is in clause 4 new paragraph (e) because those tax cuts were not fair. The GST that the Government put up which it said it would not was not fair to people. So it is good that at least one clause pulls on the small pangs of conscience that one or two of these Government members may have from time to time as they put through their polices that as we know benefit the top end of the street—the “Parnellites” Mr Goldsmith’s people of course—with the top 10 percent getting 40 percent of the tax cuts.Well I do not know. Will that contravene this law that talks about fairness? Because of course the Government defines fairness as that—where the bottom 20 percent gets 2 percent. It is utterly meaningless. If it does not know what fairness is and what inequity is then it should not be there. But oh the top end the one from the North Shore the one from Epsom and Banks’ biographer think—The CHAIRPERSON (H V Ross Robertson): Order!Hon CLAYTON COSGROVE: I said: “Banks’ biographer”. I do not know what you thought I said. I would not go that low—Banks’ biographer. They think that is fair. They think that is fair in a taxation sense.So really this is another John Banks special. This is political piffle. This is like writing down: “I should be a nice person. I should make sure I send Mum a birthday card and a Mother’s Day card. I need to be reminded of these basic human things.” This is piffle. This is political posturing and even Mr Goldsmith should be ashamed of this sort of stuff. We are wasting Parliament’s time on this. If that member and that Minister need a piece of legislation to say that they should manage the Crown accounts effectively and efficiently then they have got a problem. They have got an absolute serious problem. It would be nice if they did manage them effectively and efficiently as we did when we had 9 years’ worth of surpluses and zero—zero—Crown debt. We had zero net Crown debt—zero. That is called managing effectively and efficiently and we did not need a piece of paper—as the Minister scowls at me—that said: “Dr Cullen you need to manage the Crown accounts effectively and efficiently.” We just did it because it is the right thing to do.PAUL GOLDSMITH (National): I note my colleague Mr Cosgrove’s reference to the biography I wrote. He of course is jealous that I would never write one about him. I have written about successful people over the years and so that is the problem there.I am very disappointed—Hon Clayton Cosgrove: How many copies did it sell?PAUL GOLDSMITH: A lot of copies actually. I am very disappointed that the Labour Party has walked away from this bill the Public Finance (Fiscal Responsibility) Amendment Bill. I would like to acknowledge the work of the former chairman of the Finance and Expenditure Committee Mr Todd McClay who worked very hard to get bipartisan support for this bill. We heard a lot of very lengthy monologues from David Cunliffe as he worked his way through this bill. We listened we listened and we listened for hours and hours and there was a lot of talk about just how well he understood all these issues. We listened and we thought as a result of all that that we may have some support across the table for this bill but we were disappointed to find that Labour could not find it in itself to support what in the past has been something for which there has been bipartisan support.I suppose this is part of a pattern that we see from the Labour Party. It is pulling away from coherence and consistency in its support for the Reserve Bank legislation that we have. It has pulled away from bipartisan support for national security and now from support for fiscal responsibility. It is not my job of course to offer political advice to the Labour Party but I would not have thought that leaving the middle ground of politics was necessarily a wise idea.Hon David Parker: I raise a point of order Mr Chairperson. This sounds like a third reading speech not a Committee stage speech. He has not addressed the bill. Part 1 is what he should be addressing.The CHAIRPERSON (H V Ross Robertson): Thank you for bringing that to my attention. The honourable member might like to—relevance; relevance Mr Goldsmith.PAUL GOLDSMITH: My apologies Mr Chair.The CHAIRPERSON (H V Ross Robertson): But it is Wednesday morning—or I should say Tuesday.PAUL GOLDSMITH: Quite right. I want to refer to some of the points that the previous speaker Clayton Cosgrove made in relation to clause 4 of Part 1 which amends section 26G(e) of the Public Finance Act where he talked about efficiency and fairness. It is important to be reminded of these basic principles because we did have aglaring example in the previous administration where the 39c tax rate opened up a gap between the top tax rate and the trust rate which led to massive inefficiency. Suddenly as we saw in the long-term graph of Treasury’s report there was this great blip of people earning $59000.It is that sort of lack of understanding of how tax works that leads to problems and it is why this legislation is here. Legislation is never going to force a Government to act responsibly and it is never going to require political parties to act in a responsible manner but it does lay a groundwork and a framework that can guide people. This legislation is about updating that.The main aspects that are part of this bill are introducing a new principle that will require the Government to be explicit about the interactions between monetary and fiscal policy at different stages of the economic cycle. I think that is a significant contribution. The second principle is that the Government should formulate fiscal strategy in regard to its likely impact on present and future generations. Again we had Mr Parker on his hobby horse about superannuation saying that the world is going to come to an end. “Chicken Little” is running around. Here we have doom and gloom at the prospect that New Zealanders are going to live longer. Oh dear what a terrible thing that is! New Zealanders are going to be living longer and healthier lives but this is apparently something that we need to worry about.Treasury’s fiscal proposal is that the amount that we spend on superannuation—Hon David Parker: Why didn’t you say that the other day at the super conference?PAUL GOLDSMITH: —I did—goes from about 4.6 percent up to about 6.4 percent. Well at the moment we are looking at Germany at 10 percent so I would not have thought that was the end of the world.There is a decent debate about how you measure that. We saw a recent report from MichaelLittlewood at the University of Auckland where he thought that Treasury had overestimated those figures and that around 2030 we would probably be looking at closer to 5.5 percent because GDP will be bigger because people will work longer and live longer and healthier lives. If Labour thinks that that is the big issue that we need to be grappling with well that is fine. You can have that debate. That is indeed what this whole process is about with the Public Finance (Fiscal Responsibility) Bill—that we should be having those debates. I appreciate Labour’s point of view but I happen to think it is wrong on that one. That is why we are working where we are.The third principle if I can just return to Part 1 of this bill is about reporting requirements for Governments to set out the priorities for resource allocation and explain how these priorities are influenced and how they are influencing decisions.Hon Clayton Cosgrove: Wow! Amazing!PAUL GOLDSMITH: It is easy to mock. It is easy to mock but it is an important principle. Thank you.A party vote was called for on the questionThat Part 1 be agreed to.Ayes85New Zealand National 59; Green Party 14; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes36New Zealand Labour 34; Mana 1; Independent: Horan.Part 1 agreed to.Part 2 Transitional provisionThe question was put that the amendments set out on Supplementary Order Paper 279 in the name of the Hon Bill English be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes71New Zealand National 59; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes50New Zealand Labour 34; Green Party 14; Mana 1; Independent: Horan.Amendments agreed to.A party vote was called for on the questionThat Part 2 as amended be agreed to.Ayes71New Zealand National 59; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes50New Zealand Labour 34; Green Party 14; Mana 1; Independent: Horan.Part 2 as amended agreed to.Clauses 1 to 3A party vote was called for on the questionThat clause 1 be agreed to.Ayes85New Zealand National 59; Green Party 14; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes36New Zealand Labour 34; Mana 1; Independent: Horan.Clause 1 agreed to.A party vote was called for on the questionThat clause 2 be agreed to.Ayes85New Zealand National 59; Green Party 14; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes36New Zealand Labour 34; Mana 1; Independent: Horan.Clause 2 agreed to.A party vote was called for on the questionThat clause 3 be agreed to.Ayes85New Zealand National 59; Green Party 14; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes36New Zealand Labour 34; Mana 1; Independent: Horan.Clause 3 agreed to.Bill reported with amendment.Report adopted.Third ReadingHon BILL ENGLISH (Minister of Finance): I moveThat the Public Finance (Fiscal Responsibility) Amendment Bill be now read a third time. One of the strengths of governance in New Zealand that is internationally recognised has been the broad political support for the Fiscal Responsibility Act of 1994 and subsequent amendments to it. If I can just remind the House of the essential structure of that Act which we are amending the provisions specify a set of principles for responsible fiscal management in the conduct of fiscal policy. They are principles we often look to. First the principles require Governments to achieve and then to maintain for instance prudent levels of debt; second the provisions require regular public reporting by the Government on the extent to which fiscal policy is consistent with those principles; and third and probably most important the provisions of the current Act provide for regular independent updates from Treasury including a pre-election update and a statement on the long-term fiscal position every 4 years.The provisions are not prescriptive about fiscal strategy—in particular they do not define for instance what a prudent level of public debt is recognising that different levels are appropriate in different circumstances. They essentially require transparency for the Government to set out its objectives and intentions and then report against those. In practice I think successive New Zealand Governments have found that the framework has a pretty good balance of transparency and flexibility—that is on the one hand it is well within the power of the Government to change the fiscal objectives provided that it says that that is what it is doing but on the other hand it does lead to systematic transparency. These institutional arrangements are now recognised and used internationally because of the proven benefits for fiscal management. These amendments that we are debating today and putting through the House are simply improving what is already a well-proven framework.I will pick out just a couple of the amendments because I think they are quite important. One is a new reporting requirement for the Government to look back and assess its performance against its fiscal strategy. Why does that matter? You would think that that is what would happen. Well it does not actually happen. What actually happens is that the Government announces a Budget then over the subsequent 12 months Treasury revises its forecasts for that 12-month period at least twice—that is at the half-year update and then at the following Budget. Treasury adjusts its forecasts for the 12-month period according to the most recent information which means that by the time you get to the end of that 12 months and the public accounts are released the Government is actually comparing the actual out-turn with the most recent Treasury forecast which could be two cycles away from the original Budget.This tends to hide significant variations from what the Budget was. For instance the out-turn for the 2012-13 year will be compared in the first instance under the usual framework with the most recent Treasury forecast which was actually done in May. You can imagine that the forecast done in May will show a much smaller variance against the end-year figures than the forecast done in the Budget 12 months ago. So it hides variation. It also means that the Government is not inclined to look into what actually happened over that 12 months in order to understand what was driving any significant shifts. It is not prompted to do that because the variances look small. In my view just from watching these cycles over the years it is actually quite important that the Government looks back and that we have institutional arrangements that require that to happen because in the absence of those arrangements it simply has not happened.A second feature of these amendments which I think is probably generally agreed is that the Government is a bit more transparent over issues such as the interaction offiscal and monetary policy and the impact of decisions today on future generations. I want to deal with those just briefly. In respect of the effect of decisions today on future generations what we have learnt from I think recent years the last decade or so is that decisions that look relatively small in the short term can have significant long-term outcomes. It is quite telling in my view that every time Treasury has done a long-term fiscal forecast the outcome of that has looked better than the previous forecast and that is going right back to 2000. We now have 12 years or 13 years of these forecasts in different forms. Each one paints a more favourable picture of our ability to manage an ageing population. Some might say that that is false comfort but I think the provisions of this Public Finance (Fiscal Responsibility) Amendment Bill are going to ensure that it is pretty clear what the track is out in the future and that Governments are well aware of the longer-term implications both positive and negative.The other amendment that is part of this bill is around the interaction of fiscal and monetary policy. That is really just codifying I think what has been practised by different Governments over the last 10 years to 15 years. It is pretty clear that it is to everybody’s benefit that the Reserve Bank in taking its positions about monetary policy has a good understanding of what the Government’s fiscal policy is. As far as I can see there has always been satisfactory communication between Governments and an independent Reserve Bank over that issue. So I would not imagine that this amendment is going to make much difference to the practice but it will codify it. This is just adding a couple more tools to the tool kit that New Zealand Governments have to retain prudent fiscal management.If there is an area that I think still needs further work in the future it is the way that Governments deal with capital. Governments have large balance sheets. There is going to be a bit of a tendency I think for the policy focus to shift to capital and the balance sheet away from operational spending because operational spending is now quite transparent. Changes in it have to be made transparent. There is a general public expectation that we should have a Budget in surplus and then make prudent dispositions of those surpluses. That is going to tend to push the political debate to other ways of redistribution other ways of shifting value around in our communities. Those are going to be much less transparent if they are conducted through the balance sheet. I think that might be a fair way to represent some of the current policies of the Opposition for instance but it is not to say that Governments might not be tempted to push in that direction. So getting some greater transparency around the use of the Government’s balance sheet and changes in the value of that balance sheet driven by policy decisions is probably one of the next challenges in the further evolution of our Fiscal Responsibility Act.I commend this bill to the House. It takes us further along a track that has been good for New Zealand. It has had broad support and I hope that that support will be reflected in the House.Hon DAVID PARKER (Labour): Can I begin by thanking the Minister of Finance for his speech and saying that I agreed with much of what he said in his speech. The Labour Party agrees that it is appropriate that we have fiscal responsibility legislation. We think that New Zealand has done well since having the high levels of debt it had when National’s the Rt Hon Mr Muldoon left office. New Zealand at that time had amongst the highest Government debt in the world. One dollar in five of the tax that was collected off New Zealanders was being spent on interest and that amount on the then track was heading to one dollar in four if the New Zealand Government’s finances had not been brought under control.I also agree that one of the strengths of the fiscal responsibility legislation is the obligation on Treasury to produce for the Minister to sign off a pre-election fiscalupdate. I also agree that we should be striving to do better on all of these things over time. I think it would be wrong if I did not note what I thought was a pretty sloppy piece of work by Treasury at the last election in respect of allowing the Government to book the proceeds of asset sales in the Pre-election Economic and Fiscal Update without accounting for the loss of revenue that would flow to the Crown as a consequence of the dividends flowing from those assets that were sold going to someone other than the Government—that is Treasury allowed the Government to book the proceeds of asset sales without making any allowance for the loss that would accrue to the Government following the sale of those assets.It was not until subsequent Budgets that Treasury was forced to admit for the first time that the loss from the sell-down of the State-owned enterprises would increase the Government’s Budget deficit by about $100 million per annum because the capped rate at which those shares were sold was higher than the cost of Government borrowings so that the money that was saved through avoided borrowings or debt reduction was less than the profits and dividends foregone.I think that is still a pretty shameful episode in respect of the fiscal responsibility legislation. In fact I know of no more glaring error made worse by Treasury and the Government by the fact that when that was pointed out by the Opposition including me during the election the Government denied it and Treasury stayed mute. I think that that was pretty poor governance in New Zealand under the existing fiscal responsibility legislation.Having said that it is basically good legislation but at one level it is motherhood and apple pie. We used to have all these books around. I think they started withDOS for Dummies thenWindowsfor Dummiesand thenExcel for Dummies and it looks like this bill is a bit like “Fiscal Responsibility for Dummies”.Does a Government really have to be told that we have to take into account the effect of Government finance decisions between generations? The prior Labour Government did not need to have that written in legislation in order to set up the Cullen fund to help pre-fund the future growing cost of superannuation.The prior Labour Government did not need to be told that in a time of plenty you should run Budget surpluses even if the National Party then in Opposition was opposing those surpluses as being too high. We knew that that was the proper thing to do and that is why we reduced gross Government debt from 38 percent to 18 percent of GDP and net Government debt to zero. We knew that that was the right thing to do. The fiscal responsibility legislation reminded us of that but there was no need for us to be told that we had to achieve fairness in the tax system or fairness between generations because we knew that that was a duty of the Government. Any Government that does not know that is not fit to govern. I think even this Government knows—Maggie Barry: Well you’re not; no argument there.Hon DAVID PARKER: Oh we have got Rusty on the other side there chipping in and suggesting that the prior Labour Government did not understand that. We concede that the current Government understands that. It is just not credible to suggest that either side of this House does not understand those basic duties of Government. They do not need to be set out in amendments to this legislation.I want to address a couple of other issues. I was disappointed that in the Committee stage in respect of the pretty minor alterations that the Labour Party side wanted in respect of this legislation the Minister in the chair the Minister for the Community and Voluntary Sector did not address why the Government could not move on that in order to get cross-party support for this legislation. The Minister of Finance in his contribution did not address any of them either. The reality is that those requests were reasonable and principled.We heard Mr Goldsmith say in his contribution that the future cost of superannuation growing as it is and Government spending on superannuation will exceed education expenditure within 2 years. It already exceeds all welfare benefits for the unemployed and the unwell plus the accommodation supplement plus the Working for Families tax credits. Superannuation already exceeds those in total and he said that issue does not need to be addressed.Well I was at a meeting on superannuation the other day and Mr Goldsmith was there. The same question was put to us from the audience and he was very careful in his words. He did not completely dis the Government but nor did he make a fool of himself in front of that audience. What he said was that some future Government will have to address the issue—just not National; just not National. So his head is in the sand and he is denying what is probably the biggest cause of increasing Government expenditure outside of health. Health costs are more unavoidable and harder to change than the age of eligibility for superannuation. So I thought that there was an example of where Mr Goldsmith thumping his chest in this House was unnecessary. But when he was speaking to actuaries people from the savings and superannuation industry who know these issues as well as he and I do if not better he took a different tune.Another issue that Mr Goldsmith raised in his contribution was that because of the prior Labour Government putting up tax to 39c in the dollar for higher-income earners there was a tax wedge between the trust rate and the highest income tax rate. That wedge led to tax avoidance and that had not been fixed by our Government. Both of those propositions are true. I accept both of those propositions but you fix that by not letting trusts be used for tax avoidance. Trusts have got a very proper role in society but it should not be as a tax avoidance vehicle. The answer for this Government in respect of all of these things is just to cut taxes for the wealthy. That is not a solution. The wealthiest people were avoiding tax through trust structures and those loopholes should have been closed. It should not have been the case that it cut the highest tax rate giving 40 percent of its income tax cuts to the top 10 percent of the population as the Government did. It should have addressed the problem of tax avoidance through trusts.We had advice from Treasury officials in respect of fairness between generations that it would not affect the Government’s decision not to address the age of eligibility for superannuation. As the Hon Clayton Cosgrove said in his contribution that shows you that this legislation is pretty meaningless. It is window dressing.David Bennett: Oh shocking.Hon DAVID PARKER: Oh here we have David Bennett. He made a similar intervention during the second reading. At that time I had said that the proposed spending cap that was originally a part of the confidence and supply agreement with ACT—and that was the progenitor of this bill—was nonsense. I said that those sorts of fiscal caps were ridiculous and caused problems overseas and he said that I was talking rubbish. Well I will remind him as I did then that the country that is probably the exemplar of how caps as a percentage of GDP are wrong is the United States. California in the United States used to have one of the best State education systems in America. Then it introduced a fiscal cap and it could no longer properly fund education. As a consequence the education system in California has gone from being one of the best State education systems to one of the worst. That is what happens when you have inappropriate fiscal caps. If we had a fiscal cap like National agreed to in its confidence and supply agreement with ACT we would not as a country have been able to properly fund the Christchurch rebuild.In respect of capital spending I agree with the Minister’s statement that there is more work required to better and more transparently deal with the capital spending and capital assets of the Government. My last point is on monetary policy in New Zealand.We think that the amendments we had to the wording would have made that better. We also think that there should have been a reference to national savings. Neither of those was agreed to by the National Government and that is why we are opposing this bill.PAUL GOLDSMITH (National): I am very disappointed that Mr Parker and the Labour Party have found a reason to not support this Public Finance (Fiscal Responsibility) Amendment Bill this very important bipartisan bill that has usually been held to by all parties in the House. It is unusual to find the Greens and New Zealand First certainly being more responsible on such a matter. We tried hard during the Finance and Expenditure Committee process. We listened to Kevin Rudd—I am sorry I mean David Cunliffe—making long speeches in the select committee working on all the details and huffing and puffing. We listened to all that and we thought we had made something that everybody could agree with and Labour did not support this bill. That is very sad for the country given that that glue that holds us all together in our agreement over basic fiscal responsibility has been weakening as we have seen Labour losing its way I think. It used to be the party for the workers and it is no longer. I think National is the party for the workers these days for the people who look after themselves who look after their families who work hard and who are involved with their community.We recognise that the world does not owe us our living standard that it is not written in stone that New Zealand will always be one of the rich places in the world and that we have got to go out in the hard world and make a living. Mr Parker says that what is being talked about in this fiscal responsibility legislation is all motherhood and apple pie. Well you can look at plenty of countries around the world that have not understood that motherhood and apple pie idea. They have not understood that you have actually got to spend less than you earn and that Governments have to be responsible over a long time. New Zealand has been very fortunate that broadly speaking parties have all understood that. I do acknowledge that for a long period the previous Labour Government did hold a basically responsible approach. I criticise it in the sense that it left us at the end of its 9 years with a whole lot of spending projections and a whole lot of decisions that were leaving the country pregnant with debt which was going to be building up over the next 5 years.Having said all that we have had a tradition. It is a very important tradition and I think we should be reinforcing it not finding excuses not to be supporting this fiscal responsibility bill. The Western welfare States all around the world are having to face up to the fact that we have to change—[Interruption]The ASSISTANT SPEAKER (H V Ross Robertson): Order!PAUL GOLDSMITH: I am sorry Mr Assistant Speaker.The ASSISTANT SPEAKER (H V Ross Robertson): That is all right. I think someone is using a telephone in the House—PAUL GOLDSMITH: Oh right.The ASSISTANT SPEAKER (H V Ross Robertson): —and this is not a call centre. This is a debating chamber.PAUL GOLDSMITH: Indeed and these are grave matters that we are debating. So Western countries are facing up to the challenges and the good news in all this is that New Zealanders can adapt. They can see that the world is changing and that we cannot just expect to have an entitlement culture dominating the way that we see the world but we have to go out and work hard and make a living. So it is about controlling expenditure and this Government has a very good record on controlling expenditure. Nobody believed that we would be back in surplus next year but we will be. We are reforming the welfare State that we have inherited for the first time in seven decadesand getting some practical boundaries around the welfare State and that is going to make a big difference.Just drawing in on the bill itself I think that one of the more important aspects of it is the tweaking that it has done in the reporting requirements for the fiscal strategy reports and in particular I want to make note of requiring fiscal strategy reports to be clear about what the Government is trying to achieve and how its management of the Crown resources contributes to its goals. I think that puts its finger on the issue. I would be interested to hear from Labour speakers because Labour increased spending on health by 50 percent for example. But that is not an end in itself. Just because you have increased spending by 50 percent it does not automatically make the world a better place so what were the outcomes that it actually achieved with that 50 percent increase in spending? That is the thing that we need to be focusing on and that is how this Government has turned things round and has focused on asking: “Well OK what are we trying to achieve in health? What are the results that we want to get in terms of immunisation and in terms of access to surgery and those things?”. Increasing the results in that area is the important thing. When you shift that focus and concentrate on results you get a far more disciplined approach to spending. So that ultimately over time will be one of the great contributions of this Public Finance (Fiscal Responsibility) Amendment Bill. On that basis I commend this bill to the House.Hon CLAYTON COSGROVE (Labour): That speaker Paul Goldsmith talked about the need to be fiscally responsible which as my colleague David Parker said is something that is agreed on in this House. You would have to say reading this sort of lightweight stuff in here in this Public Finance (Fiscal Responsibility) Amendment Bill that the Government sort of needs its own wee guidebook to be fair to be equitable to take account of future generations in its expenditure to “formulate fiscal strategy with regard to [the] impact on future generations” and to “ensure the Crown’s resources are managed effectively and efficiently.” It needs a wee guidebook apparently to ensure that it adheres to basic fiscal principles.We over here do not need a guidebook. It is sort of in our DNA—it is how we were brought up. But to the member Mr Goldsmith who apparently has a monopoly on representing the working class all the way from Parnell to Epsom—the man who was John Banks’ biographer and who apparently has a monopoly on representing the working class—I just make this point. Is it fiscally responsible—David Bennett: Harvard. Herne Bay. Working class—where does that fit in?Hon CLAYTON COSGROVE: What was that “Billiard Ball”? Is it fiscally responsible for a Government to borrow hundreds of millions of dollars a week to put in place a tax cut where the top 10 percent get 40 percent of that tax cut and the bottom 20 percent get 2 percent of it? I just put that question. Is that fiscally responsible? Is that within the parameters of this “political pamphlet” full of piffle in here? Is that fiscally responsible? I would argue—Dr David Clark: Could be fairness.Hon CLAYTON COSGROVE: Maybe it comes under fairness my colleague Mr Clark says. I think he is saying it tongue-in-cheek—I know he is—but it does not sound fiscally responsible to me to borrow hundreds of millions and its peak I think it was $300 million - plus per week.And those members talk about borrowing! They say that we were fiscally irresponsible. Well what the genius from the Waikato over there forgets of course is what his Government did inherit from us which was net Crown debt at zero—David Bennett: Oh recession.Hon CLAYTON COSGROVE: —net Crown debt at zero. The recession—I mean maybe Mr Bennett lives in a very myopic little world and does not realise that there issomething called globalisation and an international fiscal crisis. Maybe he thinks that New Zealand initiated the whole global collapse you know in his own little world out the back in the bush in the Waikato but the deal is that these people—this Government—inherited 9 years of surpluses and net Crown debt at zero.As I have said previously in this House I remember as an Associate Minister of Finance being pilloried along with Michael Cullen by one Bill English the shadow finance Minister and I never thought in the history of my time in politics or when reading about it as a kid that I would hear a National Government attacking a Labour Government for being too tight and not spending a lot. I never thought in my wildest dreams that I would ever hear that from this crew over here but what they wanted was for us to spend the lot. They said we were mean. Remember the “block of cheese Government”—the mean awful Labour Government that would not go and tax and spend and borrow and hope? That is exactly what these geniuses over here have done for the last 5 years: borrowed given a tax cut to their mates and been propped up by every other person sort of 80 percent of the people who has had to prop up their mates to pay for it. They have been borrowing $300 million a week. So I just ask them is that responsible? Mr Bennett was interjecting about debt. I say to Mr Bennett that I am happy for him to get up and have a crack. Is borrowing $300 million a week fiscally responsible? Oh hang on the boy from the Waikato is suddenly silent. He has lost his tongue—lost his tongue. Oh yes.The second thing I would say in terms of fiscal responsibility—because this bill is some sort of National Party bible; National needs an instruction book as to how to be told to be fiscally responsible—is about selling assets. Today we hear with regard to Meridian Energy that $140 million worth of divvies is not going to 4.4 million people; it is going to those shareholders who had a lot of money and could afford it. Is that fiscally responsible? We also know that the money raised from the Mighty River Power deal is not going into hospitals and schools; the money is going into giving advice on risk management to the Department of the Prime Minister and Cabinet. I suppose there is some value in resourcing the Prime Minister’s department given its recent track management on risk management but that ain’t a school or a hospital or a road or a bridge the last time I checked.The money of course the millions of dollars going into free shares to pay for the free shares the giveaway or the bribe to people in the Mighty River Power deal the incentive scheme—where was that paid for? Out of the Future Investment Fund we know because those figures are in Mr English’s Budget. Is that fiscally responsible? We now have the Meridian Energy share deal which is you know you get a free lot of shares. It is “Buy now pay later. Next stop a set of steak knives.”—whatever it takes to get it off the deck. Is that fiscally responsible? Is it fiscally responsible to have hundreds of millions of dollars flowing into the pockets of those who live in New York and London and Tokyo and Zurich and other places rather than it being ploughed into the infrastructure that those members say—and we agree with them—this country so desperately needs in respect of hospitals and schools and roadways and transportation and all those good things. Is that fiscally responsible?Maybe they should actually take this bill away and rewrite it because they talk a lot. Mr Goldsmith got found out of course by Mr Parker over superannuation. He is a lion in this Chamber—a lion in this Chamber—when saying that nothing needs to be done in terms of securing superannuation for future generations.Hon Maryan Street: Put him up in front of an audience.Hon CLAYTON COSGROVE: How do you secure it? You have got to reform it. You have got to make it sustainable. But oh put him up as my colleague Maryan Street says before an audience. Oh what does he say? “Yes there will have to bereform but that is for another Government—that is for another Government and another time.” He says “another Government” so what he is really saying and what Mr Hayes of course signed up to is that those members know it has to be done. They know that their grandkids and their great-grandkids deserve—here Mr Goldsmith is now—superannuation and should be entitled to and should get New Zealand superannuation. I do not buy the argument that many of my generation had which is that nothing will be left for us because you know it is just the way it is. No there should be superannuation for my generation and for generations beyond.The way you secure that is to tell people the truth to bite the bullet and to put in the transitional provisions for people like the building site person whose knees have gone—John Hayes: Who yougonna vote for?Hon CLAYTON COSGROVE: —Mr Hayes’ knees have gone for other reasons but we will not go there—so that they can actually progress and perhaps retire a little early because the body’s given up. The way to actually secure that is to be truthful with people and say that people of my age—43—may have to work a bit longer and we will to provide for others. Mr Goldsmith is a lion in this Chamber but he says that it will be up to a future Government. It will be up to a future Government.What that tells us is that this bill is simply political propaganda. This is just designed to tell people whatever they want to hear and when these guys slither out of this place in the next election—slither over to this side of the House—then it will be up to as it always is a Labour Government to fix it to be fiscally responsible as we were with the Cullen fund and to be fiscally responsible as we did with KiwiSaver. All of which National railed against. It said it was communism it said it would repeal it and what has it done? Nothing. We hear record profitability for the Cullen fund today—and it should be officially named that I reckon. That is called fiscal responsibility. That is called not just talking about providing for future generations and assessing the impact of Government policy in line with its impact on future generations.We do not need a guidebook—a level 101 book for dummies on how to be responsible. We do not need that because we did it. We did not need anybody to tell us. We set up superannuation mechanisms—KiwiSaver the Cullen fund—because we knew that they would have a positive effect on future generations. [Interruption] The man from Waikato is opposed to it. The man from Waikato I believe in one of his election campaigns went around and campaigned against it. I bet he would not do that next time. I bet he would not go on the stump in the Waikato and say: “I’m going to repeal the Cullen fund and I’m going to ditch KiwiSaver.” Oh he will not say that this time because he knows that people understand it. That is called fiscal responsibility.We do not need half a dozen pages of drivel. The best argument the Government can come up with is that the Labour Party not supporting a bill because it is piffle means we do not believe in it. Well we do not need somebody to write down that you have got to look after future generations. We do not need a clause in this bill that says you must formulate revenue strategy having regard to efficiency and fairness including the predictability and stability of tax rates. We did not set up a tax regime where the top 10 percent got 40 percent and the bottom 20 percent got 2 percent. We did not do that. We did not need anybody to define for us to tell us to give us a definition for what was fairness. We knew because unlike them it is in our DNA. It is what we were brought up with. It is our value base. It is in our DNA. I do not know what is in Mr Goldsmith’s DNA—I hate to think—but we do not need a guidebook. This bill is a political pamphlet it is piffle and it is a waste of taxpayers’ money. It is irresponsible that we are spending taxpayers’ money and time on debating this tripe.Dr RUSSEL NORMAN (Co-Leader—Green): I rise on behalf of the Green Party to speak on the Public Finance (Fiscal Responsibility) Amendment Bill in its thirdreading. The Green Party supports this legislation. It is essentially a good bill. What I think is quite interesting about this bill is that the Government is essentially hoist on its own petard because when you look at the principles that the Government wants to introduce into the Public Finance Act those principles are completely at odds with the Government’s own fiscal strategy. Let me give a few examples. The Government wants to introduce a new paragraph into the principles of responsible fiscal management in section 26G of the Public Finance Act in clause 4: “when formulating revenue strategy having regard to efficiency and fairness”. I think that this is a very sensible introduction of a principle into the Act.However what you have to ask yourself is how on earth it can be fair that the Government as part of this cycle after 2008 gave away very large tax cuts to the wealthiest 10 percent of New Zealanders. How can it possibly be a fair revenue strategy to introduce as this bill rightly does the principle of fairness when putting together revenue strategy to give the wealthiest people in New Zealand very large tax cuts while increasing GST of course for those who are on lower incomes? When you look at the impact of the Government’s tax cuts it is the wealthy who did extremely well out of those tax cuts and the poor who got very little indeed from those tax cuts. How could that be considered introducing an element of fairness into the tax system? It seems to me that this is a good principle but where is the fairness in the Government’s own revenue strategy?To consider another issue what about a capital gains tax? We know that New Zealand is one of the very few OECD countries if not the only OECD country not to have a capital gains tax and the Greens have supported for many years a capital gains tax excluding the family home. The reason why this is an issue of fairness is that the very wealthy get most of their income from capital gains. So when you look at where people get their income from you will find that most people get their income from wages and salaries and they pay taxes on those. That is what the PAYE system is—pay as you earn. You pay taxes in income taxes on your salary. If you get income from capital gains—so if you own large numbers of shares those shares are worth more this year than they were last year and let us say you sell those shares and you make a big capital gain when you sell those shares—you do not pay tax on those capital gains. That is tax-free income.Why is it that we have a tax system whereby the primary kinds of income for the very wealthy—which is capital gains because they do not get most of their income from wages—pay no tax? Why is it that those on that kind of income pay no tax whereas it is ordinary working people who have to pay the bulk of the tax which they pay through their wages and PAYE taxes? It seems to me that if you were to develop a tax system based on this principle of fairness that the Government wants to introduce in this bill and which I think is very sensible surely a fair tax system would also tax capital gains so that the very wealthy who make most of their income from capital gains would in fairness pay tax on those gains.There is another principle that the Government is proposing to introduce here which I think is a very good principle: “when formulating fiscal strategy having regard to its likely impact on present and future generations;”. I think it is really important that we have a long-term horizon when developing fiscal strategy. In this respect I think we need to ask ourselves the question of why New Zealand does not have a proper carbon tax or a proper price on carbon. We have the joke of the emissions trading scheme which is just the pretence a fig leaf of some kind of price on carbon and which has very little effect whatsoever on a real price on carbon. But if we had a proper price on carbon whether through a carbon tax or an effective emissions trading scheme then that would be good for future generations. Very shortly I will be attending an event puton out the front by Generation Zero that is exactly about the issue of climate change. Climate change of all issues you would have to say is going to have a massive effect on future generations. Human-caused climate change is accelerating and of course New Zealand’s greenhouse emissions are at an all-time high and this Government has removed most methods to control it.One method to control it is to put a proper price on carbon so that those who are emitting carbon would need to take into account the fact that they have to pay a price on it. For example right now Fonterra is talking about digging a new coalmine in the Waikato in order to use the coal in its production. It could equally replace that coal with say woodchips or alternative methods that have lower greenhouse emissions or carbon emissions but it is choosing not to do that because there is no price on carbon. It has no economic incentive to look at the alternatives to digging a dirty great coalmine as part of our clean green image—not. If under this principle that the Government is introducing we considered the impact of fiscal strategy on present and future generations then it seems to me a compelling reason to introduce a price on carbon so that future generations will not face the kinds of problems that they are very likely to face as a result of climate change.Let us remember that New Zealand is a very small emitter by global standards so we are entirely dependent on the rest of the world saving our bacon on climate change. New Zealand is entirely dependent on the big emitters making cuts but we cannot ask the big emitters to save us if we ourselves are not willing to take any action on climate change. We cannot protect future generations as this clause within the bill proposes if New Zealand itself does not take action on climate change. We cannot ask the big emitters the big polluters to save us which is essentially what has to happen with climate change if we ourselves are not willing to take any action on it. So I think this is a very good clause to introduce within the bill.One could likewise make the same argument about the tax cuts that put a huge hole in the Government’s fiscal position and of course became the justification for asset sales for the Government—that is it cut taxes for the wealthy and then it said: “Oh dear! There’s a big hole in the Budget. We’re going to have to sell assets in order to pay for schools.” But more of that later.The other issue of course that the Labour Party has drawn attention to is in clause 4 amending section 26G(1) and the introduction of new paragraph (f): “when formulating fiscal strategy having regard to the interaction between fiscal policy and monetary policy;”. I would have to say that I do not share the concerns that the Labour Party has raised in this respect. I think that the new paragraph is fine and I really do think that Labour has got that wrong.There is another part of this bill that I think is really good which is the introduction of the investment statement. This of course has been a useful innovation and it is important to understand how this would work. For example under the investment statement clauses basically the Government is required to present an investment statement which would look at the value of the Crown’s assets and liabilities to the House of Representatives. Let us look for example at the issue of asset sales within the context of the investment statement. The Government has just gone through with the Mighty River Power privatisation or partial privatisation and we got the annual results for 2012-13 from Mighty River Power within just the last couple of hours. What they show is that total shareholder return for Mighty River Power was 11 percent over the financial year 2012-13. Total shareholder return includes both the increase in the value of the equity and the dividends paid out. That was an 11 percent return from Mighty River Power. The cost of borrowing to the Crown over the same period was 2.9 percent.Let us remember that the Government told us that we had to go down the privatisation path to avoid debt. It had all sorts of nefarious reasons that did not really make any coherent sense but let us consider that particular argument. In order to avoid debt of 3 percent the Government sold shares in an asset that was returning 11 percent. I mean think about the business case. Here you are you have got this asset that is earning 11 percent and you say: “Well I want to sell this asset earning 11 percent in order to avoid debt that would cost me 3 percent.” What kind of business manager would come to you with a proposal like that? It is the kind of business manager whom you would immediately sack. It is the kind of business manager who should not be in the practice of providing advice around business.And of course Treasury documents and the Budget Policy Statement outlined exactly this case where they said that asset sales would increase the operating deficit because you would be selling assets with very good rates of return in order to avoid debt that has got pretty low cost. In this case we know now because we have got the actual numbers and we can quantify it that basically the sale of 49 percent of Mighty River Power is costing the taxpayer $2.3 million a week. That is the difference between what we could have returned on that asset the 11 percent as it has told us just today versus the 3 percent cost of debt. So because we privatised 49 percent of Mighty River Power—or rather the National Government did—it means that the Government’s position which would come up under the investment statement is $2.3 million a week worse off. That is why I think it will be very useful to have this investment statement and that is why we support this bill in order to make it clear what a terrible economic manager National really is.MAGGIE BARRY (National—North Shore): I rise with pleasure to speak to the Public Finance (Fiscal Responsibility) Amendment Bill. As the Minister of Finance reminded us at the beginning of this reading the structure of the legislation that we are amending does need amendments. It is all about improving the Public Finance Act 1989 which is a piece of legislation that for many years has served us well as successive Governments and as New Zealand taxpayers. What this bill does is make the public reporting and transparency provisions of that Act stronger than they have been. We need to keep the focus on maintaining low Crown debt levels.These amendments as Minister English said at the outset will add a new tool to the tool box to help Governments manage finances more responsibly. What is the problem with that? The Greens say that they support it but they are doing a dollar each way because they are also criticising us unfairly on a number of other levels as is their wont—nothing new there. But the principles of this amendment are absolutely sound—the third principle in particular. We will have regular independent updates from Treasury; a pre-election update so that the public know what they are voting for and so they know where we are at; and a statement every 4 years because unlike the people on the opposing side we recognise that things change. We need to be up to date and we need to constantly reflect on our performance measure it and ensure for the sake of the taxpayers and the voters as well as ourselves that there is a clear pathway and that we understand what is going on despite the sorts of changes that might occur to derail the best intentions.We have heard a lot of stuff and nonsense and some thundering from the Labour Opposition benches about how this bill is absolutely not needed. To me that speaks volumes about where those members are coming from and their inclination to resist scrutiny. “Trust us.” they say. “It’s in our DNA.” they say—the former member for Waimakariri thundered that in his effortlessly unpleasant way. These are not things that we believe because we do not believe those members. We do not trust them and neither do the public of New Zealand which is why those members polled so badly inthe last election and continue to poll badly. No matter who leads them they still remain people who are deluded into thinking that people trust them.Phil Goff was the chief cheerleader back in the 1980s when they introduced GST. Let us look at the track record of these people because basically what they did was that they campaigned on one thing and they transformed all of that. They changed it. They flip-flopped. They told the people of New Zealand to vote in one way and then when they got into office they went from being a socialist party to somewhere further to the right of Genghis Khan.Hon Phil Goff: We did what Muldoon never had the guts to do and you know it.MAGGIE BARRY: Phil Goff who is piping up quietly says: “Yeah we learnt from our mistakes.” Well actually they never have.There is that delusion and I guess that culture and mind-set that they know best—nanny State. Remember the shower heads? Remember the lights that we were told we needed because that Government knew best? We were told to trust them because they knew what they were doing. Well actually the people of New Zealand are not fooled by that nonsense. A piece of legislation like this brings Governments into line and makes sure that they are held accountable and are transparent. That is why Labour members are not supporting it because something of that kind really is anathema to their culture.So from my point of view when I look at this legislation I see that it provides things that are absolutely necessary. The fiscal strategy report is basically a report card for taxpayers. It will include an assessment of the extent to which the fiscal performance of the Government is consistent with its own published fiscal strategy. What on earth is wrong with that? Taxpayers want to accurately measure what is going on with Government expenditure. They have the right to know and it is a mystery to me—although having said what I said about my knowledge of Labour going back to the mid-1980s I am not surprised at those members’ duplicity. They even manage to fool themselves that they think they know what they are doing and that they are able to be trusted when firmly they are not.The public want to know what is going on. They need that transparency and they deserve it and that is what this bill does. Fiscal responsibility means managing the Crown’s finances prudently and it also means making sure that New Zealand’s fiscal institutions and practices remain fit for purpose. That is what this bill is all about and that is why I support it unreservedly and commend it to the House.ANDREW WILLIAMS (NZ First): I take a call on behalf of New Zealand First. Perhaps this Public Finance (Fiscal Responsibility) Amendment Bill would have been better to be called the “Public Finance (Bleeding Obvious Fiscal Responsibility) Bill”—the “Public Finance (Bleeding Obvious Fiscal Responsibility) Bill”. At the end of the day what this bill is doing—and I have looked back through the previous two readings of this bill—is basically just putting into words what should already be happening with this Government.In particular the bill sets out three new principles of responsible fiscal management. It says that the Government should “formulate fiscal strategy with regard to its interaction with monetary policy.” Well surely this is the case anyway. All this is doing is confirming what should already be in place. The second part of the bill says that Governments should ensure that “resources are managed effectively and efficiently.” Well if the Government is not managing our economy and the Government books effectively and efficiently it is not doing its job. So basically again this is only putting into words into the Public Finance Act something that should already be taking place.The third part of the bill says that the Government should “formulate fiscal policy with regard to its likely impact on present and future generations.” Well again certainlyyou would expect that any Government of New Zealand whether it be a National Government or a Labour Government or any other form of Government would always be looking at the impact on present and future generations. If they are not doing so if they are thinking only of the short term the myopic what is happening right now looking only at what is happening in terms of the polls looking only at what is happening in terms of their voter response then certainly that is not how this country should be run.In that regard again it is a little bit of a nonsense that we are having to put this legislation through for what is as again I say the bleeding obvious. New Zealand First pointed out in the first reading that we thought this was a bit of an irrelevance that there were 64 other bills on the Order Paper and that other bills had a far higher priority to get on with the business of the Government and of this Parliament. At the time we said we were opposing the bill because we thought it was simply a waste of time. We will now support the bill but when we say that we now support it we support it on the basis that it can do no harm. It can only improve things surely. It can only improve what should hopefully already be happening in the Government. We would hope that as a result of just these extra words amending the Public Finance Act things would be done to an even better standard than should already be happening.But in regard to this perhaps the bill needs to be thought about in a much wider context. Previous speakers have referred to other initiatives that the Government should be looking at. If it is looking at the third purpose of this bill which is that the Government should “formulate fiscal strategy with regard to its likely impact on present and future generations” then maybe superannuation should be one that it should really really be looking at.At the present time this Government and many other parties are putting their heads in the sand in relation to superannuation. New Zealand First has come out with a scheme in the last 6 months. It is a pro rata scheme that would see people receive superannuation at 65 years of age but on the basis of how much they contributed over their working lives in New Zealand in the 45 years between the ages of 20 and 65 how long they were here how long they worked for and how long they contributed to this great country of ours New Zealand. If they had been here through that whole period they would be entitled to 100 percent of their superannuation. However if they had spent a considerable amount of time overseas it would be a pro rata amount that they would then receive on retirement in New Zealand but in doing so they could bring retirement funds from offshore from wherever they may have been working or living to help support them here in New Zealand.It means that New Zealanders who have worked all their lives in New Zealand and have contributed here whether it be working for money working for their families working in volunteer situations or whatever they have done in New Zealand get the full payout at 65 and are not subsidising those who just jump on the boat later in life come to New Zealand and then get the full payout as a result of hard-working New Zealanders having contributed to the scheme all their working lives.These are the sorts of things that any Government if it was looking at the Public Finance Act and looking to formulate fiscal policy with regard to the likely impact on present and future generations would be seriously looking at. We certainly hope that that third purpose does see the light of day and that Governments do look along these lines.Similarly my Affordable Healthcare Bill says that seniors withSuperGold cards who are 65 and over should receive a discount and should receive a rebate if they continue private health insurance after they retire to assist them to retain their health insurance. Again that would mean that far fewer of our seniors would drop their health insurancedrop out of the private health system and suddenly go into full 100 percent dependence on the public health system which would then load up our public health system to a higher level. With an ageing population we need to be looking at this far more. We need to be working out how we can keep people who may have had private health insurance on those private health insurance schemes.Similarly my Affordable Healthcare Bill talks about taking fringe benefit tax off companies’ contributions to health insurance. Why should companies have to pay fringe benefit tax to help provide for health insurance which reduces the impact and the burden on the public health system? Again we should be looking at all these wider-picture ideas as to how we can help the New Zealand economy how we can be more fiscally responsible and how we can make the New Zealand taxpayer’s dollar go further on behalf of the 4.5 million people who live here.New Zealand First will support this basically administrative bill—it is very much a technical bill—but we would say again to the Government that again this is tinkering around the edges. This is taking the deckchairs on theTitanic and just shuffling them around so that the window dressing looks a bit better but at the end of the day this bill does not do a huge amount. Get down to basics. Get down to finding ways to create more employment and regional economic development improving the opportunities for our young in this country and helping New Zealand grow this country not just tinker around the edges with minor little administrative bills such as this.Hon KATE WILKINSON (National—Waimakariri): I rise to take a very brief call in support of the third reading of the Public Finance (Fiscal Responsibility) Amendment Bill. This bill is a sensible responsible bill. It is about strengthening our fiscal responsibility. To say that strengthening our fiscal responsibility is irresponsible is just pure nonsense and political posturing. This bill is about more transparency. It is about ensuring that the Crown’s resources are managed effectively and efficiently. It proposes three new principles which previous speakers have already alluded to. This is a good bill. It is a sensible bill. It is a responsible bill. Any opposition to it is just pure nonsense and political posturing. I commend this bill to the House.Dr DAVID CLARK (Labour—Dunedin North): In reference to the previous speaker Kate Wilkinson I rise actually to oppose this bill the Public Finance (Fiscal Responsibility) Amendment Bill. The previous speaker made a number of unfounded allegations in her very short contribution but it is fair to say added nothing of substance to this debate.The Public Finance (Fiscal Responsibility) Amendment Bill is a bill that paints by numbers fiscal responsibility. As I said in the Committee stage of this debate I strongly suspect that it is an attempt by Treasury to rein in the current spending pattern of the Government—an attempt to pull it back from this $300 million-a-week habit of borrowing borrowing borrowing with no real plan for the economy.Our economy is struggling. It is not working for ordinary New Zealanders. Unemployment in my home region in Otago is at its highest level in 22 years. Last time the numbers were this bad Ruth Richardson was the finance Minister. I think that is a sad indictment on the current Government which inherited zero net debt—zero net debt—just 5 years ago and in the meantime has driven our economy away from the responsible path it was on. Under this Government we now have the greatest gap between rich and poor and we have a growing Government debt. It is outrageous that the Government should suggest that this is something that is necessary for Parliament in order to direct it on the right course. It is specifically the choices of this Government that have put us in the wrong direction. This Government is the one that passed those tax cuts in 2010 that saw 40 percent of the value go to the top 10 percent of earners. This Government—Hon Nanaia Mahuta: How much?Dr DAVID CLARK: Forty percent—40 percent of the value went to the top 10 percent of earners. Outrageous that is what it is—that is what it is. And the bottom 20 percent of earners got just 2 percent of the value of those tax cuts.Hon Nanaia Mahuta: How much?Dr DAVID CLARK: Just 2 percent. That is an outrage. That is not responsible. In this legislation here we have reference to fairness. Well if this bill will change the Government’s attitude to these issues that will be a wonderful day but I very much doubt it—I very much doubt it. If these are the guiding principles this Government wants to put in place and that is what it means by them New Zealanders will be very very very suspicious about what this legislation will achieve.This legislation also talks about the likely impact on future generations in respect of Government fiscal policy. Well that is coming from a Government that will not address the issue of superannuation and making our superannuation a sustainable scheme. There is no issue that is more important to New Zealanders in terms of their future well-being than whether they will be able to enjoy a retirement scheme that is sustainable. This Government has put its head in the sand on that issue.The other crazy thing that was in this bill and I am very glad it has been taken out was something to do with the Government’s confidence and supply agreement with John Banks. This bill as it was originally drafted promised that a spending cap would be implemented. Unfortunately no one asked the independent MP Mr Dunne what he thought of that. On this occasion he was very frank and described it as part of an unnecessary right-wing agenda and inconsistent with constitutional principles. National and ACT did not have the numbers to pass it but that is what they actually wanted in here. They wanted a spending cap—the same type of spending cap that you have seen in Colorado and California. Those examples should be instructive to New Zealanders.If we look across to Colorado and what happened there we see that Douglas Bruce who was in fact the prominent advocate of a spending cap there ended up in prison for tax avoidance. That is a whole other story but it shows you the kind of mind-set that wants to push for this kind of legislation. It is the type that is mean-spirited and does not have the wider public good in its frame and it is all about making the numbers look good on paper.In Colorado the infrastructure rotted. It is the 48th state in terms of education spending and the 44th in terms of road spending. It had previously been a proud state with good social infrastructure and good physical infrastructure and that all deteriorated. There is a whole lot of economic literature on this bad experiment. I am very glad on this occasion that Peter Dunne stood up to the others in this corrupt—well not corrupt Mr Assistant Speaker that would be a step too far. I am glad he stood up to others in this regime which has a number of unsound ideas that it is trying to bring to this Parliament. I am very glad that on this occasion Mr Dunne labelled the spending cap for what it is—part of an unnecessary right-wing agenda and inconsistent with constitutional principles.The provision for the spending cap was taken out of the bill but that is what was sitting behind this in the National Government’s mind. It wanted to bring in legislation that would reduce and restrict the options of future Governments. If we had such a fiscal cap in place we would not have been able to make the Canterbury earthquake response that we made as a Parliament. I ask New Zealanders to think about that. That is the kind of short-term thinking this Government wants to bring to this Parliament. It wants to restrict future Governments from dealing with crises. It wants to restrict future Governments that find themselves in a tight spot from helping out the citizens of thiscountry. Fortunately that part of the legislation fell over but it speaks to the intent of this Government.This is hollow legislation. It is thin legislation. It describes motherhood and apple pie. It describes what responsible Governments have done over the ages and we can see that New Zealand Governments have done different things. We know that the Labour Government in the 1980s brought spending under control. To some extent the 1990s with National continued that pattern. The 2000s had an exemplary Government which brought net Government debt down to zero and ran 9 years of surpluses in a row. How many surpluses has this Government generated Mr Bennett?David Bennett: How many?Dr DAVID CLARK: “How many?” the member asks. Zero—none; this Government has not generated one Government surplus in its entire time in this Parliament. Yet all we hear about from Government members is responsible financial management. This is a Government that knows how to talk responsible financial management—David Bennett: Oh come on!Dr DAVID CLARK: —but does not know how to put it in place. Mr Bennett says: “Come on.” Well the facts speak for themselves. The rhetoric does not stack up.This is an irresponsible Government. It is passing legislation that it did not get bipartisan agreement on. It failed to consult properly with the Opposition to get to an agreed position. In this area historically there has been an agreement across the House. It has been the effort of past Governments to make sure that everyone gets to have their say because the whole point of this sort of legislation is that you have a long-term plan for the country.We think there should be a reference to adequate levels of national savings in this document. There is silence across the floor. Over there they do not believe in an adequate level of national savings because it is not in the interests of the big end of town. That is whose interests they are looking out for. They do not address issues like a capital gains tax which would be about a fair tax system and about pro-growth tax reform. They do not address issues about universal KiwiSaver. They are not interested in making sure New Zealanders are well prepared for their retirement. They are more interested in driving down wages and making sure that the interests of the 1 percent are looked after. They do not address monetary policy issues. They are still committed to the hands-off policies of the 1980s. They do not want to update fiscal policy. They do not want to update financial policies. They are a hands-off Government. They are not addressing the housing issue. They are not addressing the affordability of power. They are not addressing the big issues.This Government has its head in the sand and that is why we oppose this bill. It does not address the big issues. It is a lot of piffle waffle and empty words. It is tinkering and it is not a bill that is worthy of this Parliament’s time. Therefore Labour will oppose this bill through the rest of its time in the House.JOHN HAYES (National—Wairarapa): Thus spoke the “Red Reverend” from Otago. What a misleading purveyor of facts that man is.Jonathan Young: What facts?JOHN HAYES: Well he said that we have got the greatest unemployment in his electorate that this country has ever seen. Well I would like to take issue with that because I can refer him to the ANZ Business Outlook survey for July which confirmed that overall business confidence has increased by 3 further points in the month with a net 53 percent of respondents expecting better times ahead. This is the highest level of business confidence since April 1999. Then there is the Ministry of Business Innovation and Employment’s Jobs Online report for July—last month—which showedthat vacancies increased by 8.3 percent per month. “Red Reverend” you have been telling porkies. The month of July took the annual increase to 13.2 percent. The household labour force survey shows that unemployment has fallen—not increased “Red Reverend” but fallen—from 6.8 percent to 6.4 percent over the past year. It also shows—Dr David Clark: I raise a point of order Mr Speaker. I am not sure what my remedy is to this but the member is quoting statistics and saying the Otago numbers have dropped and they have not.The ASSISTANT SPEAKER (Lindsay Tisch): No no. That is a debating point.Dr David Clark: It’s a fact.The ASSISTANT SPEAKER (Lindsay Tisch): It is a debating point which can come up at another time.JOHN HAYES: Thank you Mr Assistant Speaker. The “Red Reverend” does not like the truth does he? Well let us go to the household labour force survey. It shows that unemployment has fallen from 6.8 percent to 6.4 percent over the past year. I say to the people of Otago that they are being misled by their member of Parliament the untruthful “Red Reverend”. It also shows that there have been 46000 more people employed in the past 6 months. That man cannot lie straight in bed.I am also totally perplexed as to why the Labour Party will not support this Public Finance (Fiscal Responsibility) Amendment Bill which provides huge common sense and a tremendous improvement in the way that future Governments are going to have to manage this economy. Although I have heard criticism from the co-leader of the Greens this morning and also from “Captain Cliché” of the New Zealand First Party I would like to say that the National Government’s responsible economic management is helping the country grow and is lifting confidence. Under this Government’s strong economic management we are on track to return to surplus in 2014-15. Dr Clark said we have never run a surplus. We never claimed we could in the middle of a global recession but we said we would be back in surplus by 2014-15 and we will “Red Reverend”.The ASSISTANT SPEAKER (Lindsay Tisch): Order! There is a Speakers’ ruling 28/1 that I would ask the member to look at. You must refer to people by their names. It has been mentioned a few times across the House. I just remind members of Speakers’ ruling 28/1—refer to members by their correct names.JOHN HAYES: Thank you Mr Assistant Speaker. By 2014-15 New Zealand will be one of the few developed countries not increasing public debt. Our economy continues to grow: 2.4 percent in the past year which is faster than most other developed countries and members of the OECD.I come back to the comments made by the Green co-leader. He was talking in a very misguided and untruthful way about Mighty River Power’s performance. He omitted to understand that running a surplus helps keep mortgage rates lower for longer. It gives the Government choices about how to invest your taxes. In ensures our economy is stronger and more stable in case of future economic shocks—for example if Wellington suffered a big earthquake. What I can tell this House is that Standard and Poor’s has just affirmed New Zealand’s AA+ credit rating saying that the rating reflects the country’s fiscal and monetary policy flexibility economic resilience and public policy stability in the finance sector. This follows earlier comments by theIMF’s managing director ChristineLagarde who said that the IMF is very supportive of what is being done by the Government. So if you look at the numbers whether for growth employment inflation or debt overall they are very stable and they are also very promising. It is certainly a lot better than what we see in most other parts of the world and it is infinitely better than the situation that would arise if those economic miscreants on theother side of the House were to take over running this country and we cannot put this at risk.Here in New Zealand we are seeing a growing mood of optimism being recorded in business sentiment surveys retail sales data house sales and the ability of businesses and consumers to pay their bills on time. The most recent BNZ-Business New Zealand Performance of Manufacturing Index increased 4.3 percent to a seasonally adjusted 59.5 percent. I would ask the people of Otago to keep that fact in mind when they consider the comments of their member in this House this morning. It raises further questions about the Opposition’s irresponsible attempts to manufacture a manufacturing crisis in this country. It simply does not exist. This is a very good piece of legislation. It helps the Government consolidate its sound management of this economy and I support it without reservation. Thank you.The ASSISTANT SPEAKER (Lindsay Tisch): I understand the next call is a split call.Hon DAVID CUNLIFFE (Labour—New Lynn): I rise to take a brief call to oppose this bill the Public Finance (Fiscal Responsibility) Amendment Bill. Being lectured to by the National Party about fiscal responsibility is a bit like being lectured to by I do not know John Hayes about probity advice or something—Hon Maryan Street: Idi Amin on democracy.Hon DAVID CUNLIFFE: Idi Amin on democracy—many things come to mind. In its last two Governments Labour has never run a fiscal deficit. There were nine surpluses out of nine. How many fiscal surpluses has the National Government run? None zero zilch zip nada never. It has never run a fiscal surplus and it is some sort of jealousy factor that it is trying to elevate fiscal restraint as an overriding aim over all other objectives of economic policy through this legislation. I am going to briefly tell you why I think that is a very bad idea but firstly the history of the bill.This bill came out of the confidence and supply agreement with the ACT Party. It was the price of coalition. It was the ridiculous notion ditched everywhere else in the world that the best way to restrain public finance was to put on a strict cap. Of course that stupid idea went down the river and it was to have been replaced with a genuine process of multiparty consultation that would have led to an updating on what has hitherto been a bipartisan bill. But unfortunately the scrum got screwed—the scrum got screwed—and the draft before us is none of those things.Let me just turn the attention of the House to what it actually says. This will come as a surprise to the National backbench who no doubt have not read it. Firstly it elevates monetary policy above fiscal policy. The Labour Party argued that it would be fairer to have that as a two-way street—to have the Reserve Bank making monetary policy with regard to fiscal settings and Treasury advising on the fiscal stance having regard to monetary policy. That is what all well-managed developed economies do but it was not good enough for the National Government. For the Government it is a one-way street. It is that No. 2 The Terrace—the Reserve Bank—and the Governor run the Government. Well that is ridiculous. It is an outgrowth of Milton Friedman’s monetarism. It has gone the way of the Ark in most places except under John Key’s National Government.The second point is to “formulate fiscal strategy with regard to its likely impact on present and future generations”. Look that sounds good but you have got to be careful. It sounds good because we do want intergenerational fairness. We do not want the young people of today being screwed because of greed by the old people of tomorrow. But that is not as simple as it sounds. Is it not ironic that the National Party’s leader has said that he would resign before he addressed the problem of superannuation eligibility? Before he touched that he would resign his office. The grey-rinse brigade has nothingto worry about from John Key. Where is the fiscal responsibility in that? Just ask “Gabs”Makhlouf Secretary to the Treasury who says there is a $220 billion problem by 2050.The third point is to manage the Crown’s resources “effectively and efficiently”. It sounds innocuous enough. Where is the word “fairly”? Where are the words “fairly” and “justly”? Where is the reference to equity? Where is the reference to closing the inequality gaps that mean a quarter of a million kids in this country are growing up without their warm bellies full and with no shoes on their feet? Where is fairness? I will tell you where it is—JULIE ANNE GENTER (Green): I rise on behalf of the Green Party to speak in support of this Public Finance (Fiscal Responsibility) Amendment Bill. Although I acknowledge that the bill had a very unfortunate political genesis luckily the very worst aspects of that original billACT’s spending cap have been dumped and what has been left is actually a pretty good bill requiring greater transparency from the Government. The principle that it introduces when considering a revenue strategy—for example taking into account efficiency and fairness—is quite a good principle. The Green Party can support that principle. Having regard to the impact on present and future generations is extremely important and I would say that it is very much in line with the Green Party’s philosophy on economics and monetary and tax policy. However if this bill was implemented now it would become quite clear to everyone that what the National Government is doing is quite the opposite of this.There are many examples of National policy that have reduced the efficiency and reduced the fairness of the tax system. We have growing inequality in New Zealand and that in part is due to the lack of a capital gains tax which would be a very fair and efficient way to broaden our revenue base. It is also because when National came into power in 2008-09 it introduced regressive tax cuts which gave a lot of wealth to those who already had a lot of wealth. Basically it is a wealth transfer from those who are the least well off the most vulnerable in our society to those who have the most. But of course aspects of this bill like the investment statement are not going to come into force until 2017 by which time of course this National Government will have long since moved into Opposition and will not be required to be held to account to these good principles of efficiency fairness transparency and taking into account the capital position of the Government—not just looking at debt and at GDP.The Green Party would say that this bill does not go far enough. A move to having a more clear investment statement that has a medium and long-term outlook is quite a good move—that is in line with Green Party principles—but it does not take into account the natural and social capital that is essential for the long-term prosperity of New Zealanders. So we have a challenge and we have an opportunity in the 21st century. We are coming to grips with resource depletion climate change and rising inequality. All of those things do not serve the greater interest of the people of New Zealand. The global financial crisis is a crisis but it is also an opportunity to revisit some of the assumptions that have been operating since the 1980s.What the Green Party fundamentally recognises is that the economy is a subset of our society. It does not reflect all of the unpaid work that enables New Zealanders to have enough to eat and to have a high quality of life in New Zealand. The economy is just one subset of our human activities that we take part in as part of society and society is a subset of the natural environment. We cannot have ongoing economic growth if we are drawing down non-renewable resources and increasing the carbon pollution in the atmosphere. It is simply not possible.In order to have the ability for New Zealanders to have a high quality of life well into the future to enjoy the benefits that come with living in a place that has water that issafe for swimming and safe for drinking and that is going to be available to future generations—not just the people who are currently in business today—and to be able to have the benefit of a stable climate we need to start taking all of these things into account. We need to live within our means and we need to look after the fairness and opportunities for all New Zealanders if we want to have a fair society that enables future generations in New Zealand to thrive. This bill makes some small changes that we hope will increase the efficiency fairness and transparency of Government revenue strategies and the Government’s long-term fiscal strategy. Thank you.DAVID BENNETT (National—Hamilton East): I just want to take a short call on the Public Finance (Fiscal Responsibility) Amendment Bill. It is very encouraging to see the Green Party supporting this bill for once and I thank them for that and New Zealand First for its comments as well.Hon Tau Henare: Showing real leadership.DAVID BENNETT: I think that is really just as Mr Tau Henare just said an indication that the Green Party is changing tack. While Labour is trying to work out where it stands on many things the Green Party is seeking to take back some of its ground as it has successfully done over the last couple of years. The Labour Party has made a number of comments in regard to this bill that are just plain incorrect. It is very disappointing to see a party that had such a proud history being in such a position now of weakness and also now having to make such silly comments in regard to a bill like this.One of the comments that came through in its members’ speeches and through their speech notes which they obviously had to follow was that they needed to say that there had been 9 years of surplus in a row under the previous Labour Government. Well that may be the case but you lived in the most economically prosperous times of that generation. You did not have to deal with rebuilding your second-biggest city. You did not have to deal with a world recession. This Government has dealt with those issues—dealt with them successfully—and got New Zealand back into surplus within a short period of time. I think that is something that we need to be incredibly proud of as the National Party and the public of New Zealand are as well.One point that Labour members did not leave you with was that the Labour Government set up the recession in New Zealand before the world went into recession. The Labour Party’s policies led to New Zealand being in recession before the world went into the global recession. That is how poor an economic manager it was. That is the reality that the public needs to be aware of not some line about 9 years of surplus in a row. The reason it put New Zealand into recession is that it is a poor economic manager that set up New Zealand with some poor economic policy. It does not want a bill like this because New Zealand will stop having poor economic policy. [Interruption] What is that Damien O’Connor?Hon Damien O’Connor: How much have you borrowed?DAVID BENNETT: How much have we borrowed? Damien O’Connor does not want to see Christchurch rebuilt. Damien O’Connor does not want to see people keep a standard of living through this recession. The reason that the Labour Party is against this bill is that it knows that the bill will control it doing that silly economic management that it did last time when it put New Zealand into a recession before the rest of the world. Bills like this are here to stop the kind of silly economic activity that you saw from the Labour Party last time it was in power.Hon Damien O’Connor: Irresponsible managers.DAVID BENNETT: Irresponsible managers—that is what Labour members are. You are right Damien O’Connor. Labour members are irresponsible managers. Theycannot even manage themselves. They will never manage the New Zealand economy properly. This bill is good for New Zealand.A party vote was called for on the questionThat the Public Finance (Fiscal Responsibility) Amendment Bill be now read a third time.Ayes85New Zealand National 59; Green Party 14; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1.Noes36New Zealand Labour 34; Mana 1; Independent: Horan.Bill read a third time.Patents BillIn CommitteePart 1 PreliminaryCLARE CURRAN (Labour—Dunedin South): There is a real story to tell about this bill the Patents Bill. It is a story about patience and tenacity. The tenacity is particularly the tenacity of a growing economic force in New Zealand which I would like to call the vanguard of the new economy. This force is the software developers who could also be described as our new frontiers people the forgers and the creators of our new economy. It is a story of progressive law and we have actually got there. This might seem like an unusual thing for a member of the Labour Opposition to say but this is a progressive law. We have finally got there. It has taken 3½ years to get here but it does appear that we are here today discussing in the Committee stage the patents law and the revision of the Patents Act 1953.When the Commerce Committee reported back to the House on the Patents Bill on 30 March 2010 it was the product then of parliamentary work at its best—the repeal of an Act that was clearly out of date. That was the Patents Act 1953 which was modelled on a United Kingdom Act from 1949. It certainly did need revamping. It was very out of date. The revamped Act proposed a regime to align the criteria for granting a patent with international practice. It aimed to promote innovation and economic growth while also providing a balance between the interests of inventors and patent owners and also society as a whole.The new bill that was sent back to the House was a major accomplishment. It was seen as a major accomplishment then. At the heart of that bill and the changes to it was a commitment to provide a real incentive to help grow the New Zealand economy through its software industry and through its weightless economy. An awful lot of work went into that debate at the Commerce Committee and I do want to pay respect and tribute to the officials who did that work back at that time and also to the chair of the select committee at that time the Hon Lianne Dalziel who chaired a united committee that only a few of the original members are still on. But it was a united committee on this particular bill. That select committee did a very good job of working through all the issues and sending those issues back to the officials to go away and do more work.What that bill sought to address was that New Zealand’s existing patent law was too generous to the people seeking patents and that there were too many corporations getting monopoly rights and many of those corporations were multinationals that could get patent rights to inventions inside New Zealand that would not be protected overseas. That discouraged innovation and growth the committee felt which was the last thing that we wanted to do as a nation. In relation to software that meant having moresoftware companies being taken to court and tied up for years to stop those companies from inventing new software because of the threat of patent lawsuits.When that bill came back to the House in 2010 the Commerce Committee proposed something groundbreaking and innovative. The select committee proposed after hearing much evidence and discussing it in depth with officials to exclude software as being patentable. It was one of a number of exclusions that were proposed. Those exclusions included methods of medical treatment of humans human beings and biological processes for the generation of human beings plant varieties inventions whose commercial exploitation would be contrary to morality or public policy and computer programs. This was historic. This was the first time in the world—that we knew of—that a piece of law included such a proposal. It was seen as being groundbreaking.The reason for this was that the existing regime allowed patents for anything that met the relevant criteria whether or not they were implemented in software. When you think about it I suppose in 1953 this was not an issue so the bill simply was out of date. I think everybody acknowledged that. But when software applications first arose the Intellectual Property Office of New Zealand and the courts had no legislative guidance. Early applications were knocked back but were faced with no provision saying that they should not be granted. Software patents were generally available in New Zealand from the mid-1990s but they were starting to get to a point where they were exploding. There was a view put very strongly to that select committee that the trickle of software patents worldwide had turned into a flood and so it was decided that our patent law would come into the 21st century and that software patents would be on the agenda.I do want to take you through the history of this and if it takes a little while then so be it because it is such an important new groundbreaking piece of law. There were four options that New Zealand could have chosen from when we were considering this. The first was to allow patents on anything under the sun which really was to use a description of the US regime and allow software patents without any particular restrictions—in other words the status quo. This option was rejected. It was ruled out by the Commerce Committee because we accepted that software patents were becoming increasingly problematic. That view has been borne out in the United States in recent years with software patents coming under fierce criticism. I spent a month in the US last year. This issue is being hotly debated in the US right now even though the regime does still favour software patents. It has even been acknowledged by President Obama and in studies highlighting the economic and innovative harm that software patents are causing.The second option was to implement a partial or a weak exclusion of software patents as the European Union has done. It has been contended that it is unlikely that this is what the European Union actually intended but this is what it has ended up with as a result of the now infamous “as such” provision which has received a lot of coverage in New Zealand. It is one little phrase that has received a lot of debate as to what it actually means. It is a term that is vague and has effectively negated the software patent exclusion in the European Union and led to much confusion and criticism.The third option was to implement a broad strong exclusion of software patents such as in the UK. The UK also uses the “as such” language but judges have taken a much more robust approach than their counterparts in the European Union and in 2006 they developed a legal test that specifically evaluated patents involving software. That was known as theAerotel test. The result of that was that the UK now has tougher criteria for software patents rather than the European Union countries.The fourth option which was what the Commerce Committee actually decided back in 2010 was to chart our own course take a new way forward and clearly excludesoftware patents. This was the preferred option of many of the submitters who appeared before the select committee particularly New Zealand’s Kiwi innovators. But there was a lot of concern around whether this would give rise to international trade obligations and also about whether there should be a definition in the bill around what embedded software is—for example where you have an invention such as a Fisher and Paykel washing machine and within that you have a piece of software where does the beginning and the end of the software happen?But it was considered by the select committee that it was simpler to exclude software from being patentable altogether and we asked that the Intellectual Property Office of New Zealand would be writing the guidelines as to the embedded software. This came back to the House. The Minister at the time—DENIS O’ROURKE (NZ First): I wish to take only a very brief call on behalf of New Zealand First as far as Part 1 of the Patents Bill is concerned. The Minister’s amendments set out on Supplementary Order Paper 120 will be supported by New Zealand First. Those amendments are with the support of the amendments to Supplementary Order Paper 120 on Supplementary Order Paper 237 consistent with the bill as a whole and we think they add value—mainly in respect of technical aspects but also they clarify some important sections in the bill.Concerning new clause 10A(1) and (2) New Zealand First supports Supplementary Order Paper 237 to add a new clause 10A(3). Clause 10A(2) is unclear without new subclause (3) which says: “A claim in a patent or an application relates to a computer program as such if the actual contribution made by the alleged invention lies solely in it being a computer program.” We think that this now makes sense of the words “as such” as they were used in subclause (2). The clause we feel had been a cause of considerable complaint as the bill had been introduced because of the uncertainty around what it had meant. But we now feel that the amendment to add new clause 10A(3) solves the problems with the clause. Accordingly we will support the bill on the basis that it is amended in that way and New Zealand First will not accordingly be supporting Clare Curran’s Supplementary Order Paper 123.Hon CRAIG FOSS (Minister of Commerce): Can I acknowledge the previous speakers and also the work they have done to get us to where we are today and the speakers who I think are going to follow me particularly Clare Curran. The Labour Party has been quite reasonable in our discussions in and around what have been some contentious issues in this bill the Patents Bill. I also acknowledge the support of New Zealand First which initially showed reservations concerning my Supplementary Order Papers but is now supportive as per the member Denis O’Rourke’s speech. So thank you very much. I also understand where other parties—but I will let them talk about it—are supportive of the bill which starts to be a bit of a worry sometimes with everyone supporting this bill.It has been a journey. Most of the issues around Part 1 and Part 2 new clause 10A and what was in clause 15 which other members have talked about concern the part around computer programs so I will just touch on that. It has been a journey. I think we now have legislation in front of us that achieves the intent of the Commerce Committee. I do acknowledge that the select committee when it was going through these very same issues wrestled with all sorts of scenarios and came to a reasonable space although when I inherited the bill and looked at the bill—and I will touch on this again in a moment—I was concerned about what was in the commentary versus what was actually proposed as part of the statute. We have got to the point now where the examples that the previous speaker Clare Curran talked about and that are in the commentary—for example the washing machine as far as embedded software is concerned—are nowcodified in the bill as an example as a pointer to what could or could not be allocated or allowed and given patentability. I think we have done a pretty good job.On that note I do want to thank the many many people who have been involved with this bill since its gestation in 2008 I think. I think we have had three Ministers involved—the Hon Lianne Dalziel the Hon Simon Power and now me. We have had the select committee some members of which are still with us and still on that committee in Parliament. I must fully acknowledge the officials who have been working with this bill for quite some time who have been very very keen to see it progress. I fully acknowledge that some of them took a bit of the heat during some of the parliamentary debates through the time but I also acknowledge that those same officials have helped to get us to where we are today. It is a great example I think of the parliamentary process working in action and of joint ownership of this quite significant legislation which modernises 50-year-old patent law in New Zealand.I also acknowledge my colleague from the ACT Party John Banks. I particularly want to acknowledge the Hon Peter Dunne of United Future who did play quite a role in the communications with various sector leaders information and communications technology players industry people and interested bodies again to get us to the point where we are now. As I said I acknowledge New Zealand First and Labour and I believe that the Greens are now supportive of the bill.I have to thank the many innovative New Zealand businesses and stakeholders that have given feedback on this Patents Bill for their engagement to getting us to this point and helping us pass it. This Patents Bill guarantees that genuine inventions are protected and that Kiwi businesses can continue to grow and prosper. I am proud of where we have got to and the process of this bill over the last year. I am very proud to have a major stake in that to where we have arrived. I fully acknowledge that there have been some bumps along the way of that journey. But again professionals who have looked for solutions have helped us to get to where we are. When I became Minister of Commerce I took on a bit of a mission to have a look at this bill and understand what was holding it up and what the issue was and there really was only one key issue: the discussion around the patentability or otherwise of computer programs. So we spent a fair bit of time on that—again a good journey perhaps takes a long time—but as I say we are there.My Supplementary Order Paper 120 to try to tidy that up last year did create a bit of concern to be fair. That is absolutely fine but interestingly we have gone from a period where there was major concern in the information and communications technology sector about my particular Supplementary Order Paper to where we are now and the entire sector actually cannot wait for the bill to be passed in its new form. So I appreciate all of that.The concern was about that Supplementary Order Paper. Opposition did intensify around that time around what was believed to be my not following the intent of the committee. I can assure the Committee that at all times—and it is reflected in my correspondence with different professionals and people in the sector—the intent was always to follow what the committee pointed to. But I realised there was a problem in the bill in that form where in fact New Zealand could have been exposed to World Trade Organization action. Of course none of us wanted that. But I was surprised at the time because my intent was to follow through as earlier indicated.The bill has been strengthened as reported back initially. There is just one person I want to quickly acknowledge. I will not mention the person but when concerns organised protests campaigns emails and tweets and things were really going I had a chat to a person who is in the information and communications technology sector. At that moment everyone seemed to actually start to engage a wee bit more. When I toldthe person that we had about 250 software patents in New Zealand over the last couple of years I listed some of the programs around at that moment that are well known that are patented in New Zealand and not elsewhere and I pointed to my willingness in wanting to follow the UK process and where it is at as opposed to the euro area and where it is at. That was a pivotal point. Everyone started to engage a bit more and a bit better again leading us to where we are now.I fully acknowledge the key issues. My Supplementary Order Paper the new clause 10A and the previous clause 15—that is where the contentious issues are. I think we are now over those. Again let me acknowledge and thank all those who helped us to get to this point and for their support of the bill I believe at the coming stage.Dr DAVID CLARK (Labour—Dunedin North): Labour will be supporting this Patents Bill and I thank the Minister of Commerce for his contribution. There have been many Ministers who have contributed to this over the years. I think I am right in saying that its introduction dates back to the time of the Hon Judith Tizard in this House. It has been around a wee while. The bill has made steady progress and now we are here debating the final form but with more Supplementary Order Papers on the way. So it is a journey—it is indeed a journey.We support the bill because when we look at the purposes at its most fundamental Part 1 covers the purposes of this bill it says that “The purposes of this Act are to—(aa) provide an efficient and effective patent system that—(i) promotes innovation and economic growth while providing an appropriate balance between the interests of inventors and patent owners and the interests of society as a whole;”.So often when we debate these intellectual property issues we come back to the question about how the interests of society as a whole are protected. The debates around software patenting and innovation in that sphere often revolve around whether the interests of society as a whole are served by protecting inventors to an extent that may be beyond what is necessary to encourage innovation in that sector. There are plenty of people who say that innovation is rife in many sectors and that very little patenting or intellectual property protection is required. In other sectors when we think it through pharmaceuticals require a huge amount of investment when it comes to intellectual property. The billions of dollars that go into drugs that are of benefit to society as a whole simply would not be invested without the appropriate protections in place. That is why this kind of intellectual property law needs to find the right balance between the interests of the inventors what the incentives need to be to ensure that they do invest in stuff that is good for society as a whole and the benefit that accrues to society and whether it would be more or less depending on the incentives that are put in place.We could question some of things that are being debated in the leaked Trans-Pacific Partnership agreement in the negotiations and the issue always comes back to whether the interests of society as a whole are being served by the changes that are proposed. The one that is in the public domain most often is the extension of Disneyland’s intellectual property protections and whether that is actually of use to society as a whole given that no new creative content is likely to arise from historic material.This bill itself—[Interruption] My colleague Clare Curran says—I do not know whether I heard her correctly—that that is a Mickey Mouse proposition but if not I am extrapolating and there may be some truth in that. Of course we do not know what the final shape of those arrangements will be and we are not privy to the negotiations. That is of course something New Zealanders are concerned about because we all want not only the interests of society as a whole but our national interests to be taken care of. Mr Lotu-Iiga I am sure would agree with me if he had the opportunity to speak on this matter.Part 1 covers those purposes the preliminary purposes that I mentioned striking that balance. It also mentions there in the opening gambit New Zealand’s international obligations and the Agreement on Trade-Related Aspects of Intellectual Property Rights springs to mind for me. Those agreements are in terms of the World Trade Organization expectations what serve to make sure that international trade is looked out for and that we all as countries are encouraged to create new intellectual property—and that is good for society as a whole—broader than just national boundaries.These purposes in the bill look at the criteria for granting a patent they provide for procedures that allow the validity of a patent to be tested and they provide certainty for those patent owners and users of patent interventions. They address someMāori concerns relating to the granting of patents for inventions derived from indigenous plants. Of course Wai 262 is something that many members of this Committee will be familiar with from the debates over the years. It is something that is not finally settled and is something that I personally believe needs the attention of the Government. The failure of this Government to progress that matter fully is also a concern and it should be a concern for this House.When we look further into Part 1 we see that it covers the meaning of “novel” which of course is a simple and basic requirement of outlining what a patent is.Hon Trevor Mallard: It’s a book. I know.Dr DAVID CLARK: My colleague Mr Mallard says he has read the book on what novel is about. It is the meaning of an inventive step so what it actually means to invent something new because of course if that is not defined correctly we can have people who are trying to claim that they have rights to something that again does not benefit society as a whole if it is something that already exists if it is something from which we already derive benefit and then somebody is seeking a private rent—seeking to make profit from something that does not belong to their own intellectual property contribution. That then is a net drain on society as a whole. So it is important that we lay out exactly what each of these things is.It also covers the meaning of “prior art base” and I would ask the Minister in the chair the Minister of Commerce to clarify that as I have not been particularly engaged in the discussion about the prior art base. I think the Committee would be interested to know exactly what that looks like in practice and what it means in those clauses that describe the prior art base. Then of course there are disclosures and the meaning of “useful” because we are talking here—to come back to those first principles—about what is useful for society as a whole.As I said from the outset Labour will be supporting this legislation. New Zealand’s existing patent law is in our view too generous to those people seeking patents. Too many corporations get monopoly rights and many are multinational corporations that can get patent rights to investors inside New Zealand that would not be protected overseas. We are pleased to see that this is being upgraded. It has happened over a long period of time being first introduced in 2008 by the Hon Judith Tizard as I said and it is still being debated actively today. But it is great to see the bipartisan nature of the debate here in Parliament.I will not speak for much longer. I am simply interested though in hearing further from the Minister about the meaning of “prior art base” so that the Committee can understand that a little better. It is also for my own ignorance on that matter that I might have it clarified by the Minister. Thank you very much.GARETH HUGHES (Green): Kia ora Mr Chair.Ngā mihi nui ki a koutou. Kia ora. It is a privilege to rise in the Chamber and speak in the Committee stage on Part 1 of the Patents Bill. I thought I was the only one in Parliament who thought patents was an interesting fun and cool area to study.Clare Curran: Sexy.GARETH HUGHES: Sexy as well Clare Curran says. We often feel a bit lonely when we talk about patents at parties or social gatherings but it is good to see some other people in this Parliament who also find them interesting like Dr David Clark and Clare Curran. Obviously I would like to acknowledge the work Clare Curran has put in over the years as part of the coalition putting in a Supplementary Order Paper and trying to fix up some of the software patent issues. So I would like to congratulate her. I would also like to congratulate the Minister of Commerce because when other Ministers would rush straight ahead maybe blind to opposition or calls for common sense from industry or the public or experts Minister Foss did listen. He did move and I would like to acknowledge the Minister’s role in shepherding this bill through and for taking a common-sense approach to patents.This bill is incredibly important to our economy to our prosperity and to how we go forward. We are a country that wants to trade on our innovation on our ideas and on our niches. Intellectual property issues particularly patents are a critical part of that. It is high time we reviewed our antiquated Westminster-derived 1953 Patents Act. In previous readings I talked about how it was literally being laughed at by patent experts and interested parties because it was just so out of date. It was high time we revisited it. This bill represents a step forward. It is obviously not an ideal solution but it is a step forward and that is why the Green Party will be supporting it. Overall it is an improvement on existing law not a step backwards.When you look at Part 1 of the Patents Bill it contains the purposes clause—the purposes around an efficient and effective patent system around the criteria for granting patents and providing greater certainty for patent owners and I believe critically in a Treaty relationship addressingMāori concerns which the Green Party takes incredibly seriously. This is very much a live debatable issue. I think it goes some way although again it is not an ideal solution or one truly reflecting a Treaty relationship that we should have in New Zealand but it is a step in the right direction.I am interested because this patents issue is incredibly interesting internationally and it is stimulating a lot of discussion. I would like to quote very briefly from Nobel Prize - winning economist JosephStiglitz who has written recently on the link between patents intellectual property and inequality.Stiglitz writes that “corporate interests prevail in intellectual property rights” and that the policies of the American Government are increasing inequality abroad. He writes: “it’s our intellectual property regime that contributes needlessly to the gravest form of inequality. The right to life should not be contingent on the ability to pay.” He was talking about a very specific example where a company had basically patented genes and some breast cancer and other cancer identification genomic research and it substantially increased the cost driving the cost out of the reach of many people. It went through the legal system in the United States and now as a result of losing that court case the cost of that genomic research has dropped substantially. People are getting the medical attention they need. It is positive and is just another example of how patents can impact inequality.When it comes to the exclusions to patents this is where I think we really are genuinely seeing a step forward in terms of this bill. The bill is going to allow exemptions to patent human beings medical techniques plants and inventions contrary to public order or morality. That is very much a step in the right direction. The bill does not however prevent all biological patents of course provided that the absolute novelty and inventive step is there. This is something that my colleague Steffan Browning is addressing with his Supplementary Order Papers 124 and 336 which try to tighten up those exemptions and expand them. Obviously the patenting of genesindigenous knowledge and native flora and fauna in very different countries is a very live issue internationally.When it comes to the Treaty andMāori relationships aspect which is looked at in clause 3 of Part 1 I believe that this is going a step in the right direction. But when you read the submissions—and unfortunately I did not have the pleasure of sitting on the Commerce Committee; I think we have had about twice as many MPs work on this bill as the Government has had Ministers work on it—what you see from a lot ofMāori submitters and iwi organisations and theMāori Law Society is that they wanted to wait for Wai 262 the Waitangi Tribunal case to report back. That did report back and it recommended aMāori advisory committee but with binding powers. Of course the fear of many of those submitters is that this advisory council to the Commissioner of Patents could perhaps be perceived as tokenism and that perhaps their voice will not be heard. Hopefully that will not be the case but of course we would have preferred that this was a binding advice provision on the Commissioner of Patents reflecting the Wai 262 recommendation but also that Treaty relationship that I touched on.Of course the interesting thing and the big victory in this bill is the software patent exemption. As Clare Curran notes this has quite a bit of history. It came out of the select committee with the unanimous recommendation to take this bold innovative supporting step. It was congratulated broadly around the world and in New Zealand it was a positive announcement. I think everyone got incredibly disillusioned when the bill sat on the Order Paper for so many years when people were not given the sense that it was going to be progressed. Then when the Minister came out with Supplementary Order Paper 120 which went backwards on the issue of software patents many people were upset and disillusioned but they also got angry and they got organised.I would like to congratulate those involved in that campaign who did change the Minister’s mind—the likes of Orion Health Catalyst ITInternetNZ and Jade Software. It was a huge campaign and I would like to acknowledge all the members behind it. My only regret though with the Government listening to the experts and to the industry and putting the software patent exemption back in is that I cannot give the speech that I wanted to give to the Minister about what a fantastic Minister he was as such and how he was supporting New Zealand industry as such because it was those two little words—“as such”—that made the whole issue clear as mud. That would have seen our information technology sector focused on litigation not on innovation and not on coding. So I will not be able to take themickey out of the Minister in that speech but I would much rather be giving a speech in congratulation and acknowledging the role played there.This bill is about jobs and innovation. It is about supporting our thriving information and communications technology sector which grew by $3 billion in the last 2 years. Our high-tech sector is a critical part of our economy and a critical way that the Greens see jobs and prosperity going forward. Obviously patents issues and debates do not end here. This bill is by no means ideal. It is a step in the right direction but what we need to do is have a fundamental conversation about what intellectual property looks like in the 21st century. What does intellectual property patents copyright look like in the internet age? It is deeply disappointing that we will not be seeing a copyright review. Copyright is a significant driver of not only economic development but also freedom of speech and public discussion and it is deeply disappointing that we are not going to see that review.In the midst of the Anti-Counterfeiting Trade Agreement and the Trans-Pacific Partnership negotiations which are not public and which could curtail some of our current exemptions or fair dealing or which could take a much more punitive approach to intellectual property issues these are live issues. The people behind the softwarepatents win cannot give up. There is a whole bunch more that we need to address when it comes to intellectual property issues to keep our country going forward.In summary the Greens are supporting this bill in Part 1. We recognise that it is a step forward. It is not ideal. We do have concerns around patenting of life. We do not think theMāori advisory committee is as strong as it should be. But still the bill is a step forward a step in the right direction and we will be supporting it. Kia ora.Dr MEGAN WOODS (Labour—Wigram): It is always my pleasure to take a call when I can give a speech that talks about the innovative economy and job creation—[Interruption]; thank you Mr Mallard—because this is New Zealand’s natural advantage. This is about our raw material which is the talent that underpins New Zealand’s future and underpinning that is our intellectual property law. Specifically it is our patent law and how we are going to protect our economy in the 21st century and protect what that economy is based on as colleagues have talked about. I want to acknowledge the work of members right across this House. I want to acknowledge the hard work of my colleague Clare Curran next to me who I am sure will be taking a call on this in the very near future to finish the story she started telling about what this law means to New Zealand.I want to acknowledge the work that has gone on around the House because this bill the Patents Bill does balance the two interests that need to be balanced within any considerations of intellectual property. First it allows innovators to profit from their inventions. It allows the people who put in the work and their talent and their ideas to commercialise their ideas and to make businesses out of them. In Labour this is something that we celebrate and it was one of the reasons why we thought that having a research and development tax credit was a reasonably good idea. These are the kinds of measures we need to have to celebrate innovation. But what we also need to be very careful about as legislators in this country—and I think this bill does this very well—is that we balance out the monopoly rights that accompany patents and make sure that they are not unduly exploited. That is really important.About 3 weeks ago I had the pleasure of attending the launch of Shaun Hendy’s excellent new bookGet Off the Grass which talks about innovation in New Zealand. This was a book that Shaun started with Sir Paul Callaghan before Sir Paul’s death and Shaun finished it off. One of the things that Shaun talks about extensively in this book is the innovation networks that exist in New Zealand and one of the ways that he explores these innovation networks is through our patenting system. Who is collaborating with whom? Who is it? It is this ability for people to work together and to commercialise these ideas that underpins this. I really encourage people to go and look at this because it is the culture of innovation and these innovation networks that underpin this. We see universities sitting at the centre of this. They are committed to research-based excellence and flowing out from this are all kinds of opportunities that can be commercialised. But in order to do that—to have New Zealand businesses that can make successful companies out of these ideas—we need the ability to protect our intellectual property. In New Zealand much of our expertise does lie in our ability in theagritech sector and we do need to realise that much of our intellectual property is in the form of living organisms. It is our plant variety rights and our ability to utilise these.The ability for us to protect plant variety rights in this country is the basis of the business model under which Zespri operates. Hort16A or golden kiwifruit which is the other name by which it is known is a plant variety right that was developed by what wasHortResearch and it is the very basis of why Zespri is able to make its way in the world. It has the proprietary rights on this fruit and it is the way in which it can survive. Not only are things like Hort16A incredibly important to us and our need to be able to protect those technologies but also we need to understand New Zealand’s technologicalfuture in a very complicated way. It is not just about factories pumping things out although these are important. It is not just about software although that is undoubtedly important. But the technological basis of what our agricultural sector will be and how we will transform ourselves as an agricultural nation from being a mere commodity producer is something that we need to think about in a sophisticated way and we need to think about what will underpin that.Not only do we have the example of Hort16A the plant variety right that is crucial to the commercial success of Zespri but when we think about our apple imports and what that is worth to our economy we have over $1 billion a year in apple exports alone and 70 percent of those exports is premised on four varieties. One of those varieties is the Jazz apple. Again that is a plant variety right that was developed by some excellent talent in this country atHortResearch. It is something that can be protected under plant variety rights and it is really important that we have the ability to do this.Another example where we do actually have to think about what a 21st century economy is—one that is sustainable and has absolutely at its heart our ability to protect our intellectual property in terms of our pasture in New Zealand—is how New Zealand is going to radically reduce its greenhouse emissions. It is through the development of new pastures. When our dairy sector is one of the largest emitters in our country we need the ability to protect some of the excellent work that the Grassland Association is doing around various pasture types. I am going to talk more about some of these examples and what the ability to protect this kind of intellectual property means when we get to Part 3 of the bill.I would like to congratulate colleagues across the House. I think this is a timely piece of legislation. It has had a long time in gestation and a lot of hard work has been put into it. Thank you.STEFFAN BROWNING (Green): Just in speaking on Part 1 of the Patents Bill in clause 3 “Purposes” it is very clear that there is to be an understanding between the interests of inventors and patent owners and the interests of society as a whole and I will go into this a little bit more in Part 2. But there are some elements of course that are inappropriate. Again the bill seeks to address some of those.I would like to congratulate the Minister of Commerce on the elements that have been included as exclusions from this but it does need to go that little bit further. It will be interesting when we look at the purposes and overview of the bill when some of these issues in the areas of life and organisms come up in the courts where it will be considered whether something is absolutely new or whether it is new only because different components have been pulled together. It could be clearer. It certainly allows for genetic engineering and that is one of the real risks of this bill.We were just hearing about the Plant Variety Rights Act. That is very very strong. It does look out for people breeding plants in New Zealand and it is good to see that plants have been excluded. But in terms of the purposes clause I think it could have been stronger and the Supplementary Order Paper following will address that in part. It is great that there was this cross-party effort to deal with issues around software and the like and it is fantastic to see a national approach in the truest sense of the word. A countrywide approach is something that we can all be proud of.The inventiveness is really a concerning part when it comes to life and then also the interpretation. Moving to clause 5 “Interpretation” with regards to the Budapest Treaty and the Agreement on Trade-Related Aspects of Intellectual Property Rights as well I am concerned that unfortunately those sorts of treaties that we enter into outside Parliament when our negotiators and others go over there could actually be pulled into New Zealand regulation and whatever through this bill. So things may happen that we do not intend because of the inclusion of the Budapest Treaty and some of theramifications of that. I am not quite sure that other members actually understand the lengths that that can go to.The Greens will be supporting this bill because of those positive parts but we will address some of the others in the Supplementary Order Papers and will seek support on those. Thank you.CLARE CURRAN (Labour—Dunedin South): I want to acknowledge what my colleague Megan Woods said about the importance of a modern patent regime that allows for the fundamental underpinning of our intellectual property system and enables the commercialisation of our inventions and our ideas for the benefit of New Zealand’s economy. That is fundamentally important. There will be much discussion on the Supplementary Order Paper that has been proposed by the Green Party member Steffan Browning which Labour will not be supporting but there will be room for more discussion on that later on as we get through the parts of this Patents Bill.I also want to acknowledge what the Minister of Commerce said when he took a call on this part of the bill Part 1 and the work that has been undertaken to get to the point that we are now and I will elaborate on that in a minute. But I do want to finish the story of how this bill came to be back in this House 3½ years after coming back from the Commerce Committee and with regards to the exclusion—one of the key exclusions in this bill—which is for software to be patentable why that was so important and what happened after it got back to the House. When it came back there was that clear simple exclusion. There were concerns because the bill sat on the Order Paper for such a long time. There were questions to the Minister of Commerce at the time Simon Power about whether there was still a commitment to the intent of the select committee. Those commitments were given. But unbeknown to us on this side of the Chamber the pressure certainly had come on and had come on from those who had not submitted at the select committee and who represented essentially the multinational software corporations notably Microsoft and IBM. Also I have to acknowledge some of New Zealand’s big companies including Fisher and Paykel Appliances which did remain concerned about the lack of definition in the bill of embedded software.As we feared in August 2012 the current Minister Mr Foss who was trying to deal with this situation—and ultimately we would contend at that point made things worse—amended the bill to include as my Green colleague Gareth Hughes said that controversial “as such” language. Although the Minister said in the Chamber today that his purpose was simply to clarify the intention to exclude software patents that amendment proved to be hugely controversial. Our contention then was that the multinationals had in effect won and that they had got a clause that would suit their purposes rather than those of the local IT industry. That industry mounted a concerted push back on that unclear “as such” language that amendment. An industry petition was launched that was backed by groups such as the Institute of IT Professionals New ZealandInternetNZNZRise and the New Zealand Open Source Society. They set that up and it gained huge support almost immediately. That petition called on the Government to remove the ambiguous “as such” language and replace it with a simpler clause that would clarify that underlying intention. I adopted that petition’s proposed alternative clause as a proposed amendment to counter the Minister’s amendment at that time and other MPs in this House got behind that and raised concerns about the lack of clarity in the bill.That was in September last year. It is now the end of August in 2013. It took between then September last year and May this year and the concerted efforts of many people and political pressure for there to be some very good work done on providing what is perhaps now an even better bill—and I say this in the Committee today—than the one that came back to the House in 2010. So I do want to acknowledge that work.The new clause 10A that we are now seeing in the Committee today is very carefully worded. It has wide support. It ensures that we will not go down the European Union path by effectively hard coding those parts of that UKAerotel test which I mentioned earlier. It means that even if the UK approach to patent law does drift towards a more liberal regime to allow more software patents New Zealand will not. I think that is something that all of us in this Committee today can be hugely proud of.I want to recognise the hundreds and hundreds of New Zealand software developers and innovators who worked tirelessly and patiently to explain their industry to us members of Parliament and to explain how innovation in code occurs and how it can be stifled by the might of a multinational that claims the right to a piece of code. It is in effect a mathematical algorithm like a phrase in a book or a piece of music—a series of notes in a piece of music that cannot be locked up in a metaphorical box for if they are we all lose out.I want to acknowledge some people individually. I want to acknowledge Paul Matthews from the New Zealand Institute of IT Professionals and Don Christie and DanielSpector fromNZRise which represents New Zealand IT companies to promote Kiwi innovation. I also want to acknowledge Guy Burgess and Dave Lane experts in this field. I want to acknowledge the Greens for sticking to their guns New Zealand First for taking the time to listen and understand and also theMāori Party and Mana for backing Kiwi innovation. I actually want to acknowledge Peter Dunne. We do not agree on many matters but on this particular matter he did the right thing and it was his vote that actually mattered. Finally I want to acknowledge the work that the Minister has done because he knuckled down with the officials. He listened he knuckled down with the officials and the industry and he worked out a compromise that could see us with one of the best pieces of law in the world in this area of intellectual property.IAIN LEES-GALLOWAY (Labour—Palmerston North): It is not long to go until the lunch break so I intend to take only a brief call on Part 1 of the Patents Bill. I was very interested to see that the very first subclause in clause 3 “Purposes” was actually added by the Commerce Committee and it says that the Act is to “provide an efficient and effective patent system that—(i) promotes innovation and economic growth while providing an appropriate balance between the interests of inventors and patent owners and the interests of society as a whole;”.I think there is an increasing awareness in our communities of how important that balance is. If we weigh that balance too heavily towards the patent owners and inventors then that can entrench inequalities particularly between large multinational corporations and small businesses entrepreneurs and innovators trying to commercialise their ideas and to grow new businesses. And of course if we do not recognise the efforts of inventors and patent owners then that itself stifles innovation. Striking that balance is of enormous importance.When thinking about the interests of society I think in particular of the way Pharmac works andPharmac’s ability to purchase off-patent medicines. At the moment in New Zealand medicines come off patent after 20 years. I know that there is some international pressure for us to change that approach but I think that 20 years is a good balance. It allows inventors of new medicines to reap the rewards of their research and development but it also means that society can benefit from those lower-cost generic medicines once they come off patent. I think that is a very very good example of the balance that paragraphs (aa)(i) and (aa)(ii) in clause 3 are trying to achieve. I know that in the near future we will be debating more and more—Debate interrupted.Sitting suspended from 1 p.m. to 2 p.m.Questions to MinistersElectricity Market—Tīwai Point Smelter Subsidy and Sales of State-owned Assets1.Hon DAVID PARKER (Labour) to theMinister of Finance: Why is the $30 million taxpayer funded subsidy to RioTinto being managed by the “Government Share Offers Programme” in the Treasury?Hon BILL ENGLISH (Minister of Finance): The member is wrong on three counts: it was not a subsidy it was not paid to RioTinto and it is not managed by the Government share offers programme in Treasury.Hon David Parker: Why was the refusal to release the background documents justifying the $30 million subsidy to RioTinto which had been addressed to the head of Treasury responded to by the director of the Government share offers programme?Hon BILL ENGLISH: If the member is interested in the details of how Treasury is organised around these things there is a group called the commercial transactions group which has dealt with the failure of South Canterbury Finance and the buy-out of AMI and is the group within which the share float programme is managed. It is actually the commercial transactions group that is in charge of any of the significant commercial transactions that the Government does. The $30 million is paid to New Zealand Aluminium Smelters not to RioTinto.Hon David Parker: I seek leave to table the Official Information Act request that was addressed to the head of Treasury dated 21 August.Mr SPEAKER: Leave is sought to table that particular letter. Is there any objection? There appears to be none.Document by leave laid on the Table of the House.Hon David Parker: I seek leave to table the reply from the director of the Government share offers programme dated 26 August 2013 which declined the request.Mr SPEAKER: Leave is sought to table the reply to that particular letter. Is there any objection? There appears to be none. It can be so tabled.Document by leave laid on the Table of the House.Hon David Parker: How can he deny that the dominant purpose of the $30 million subsidy was to facilitate the sale of Meridian Energy given that the refusal to release information came from the Government share offers programme section of Treasury despite the fact that the request for information was not sent to it?Hon BILL ENGLISH: The member is drawing a long bow. The Government has been quite transparent about the transaction. It has outlined the reasons why it entered into that transaction. One of the reasons is that it would create certainty for investors in Meridian Energy but I can assure the member that the decision was made by Ministers and how the Treasury wiring diagram flows did not make any difference to the decision.Hon David Parker: Did the $30 million smelter subsidy payment have any significant effect on the demand for electricity by the smelter?Hon BILL ENGLISH: Well I am not exactly sure what the member means but the finalising of the contract means that Meridian Energy has an option to reduce the amount of electricity that it supplies to the smelter in a couple of years’ time. Whether the smelter reduces its demand would depend on how much production it wants to continue with.Hon David Parker: Does he understand that his $30 million interference in the electricity market is yet more proof that the New Zealand electricity market is uncompetitive with the consequence of higher charges for other businesses and residential consumers?Hon BILL ENGLISH: No but if we are going to talk about the smelter the member needs to explain to other Labour MPs that the biggest beneficiary of Labour’s policy on the electricity market would be New Zealand Aluminium Smelters. By far it would be the biggest beneficiary of any reduction in average electricity prices because it sources its electricity fromManapōuri dam which is probably one of the cheapest generators in the country.Hon David Parker: If the smelter subsidy would have occurred irrespective of the Meridian Energy float why is it that his Government did not offer similar subsidies toHolcim cement orNorskeSkog both high energy users to stop them laying off workers?Hon BILL ENGLISH: I did not say it would have occurred independent of the Meridian Energy float. But that member needs to explain why his policy to reduce power prices will primarily benefit New Zealand Aluminium Smelters when I have seen calculations it could be worth up to $150 million per year to New Zealand Aluminium Smelters.Hon David Parker: Is the real reason he is failing to disclose properly the facts behind the smelter subsidy from New Zealanders the same reason that he is refusing to properly discuss the effect on the electricity market and electricity prices—that is if New Zealanders knew the truth they would immediately see through the spin around the Meridian Energy sale?Hon BILL ENGLISH: There is no spin. The Government has been absolutely clear about the payment—absolutely clear about the reasons for it. What that member needs to be able to explain is why his policy to cut electricity prices will hand the biggest single benefit to the smelter and also explain whether it is Labour’s policy that no payment should have been made and the 800 workers should have been sacked because that is what that member said a number of months ago.Chris Hipkins: I raise a point of order Mr Speaker. In a rather unusual turn of events the Minister of Finance in his answers asked David Parker a number of questions. I seek leave for David Parker to be able to answer them. [Interruption]Mr SPEAKER: Order! The member should bone up on the Standing Orders. He cannot seek leave on behalf of someone else.Hon David Parker: I seek leave of the House to answer those questions. [Interruption]Mr SPEAKER: Order! I think on this occasion there were some questions so the honourable member can seek leave. I will put the leave. Leave is so sought. Is there any objection? Yes there is. [Interruption] Order!Housing Affordable—Market Stability and Land Supply Policies2.Peseta SAM LOTU-IIGA (National—Maungakiekie) to theMinister of Finance: What measures is the Government taking to help prevent a repeat of the damaging housing bubble that contributed to significant economic imbalances in New Zealand in the mid-2000s?Hon BILL ENGLISH (Minister of Finance): In the period between 2001 and 2007 house prices in New Zealand doubled and the export sector went into recession in the middle of what was actually a global economic boom. As is now widely accepted housing supply constraints are one of the major causes of housing bubbles. That is why the Government is working with the Auckland and Christchurch city councils toincrease greenfields andbrownfields land supply reduce the delays costs and uncertainties of the Resource Management Act improve infrastructure provision and look to improve the productivity in the construction sector. The Government is giving effect to these through the special housing areas legislation and two Resource Management Act reform bills this year and we look forward to the Opposition support for these pieces of legislation which improve housing affordability.Peseta Sam Lotu-Iiga: What effect does the Government expect these measures to have on housing supply and what additional steps is the Government taking to directly support first-home buyers?Hon BILL ENGLISH: The Government and the Auckland Council have a common objective of more affordable housing and have therefore agreed to the Auckland Housing Accord and to introduce supporting legislation to deliver fast tracking of consents in less affordable areas. The Auckland accord targets 39000 housing consents over the next 3 years. This is up from fewer than 12000 over the last 3 years. We expect that this will have some effect in slowing the rate of increase in house prices because ideally we would like to see wages rise at least as fast as house prices so that houses can become more affordable. This is in addition to the Government’s recently announced moves to support first-home buyers.Peseta Sam Lotu-Iiga: What reports has he seen on Resource Management Act changes that are cutting red tape and freeing up land supply and why does this matter for the cost of housing?Hon BILL ENGLISH: I have seen reports that say the Government’s Resource Management Act changes will give homeowners and developers the certainty and the confidence that they need to proceed with more investment in more houses on the ground at a time when we need them in order to slow down the rapid rise in house prices. I have seen one report that the cost of waiting for building and resource consents to be processed is between $1000 and $1600 per house per week. That is money that must be recovered from the sale price and directly contributes to making houses less affordable. That is why there is broad support except from the Opposition for the Government’s changes to resource management legislation to reduce the number of weeks because every week we can reduce the length of that process we can save prospective homeowners between $1000 and $1600.Peseta Sam Lotu-Iiga: What alternative housing policies has he seen?Hon BILL ENGLISH: Land is around 60 percent of the cost of a house in Auckland so it would be ridiculous for any housing affordability policy to fail to include a mechanism for delivering lower land prices. I have seen one of these policies. It does not talk about land supply or infrastructure or red tape or construction sector productivity and it is the Labour policy backed by three of its leaders so far and no doubt will be backed by the next one.Hon David Parker: I raise a point of order Mr Speaker. If you are going to allow the Minister of Finance to quote Labour Party policy could you ensure that he at least gets it right?Mr SPEAKER: I appreciate the point the member is making but it is not actually a point of order.District Health Boards—Resourcing and Service Delivery andWaitematā District Health Board3.Hon ANNETTE KING (Labour—Rongotai) to theMinister of Health: Do all district health boards have sufficient resources to provide safe quality health services?Hon TONY RYALL (Minister of Health): Yes. My objective is that all patients receive high-quality care. This is helped by having over 2500 more nurses employed by district health boards across the country under our Government. As the member knowsfrom time to time as we have seen in the Hutt Valley story in today’sDominion Post during the winter season of heavy demand and staff illnesses there are periods of extra pressure on staff.Hon Annette King: In light of that answer has he seen the press release a few moments ago from the New Zealand Nurses Organisation stating that the practice of care rationing to patients “is widespread asDHBs and the nursing team are forced to do more with fewer staff and less money.” and that “Fiscal constraints are creating a ‘a head in the sand approach’ to staffing issues in our hospitals.”; if so when will he get his head out of the sand or wherever it is and listen to our valuable health professionals?Hon TONY RYALL: I have not seen that press release from the nurses union but what I do know is that in the term of this Government there are now 2500 extra nurses working in our district health boards together with extra funding averaging $500 million a year.Hon Annette King: Has he been informed that acute mental health community services over all five localities atWaitematā District Health Board are required to reduce their expenditure by $1 million this year with 16 positions to be lost because of budget constraints; if so what impact will these cuts have on patients?Hon TONY RYALL: I am aware that theWaitematā District Health Board is looking at how it can best arrange its services in that community and that is the reason why this Government gave it an extra $31 million in this year’s Budget a total of $226 million extra for theWaitematā District Health Board over the last 5 years.Hon Annette King: In light of that answer has he been told that the acute response in forensic mental health services atWaitematā District Health Board is required to save $250000 this year and that the staffing at the adult in-patient units is to be reviewed to save $305000 this year; if so what impact would these cuts have on patients?Hon TONY RYALL: I do not have the exact details of those changes but what I do know is that this year we have given theWaitematā District Health Board an extra $31 million and in the last 5 years it has employed 143 extra doctors and 302 extra nurses onto the front line of health care on the North Shore and West Auckland.Hon Annette King: In light of that answer has he been told that community alcohol and drug staffing atWaitematā District Health Board is to be reduced to save $436000 this year and that an NGO provider is to have its contract reduced by $232000 this year; if so what impact will this have on patients?Hon TONY RYALL: Because we are giving theWaitematā District Health Board an extra $31 million this year I am fully expecting that services will improve in those areas. This Government is focused on delivering more care for patients. That is one of the reasons that we have over 300 extra nurses and 143 extra doctors at theWaitematā District Health Board and that patients no longer wait 3 days on hospital trolleys in corridors under bright fluorescent lights in the emergency department.Hon Annette King: Has he been told that administration support for mental health services atWaitematā District Health Board is to be cut by 25 percent to save $1.19 million and budgeted sick leave is to be reduced from 10 days to 7 days to save $260000 and do all these cuts measure up to his promise of better mental health services for people inWaitematā?Hon TONY RYALL: I have never had an Opposition MP talking about cuts to administration and being opposed to them before. We are right behind any reductions in administrative staff and having the money put into better services for patients with the extra $226 million that we have put intoWaitematā District Health Board providing more services for patients.Youth Employment and Training—Youth Guarantee and Industry Training4.SIMON O’CONNOR (National—Tāmaki) to theMinister for Tertiary Education Skills and Employment: What reports has he received on the performance of the Youth Guarantee scheme?Hon STEVEN JOYCE (Minister for Tertiary Education Skills and Employment): This morning I released the latest figures from the Tertiary Education Commission on the Youth Guarantee scheme. The Government established Youth Guarantee fees-free tertiary places in 2008 for students who find the traditional classroom environment challenging and were at risk of dropping out of school. The 2012 results for Youth Guarantee show course completions at tertiary institutions that provide Youth Guarantee improved to 70 percent in 2012—up from 63 percent in 2010. Qualification rates have also increased from 48 percent in 2010 to a very impressive 64 percent in 2012.Simon O’Connor: How many students were enrolled in Youth Guarantee in 2012?Hon STEVEN JOYCE: There were 8900 students enrolled in Youth Guarantee fees-free tertiary education in 2012 and by 2015 the Government will be funding up to approximately 15500 full-time equivalent student places. A large number of students involved in Youth Guarantee have had little previous achievement at secondary level. In 2012 39 percent of them arrived at Youth Guarantee with little or no qualifications. In 2011 the Youth Training programme was merged into the Youth Guarantee scheme and it is great to see that students of former youth training providers are producing significantly better results under Youth Guarantee. Credit achievement for that group has risen from an average of 24.8 credits in 2011 to 37.3 credits 1 year later—a 66 percent increase in just 1 year.Simon O’Connor: What other steps is the Government doing to help young people succeed in education or work?Hon STEVEN JOYCE: When we came into office 4½ years ago too many young people were falling between the cracks between education and work. A couple of the initiatives we have taken include taking the pruning shears to the thousands of qualifications below degree level. In 2008 there were 6000. We are on track to be down to 1800 by the end of next year. At the end of it a hairdresser a plumber and a joiner will be able to complete the same qualification that is trusted by employers whether they do it at a polytech at a private training establishment or as an apprentice. We have set up vocational pathways in National Certificate of Educational Achievement in schools and in Youth Guarantee providers. They list good subjects for young people to take at secondary school to set them up for a career in industry sectors. And we are rebooting industry training—creating New Zealand Apprenticeships boosting overall funding increasing the educational content and untangling the spaghetti of industry training organisations that we inherited.Callaghan Innovation—KiwiStar Optics5.Dr MEGAN WOODS (Labour—Wigram) to theMinister of Science and Innovation: What reports or briefings has he received regarding the commercial future ofKiwiStar Optics?Hon STEVEN JOYCE (Minister of Science and Innovation): As I advised the member in my answer to written question No. 10617 as at 12 August I had received five reports containing information relating toKiwiStar Optics. The names of those reports are listed in that written question which was lodged on 12 August. Since that time I have received one additional fortnightly progress update report that includes information relating toKiwiStar Optics.Dr Megan Woods: Is Callaghan Innovation planning to license or sellKiwiStar Optics’ intellectual property primary design and/or rights to the Australian Government - owned Australian Astronomical Observatory?Hon STEVEN JOYCE: I am not aware of that. I do know that Callaghan Innovation is looking for a range of options in terms ofKiwiStar Optics’ future to encourage opportunities for that organisation.Dr Megan Woods: How much public funding hasKiwiStar Optics received since 2008?Hon STEVEN JOYCE: I do not have that answer for the member in front of me. If she would like to put it down in a written question I would be happy to provide that information.Dr Megan Woods: Given that the Government invested $1.4 million inKiwiStar Optics in 2008 what returns can the New Zealand taxpayer now expect given that Callaghan Innovation has refused to sign a major commercial contract?Hon STEVEN JOYCE: Well it is an interesting question the member raises which I suggest suggests that she does not actually understand the issues that are there. Callaghan Innovation was looking at signing—Hon Trevor Mallard: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! I apologise. We have a point of order.Hon Trevor Mallard: That was a very straight question. The Minister did not need to denigrate the questioner in the answer.Mr SPEAKER: Order! It was a straight question. I would like the opportunity to listen to the answer. If we could hear from the Minister then I will judge—[Interruption] I do not accept that there was a denigration at all.Hon STEVEN JOYCE: As I was saying I think there is a misunderstanding there because the reason—[Interruption]Hon Trevor Mallard: That’s not what you said.Mr SPEAKER: Order! Would you allow the Minister to answer the question.Hon STEVEN JOYCE: Well I said I think the member has made a misunderstanding there. You can get me to repeat it as often as you like Trevor but I think she did. The point in regard to this is that one of the major reasons Callaghan Innovation did not want to sign that contract was the very significant fiscal risk that it believes it would have to take up for what was a fixed-price fixed-term contract—[Interruption] He is back. It was a fixed-term fixed-price contract that carried significant risk so it could end up actually costing taxpayers more money and there would be no return from it.Dr Megan Woods: Does the Minister consider it Callaghan Innovation’s core business to shut down high-value science and manufacturing opportunities in New Zealand as it has done withKiwiStar Optics?Hon STEVEN JOYCE: Well the member is simply incorrect. It has not done anything of the sort. What it is looking for is opportunities forKiwiStar Optics.Dr Megan Woods: Selling it to the Aussies.Hon STEVEN JOYCE: Well if the member is saying that it should never ever sell any of its capability to anybody then Callaghan Innovation will always end up doing what it always did. What we are working on here is actually getting closer to businesses that need research and development support and that is the whole principle of Callaghan Innovation. If the member disagrees with that she is welcome to it but I am very much in favour of it.Hon Trevor Mallard: What value is there to the taxpayer by sending eight to 10 of our brightest and best scientists and technicians to Australia?Hon STEVEN JOYCE: Nobody is suggesting that. I appreciate that is Mr Mallard’s view but that is not what is being suggested.Hon Trevor Mallard: That’s exactly what’s going to happen. He knows it.Hon STEVEN JOYCE: No it is not. It is absolutely wrong Trevor—absolutely wrong.Minerals Exploration Central North Island—Pureora Forest Park6.Dr RUSSEL NORMAN (Co-Leader—Green) to thePrime Minister: Does he stand by all his statements relating to Government policy?Rt Hon JOHN KEY (Prime Minister): Yes.Dr Russel Norman: Does he stand by his statement from November 2011 that “Our environment is a valuable resource that we must preserve and protect. It’s a big part of our quality of life and it’s central to our international reputation our primary sector our growing tourism market and our economy.”; if so why?Rt Hon JOHN KEY: Yes; because it was correct.Dr Russel Norman: How does he reconcile that statement—that we must protect our environment—with his decision yesterday to open up the ancienttōtara forest of Pureora for mineral exploitation?Rt Hon JOHN KEY: If the member is talking about the submission around epithermal gold that is because the belief is that there may be opportunities there. But obviously they have to be done in a way that is sympathetic to the environment.Dr Russel Norman: Why has his Government opened up Pureora Forest Park for mineral prospecting in an area containing the last gianttōtara trees left in New Zealand—trees that are so old that they were old before the firstMāori set foot in New Zealand and that is one of the last strongholds of thekōkako?Rt Hon JOHN KEY: I do not think anyone is suggesting that if there was to be mining for epithermal gold it would take place in a way that would challenge or threaten those trees. That is not going to be something that would get the appropriate consent from the authorities and it will not occur.Dr Russel Norman: Can he explain exactly how it is compatible to mine for gold within Pureora Forest Park without disrupting the last remnant ancient 1000-year-oldtōtara left in New Zealand and one of the last strongholds ofkōkako?Rt Hon JOHN KEY: My understanding at this point is that there is no mining that is taking place. What is taking place is that there is an issue of looking at block offers looking at a potential issue. As I said earlier in the end that case can be made about anything that takes place in New Zealand. By definition there are wonderful and special things right across this country and in the seas that surround it. But we have in the past been able and we will continue in the future to balance those environmental protections that are absolutely necessary with the economic opportunities that present themselves with modern-day mining techniques.Dr Russel Norman: I raise a point of order Mr Speaker. My question was specifically “How is it possible to do such mining?” and I have heard no such answer to the question.Mr SPEAKER: Order! The question was adequately addressed by the Prime Minister.Dr Russel Norman: Given that the national cycle trail is planned to pass through this ancient towering rainforest does he think that people will want to ride down the cycle trail through this fantastic piece of ancient rainforest while there is active goldmining under way?Rt Hon JOHN KEY: Yes I do actually depending on of course how that takes place. People cycle round to Shantytown on the West Coast all the time to look at theold historical mining that has taken place there. I say to the member that he should not be too judgmental; from memory one of the “100% Pure New Zealand” ads that has been filmed recently or pictures that have been taken was actually in front of an old quarry mine that was filled in.Dr Russel Norman: Will he listen to the wise words of HoneTūwhare writing about Pureora in 1978 who said “Stop your raping of the land” and will he keep his drilling rigs out of Pureora?Rt Hon JOHN KEY: No.Minerals Exploration Central North Island—2013 Epithermal Gold Tender7.LOUISE UPSTON (National—Taupō) to theMinister of Energy and Resources: What recent announcements has he made about mineral exploration in the central North Island?Hon SIMON BRIDGES (Minister of Energy and Resources): Yesterday I announced the opening of the Epithermal Gold 2013 tender. The tender covers more than 8000 square kilometres of the central volcanic zone across the Bay of Plenty and Waikato regions. Companies interested in exploring for minerals have until the end of January to submit bids for exploration—not mining Mr Norman. Following the success of the first minerals tender in Northland the Government is keen to promote further opportunities for exploration that could offer down the track far-reaching benefits to local communities and regional development.Louise Upston: What reports has he seen on the development of mining opportunities in New Zealand?Hon SIMON BRIDGES: In the course of my duties I have seen reports that called exploration and mining “an essential feature of domestic and export growth”. I have also seen anti-exploration development leaflets distributed in Wellington and I have seen a muddled interview onThe Nation in which the interviewee seemed intent on not holding a firm view on mining development. While the contestants on that side of the House are all over the show on this side of the House we believe mining has been and will continue to be a strong contributor to building a more productive economy for all New Zealanders.Housing—Vacant State Properties and Ministerial Accommodation8.Hon TREVOR MALLARD (Labour—Hutt South) to theMinister of Housing: What action is he taking to ensure that all available Housing New Zealand houses are tenanted?Hon Dr NICK SMITH (Minister of Housing): The bulk of homes not tenanted are because of earthquake damage earthquake risk and Housing New Zealand’s major redevelopment programme. The first action I am taking is to get real pace into the Christchurch earthquake repair programme. The $320 million insurance settlement is enabling us to get on with the repair of the 5000 homes that were damaged there. The second action is on earthquake buildings in places like Wellington. I am actually very pleased that we vacated buildings like the Gordon Wilson Flats because after the most recent quakes there was significant damage that could have posed a risk to those tenants. We have got work well-advanced on strengthening a number of the State houses in Wellington and a programme of work to determine which can be economically repaired and which should be replaced. The third action announced in the Budget was a $2.9 billion investment the biggest in more than 20 years on improving our overall State housing portfolio. This massive programme of work will result in additional vacancies particularly in areas where we are demolishing groups of oldhouses and rebuilding far more houses of better quality more appropriately sized on that same land.Hon Trevor Mallard: What action does Housing New Zealand take to remove squatters from its houses and recover rent owed by former tenants?Hon Dr NICK SMITH: I am not familiar with any specific examples of squatting in any of the State houses. But the general intent would be where people have been given a reasonable time to get out of homes—but if the member has got a specific example I would be happy to have it drawn to my attention.Hon Trevor Mallard: What action if any has he taken to ensure that the approximately $10800 owed by one former State house tenant is paid?Hon Dr NICK SMITH: Unless the member gave me an example of the particular tenancy then I am not aware of which example the member is giving. State houses have about 69000 tenants so it is not possible for me to give an instant answer on any one of those cases.Hon Trevor Mallard: Has Housing New Zealand given any advice to Ministerial Services as to how to recover approximately $10800 which was not paid when he squatted for over 6 weeks in a $2 million house owned by Ministerial Services?Hon Dr NICK SMITH: When I resigned as a Minister last year myself and my family stayed in the ministerial house until the end of that term for my kids who were attending school in Wellington. Ministerial Services gave me consent to leave my personal belongings there until I established a new flat in Hill Street. I would note that it has long been the practice where Ministers resign—and as occurs when there is a change of Government such as after the 2008 election—that families are given a reasonable amount of time to move. The time when my family moved out was less than 2 weeks after I resigned.Hon Trevor Mallard: Mr Speaker—Mr SPEAKER: The member has a right to ask questions but I caution him to think seriously about treading into an issue like this.Hon Trevor Mallard: I seek leave to table a document that shows that no rent was paid for that house.Mr SPEAKER: Leave is sought to table that document. Is there any objection? There is none. It can be tabled.Document by leave laid on the Table of the House.Rt Hon John Key: Is it true that when National became the Government in 2008 I said to the outgoing then Prime Minister that she should feel free to stay at Premier House as long as she wanted without rent to allow a smooth transition and to allow her to pack up with her family?Mr SPEAKER: Order! Just before that question is answered I do not think there is actually any ministerial responsibility for the Minister. I think on this occasion—[Interruption] Order! The question has been asked but I cannot see that there is a responsibility to the Hon Dr Nick Smith as Minister of Housing to answer that particular question.Hon Dr NICK SMITH: I raise a point of order Mr Speaker. You saw fit for me to answer equivalent questions about my circumstances in respect of my ministerial house and so I think it is appropriate that I be allowed to answer the Prime Minister’s question.Mr SPEAKER: Order! We are dealing with a question that was raised by the Prime Minister and asked to you as Minister of Housing. Are you seeking the right to answer that question?Hon Dr NICK SMITH: Yes I am.Mr SPEAKER: On that basis I am going to allow the Minister to—[Interruption] Order! I have ruled that on the basis that the honourable Minister wants to answer the question I am going to allow—[Interruption] If there are further interjections coming from that side of the House I will be asking both members to remove themselves.Hon Dr NICK SMITH: The attitude I have felt consistently from the Prime Minister whether it was for the families and members opposite when they ceased to be Ministers or my own experience was one of sympathy for Ministers’ families. I had children at school in Wellington and I appreciated the Prime Minister’s office allowing those children to stay at school for the 2 weeks to the end of term.Hon Trevor Mallard: Will he now set a good example to Housing New Zealand tenants by paying the $10800 rent as well as the un-reimbursed power the housekeeper services the weekly sheet changing and laundry services the security services and the gardening services from when he stayed in his $2 million former ministerial house after he resigned?Mr SPEAKER: I call the Hon Dr Nick Smith insofar as he has ministerial responsibility.Hon Dr NICK SMITH: At the time I sought advice from both Ministerial Services and Parliamentary Service. I was told that I would not be able to claim a parliamentary allowance for the period the Prime Minister gave me to relocate my family as a backbencher and so I was not claiming parliamentary allowances for the period of grace that Ministerial Services allowed me for my family to move.Hon Gerry Brownlee: I raise a point of order Mr Speaker. I wonder whether you would be able to assist the Opposition in its quest to gain these efficiencies for the State by perhaps ruling that if a Leader of the Opposition publicly announces their intention to relinquish that position and then fails to turn up to Parliament they may not also claim the ministerial salary and various other entitlements that go with that job?Mr SPEAKER: Order! That is not a valid point of order but it shows Parliament where we go to when anybody tracks this line of questioning.Electoral System—Legislative Reform and Improvements9.Hon KATE WILKINSON (National—Waimakariri) to theMinister of Justice: What changes is the Government making to election laws following the inquiry into the 2011 election?Hon JUDITH COLLINS (Minister of Justice): Yesterday I introduced the Electoral Amendment Bill that will implement improvements to our electoral system. The key changes include allowing greater use of theEasyVote cards to simplify and speed up voting processes and improve the accuracy and efficiency of scrutinising the rolls; providing for greater use of technology including full online enrolment; using the Government’sRealMe electronic identity verification; and clarifying the law around list seats. The bill also provides that loans exceeding $15000 will be subject to the same disclosure rules as donations. These are sensible improvements that ensure our electoral system maintains its high level of integrity.Hon Kate Wilkinson: What other changes are being made as a result of the inquiry?Hon JUDITH COLLINS: There are a number of recommendations from the Justice and Electoral Committee that do not require legislative change. The Government is obtaining further advice from the Electoral Commission on a long-term strategy for voting technology incorporating civics education into the New Zealand school curriculum and expanding public civics education. The Electoral Commission will be ensuring that future public information campaigns about electoral matters provide sufficient information and are accessible to all voters including disabled voters. The commission is looking at ways to expand phone voting for vision-impaired voters. I aimfor the bill to be enacted by early next year. This will ensure that the Electoral Commission has enough time before the 2014 general election to implement changes. It will also allow time for candidates and parties to be made aware of new requirements.Consumer Goods—Australian Inquiry into Pricing of Digital and Electronic Products10.GARETH HUGHES (Green) to theMinister for Communications and Information Technology: Has she finished working through how the findings and recommendations of the Australian parliamentary inquiry into digital product prices may relate to New Zealand; if so will she be taking any action?Hon AMY ADAMS (Minister for Communications and Information Technology): Along with my colleague Minister Foss we are continuing to work through the findings and recommendations of the Australian parliamentary inquiry. I recognise that this is an issue of similar concern in New Zealand and accordingly I have directed my officials to work with their Australian counterparts so that advice can be informed by what response the Australian Government is likely to take to that review. It is important to note that these recommendations are still under active consideration by the Australian Government which is currently in caretaker mode prior to the election.Gareth Hughes: Does the Minister think it is fair that a recent survey of 100 common hardware and software products found that New Zealand consumers are paying on average 46 percent more than shoppers in the United States and that for example some laptops cost as much as three times more for New Zealanders than Americans?Hon AMY ADAMS: As far as I am aware the survey the member refers to is his own. But actually I am aware that there is a significant differential between the pricing of a number of digital products in New Zealand compared with what they can be purchased for in the US. This can be as little as 2 percent—for example on theiPhoto foriPad product—or it can range up to more than 100 percent. So clearly there is a differential between what a similar product costs in New Zealand and in the US. That is an issue that the Australian committee has found cannot be entirely reconciled by differences in the cost bases supplying those products and that is why it is an issue that I have directed my officials to continue to look at.Gareth Hughes: I seek leave to table a survey of 100 products prepared by my office which shows a 46 percent average higher cost charged by Kiwis.Mr SPEAKER: Leave is sought to table such a survey. Is there any objection? Yes there is.Gareth Hughes: Does she think it is acceptable for companies to be charging consumers with geographic pricing and for them to have to pay a premium like the more than $1000 for AdobeFrameMaker just because they are downloading it in Wellington and not Washington?Hon AMY ADAMS: What I think we have to be careful of is getting into the space of whether it is the role of Governments to tell businesses what they can and should charge for their products and how they should market them. So these are issues that have to be looked at with some caution. I would just point out that even within the Australian Parliament already there are notes of caution about how realistic it is for Governments to try to regulate and tell private businesses how they should sell their products and for what price. It is something that you would have to approach very carefully.Gareth Hughes: Given that it is such a large cost for Kiwi businesses and Kiwi consumers would the Minister support a Commerce Committee inquiry into inflated IT prices for Kiwi consumers?Hon AMY ADAMS: Well that is obviously a matter for the committee to work through and not one that I would want to prejudge. But I imagine the committee would want to carefully consider whether a New Zealand inquiry replicating the Australian one would add further to the debate. But if it felt that that was necessary I am sure it is something that it will work through.Gareth Hughes: I seek leave to table a letter from myself to the Commerce Committee requesting such an inquiry.Mr SPEAKER: No. If any members are interested in that I am sure they can get hold of it.Children’s Action Plan—Minimum Screening and Vetting Standards11.MIKE SABIN (National—Northland) to theMinister for Social Development: How will the Children’s Action Plan better protect children through greater screening and vetting standards for those working with children?Hon PAULA BENNETT (Minister for Social Development): Outstanding—outstanding question. Legislation will be introduced in the next month to implement minimum screening and vetting standards for those people who are working with children. This process will be more comprehensive than the current police check that some do and others do not. It will include specific interview techniques thorough referencing police record checks as well as looking into the history and behaviour of every one of those individuals. It will also mean checking with former employers and wider community members about any concerns relating to the children that may have been raised during that process.Mike Sabin: Whom will these new mandatory standards apply to?Hon PAULA BENNETT: This will be mandatory for all Government agencies and Government-funded organisations working with children but voluntary for community organisations. There are hundreds of thousands of people in that children’s workforce. We estimate all up that it is more than 370000 people. In the core workforce we are talking about paediatricians Child Youth and Family social workers and teachers. The wider workforce would mean non-teaching staff such as library reading-group leaders for example or Work and Income case managers.Mike Sabin: How will these new restrictions keep dangerous violent and abusive people away from children?Hon PAULA BENNETT: Alongside the new screening and vetting there will also be new restrictions on whom they are allowed to employ. For example there will be restrictions meaning that they cannot employ people who have serious convictions such as murder manslaughter sexual violation assault on a child and sexual conduct with young people. We simply have to protect our vulnerable children. For those who choose to ignore that restriction there will be heavy fines.Jacinda Ardern: Will charter schools be compelled or will they just be expected to vet staff under her new vetting and screening requirements?Hon PAULA BENNETT: They will be included in the law and they will be expected to and compelled if that is the word the member chooses to use.Jacinda Ardern: I raise a point of order Mr Speaker. If I could have the Minister perhaps clarify. I asked whether or not it was mandatory compelled—Mr SPEAKER: Order! The question was very clearly addressed for the member.Jacinda Ardern: Will it be mandatory for charter schools to vet and screen their staff?Hon PAULA BENNETT: I would say that actually if the member had answered my letter of 2 months ago where I offered to her to have a briefing on this then shewould have the answer. But since she chose not to get involved yes it will be mandatory.Superannuation—Commentary on Flexi Super Scheme12.DENIS O’ROURKE (NZ First) to thePrime Minister: Does he stand by all his statements?Rt Hon JOHN KEY (Prime Minister): Yes.Denis O’Rourke: Will he be using Peter Dunne’s Flexi Super scheme to cut superannuation taken before 65 as an excuse to break his election pledge that “I will resign as Prime Minister and from Parliament if I cut super”?Rt Hon JOHN KEY: I am not sure whether the member understands the principle behind Flexi Super but if that policy was to be implemented if any New Zealander wanted to continue to take their full New Zealand superannuation at the age of 65 that would be available to them. In my book that does not break any promises.Denis O’Rourke: Does he agree with Grey Power president Roy Reid who slammed the proposal as a cruel poverty trap and that it is “… one of the more cynical cruel and dangerous bits of stupidity I have heard in a very long time.”; if not why not?Rt Hon JOHN KEY: No I think Roy was confused. He was clearly reading the New Zealand First manifesto.Denis O’Rourke: I seek leave to table a letter from Grey Power on what it costs today for elderly people to live.Mr SPEAKER: Leave is sought to table that letter from Grey Power. Is there any objection? There appears to be none.Document by leave laid on the Table of the House.Denis O’Rourke: I seek leave to table a document from the Parliamentary Library based on a minimum income for healthy-living older New Zealanders ageing in society—Mr SPEAKER: Order! If it is a document prepared by the Parliamentary Library it is available to any member who wants it.Denis O’Rourke: I raise a point of order Mr Speaker. It was a document prepared by the Parliamentary Library based on that document.Mr SPEAKER: Is it prepared specifically for the member?Denis O’Rourke: It is.Mr SPEAKER: On that basis I will put the leave. That is the easiest way to solve it. Leave is sought to table a document prepared by the Parliamentary Library specifically for Denis O’Rourke. Is there any objection to that document being tabled? Yes there is.Denis O’Rourke: Does the Prime Minister agree with retirement policy director MichaelLittlewood who said: “Those at the bottom end will not have the information they will need to make informed decisions and will have fewer financial choices. Having made their decisions they will be stuck with them until they die.”; if not why not?Rt Hon JOHN KEY: Well firstly let me just remind the member that it is a discussion document so let us see what happens from there. But I do agree with one thing MrLittlewood said and that is that yes if they elect to take their New Zealand superannuation earlier at a lower rate they would be stuck with that for the rest of their life. That is a decision that they would be making. But if one was just to take a 2-second step back and look at the merits of this type of policy what it would show is that there is quite a bit of merit as opposed to the crazy policy that the Labour Party is proposing which is to raise the age of superannuation to every New Zealander by 2 years. Thereason for that is that it may well be that someone who is in a very physical job actually cannot easily continue to work—Hon David Cunliffe: Far-sighted leadership!Rt Hon JOHN KEY: Well it would be really interesting whether when David Cunliffe becomes the leader—Mr SPEAKER: Order! Order! The Prime Minister has given quite a long and lengthy answer.Denis O’Rourke: Does the Prime Minister agree with retirement policy director Susan St John that the Flexi Super scheme could turn out to be a very expensive one for the taxpayer because many low-income people attracted to the option to retire at 60 on significantly lower rates would inevitably need social welfare top-ups; if not why not?Rt Hon JOHN KEY: Well firstly they would not have to retire. People who take New Zealand superannuation today do not retire so it would be entirely up to them. Yes of course they are all the sorts of things that have to be considered but I would have thought that a lot of New Zealanders—some of them as I say who are in physical jobs—do not necessarily want to work until they are 65 because their body is breaking down and it is more challenging for them to do so. Whereas there are many other people who are for instance not doing a hell of a lot. Say for instance they are in the New Zealand First caucus—Mr SPEAKER: Order! [Interruption] Order! And now that answer is quite sufficient as well.Denis O’Rourke: Given that I would much rather be in the New Zealand First caucus than the National one I ask does he recognise that the Dunne scheme amounts to a tax dodge to favour high-income earners who do not need superannuation payments while still working and who are being taxed at a higher rate and who will wait until they are not earning before taking more superannuation and paying less tax on it?Rt Hon JOHN KEY: No and I do not want to get terribly personal but I do not know whether he has noticed that his leader is 68. He will actually be 70 at the next election—Denis O’Rourke: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! I have a point of order and I will hear it in silence.Denis O’Rourke: I would appreciate the Prime Minister answering the question rather than reflecting on the ages of people for whom he has no prime—Mr SPEAKER: Order! I invite the member to look atHansard at the end of question time. He asked whether the Prime Minister recognised a tax scheme and the Prime Minister started his answer by saying that no he does not.Denis O’Rourke: I raise a point of order Mr Speaker. What you have just said does not deal with the point of order that I raised. The point of order that I raised was that the Prime Minister has no prime ministerial responsibility for the age of any person in this Parliament and I request that he specifically answer the question that I actually asked.Mr SPEAKER: Two points on that. I have already ruled that the Prime Minister did specifically answer the question that was raised. With regard to the second point I invite the member to have a look at the way he asked the supplementary question. He talked about the privilege of being in the New Zealand First caucus rather than in a National caucus as he prefaced his question.Hon David Parker: I raise a point of order Mr Speaker. I would challenge that ruling because the point that Mr O’Rourke made was in response to a quip by the Prime Minister—and it was not offensive but you know it deserved a response. It deserved a response. It did not justify the later reference that Mr O’Rourke complained about.Hon Gerry Brownlee: Well as someone who certainly does not want to prolong proceedings here today I do think it worth noting that in the Prime Minister’s answer he simply pointed out a perfect example of the sort of dodgy tax behaviour that Mr O’Rourke was alleging some pensioners might engage in.Tracey Martin: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! I will hear from Tracey Martin.Tracey Martin: My understanding is that we do not bring other members of this House into disrepute in any way and I would suggest that Mr Brownlee’s suggestion—Mr SPEAKER: Order! [Interruption] Order! To mention a person’s age does not bring that person into disrepute in my opinion.Denis O’Rourke: I raise a point of order Mr Speaker.Mr SPEAKER: I will hear the final point of order—let us hope that it is a serious one—from Denis O’Rourke.Denis O’Rourke: It is a serious one. If the Prime Minister cannot answer the question why does he not just say so?Mr SPEAKER: Order! That is the sort of behaviour that will have the member not remaining in the House. I said to the member—and I invited the member to look atHansard—that the Prime Minister did answer the question.Patents BillIn CommitteeDebate resumed.Part 1 Preliminary(continued)IAIN LEES-GALLOWAY (Labour—Palmerston North): Before the lunch break I was talking about the new clause that the Commerce Committee added to the “Purposes” clause of the Patents Bill which is around getting the balance right between the rights of the patent holder and the person who invented a particular item to which a patent applies and the interests of the well-being of the wider society.I think there are two aspects to this. One is the fact that if we clamp down too tightly with patent law that is too restrictive that stifles innovation. A very important aspect of innovation is building on previous ideas—taking an idea that someone else has had and adding something new to it. If patent law is too restrictive then it is not possible for that type of innovation to be carried out.But there is also the societal good side and I think that Pharmac is a particular example of this. Pharmac makes use of the fact that medicines come off patent after 20 years and can therefore provide cheaper access to medicines than is otherwise possible whilst medicines remain on patent. It is important that drug companies are able to patent medicines and reap the rewards from the research and development that they have carried out and the invention of that new medicine or the discovery of the ability that a particular product has as a medicinal property. But after a period of time when they have justifiably held a monopoly on the rights to such a product it is important that they are opened up.There is a debate going on internationally about how long medicines should stay on patent and I know that New Zealand is under pressure from a number of different organisations and from people located in a number of different countries to change our patent law in a way that would keep medicines on patent for a lot longer. The purpose of this bill speaks to that. It speaks about the balance that has to be struck between the rights of the patent holder and wider society and I think that we have a good balance in New Zealand between the rights of the holder of patents of pharmaceuticals and thewell-being of wider society. I think New Zealand should be firm on its stance in holding to that 20-year period because as this bill says that is a fine balance that must be struck carefully.The CHAIRPERSON (Lindsay Tisch): I call Clare—no I am sorry that member has had her four calls. I call Chris Hipkins.CHRIS HIPKINS (Labour—Rimutaka): Thank you Mr Chair. I will have a go. I am very happy to take a call on Part 1 of the Patents Bill and I am sure that Mr Henare who seems to be so amused over there is just preparing his thoughts on what he wants to say on the Patents Bill because after all it was a Labour bill that has been sitting on the Order Paper now for 5 years due to the inefficiency of this Government. So completely hopeless is the Government that after 5 years of being in Government it has suddenly decided that it needs to progress this bill under urgency.Hon Tau Henare: Do you support this bill?CHRIS HIPKINS: It is 5 years since the Labour Government introduced this possibly longer and then finally this Government brings it forward and allows it to be introduced. Mr Henare asks me whether the Labour Party supports this bill—yes yes. The Labour Party does support the bill. The Labour Party does support the bill—it is actually a very important issue. It is a very important issue. It is a very thick bill. The debate on this I am sure is going to go on for quite some time with all of the significant amount of content that there is here in the Patents Bill.Let us have a look at what the purposes of this bill are.Hon Tau Henare: OK you go and have a look.CHRIS HIPKINS: We turn now to the “Purposes” clause for MrHenare’s benefit. That would be clause 3. It states: “The purposes of this Act are to”—Hon Tau Henare: What’s it say?CHRIS HIPKINS: What does it say? I am happy to enlighten the member. I am very happy to enlighten the member. I am sure that I can read it to him faster than he can read it for himself. So “The purposes of this Act are to—(aa) provide an efficient and effective patent system”—Hon Tau Henare: I don’t know about that. Is that because I’m aMāori—or what? Is that because I’m older than you?CHRIS HIPKINS: What was that?Hon Tau Henare: You heard.CHRIS HIPKINS: No I did not.Hon Tau Henare: Oh yes you did.CHRIS HIPKINS: I was busy talking.Hon Tau Henare: Oh yes you did.CHRIS HIPKINS: I was too busy talking.Hon Tau Henare: You heard.CHRIS HIPKINS: Oh no I did not. Look he is welcome to repeat himself. I know he is very familiar with repeating himself. He is welcome to do so. So one of the purposes of the Patents Bill in clause 3(aa) is to “provide an efficient and effective patent system that—(i) promotes innovation and economic growth while providing an appropriate balance between the interests of inventors and patent owners and the interests of society as a whole;”. That is incredibly important. It is a very important balancing act.Hon Tau Henare: Wow! The man can read! The boy can read!CHRIS HIPKINS: It is an important balancing act—for Mr Henare. I know that balancing is something that he has a great deal of difficulty—very great deal of difficulty—with these days. The purpose is also to comply “with New Zealand’s international obligations;”. Well that is not something that Mr Henare is interested in atall—complying with New Zealand’s international obligations—but that is something that I think is important. If we move to paragraph (a) within the “Purposes” clause of the bill it is about ensuring “that a patent is granted for an invention only in appropriate circumstances by—(i) establishing appropriate criteria for the granting of a patent; and (ii) providing for procedures that allow the validity of a patent to be tested;”.Hon Tau Henare: So much for the whip protecting the leader.CHRIS HIPKINS: What was that?Hon Tau Henare: So much for the whip protecting the leader.CHRIS HIPKINS: Oh come on that is not relevant to this debate. That is not relevant to this debate. I tell you what. Mr Henare should be patented because he is clearly one of a kind. He is clearly one of a kind. I do not think I have ever found a member quite like Mr Henare in this Chamber. We should be quite grateful for that. We should patent Mr Henare and then make sure that there is a clear restriction that no more are to be produced—that no more are to be produced after that particular point in time.Anyway we are getting into the further detail of the Patents Bill. This bill as I mentioned of course is a bill that was introduced by Labour. We will support it unless our amendment is voted down because it can be added to the long list of improvements to the business and regulatory environment that were made by the previous Labour Government. Of course we are actually interested in improving the business regulatory environment unlike this Government here. It talked a lot about cutting red tape. Actually the only red tape it is interested in cutting is the stuff that its mates want to get rid of; it is not actually interested in protecting consumers and protecting New Zealanders.The bill attempts to balance the interests of the innovators who should be entitled to make a profit from their inventions—I think that is quite important—but also we have to look at the interests of society as a whole. I think there is a general view that the existing patent law is too generous for those people who are seeking access to patents and too many corporations end up getting monopoly rights. So in a way I am surprised that the National Government is progressing this legislation because of course we know that this Government’s priority is the top 10 percent—the people who are more likely to be able to access the patent rights—rather than the rest of society. I am pleased and I want to congratulate the Government. It is actually taking a very positive step now in making sure that society’s interests are balanced against the interests of those who might be able to access the monopoly rights to patent. So overall I think this bill has a lot of merit.Hon TREVOR MALLARD (Labour—Hutt South): I would like to start off by absolutely disagreeing with my colleague the chief whip Chris Hipkins. I know that will not do me much good but if he had looked carefully at this Patents Bill especially clause 10 he would know that Tau Henare is not patentable because to be patentable you have got to be useful. You have got to be useful. Clause 10 states: “An invention so far as claimed in a claim is ‘useful’ if the invention has a specific credible and substantial utility.” And any suggestion that Tau Henare has a specific a credible or a substantial utility can only be a lie—can only be a lie—and therefore there is no question that Tau Henare is patentable.I think it is also worth having a good look at clause 9 of the bill “Disclosure to be disregarded in certain circumstances”. I think this is something that Mr Henare could have a good look at because it is an area that he would be particularly interested in. What it does is go to things being obtained unlawfully or in breach of confidence. I invite Mr Henare to consider his relationship with his leader and matters of confidence—and matters of confidence. I think it is fair to say that members on this side of the Chamber had a lot more confidence in him when he was attempting to elevate hisstatus than the Prime Minister did and I want to just thank the Hon Tau Henare for the disclosures that he made in that particular area—the disclosures that he made to the House and the disclosures that he made to the country about his availability.Andrew Williams: He’s gone quiet.Hon TREVOR MALLARD: Yes he has gone quiet.I am going to accept that it has been a long time since I had a look at this bill. I think that the last time I had a detailed look at it Simon Power was the Minister of Commerce. I note that this lazy Minister of Commerce has not progressed it at all. In fact he has not progressed it far enough even to put his own name on the bill. Craig Foss has got his name on the Order Paper but he has not worked hard enough on this bill has not made enough progress on the bill and has not made a proper contribution even to the extent that when one goes to the title page of the bill. We see that it is still in the name of the Hon Simon Power.Hon Member: On the cover it is.Hon TREVOR MALLARD: No no it is not on the front. I am working by the report-back copy.I do want to say thank you to the Minister though on the question of the information and communications technology programming issues around patents—the fact that in the end he got to the right decision. I think it is fair to say that as someone who has been involved in both patents and earlier in the copyright area mine was one of the in-boxes that tended to act as a magnet to the objections when the Minister attempted to overturn the decisions of the Commerce Committee and I do want to say that I think that the select committee worked hard on it.I think it is also fair to say that the select committee was much less influenced by overseas information and communications technology companies than were the Minister and a number of the officials. Without making any specific comment I think we do need to watch very very carefully the influence of the major information and communications technology companies in this area.I am looking forward to the contribution of the Hon Maurice Williamson in this area because I know that he is someone who has quite a good knowledge in this area. He did some programs himself which probably had copyright on them. They involved the National Party’s canvassing system. Unfortunately he left them in George Hawkins’ office at one stage I think along with a floppy disk that had a letter to the transport department asking to be let off a fine for speeding in a period before he was a Minister. So I think it is fair to say that these things are relatively easily discoverable especially if people are careless and leave their floppy disks down the back of the couch as the Hon Maurice Williamson did.This is getting towards being a good bill. There are some important Supplementary Order Papers. There are a couple that the Labour Party will not support. I do want to indicate that I am slightly surprised with one of the later Green Supplementary Order Papers in that it does not appear to be drafted in a way that addresses the interpretation section of the bill. Although Supplementary Order Paper 348 is attempting to take the “advisory” out of “Māori advisory committee” the Supplementary Order Paper is slightly sloppily drafted in that it does not address Part 1 in the way that it probably should if it was carefully drafted and if there had been consultation on it. I am not saying that if there had been consultation on it we would have supported it. Probably we would not—givingMāori a veto over patents is something we are not up to yet. Listening hearing taking advice is important but I think taking the word “advisory” out of the “Māori advisory committee”—I am going to be interested to see how the Hon Tau Henare votes on that particular amendment—Hon Tau Henare: I’ll be voting with the Government brother just like you.Hon TREVOR MALLARD: He is going to be on my side again. On that note I will leave it to my colleagues.Hon LIANNE DALZIEL (Labour—Christchurch East): This bill the Patents Bill as my colleague Chris Hipkins has said was introduced into this Parliament quite some time ago—on 9 July 2008 in fact when the Hon JudithTizard’s name was on the bill as Associate Minister of Commerce.Hon Ruth Dyson: Who was the Minister?Hon LIANNE DALZIEL: Of course I was the Minister of Commerce at the time. When the bill was referred to the Commerce Committee though I was no longer the Minister of Commerce. I was in fact the chair of the select committee. I will take all of those encouraging words that I just heard from the Hon Trevor Mallard to be an endorsement of my chairmanship of that particular committee and I want in turn to acknowledge Clare Curran who actually acted as a very strong liaison person for a range of interests that were needing to be heard.I think that when the original set of submissions was heard on the bill we were left with the position—and we had a very good meeting with Simon Power who was the Minister at the time which basically gave us comfort that the position that we would ultimately adopt would be one that would be acceptable to the Government. He was very accepting of the fact that we were engaging quite appropriately with the wide range of interests that were expressing quite strong views on both sides of the argument. I think we came to a very good position and we did so in a very robust way.It was of great disappointment I think to both Clare and me that we ended up in a situation where a new Minister a fresh Minister having another look at the legislation decided to overturn all of that good work and thereby create exactly the same environment that we had confronted when we heard the submissions.I want to comment on this because I am not going to be here for very much longer so it is an opportunity just to say that when I was a Minister I found that allowing the select committee to have the leeway to work closely with officials and to even meet off-line with people who had very strong interests actually enabled people to reach sensible conclusions. Sometimes there is no need to stick to a formatted process just because that is the way things are always done. Sometimes things get missed in the to-ing and fro-ing and sometimes it is actually better to get people to go off-line and have these conversations and to show a bit of trust.I think that trust was certainly experienced with Simon Power as the Minister. I felt as the Minister that I had that relationship with him and then afterwards as the select committee chair again there very much was flexibility from that particular Minister to enable the officials to also go off-line and to have conversations with the people who were making submissions.I really want to kind of endorse the process and invite Parliament to think very carefully because I notice that we have had a letter for an update of our Standing Orders. In fact it may be worthwhile having a look at that because at a select committee hearing during the select committee process you cannot provide briefings to people who are not members of the committee. Well you can to other MPs but you cannot provide briefings outside unless there is a report to the House and then that enables information to be made publicly available.I think that some of those rules could actually be looked at if it was done by agreement. It seems to me that the Standing Orders of Parliament would be improved if in fact our select committees were able to facilitate that level of engagement with the officials and the protagonists. This is in relation to this one clause that is in Part 1. It is absolutely related to that because Supplementary Order Paper 120 which brings in the definition of a computer program amends clause 10 which is in Part 1. That is why Ithink that it is absolutely critical because what we ended up seeing was that the Minister himself obviously went off-line in a process as a new Minister and then came back with what was in fact an unacceptable option without discussing it with the members of the select committee who had—Hon Ruth Dyson: Which Minister was this?Hon LIANNE DALZIEL: Well it was the Minister of Commerce who is in the chair now. I do not know why that happened but putting that particular clause out into the public arena on a Supplementary Order Paper caused a furore because there really had been an acceptance that we had reached a good decision we had used a good process to get there and the select committee had actually contributed I think very positively to this bill.I think what the Minister has unfortunately done by going down this pathway—and it actually picks up on what Trevor Mallard was saying before about the timetable and about how he had not seen this particular piece of legislation since it first had Simon Power’s name on it. In actual fact this could have been dealt with a lot sooner and the legislation could have been passed and in place prior to the 2011 general election. I think it would have been incredibly helpful to have had that matter resolved although admittedly he did not take over that role until after the 2011 election. But here we are in 2013 and we have wasted literally 2 years of our time generally to update patent law.The legislation itself obviously has lots of different provisions within it but because this particular provision is so important for where we get to in terms of the IT sector and the definition that the legislation will now contain—and I have got so many Supplementary Order Papers here that I am just trying to find exactly the correct one that has the new wording in it which is that “(1) A computer program is not an invention for the purposes of this Act. (2) Subsection (1) prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such.”The wording “as such” is still there which is not as helpful as it could have been but it is better than the previous wording. The one example that we kept coming back to at the Commerce Committee was what we called the “Fisher and Paykel example” where the particular embedded software within the machine itself is not a computer program in its own—Jonathan Young: Yes it is.Hon LIANNE DALZIEL: Well it is not a computer program but the purpose of patenting it is for the type of washing machine that it is rather than the software process per se. I suppose that means “as such” does it not? What it does mean is that the mere execution of a method within a computer does not allow the method to be patented and I think that is the core difference in respect of the wording that has finally been agreed.So I think that we are all on the same page. This is essentially what the select committee agreed to do with slightly different wording and we could have avoided the significant level of delay that has been incurred if we had been able to get together and probably resolve these issues before it came out the way that it did.I think it is kind of a warning to others who are in this situation: when there are competing interests then I think trusting the select committee to play a role in terms of seeking to broker a compromise is actually not a bad thing to do. But then when you have trusted it to do that please let that continue and do not try to overrule it without going back to the people who brokered that compromise. Sometimes legislation will be compromised if you have really strong competing views. Sometimes there is a way through the issue as I think we found in this particular case. We were all on the same page and it would have been helpful if the Minister had decided to join us there much earlier.Hon DAVID PARKER (Labour): I will make a brief contribution to this part of the debate. I think as the Minister of Commerce and most in this Committee will understand patent rights involve a trade-off that is thought to be in society’s interests. If we enable the people who make discoveries and go to the trouble of investing in the research that leads to discoveries and we allow them a reward from their efforts then society is better off because people will go to the effort of making those discoveries. If there was no protection of the discoveries they make that have utility and if there was no protection for them for the economic benefits that flow from those discoveries they would not do the research in the first place and as a consequence society would be poorer for it. We would have fewer medicines and we would have fewer discoveries in engineering across society. We would be poorer in a wealth sense we would be in poorer health and we would have worse environmental outcomes were it not for those discoveries.This tension between the monopoly rights that you confer upon a patent holder to enable them to get the fruits of their labour rather than having them being ripped off by someone who has not put the time and investment into the discovery immediately upon that discovery becoming public is dealt with in a public policy sense by limiting both what it is that you can patent and the term of the monopoly right that flows from the patent. This legislation the Patents Bill attempts to do that.Where you stand on how broad patents should be or on how broad what should be able to be patented should be and the period for which patent protection should exist seems to depend in part from the point of view of some countries on what is in their economic interests. Countries that end up owning a disproportionate share of the world’s intellectual property rights as protected by patents seem to think that from an economic sovereignty point of view that justifies their trying to push the boundaries of what can be protected and how long it can be protected for. We see that and we perhaps will see that playing out in the Trans-Pacific Partnership negotiations that are under way. In respect of that I would suggest that even those who have lots of intellectual property should be hesitant to extend protections too far because it stymies innovation even in their own countries. If you extend patent rights too far—and I am coming to how this is relevant in respect of the definition of computer programs and of what can or cannot be programmed in respect of computer programs or indeed in respect of DNA code—you stop other people innovating.One of the concerns that the New Zealand computer industry has both in terms of patent law and copyright law is that the New Zealand Government will go too far in adopting what countries like the United States want to which the Australians actually agreed in their free-trade agreement with the Americans notwithstanding their Treasury advice that it came at significant economic cost to the Australian economy. If you go too far that way you actually block innovation in your own country because the computer programmers who might want to design or write a software solution—for example in medical technologies which New Zealand is very strong in—could be blocked from doing so because their freedom to operate is effectively prevented by the terms of patent law protecting prior inventions that have been allowed to be patented under patent law. So if you push it too far that is the consequence and then the societal outcome of that is that you actually have less innovation which runs in the opposite way of what the underlying intention of patent law is. This is the balance we are trying to strike.In my opinion we always need to be very wary about those who claim extensions to patent rights because their attempts to extend the terms of their monopoly rights is often motivated by their financial interests rather than by the societal need for more knowledge which should be what drives patent law. So it is with that somewhat longand complicated—necessarily so I think—description of what it is that underlies the principle we should be judging this amendment to insert proposed clause 10A as to whether it gets the balance right. As the Hon Lianne Dalziel has said it tries to say that where you have some computer software that is intrinsic to the working of a mechanical device then the fact that the mechanical device includes some software does not stop it being patented. Yes I agree with that. But if you go so far as to say that source code can be protected by way of patent—this is not copyright; this is patent—then you can go too far because you can block other people from innovating.Similarly in respect of some of the lines that we have to draw round DNA related - technologies there was a time in the United States when you could patent a string of DNA that had been decoded. There was no invention in that step. There was nothing that should have been patentable in there. It was essentially a list using a technology that might in itself have been patentable. The patentable technology that allows you to read the list might very well be properly patentable but the list that you read in DNA as a consequence and other DNA when you are reading that should not be patentable. That particular branch of the law was closed off even in the United States when it realised the folly of its way and cut back on patent rights.That is an example of why you need to be very careful about not extending the scope of patents in a way that does not meet the underlying purpose. The underlying purpose is to stimulate investment in the research and development that increases the sum of knowledge in society in a way that would not otherwise occur so justifying the time-limited monopoly rights that are conferred because as a society we are better off. I would like the Minister to explain on the basis of that principle how he has arrived at this amendment that he proposes to insert clause 10A in respect of computer programs.The question was put that the amendments set out on Supplementary Order Paper 237 in the name of the Hon Craig Foss to the proposed amendments set out on Supplementary Order Paper 120 in his name to Part 1 be agreed to.A party vote was called for on the questionThat the amendments to the amendments be agreed to.Ayes117New Zealand National 59; New Zealand Labour 34; Green Party 14; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes4Māori Party 3; Mana 1.Amendments to the amendments agreed to.The result corrected after originally being announced as Ayes 103 Noes 18.The question was put that the amendments as amended set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to Part 1 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes18Green Party 14;Māori Party 3; Mana 1.Amendments as amended agreed to.The question was put that the amendments set out on Supplementary Order Paper 348 in the name of Metiria Turei to Part 1 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes15Green Party 14; Mana 1.Noes106New Zealand National 59; New Zealand Labour 34; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.Amendments not agreed to.Part 1 as amended agreed to.METIRIA TUREI (Co-Leader—Green): I raise a point of order Mr Chairperson. I would just seek your advice as to why my amendment to Part 6 of the bill was put during the vote on Part 1.The CHAIRPERSON (Lindsay Tisch): I will just have to seek some clarification. The answer is that it has amendments to clauses 4 and 6 which form part of Part 1.METIRIA TUREI (Co-Leader—Green): I raise a point of order Mr Chairperson. Does that mean that the amendments to clauses two hundred and something—I cannot recall the exact numbers now—will be put during the vote on Part 6?The CHAIRPERSON (Lindsay Tisch): That is correct.Part 2 Patentable inventions and patent rightsHon DAVID PARKER (Labour): I want to address respectfully Steffan Browning’s proposed amendment to clause 15 of the Patents Bill in Supplementary Order Paper 124 and explain why it is that the Labour Party will not be favouring that amendment. Thank you for consulting us about it and the way in which you have gone about that.The explanatory note or the letter that came with the Supplementary Order Paper said that one of the things that the amendment intends to do is to stop people—in its current form it says it encourages biopiracy of indigenous resources. I understand the member’s concern. There have been some quite I suppose famous cases around the world that have been referred to. One relates to the scientific properties of theNeem tree which is an Indian tree as I understand it. Have I got that right? Yes it is an Indian tree the extracts of which have long been used as a control of insects and other fungal infections in trees. There were patents taken out that were then said to have been used to stop the traditional uses of theNeem tree despite the fact that that had been a long-standing practice.Secondly there were assertions—and I do not understand enough to know whether all of these assertions were right—that it seemed unfair that the insecticidal and fungicide effects ofNeem tree extracts could be commercially taken by someone who claims that they have discovered the chemical reason that that is occurring in a way that prevented other people from doing it despite the fact that they had always done it. I agree that that seemed unfair. If that was properly described I have problems with that. But that does not mean to say that I think that this amendment can be supported because what this says is that you will not be able to patent organisms including plant varieties and traits in organisms and that is the issue that I want to deal with.We know that we have a lot of challenges environmentally in the world. One of the challenges that we have is that the form of energy that we use at the moment produces carbon emissions that are put into the atmosphere. We know that in order to reduceemissions we need to do lots of things. One of the things that we may need to do is to bring forward scientific research into organisms that help prevent that from occurring or enable othersubstitutionary forms of evidence that are not high in greenhouse gas emissions. For example the conversion of plant material into biofuels may require or may be advantaged by the use of bacteria or other organisms that are discovered in volcanic vents deep at sea. Thesethermophiles as I think they are called are organisms that can survive very high temperatures.I think there is a proper question to be asked or to be asked by those who are researching in favour of making those discoveries as to whether what they are discovering is something that is novel that is of utility and that was not known previously in a way that should be patentable. I find it hard to see a distinction—a hard distinction—drawn in respect of that sort of discovery that would mean that it should not be patentable and I think that the societaldisbenefit of preventing patents in those areas would be that we do not have discoveries that help us overcome some of these other planetary challenges that we face.So I think that if I properly understand that—and it is possible that my understanding is wrong; if it is I invite Mr Browning to point it out. I am not here saying whether those discoveries should be made through or variations in the organisms should be—I do not think this is through this bill a debate about genetic modification or more traditional technologies. I think the same principle applies to both here which is not to advocate for genetic modification; it is just to say that the same principle applies.If I give another example the technology that is being pursued byLanzaTech is taking the flue stream gases of steel mills that are carbon monoxide I understand rather than carbon dioxide and using a process to convert that carbon monoxide into ethanol which is a fuel that can then be used as a substitute for fossil fuels. Overall the environmental impact of steel production is reduced as a consequence. My understanding is that the process does involve organisms that are going to be modified through technology in order to make them more efficient so that that becomes a viable technology.LanzaTech could not do that and could not raise the money to make that advance in science if it were not for the protection that it gets through patents. My understanding of this amendment proposed by Steffan Browning is that if it passed it could prevent that patent from being granted which would then cut off the money forLanzaTech—Hon Member: No.Hon DAVID PARKER: Well it would not cut off the money forLanzaTech? I think it probably would. If it could not get an economic return for its investment it would be less likely to make an investment in it. For those reasons based on our current understanding of this amendment the Labour Party will not be supporting that Supplementary Order Paper.STEFFAN BROWNING (Green): I will address that aspect straight away in this contribution on the Patents Bill. In terms of biofuels bacteria and other organisms certainly are intended to be used by some. They will be being used. Whether they need to be modified and whether they need patenting is a whole different matter. We are very very keen on public-good science and not everything should be tied up in commercial entities or operations. I can think back to when we had the Department of Scientific and Industrial Research and our Crown research institutions which were seriously about public-good science and were very collaborative. Clearly we are working as a country to try to get some sense of that back.This need it seems to have everything put into a commercial context is very unfortunate—the novel and the utility. It should still be part of public-good science and we have to be careful because this suggestion that there is a suppression on innovationby stopping organisms or traits of organisms from being patented is misleading. It is the same with ethanol from methanol conversions and shouldLanzaTech be the only one going down that path when it is such an international need as we acknowledge that we need to look at other forms of energy then that is a very very sad day. We have institutions and we have science in this country that does not need to be bound to somebody who ultimately would get a patent and then monopolise that. If it is so important—and it is—to work around the area of biofuels it should not be able to be monopolised or controlled by a single corporate or owner.So I have put forward Supplementary Order Paper 124 on this crucial area of making sure that companies cannot patent life nor certain elements of life because it goes right back to public expectations. That includes genes and proteins that exist in nature. We accept that patents are a statutory right. They were created hundreds of years ago for good purpose but that was around things not life. Patents should not be permitted over things that are fundamentally part of the natural world. No one has invented life or the elements of life so it follows that no one should be entitled to a patent in New Zealand over life—in fact anywhere.Some of this comes back to some early decisions—I say “early” but not hundreds of years ago. It was really in 1980 when life first got patented. It is a case known asDiamond vChakrabarty and it concerns a decision about a bacterium.Chakrabarty had isolated a particular bacterium. Even then he was able to get the patent but he admitted that he simply shuffled genes about. He said he changed bacteria that already existed. He did not create a new form of life; he merely intervened in the normal processes by which strains of bacteria exchange genetic information. Genetic modification of course is an extension of that. It goes much further. That same genetic modification has caused the monopolisation of major parts of the global food supply. So if you think of soy corn and canola they are some real fundamentals in terms of the international food supply and they are monopolised and they are controlled because there are patents on some aspects of the technology behind them.We cannot afford intentionally or not to allow for the patenting of life forms or the elements of life that exist in nature. A colleague over here was right in saying that we believe it will encourage biopiracy of indigenous resources and it turns those life forms into just mere commodities to be used for profit. This is life that pre-existed us as well and to be putting that into some commercial separate ownership is inappropriate. It also puts up barriers to the free flow of scientific research and in the material I circulated I pointed out that there was a case—and it has just been won in the Supreme Court in the United States—where a breast cancer cell and an ovarian cancer cell had been patented and that was blocking research in that area. Anything around life any genetic material is everybody’s and again my colleague spoke about the fact that the helix of DNA is part of the natural world. Sure we are getting to understand it and there is some fantastic science and there are individuals who are discovering new aspects all the time but that is ours that is everybody’s and it should not be included.The issue as I was saying about breast cancer and ovarian cancer and those genetic mutations that were identified resulted in a huge uproar. There were multiple groups scientific associations and medical people who pushed against that decision until it was reversed. We have to be careful here in New Zealand when we look at some fantastic new approaches and patents around computer software and programs. Here we could make another clear statement in a similar league by supporting this Supplementary Order Paper. Allowing the passing of this bill without supporting the Supplementary Order Paper will lead to the continued blocking of open research and to profit making from our collectively owned genes and resources and importantly it will continue the process of stealing those resources including the intellectual property ofMāori.Some industries seek out organisms and they draw upon this intellectual property to get control and to get control of the food chain. One of them of course is internationally known as Monsanto and it has just created case after case in the courts. It has put farmers out of business and it has really distorted where farming where agriculture where the food supply should naturally lie. It has also had an effect on the availability of the diversity of seed available to everyone from farmers down to home gardeners. There is a huge reduction in the amount of genetic material available because these monopolies that have got greater and greater control through some patents and just some small angles have also ended up buying up the seed companies and have restricted others’ access to those same seeds.So what would the amendment do? The amendment would specify that life is not a patentable invention. Currently the bill already excludes some aspects of life—those exclusions being human beings and their biological processes. That is great. That is a very good exclusion but it does not go far enough. The invention of a method of treatment of human beings by surgery or therapy is a very good exclusion. The invention of a method of diagnosis practised on humans is another. The list of exclusions includes computer programs which is a fantastic shift. Plant variety because it is already very deeply and solidly covered under the Plant Variety Rights Act still leaves many life forms and those elements of life are still part of it.Plants and humans aside the bill does not go anywhere near far enough. Animals bacteria viruses cells and algae all need that extra protection of the Supplementary Order Paper—and their traits. Even a piece of DNA of genetic material from those is something that is ours. It is everybody’s. Everybody on this planet owns that and letting someone manipulate it even slightly is something quite different from inventing a thing. There is a moral level. [Bell rung] Life is not—I suppose I have done my time.The CHAIRPERSON (Lindsay Tisch): I am going to call—I will just explain. You have had two calls in a row and we do not normally give a third one when someone else is calling so I am giving the call to Dr Megan Woods.Dr MEGAN WOODS (Labour—Wigram): I am very happy to take this call on the Patents Bill and to hear further from the member Steffan Browning because I think we are discussing some very important issues around his Supplementary Order Paper 124 this afternoon in the Chamber. There are some very complicated issues around the level of debate informing a number of people. I want to join with my colleague David Parker in thanking the member for the consultation he has done with us around the Supplementary Order Paper that he has put up. It was a discussion that was engendered amongst the caucus too which we have been able to have.I think that what we are discussing this afternoon cuts to the heart of what a 21st century economy might look like and what a high-tech 21st century economy in New Zealand may look like. The 20th century in many ways in New Zealand was transformed in the 1980s by New Zealand researchers and New Zealand commercial entities in 1987 being able to protect their plant variety rights as New Zealand moved more into the intellectual property sphere in terms of what we did around protecting our intellectual property rights. The fact that we hadprotectable rights around plant varieties saw Zespri invest $20 million in developing Hort16A which is the kiwi gold kiwifruit that has gone on to earn that company billions of dollars. It saw the New Zealand Apple and Pear Board under its various incarnations invest similar amounts of money in apple varieties and it gave us the Jazz apple. What we know is that if we are going to have high-value high-tech sustainable industries in the 21st century we do need them to be commercially viable and we do need people to invest in that research and development.Mr Browning raised some very interesting questions in his first contribution—one of what I am sure will be many on this issue—about public-good science and the role thatpublic-good science should play in our society. Public-good science is hugely important but I think it is very important to remember when we are talking about whether or not we can protect biotechnology intellectual property that it is not a dichotomy—it is not either/or. I started talking about the transformation that the New Zealand economy could undertake in the 20th century through the protection of plant variety rights. I truly believe that the ability to haveprotectable intellectual property around organisms and particularly micro-organisms in the 21st century is going to be a similar transformational boon for the economy. It is something that New Zealand cannot be left out of and something that we have to make sure we have progressive and world-leading legislation around to make sure it is fully capable of dealing with these situations.In terms of whether or not as Mr Browning has suggested we might put commercial protections around knowledge and whether that will actually stifle the ability of researchers and the way in which researchers conduct themselves and the ability for knowledge to flourish in this country—the way in which we need knowledge in this area to flourish if we are going to have the kind of economy that we on this side of the Chamber know is our future. I do not think that protecting will do that. We have seen an analogous situation in what has happened in the fields of our traditional crop sciences around the ability to protect the horticultural and arable crops. We have not seen a stifling of interactions. We have not seen a stifling of the ability of researchers to get together. Something that we always have to remember is that this research happens on a continuum. The fundamental basic research is still going to be published in the scientific journals. It is still going to be subject to peer review. It is as we get down the chain and we look more at the applications of this knowledge that the protections come into place.Let us think about what it is that a patent process does and what would happen if we do not have a patent process. If we do not have a patent process what will happen is that industry and commercial entities will be less likely to let their scientists and their researchers share their knowledge and work with other collaborators. What they will rely on is know-how—trade secrets and know-how. But if they go through the patent system then there is a clear chain of documentation. There is a clear chain that lays out the research path that it has been put on and a clear chain of who the researchers working on it are. Part of the patenting process after all is about making that knowledge public. We need to see whether there is prior art. We have to consider what research has happened in the past in this field so these are things that I am confident will allow our biotechnology sector to flourish in New Zealand. I think that this new economy the biotech economy is an important part of our future going into the 21st century.I want to consider some of the ways in which micro-organisms might play a role in a 21st century New Zealand economy. One of the things that we have to absolutely grapple with in this century is the idea of greenhouse gas emission and how in an agricultural economy and an agricultural society and country we are going to manage that. Bacteria and micro-organisms can play a crucial role in this. The photosynthesis that happens via bacteria is so much more rapid than photosynthesis that occurs through only plant material. Using bacteria in our soils is actually a way for us to reduce our reliance on nitrate-rich fertilisers in our soils. There are huge environmental gains for us to be made by having the ability to use these micro-organisms in our agricultural practice but the only way that we will get industry to invest to commercialise these products and for us to be able to use them is if they can see a viable business model that operates around them. Being able to protect their intellectual property for the millions of dollars of investment that they are going to make is absolutely vital to this.We have seen that the popular science literature is full of ways in which bacteria and micro-organisms are going to be a huge part of our finding a sustainable path for the 21st century. Toxins that can usually last in soils and sands for up to 10 years can be broken down in a matter of days through the use of bacteria. Imagine what we could do in terms of cleaning up around spills if we have these high-tech high-value products that can be used to do that. But we need to encourage industry to invest in this. Yes our public-good science and our universities absolutely have a part to play and that is something that I believe in passionately. I believe that we need our universities to be “critic and conscience” and free to publish but we also need to have the part of the chain where we can commercialise this knowledge well-though-out and part of a sophisticated economy that is capable of taking us forward. It is about the ability to protect the knowledge around these organisms and particularly even the organisms themselves because that will be our competitive advantage in the 21st century. It is our raw natural product of our talent and our ability to work in this field put together with what we have always done well that will take us into the 21st century.What we know is—and my colleague David Parker talked about it and Mr Browning addressed it—the fact that biofuels is something that we know are going to be part of the 21st century. Bacteria and micro-organisms are an absolutely crucial part of this technology. Without the ability to build a business model around it to see how it stacks up and to know how it is that a company can make a commercial gain out of this it will not be the way.Of course there need to be limits on this. We need to be able to protect the ability for us to have surgical procedures and the things that there is a morality around. They need to have limits. But the legislation as it currently stands offers those protections. We do not need this amendment. All this amendment will do is stifle the ability to innovate when actually there are some very elegant solutions that have been well-thought-through that have been worked hard on by this Committee and are indeed in this current piece of legislation. Labour will not be voting for this Supplementary Order Paper. It has been an interesting discussion and I thank the Committee for this discussion.METIRIA TUREI (Co-Leader—Green): I raise a point of order Mr Chair.The CHAIRPERSON (H V Ross Robertson): Ah point of order. The honourable member Metiria Turei.Tēnā koe Ms Turei.METIRIA TUREI: Thank you Mr Chair.Tēnā koe. I am glad you are so relieved. I seek the leave of the Committee to amend a Green Party vote on Part 1. We mistakenly opposed Supplementary Order Paper 237 when we should have voted in favour.The CHAIRPERSON (H V Ross Robertson): Is there any objection to that course of action being taken? There is none. The vote shall be amended. Thank you. Kei te pai.METIRIA TUREI (Co-Leader—Green): I hope you are similarly relieved by the content of my speech. I have Supplementary Order Paper 348 on the Table which amends various clauses within this Patents Bill including at least one clause in Part 2 and a substantive one in Part 6. I would like to take the opportunity to talk with members about Supplementary Order Paper 348. It does two main things. First it removes the advisory aspect—or the dominance of the advisory aspect—from theMāori committee and makes the recommendations of theMāori committee concerning patents obligatory on the Commissioner of Patents and the decisions that the commissioner makes. Second it removes the commissioner from the appointment of members to theMāori committee and instead replaces that person with the Minister of Commerce.I want to briefly outline the issues around why Supplementary Order Paper 348 was put together. We have committed to making further changes to intellectual property law to give effect to the Wai 262 claim and the Waitangi Tribunal reportKo AotearoaTēnei.We want first to just acknowledge the original claimants of Wai 262 which was lodged 20 years ago—more than that possibly—by members ofNgātiKurī Te RarawaNgātiKōataNgatiPorouNgāti Wai andNgāti Kahungunu and acknowledge that none of those original claimants is still alive. All have passed on. We acknowledge the support of those claimants particularlySaana Murray and DellWīhongi who were so instrumental in fighting the incursion of genetic engineering into our environment because they believed with all their hearts that we must protect the mauri of Te AoMāori not for themselves or for ourselves but for their tamariki and for our mokopuna to come.The issues here concerning patents have a very long history—a very long Te Tiriti - based history. Unfortunately in the way that the bill has been prepared and the select committee process for this bill that history has been largely ignored. Although we cannot fix that failure during this Committee process we can make a small step to try to remedy at least part of that failure. So we have Supplementary Order Paper 348 on the Table which meets some of theMāori submitters’ concerns about the nature of theMāori advisory committee and gives that committee more authority and more decision-making power in the decisions around patents.We will be clear. We support this bill because it makes some significant improvements to patent law in New Zealand ruling out patents on humans on methods of treatment and diagnosis on plant varieties and on computer programs. I acknowledge the work of my colleague Gareth Hughes which was instrumental in campaigning to make sure that those protections or exclusions were put in place. These changes are important and they are way overdue.But the bill does not deal with the issues that were raised in Wai 262. It does not deal with the issues that were raised by the tribunal inKo AotearoaTēnei. That means there are serious gaps and flaws in it. We acknowledge that. In supporting this legislation we acknowledge those gaps. Our support comes with the knowledge that there is no real progress onmātaurangaMāori here in this legislation.The reason we have put forward the changes in Supplementary Order Paper 348 is to at least give theMāori world view—mātaurangaMāori Te AoMāori—the opportunity to have a genuine say at the table. I would just refer members to the Waitangi Tribunal report. The tribunal was very careful and very measured—it has had some criticism for being far too measured I have to say—in stating its view on howMāori should be part of the decision-making process around patents. It said: “The Treaty of Waitangi gave the Crown the right to govern and enact laws but that right was qualified by guarantee of tino rangatiratanga … for iwi andhapū over their ‘taonga katoa’ … The courts have characterised this exchange of rights and obligations as a partnership. In this context tino rangatiratanga means that iwi andhapū are entitled to exercise authority over theirmātauranga and to exercise authority over their relationships with taonga such as cultural works and parts of the environment that are significant to their culture and identity so that they can fulfil their obligations as kaitiaki.”So that sets the framework for how these issues need to be considered by the Crown. The tribunal then went on to say that its recommendations include in relation to changes to patent law in particular “the establishment of aMāori advisory committee to advise the Commissioner of Patents and Plant Variety Rights about whether inventions are derived fromMāori traditional knowledge or use taonga species;”—that is there in a very watered-down form in this bill—“establishment of a register of kaitiaki interests in taonga species; granting the Commissioner of Patents the power to refuse patents that unduly interfere with the relationship between kaitiaki and taonga; and introducing a legal requirement for patent applicants to disclose anyMāori traditional knowledge usedin research and the source and the country of origin of any genetic or biological material contributing to the invention.”This is essentially about making sure that there isMāori decision making about whether patents should proceed based onmātaurangaMāori and theMāori connection—their obligation to be kaitiaki of those natural taonga—and that there is an obligation on those seeking patents to provide information about those patents from aMāori point of view. That is good. That means that when those organisations those companies those researchers and those inventors are in this country this Te Tiriti - based country they need to take as their first principle considerations of whereMāori interests lie in the work they are doing whose taonga they are using for the invention how they have communicated with those people who are kaitiaki and how they then work with those kaitiaki to make sure that themātaurangaMāori is respected restored and protected. That obligation should be on those who are making the applications. It should be on the researchers and on the inventors.We must make sure thatMāori interests are maintained and upheld from the very start. The current law simply does not deal with any of that at this point. It does nothing about that. We cannot fix that in this bill at this point. It does mean that at some point the Government is going to have to—well we would very much like the Government to—take the tribunal report the findings and these recommendations very seriously and find a way to implement them in this new patents law.We understand that it was not widely understood or acknowledged at the time that the bill was drafted and at the time that the Commerce Committee heard the submissions. Now that we do know now that we have the report and now that we have more information and understanding about how the law could better reflect and incorporatemātaurangaMāori and Te AoMāori into its decision-making processes we have an obligation as a Parliament to make it happen. This is what the Treaty relationship requires.The Green Party will be supporting this bill. We urge members to support our Supplementary Order Paper 348 around theMāori advisory committee to at least give some opportunity forMāori to be decision makers over those issues that are most important to them. It is a small but significant step that could be made today to take the issue just a little bit further and then for us to find a way to work together in the future—and in the very near future I would hope—to really bring these issues fromKo AotearoaTēnei to the fore and further amendments to patent law and intellectual property law. Thank you.Dr DAVID CLARK (Labour—Dunedin North): I rise to speak to this Patents Bill. I want to start first by agreeing with the previous speaker Metiria Turei that the Wai 262 matters need to be addressed. That is fundamentally something that this Government has been very slow to work on andMāori whom I speak with who have an interest in this area are incredibly frustrated with the lack of progress on that particular claim. There is absolutely no doubt that there are some very tricky details to sort through but that is no excuse for not addressing them and for parking the work and not actually getting on with having that conversation. It is my understanding that that is the current state of things. The Minister in the chair the Minister of Commerce may like to take a call to correct me if that is not the case and maybe explain what work is going on because it does cut to the heart of the issue that we are debating here and to which I wish to return as I round out my contribution on this part of the bill Part 2.This part of the bill is as I said right there at the core. It starts out: “Patent may be granted for patentable inventions only”. In one sense we would say that that is an absolute truism but then this part of the bill wants to set out what that means and what it does not mean because we need to know as lawmakers exactly why we are puttingthese things in place and what the purpose is that we are trying to achieve. We talked about the wider public and social good in the previous part. This part of the bill lays out exactly what it is that that means.There are many types of intellectual property. We are talking about patents that protect ideas and concepts as opposed to patents for designs which protect appearance aesthetics and the like; copyright which protects the copying of things that are exactly the same; or trademarks which are designed to protect a unique sign. It is distinguished from know-how which is more around confidential information and is the kind of thing that is usually covered by contract.So we are talking here about patents and what is patentable. There is a significant change that is picked up in this part. Clause 13 of Part 2 says that an invention that is patentable is one that is a manner of manufacture is novel takes an inventive step—that means it is not obvious—is useful and is not excluded by other clauses that are discussed elsewhere in clauses 14 and 15.All of these criteria must be satisfied before a patent application can be accepted and granted. Currently inventive step and usefulness are not part of the patent examination process. So this tightens up the law in a fashion that we think is very important. But we do not go so far as to say that we think that organisms including plant varieties and traits in organisms are not patentable inventions. That is because of the kind of economy that we believe there should be in New Zealand.I should say that all members of the House—or I believe most parties—are going to be supporting this bill. We are all in agreement that we need to have patentable material and that it needs to be well defined in the interests of New Zealand. What we are having a debate about in one sense is precisely how far this patenting should extend. The Labour Party has a strong view that we need a diversified economy and that we need an economy that is based on new technologies new inventions new ideas and new concepts. So we want to support legislation that encourages new patents that encourages new inventions and that encourages and protects the ideas generated by New Zealanders for reasons of greater social good but also in the interests of New Zealand as a country. That is why we support the legislation and that is why we think these tests need to be put in place.The idea that we will not protect plant varieties as suggested in Supplementary Order Paper 124 which Mr Browning has put forward does potentially undercut the future prosperity of New Zealand. In the Labour Party we believe that we need to have a prosperous and flourishing economy in order to provide those social goods and in a sustainable fashion that we as a country would like to afford and need to afford. With high unemployment at the moment and an economy that is struggling we see many of these things being cut through a range of cuts by the Government.In order to afford the health care and the education that we as a country would like to see we need to have a prosperous economy. One way in which we do that is by protecting intellectual property correctly. A law that updates the understanding of what that might mean is very important to New Zealand’s future prosperity and to a diverse economy that is not susceptible to putting all our eggs in one basket and then susceptible to global trends in commodity prices to use one very pertinent example right now with the trade issues with China. This kind of legislation can encourage entrepreneurs to explore new ideas to expand the base of human knowledge and therefore to also increase New Zealand’s prosperity over time.There are exclusions that are explicit in this part of the bill and we support these as well. The examples provided here and in several of the Supplementary Order Papers are intended to give a signal to law interpreters further down the track. For example we know that exclusions are there to restrict access to necessary health-care to treatmentsof human beings by surgery or therapy to methods of diagnosis practised on human beings and to biological processes for their generation in respect of human beings. There are others that are here as examples obviously intended as a guide.If we look at clause 14(1) and beneath it we have a series of examples that are designed to suggest a more general principle. It states: “An invention is not a patentable invention if the commercial exploitation of the invention so far as claimed in a claim is contrary to—(a) public order … or (b) morality.” and these things in that list are things that we would consider moral potentially. Those kinds of exclusions are put in there for good reason. They are technical exclusions but they are very important and are intended as a guide for future use. This part also defines the term of a patent which is 20 years from the patent date unless certain fees that are appropriate to the filing of a patent are not paid.The purpose of a patent is to enable the inventor to exploit the invention. Obviously it is to encourage them to invest and therefore reap a reward further down the track. The various what shall we call them protections—is the right word—put around that throughout Part 2 are there to make sure that those things are looked after. Subpart 3 is about who may be granted a patent and it covers technical details around co-owners of patents. We know that once you add a few more people into the mix these things can become more complicated and it is good that the department has worked through the detail in that respect. Part 2 also gives power to a commissioner to give directions to co-owners so there is a discretion clause in here—clause 25 in Part 2 Subpart 3—that gives the commissioner some discretion. That seems appropriate in the context of this legislation so that we do not get perverse outcomes from the legislation.But to round out this contribution we in the Labour Party are uncomfortable—very uncomfortable—with the exclusion of organisms especially considering the way in which some of our more prosperous inventions have come from that area. An example is the kiwifruit industry as alluded to by my colleague Dr Megan Woods earlier on. We know that patents such as the Hamilton jet and so on are the trademark—not the trademark excuse the pun. They are the—Hon Maryan Street: Hallmark.Dr DAVID CLARK: —hallmark. Thank you to the Hon Maryan Street for that tip. They are the hallmark of a New Zealand that we would want to see going into the future. It is that kind of inventiveness that our very good education system has produced. We produce quality graduates who are smart thinkers. We want to ensure that New Zealand’s prosperity is built on that creativeness.I am looking forward to hearing a contribution from the Minister because it is a very important issue for this bill as to whether these inventions are excluded or included and I am interested in his view on this matter. He has been strangely quiet—perhaps a member of that rare species of parliamentary wallflower whom the public would happily have us patent in order for more widespread exploitation. But I am sure that the Minister will take a call and I look forward to hearing why it is that he thinks this Supplementary Order Paper should be included or excluded. Thank you.The CHAIRPERSON (H V Ross Robertson): I call the honourable member Denis O’Rourke.DENIS O’ROURKE (NZ First): Thank you Mr Chairman—a very good choice. The Minister of Commerce’s amendments in Supplementary Order Paper 120 as they apply to Part 2 will be supported by New Zealand First and New Zealand First will also support Steffan Browning’s Supplementary Order Paper 124. We will also support his Supplementary Order Paper 336 amendments on Part 3 which are only inconsequential amendments.As he points out the Patents Bill allows many life forms to be subject to patentability and this should not be the case. We agree with the reasons he gives for that—in particular because it may encourage piracy of some of New Zealand’s indigenous flora and fauna turning life forms into commodities to be used for profit. There is also the problem of the barriers to scientific research that it may create. We think that is a very significant issue because it is not in the interests of any country at all that scientific research should be inhibited in any way whatsoever. That is possibly an unintended effect of the bill but it is one that we take very seriously.Life forms however they come into being must not become the exclusive property of anybody or any corporation and free access to them by everybody—especially the science community—should be clearly preserved in our view. As a matter of principle nobody invents life forms. No matter how they may be discovered manipulated or used they are not actually invented. Even if a life form can be altered to display characteristics different from similar forms found in nature this is still not an act of invention by humans. It is just a manipulation of the life form already subsisting in the natural world. So in the end for people who own the traits created by such manipulation such as the seeds it is just in fact a method of securing a monopoly which we do not necessarily see as positive. This must not be allowed or encouraged. It is sufficient that those who create such traits will have a head start in exploiting them.I know that where I live in Canterbury there are companies overseas that send seeds to Canterbury to be grown first because of course New Zealand is a season ahead of the rest of the world. Having been grown and reproduced the seeds can be used very quickly in other parts of the world. That is the advantage those companies would have from the seeds so there is no need for them to be patented. In fact it is better that they should become as widely available as possible in due course for the potential benefit to all humankind.As Mr Browning points out the bill prohibits only some life forms from patentability. It says for example that human tissue cannot be patented whether for treatment or therapy purposes or other such purposes. Plant varieties are also not patentable but they are protected under the Plant Variety Rights Act. The definition of that term in that Act means that there are still many life forms not covered. Therefore we think a more comprehensive provision is needed in order to prevent patents for living life forms. Therefore the Browning amendment would not compromise the development of exclusivity relating to products such as Zespri that have the protection of the Plant Variety Rights Act and of international agreements.Concerning the development of new—that is changed—micro-organisms for commercial use such as in the development of biofuels although not covered by the Plant Variety Rights Act and although such developments may become commercially valuable that does not itself justify patentability and does not in the end undermine New Zealand’s commercial interests in using such organisms because the value of them would be in New Zealand’s economic advantage such as climate advantage in producing and marketing them. So I do not accept that Mr Browning’s amendments would damage New Zealand’s commercial interests at all as claimed by Labour. I think that Labour has got it somewhat wrong and should have another look at the situation. New Zealand First will therefore vote for Mr Browning’s amendment but whether it passes or not we will also vote for Part 2.STEFFAN BROWNING (Green): I would just like to address some of the issues that have come up from Labour members in regard to plants and patents. Labour members seem to think that we will lose the advantages that we have had in the development of different kiwifruit and apples and it is around the Plant Variety Rights Act. There is a distinct difference between a patent and the protections in the PlantVariety Rights Act and those very plants that they are talking of are protected regardless of my Supplementary Order Paper 124 because they are protected under a very strong Plant Variety Rights Act—that is not a patent. I will mention some of the limits or exemptions to a grant holder’s rights that allow for a more communal approach or reach into those plants that have got those protections. There is very good protection for those people who have bred or who have put that effort in to get those plants to fruition and then out into the market. Other persons are free to grow or use protected varieties for non-commercial purposes—so the community at large can benefit—but the commercial aspect is still protected for those who have developed them. Other persons are free to use the plants or parts of a protected variety for human consumption or for other non-propagating purposes. They are free to use a protected variety for plant breeding although the repeated use of a protected variety for the commercial production of an F1 hybrid seed is not permitted without the authority of the rights holder. There are some pretty strong protections for the breeders of the plant varieties but they do not need a patent so I think it would be good if our colleagues in Labour have a rethink there because the legislation certainly does not cut off that innovation and the commercial benefit for those who do that development.But on a moral level life is not an invention and should not be owned by any one person or corporation. Unfortunately with a patent just the little addition of a single gene can become the invention of someone who claims private ownership. So any animal bacteria cell virus or algae could be patented and as I say we have already got plants covered elsewhere. I will run through a little bit of history where this has run amok internationally with the patenting. I will use plants as an example even though we are not patenting them or an extreme version of them. You can add that once you start to put these bacterial traits or viruses or whatever into plants then you start to get into the world of patents. In 1994 the US Plant Variety Protection Act was amended incentivising breeders by no longer allowing farmers to save seed without a licence from the owner of the seed variety and ultimately they got into the area of patents. As a result the farmers become bound to pay licence fees and royalties to the companies developing them despite their prior universal right to save plant and exchange seed from their own harvests requiring the skills and knowledge of their localities.Modern biotech companies have claimed the rights over entire species and prevented access to their inventions by other scientists but it was the fact that they were able to allow for patents in there that really locked things up. The advent of patenting genes was followed by an extremely successful float on the stock market of a company calledGenentech which raised huge money. Those companies then saw the potential of a new stream of income and they encouraged development which has led to the monopolisation of the agricultural seed market which I mentioned earlier and a significant collapse of traditional seed markets. There is plenty of research supporting that.Monsanto actually got a patent on Roundup the weed killer and it was due to lapse after a period of time. So how was it going to manage and maintain that market? Well it patented some crops using what they call the “events”—an “event” is using some material from a micro-organism and putting it in. With these events as such being patented and being able to express that through crops Monsanto benefited because it had this Roundup ready technology tied into its genetically modified seeds. A technology fee was charged to farmers and then they had to pay a per-acre royalty on patented seeds and then they were also bound by an agreement that prevented them from saving the seed for planting in a subsequent year instead buying new seeds every year. This followed lots and lots of litigation about farmers not using their geneticallymodified seeds. I have seen the same thing in Australia. I am over there shortly and will be looking at some other situations where things have gone bad from contamination.But it is the actual micro-organisms that are involved in this; it is not the plants traditionally protected under the Plant Variety Rights Act. We are getting into all aspects of life and the genetic material being able to be patented. That went wrong because companies have become quite monopolistic in the way they have managed that in the United States and in some other countries. With the increased use of herbicides plants have now got resistance so now companies are patenting and doing new genetically modified varieties right through to having varieties modified so they can spray 24-dichlorophenoxyacetic acid on them as well. That is just so they can retain control of the food chain and be able to sell their herbicides and pesticides which although we were told would not increase in use have in fact increased hugely—significantly—in use. So now there are new varieties coming through with other micro-organisms and other traits being developed. Note that we say “against the patenting of traits” for very very good reason because this allows that control of what has happened over there.This is not about blocking innovation; it is about ensuring access for the community for farmers for researchers and for medicine to all these traits of these parts of life: the genetic material the microbes algae the cells of animals the different parts of animals which with a little tweak is something that they can own—something that is everybody’s. My colleague Metiria Turei talked before about the issues around theMāori advisory board and the group that would give recommendations if asked by the Commissioner of Patents. That comes down to the same core—the same aspect. It comes right down to the basis of life and whether it should be patentable. I hope that colleagues and other parties will reconsider and support all of the Green Party Supplementary Order Papers which will make this bill a really strong fantastic innovative bill. Thank you.CLARE CURRAN (Labour—Dunedin South): In speaking to Part 2 of this Patents Bill I would like to take us back to the overarching principles that my colleague David Parker referenced in his speech on this part of the bill earlier this afternoon. What this bill is trying to achieve is the balance of two interests. Those interests are around allowing innovators to profit from their inventions and second ensuring that the monopoly rights that accompany patents are not unduly exploited. Those principles lie beneath every part of this Patents Bill and as I will set out in a minute there have been deliberate exceptions set out in this bill because it is acknowledged that in order to modernise this bill we had to look at the things that should not be patentable. Part 2 is the part that excludes software from being patentable. We have had a detailed discussion about that. But it also excludes a number of other things.The other thing that underpins this bill is the idea and the knowledge that our 1953 patent law is out of date that it needs updating and that it is too generous to people seeking patents. One of the things that my colleagues from the Greens and even New Zealand First need to think about when we are actually discussing this bill is that there has been a push back to say that not everything that has been patented before should be allowed to be patented. There has been a significant relaxing I suppose of that environment so that the ability to go out and get a patent for whatever you like is no longer there. It is just no longer there. It is actually really important to bear that in mind.With reference to the organisms debate it should be noted—and let us be very clear here—that you cannot patent any living thing in New Zealand as it occurs in its natural form. You can patent only novel processes or cell lines or genetic modifications. I note that the Minister of Commerce is nodding his head vigorously. It would be good if he perhaps took a call to actually point that out.I will draw everybody’s attention to the criteria for granting a patent where those criteria have to align to those that apply in other countries. A patentable invention is an invention that is a manner of manufacture it is novel—so it has to be new—it has to take an inventive step that is not obvious it has to be useful and obviously it is not part of the exclusions which I am going to list again in a minute. Those criteria have to be met. They have to be satisfied before any patent application can be accepted and granted. I am just going to read again that you cannot patent any living thing in New Zealand as it occurs in its natural form. That is a really important principle and that is why the Labour Party is not supporting the Greens’ Supplementary Order Paper 124 because as we see it the bill has gone through an extensive select committee process where all of those issues were discussed and were addressed. Yes we can have further debate about them but what the Supplementary Order Paper proposes is extensive. It is extensive in terms of compromising the intent of the Commerce Committee as it stood back in 2010.There have been extensive speeches given this afternoon by a number of my colleagues about the impact on our clean green tech industries and the importance of being able to patent new processes in order to be able to progress them. There was the reference toLanzaTech and the world-leading climate change work around natural bacteria which cannot be patented. It is the process of carbon monoxide conversion to create ethanol for fuel that is patentable. It is the process; it is not the organism itself. I did want to point that out. We had a very passionate speaker in my colleague Megan Woods giving a great defence and being very proactive around what sort of economy we could and should become—a diversified economy.The other thing that Part 2 does in this bill is to set out exclusions from patentability. They are set out in clause 14(2) which states that “commercial exploitation must not be regarded as contrary to public order or morality only because it is prohibited by any law in force in New Zealand.” There are half a dozen exclusions from this of which computer software is one. We have discussed that at length and I am not going to go into that but the others are also important. Because the legislation brings in that concept of morality ultimately that is the cover. That is the cover for many of the issues that are being brought up in the Chamber this afternoon. Clause 14(1) includes examples of non-patentable inventions: “an invention that is a process for cloning human beings:”—no part of a human being can be patented—“an invention that is a process for modifying the germ line genetic identity of human beings: an invention that involves the use of human embryos for industrial or commercial purposes: an invention that is a process for modifying the genetic identity of animals that is likely to cause them suffering without any substantial medical benefit to human beings of animals or an invention that is an animal resulting from such a process.” Those matters are important. Those are examples of some of the things that cannot be patentable. Also clause 15(2) includes: “An invention of a method of treatment of human beings by surgery or therapy … (3) An invention of a method of diagnosis practised on human beings …” and then the computer program. Those matters are significant. They are significant. There was in-depth discussion by submitters and discussion in the select committee with officials on all of those matters and I think that on balance the select committee ultimately got it right.Finally I just want to refer to the discussion around theMāori advisory committee and Supplementary Order Paper 348 introduced by Metiria Turei. We on the Labour side of the Chamber feel that there is a question mark around just what that Supplementary Order Paper would actually achieve. Just let me reiterate what the bill does around the establishment of theMāori advisory committee. It would advise the Commissioner of Patents in relation to patent applications for inventions involvingtraditional knowledge or indigenous plants and animals. That committee has to be allowed to function in order to progress this discussion and I certainly think that there is a case for further discussion on this matter. It is very significant but we have to get on and allow that committee to actually start to function and to provide that advice that can be used by the Commissioner of Patents to assist in determining whether those inventions are novel whether they involve an inventive step and whether the commercial exploitation of those inventions will be contrary toMāori values. We need to put this bill into practice so that we can actually get on and do that. I do want to note that the establishment of theMāori advisory committee was recommended by the Royal Commission on Genetic Modification. This is again a significant part of the bill. I certainly think that it needs further discussion but I think we have got to get on with it and test it and see how it works.RINO TIRIKATENE (Labour—Te Tai Tonga):Tēnā koe Mr Chairman. I thought I would pick up on the contributions from my colleague Clare Curran on theMāori advisory committee. I understand it comes in at Part 6 of this Patents Bill but if my colleague could send me a copy of that Supplementary Order Paper 348 I would be most appreciative.I want to make some comments on the advisory committee because there has been aMāori trade marks advisory group around for—I would say—close to 10 years now. It was quite an innovative thing at the time of its creation and I understand that it has been doing some very good work in terms of providing advice on trademark applications. I do not want to be sort of stretching into Part 6 but because this Supplementary Order Paper on this part deals with theMāori advisory committee I want to make a contribution.The CHAIRPERSON (H V Ross Robertson): Well done.RINO TIRIKATENE: Thank you to my colleague for the copy. I think we do need to look closely at the role of the advisory committee. It is commendable that it is included in the bill and that it follows from the advice of the royal commission but in contrast with theMāori Trade Marks Advisory Committee the power of appointment to the committee is in the hands of the commissioner. If you look at theMāori Trade Marks Advisory Committee you see that the membership of that committee has hardly changed in over 10 years and you have a lot of—what should I call them—intellectual-type people mainly Auckland-based people and maybe some Wellington bureaucratic - type people who have been members of that committee for a very very long time. I would not want to see the composition of the patents advisory committee drawn from the same type of people.I come from the South Island and we are very very aware of ourMāori interests in our flora and fauna and our natural landscape. It is disappointing to see that there is very little South Island input into say theMāori Trade Marks Advisory Committee and that has been the case for close to 10 years. Although it is not specified in the bill it would be advisable I believe to have geographically broad iwi representation and consideration but more fundamentally to have expertise in those matters when the commissioner actually comes to selecting people to sit on these advisory committees.I have just a further remark: we do want to make sure that they are the best people for the job. This is highly specialised and also culturally significant expertise that is required but I do not think that it is helpful to have advisory committee members appointed for such long durations of time—in excess of a decade or whatever. They just roll them over and roll them over. I think there needs to be some consideration of their performance and giving others a go. Basically you knowMāoridom is made up of many iwi and manyhapū within those iwi and there is a lot of expertise right around the country—traditional expertise on tikangaMāori andmātaurangaMāori. I think it isfair that we give a broad representation and regular advice or expertise if there is expertise—and I know there is expertise on many many different maraes and inwhānau andhapū right around the country—so that we freshen up the composition of these bodies with the expertise that is there right around the countryside.Sure I guess you have to have a mix a composition on any type of board or advisory committee but comparing it with theMāori Trade Marks Advisory Committee I see names on that committee that have been there for close on 10 years. Being from the South Island I do not know who they are. Many of these people are just academics from Auckland so I do not want to see those sorts of same old same old institutionalised people put on to these advisory committees representing all ofMāoridom. They are defending ourpā. They are the ones who will be defending ourpā. They are advising the commissioner and so we need to get a broad mix of ourmātauranga of our tohunga you could say of our traditional expertise incorporated into that committee.I know that there is no size limit given to the committee but I would certainly hope that there would be a fair representation of the geographically diverse iwi from the North Island and the South Island and that their tikangaMāori expertise would be incorporated into the full composition of that advisory committee. But I will give further remarks on this matter when we get to Part 6. I just wanted to pick up on that given that I heard that the member Metiria Turei had mentioned the advisory committee in Supplementary Order Paper 348. Kia ora.CATHERINE DELAHUNTY (Green):Tēnā koutou katoa. I would like to take just a short call on a similar point to that of the previous speaker Rino Tirikatene and give some background as to why we put up Supplementary Order Paper 348. We did that because we actually went outside the walls of this Whare and talked to some people who had been involved in these issues for many years. What they said was that aMāori advisory committee is very 1980s as a concept. We are working towards a different world where we actually honour the Treaty in our legislative programme and when we want to consult on vital issues like this we actually create entities that reflect the Treaty and this Patents Bill is not it. So although we support the Patents Bill we raised this Supplementary Order Paper in the hope that the House would be ready to move towards more of a co-governance approach as we do with Treaty legislation. This is not co-governance. This is actually about allowing two different world views where one gets to make all the calls.Receiving advice has got nothing to do with following advice. In fact if you look at the law it does not require the Commissioner of Patents to take the advice. It requires the commissioner to hear the advice but not to take it and it allows the commissioner to appoint. That is why we have suggested in the Supplementary Order Paper that it should be the Minister of Commerce rather than the commissioner who does this and that the people on the committee should have power over their advice not on all matters but on critical matters to do with taongaMāori and themātaurangaMāori world view and that advice would be binding. It is very interesting that when we talk about this process we want people to be able to be heard but not listened to. We want them to be able to speak but we do not want to have to abide by what they say. So one world view is fine it is going to dominate and it is going to be accepted but the other world view will not be. It might be if it is lucky and the commissioner decides that they will listen to it.This is very old-school and it is very inappropriate in the 21st century in terms of both the findings of Wai 262 and the people who put up Wai 262. We spoke to people like Aroha Mead who is an internationally recognised expert on intellectual property issues and other people from around the motu who actually had huge concerns about what this bill entrenches in this bit—not the whole bill which has got many manymerits. It takes us right back in time to the good old era when the commissioner could tell the tangata whenua: “Thanks for the advice but we’ve decided to continue with our approach anyway.” Let us hope that that will not happen because what we hear is that theMāori Trade Marks Advisory Committee in many ways has actually worked pretty respectfully with the tangata whenua advice but we cannot assume that that will happen. When we write law we should do the right thing and that law should be robust.That is why we are also supporting Steffan Browning’s Supplementary Order Paper 124. There is something very fundamental about what he has put forward in the Committee today—something very fundamental about what it is to be alive what it is to be patented and what it is to be protected by the law. What Steffan has done will also have the support of many of our colleagues in the tangata whenua world whom we have spoken to about this. They supportSteffan’s Supplementary Order Paper as well because basically it is talking about recognising that life cannot becommodified and therefore the Supplementary Order Paper should be supported. Life cannot becommodified and Te Tiriti should not be watered down to be about advice. So support our Supplementary Order Papers. There is the opportunity to do so on all sides of the House so that we actually get both these issues into what is a piece of legislation that we are encouraged by and that we believe the Minister of Commerce has made great progress on.There is no excuse in the 21st century for treatingMāori advice as token. There is always a risk when the commissioner has all the power as they do. I support the member Rino Tirikatene in saying that often these committees become entrenched. They become about certain people receiving a position that they become comfortable in and others are not heard. It is very important that we take this seriously and do not stay in the old mind-set of consultation.As my dad once said—[Bell rung] I am about to finish but I do want to say one more thing about what my dad always said about consultation: it is a cross between a con and an insult. I think that is an important point when the law does not require us to act around the responsibilities of article 2 in Te Tiriti o Waitangi. Kia oratātou katoa.The question was put that the amendments set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to Part 2 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes18Green Party 14;Māori Party 3; Mana 1.Amendments agreed to.The question was put that the amendments set out on Supplementary Order Paper 348 in the name of Metiria Turei to Part 2 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes15Green Party 14; Mana 1.Noes106New Zealand National 59; New Zealand Labour 34; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.Amendments not agreed to.The question was put that the amendment set out on Supplementary Order Paper 124 in the name of Steffan Browning to Part 2 be agreed to.A party vote was called for on the questionThat the amendment be agreed to.Ayes26Green Party 14; New Zealand First 7;Māori Party 3; Mana 1; Independent: Horan.Noes95New Zealand National 59; New Zealand Labour 34; ACT New Zealand 1; United Future 1.Amendment not agreed to.Part 2 as amended agreed to.Part 3 Process for obtaining grant of patent and other mattersThe question was put that the amendments set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to Part 3 be agreed to.Amendments agreed to.The CHAIRPERSON (H V Ross Robertson): The amendments set on Supplementary Order Paper 336 in the name of Steffan Browning to Part 3 are out of order because they were contingent on agreement to the amendment set out on Supplementary Order Paper 124 in his name.Part 3 as amended agreed to.Part 4 Infringement other patent proceedings and matters affecting patent ownershipThe question was put that the amendment set out on Supplementary Order Paper 237 in the name of the Hon Craig Foss to the proposed amendment set out on Supplementary Order Paper 120 in his name to Part 4 be agreed to.Amendment to the amendment agreed to.The question was put that the amendments as amended set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to Part 4 be agreed to.A party vote was called for on the questionThat the amendments as amended be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes18Green Party 14;Māori Party 3; Mana 1.Amendments as amended agreed to.Part 4 as amended agreed to.Part 6 Administrative and miscellaneous provisionsThe question was put that the amendments set out on Supplementary Order Paper 237 in the name of the Hon Craig Foss to the proposed amendments set on Supplementary Order Paper 120 in his name to Part 6 be agreed to.Amendments to the amendments agreed to.The question was put that the amendments as amended set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to Part 6 be agreed to.A party vote was called for on the questionThat the amendments as amended be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; Independent: Horan; United Future 1.Noes18Green Party 14;Māori Party 3; Mana 1.Amendments as amended agreed to.The question was put that the amendment set out on Supplementary Order Paper 126 in the name of the Hon Craig Foss to Part 6 be agreed to.A party vote was called for on the questionThat the amendment be agreed to.Ayes117New Zealand National 59; New Zealand Labour 34; Green Party 14; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes4Māori Party 3; Mana 1.Amendment agreed to.The CHAIRPERSON (H V Ross Robertson): The amendment set out on Supplementary Order Paper 336 in the name of Steffan Browning to Part 6 is out of order because it is contingent on agreement to Supplementary Order Paper 124.The question was put that the amendments set out on Supplementary Order Paper 348 in the name of Metiria Turei to Part 6 be agreed to.A party vote was called for on the questionThat the amendments be agreed to.Ayes15Green Party 14; Mana 1.Noes106New Zealand National 59; New Zealand Labour 34; New Zealand First 7;Māori Party 3; ACT New Zealand 1; United Future 1; Independent: Horan.Amendments not agreed to.Part 6 as amended agreed to.Schedule 2The question was put that the amendment set out on Supplementary Order Paper 237 in the name of the Hon Craig Foss to the proposed amendment set out Supplementary Order Paper 120 in his name to schedule 2 be agreed to.A party vote was called for on the questionThat the amendment to the amendment be agreed to.Ayes117New Zealand National 59; New Zealand Labour 34; Green Party 14; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes4Māori Party 3; Mana 1.Amendment to the amendment agreed to.The question was put that the amendments as amended set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to schedule 2 be agreed to.A party vote was called for on the questionThat the amendments as amended be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes18Green Party 14;Māori Party 3; Mana 1.Amendments as amended agreed to.Schedule 2 as amended agreed to.Clause 1agreed to.Clause 2 CommencementThe question was put that the amendment set out on Supplementary Order Paper 237 in the name of the Hon Craig Foss to the proposed amendment set out on Supplementary Order Paper 120 in his name to clause 2 be agreed to.A party vote was called for on the questionThat the amendment to the amendment be agreed to.Ayes117New Zealand National 59; New Zealand Labour 34; Green Party 14; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes4Māori Party 3; Mana 1.Amendment to the amendment agreed to.The question was put that the amendment as amended set out on Supplementary Order Paper 120 in the name of the Hon Craig Foss to clause 2 be agreed to.A party vote was called for on the questionThat the amendment as amended be agreed to.Ayes103New Zealand National 59; New Zealand Labour 34; New Zealand First 7; ACT New Zealand 1; Independent: Horan; United Future 1.Noes18Green Party 14;Māori Party 3; Mana 1.Amendment as amended agreed to.Clause 2 as amended agreed to.Bill reported with amendment.Report adopted.Third ReadingHon CRAIG FOSS (Minister of Commerce): I moveThat the Patents Bill be now read a third time. The bill will repeal and replace the Patents Act 1953 other than the provisions relating to patent attorneys. The passage of this bill marks the conclusion of a lengthy process to reform and update New Zealand’s patent legislation. I would like to take this opportunity to highlight key features of the bill that will contribute to ensuring that New Zealand’s patent legislation supports innovation while ensuring an appropriate balance between the interests of patent owners and society as a whole.The Patents Act 1953 does not achieve this objective. Its criteria for the grant of a patent are relatively weak compared with the criteria applied in most other countries. It is possible for patents to be granted for inventions that are not new or that are merely obvious variations of what is already known. The grant of such overly broad patents can impose unnecessary costs on consumers and businesses by restricting access to products and services that should be free for all to use. Such patents can actually inhibit rather than encourage innovation. Most innovations build on what already exists. If existing innovations are too heavily protected by patents it can be difficult for subsequent innovators to build on them. This bill tightens up the criteria for grants in order to as far as possible ensure that patents are granted only for inventions that are genuine innovations—that is innovations that are new that are not obvious and that have identified real-world use.The Commerce Committee in its report to the House on the bill recommended the inclusion of a provision that computer programs should not be patentable inventions. Supplementary Order Paper 237 introduced a number of amendments in the form of a new clause 10A of the Patents Bill which deals with the patentability of computerprograms. The amendments were designed to provide additional guidance on the proper interpretation of new clause 10A in a manner that is consistent with New Zealand’s international obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights. The amendments also provided an appropriate balance between the interests of inventors and the interests of society as a whole which is one of the key purposes of the Patents Bill and was already provided for in clause 3 of the bill.The Supplementary Order Paper amended the Patents Bill to provide additional clarity as to the meaning of the phrase “computer program as such” in new clause 10A. The “as such” wording was taken from the European Patent Convention and the United Kingdom Patents Act. In the United Kingdom the “as such” wording has been interpreted to mean that patent applications that involve or make use of a computer program are ineligible for patent protection if the alleged inventive feature lies solely in it being a computer program. Supplementary Order Paper 237 introduced two new subclauses to the bill subclauses 10A(3) and 10A(4). The effect of these two additional subclauses is to codify in legislation the first three steps of a test set out in an English Court of Appeal decision known as theAerotel test. The amendments provide a clarification about how clause 10A should be interpreted. The Commissioner of Patents and the New Zealand courts should apply theAerotel test and subsequent English jurisprudence that applies the test when considering patent applications involving computer programs.Given the lack of New Zealand cases in this field of patent law the ability to refer to UK case law will assist New Zealand practitioners when providing guidance to their clients. The effect of the test set out in new clause 10A is that it will not be possible to obtain a patent for an invention that involves or makes use of a computer program if the alleged inventive feature lies solely in it being a computer program. However a patent may still be granted for an invention that makes use of or involves a computer program if the actual contribution made by the invention first lies outside of the computer or second affects the computer itself but is not dependent on the type of data being processed or the particular application being used. The amendments in clause 10A as embodied in Supplementary Order Paper 237 provide improved assurances as to the intention behind clause 10A and thus enable the passage of this important piece of legislation.Also included in the bill are measures to take account of concerns expressed byMāori and others regarding the granting of patents over plants and animals. This includes the establishment of aMāori advisory committee to advise the Commissioner of Patents where patent applications involve the use of traditional knowledge or indigenous plants and animals and providing for patents to be refused where commercial exploitation of an invention will be contrary to morality or public policy. I am aware that the Waitangi Tribunal made a number of recommendations for changes to New Zealand’s patents legislation. Some such as the establishment of aMāori advisory committee were already included in the bill. The Government is in the process of considering the other recommendations but no final decisions have been made. The passage of this bill will not prevent any subsequent amendments if the Government decides to accept any of the other recommendations.These features together with the other changes introduced in the bill will provide a simpler and more open environment for innovation to take place in New Zealand. Although patents will be more difficult to obtain patent owners will have greater certainty that their patents will be valid and enforceable. Those undertaking research and development can be confident that their efforts will not be unfairly restricted by overly broad patents. The Patents Act 1953 also contains provisions regulating the patent attorney profession. These provisions will remain in force for the time beingwhile a single regulatory regime for New Zealand and Australia patent attorneys is developed. I intend to introduce legislation implementing such a regime once it has been developed.I would like to thank everyone who has contributed to the bill and the policy process that led to it including the members of the Commerce Committee the Parliamentary Counsel Office officials and members of the public and industry representatives who participated in the various submissions and policy processes. I want to particularly thank one of my intellectual property officials WarrenHassett who has been working on this bill for over 10 years. I am very pleased to commend this bill to the House.CLARE CURRAN (Labour—Dunedin South): This is a historic day for intellectual property in New Zealand and Labour supports this bill the Patents Bill. This bill was introduced on 9 July 2008 by the Hon Judith Tizard. It had its first reading on 5 May 2009 and the Commerce Committee which was chaired by the Hon Lianne Dalziel reported back on 30 March 2010. It has had a long journey.It has some core principles that underpin it. Those principles are to attempt the balance of two interests: first to allow innovators to profit from their inventions and second to ensure that the monopoly rights that accompany patents are not unduly exploited. New Zealand’s existing patent law is too generous to those people who seek patents. This law has to be updated. It has to be modernised. But we believe that too many corporations have monopoly rights and many multinational corporations can get patent rights to inventions inside New Zealand that would not be protected overseas.As I said this is a historic day for intellectual property in New Zealand. Our economy is still reliant largely on exports that are weight exports—on products that are loaded on to ships and channelled through our ports. Increasingly we are seeing a weightless economy emerge where the new innovators use code as their currency and where inventions rely on their ability to adapt and adopt technology. They rely on the ability to invent and innovate on the basis of lines of code. Those inventors are our new artisans but they are also our artists because they build on what has gone before as do musicians painters authors and dancers. We need to back them. That is why this bill is so important. It sets the framework for intellectual property in New Zealand and it sets the framework on which we can build more intellectual capital.I would like to briefly note some of the comments that were made by the IT industry upon the conclusion of the negotiated settlement around the exclusion of software from being patentable which is included in this bill. I would also like to again commend the Minister of Commerce for ultimately understanding and being prepared to listen to the industry and for allowing that negotiated settlement which has resulted in Labour supporting this bill today.The Institute of IT Professionals has thanked the Minister for “responding to industry concerns clarifying the Patents Bill’s intention to remove patentability of software and for taking extra steps to ensure the law around software patents is clear and unambiguous.” The chief executive officer Paul Matthews said: “The patent system doesn’t work for software. We believe it’s near impossible for software to be developed without breaching some of the hundreds and thousands of software patents awarded around the world often for ‘obvious’ work. Thus many software companies in New Zealand creating outstanding and innovative software live with a constant risk that their entire business could be threatened due to litigious action by a patent holder.” Ian McCrae chief executive of New Zealand’s largest software exporter Orion Health said: “We welcome the announcement. Under the current regime obvious things are getting patented. You might see a logical enhancement to your software but you can’t do it because someone else has a patent. In general software patents are counter-productive often used obstructively and get in the way of innovation.” JohnAscroft theChief Innovation Officer of Jade Software Corporation said: “We believe the patent process is onerous not suited to the software industry and challenges our investment in innovation.”These are the heavyweights of the new economy in software development. These are the people who needed to be listened to and thankfully they were.I would also just like to point out that New Zealand is not alone in heading in this direction in our jurisdiction. Our position on excluding software patents has been met with acclaim around the world in IT industries in many countries. Currently the German Parliament the Bundestag has adopted a joint motion against software patents—in just recent months. The resolution urges the German Government to take steps to limit the granting of patents on computer programs. The German Parliament said that patents on software restrict developers from exercising their copyright privileges including the right to distribute their programs as free software. Patents help to create monopolies in the software market and hurt innovation and job creation. The German Parliament called on the German Government to make sure that free software development was not restricted by patents. That resolution is being discussed currently in the German Parliament and it is looking hopeful that it will progress.Finally I want to say that vigilance is required on this issue. Vigilance is required because I think we have to be watching closely to ensure that this new law provides a sufficient exclusion of software-based patents. Only time will tell that. They are notoriously complex controversial and much litigated. There is not even agreement on what constitutes a software patent. Many can be dressed up as business method patents which are not directly addressed in this amendment.That is why we need to remain vigilant. We need to ensure that we do maintain momentum around the boundaries of the exclusion because they will be tested in due course. We have to watch that the Intellectual Property Office of New Zealand and eventually the courts do enforce this new law robustly because there may be a challenge required to ensure that the intention of this new law is upheld. What is clear is that the New Zealand IT community—the new developers the new economy those who represent our new economy—will not tolerate patents that threaten software innovation. That is to be applauded and that is why we support this bill.JONATHAN YOUNG (National—New Plymouth): I am very pleased to stand in support of the Patents Bill at its third reading. In New Zealand a patent may be granted for an invention that is a manner of manufacture. What it does is it gives the patent owner the right to exclude others from making using or signing a patent invention during the 20-year term of the patent. When it comes to patents competition innovation and all of these issues it is very complex. Although we want goods to be available for the common good we also want to protect the interests of people who are inventors and innovators so that they can get a just and deserved reward for their efforts and so inspire people to continue to innovate.We know that our patent law here in New Zealand had become quite outdated. It was based on laws in the United Kingdom. Our Patents Act was established in 1953 and it was based on the United Kingdom’s Patents Act of 1949 so it is well over 60 years of age and no doubt has had amendments all along the way. A complete rethink and a reworking are important as we live in this modern age where we have not only weightless products but also weighed products that need to be protected and recognised through patents.During this time I have no doubt that other members of the Commerce Committee received emails from many people. I thank them very much for their contributions. I thank the submitters who came and spoke to us during the previous Parliament. Their views have been considered. I believe that the Minister of Commerce was right inaddressing some of those areas. We need to understand that we live in a complex world where so much information and sharing of ideas occurs. How to do that in an appropriate way that not only protects the originality and the inventors’ interests but at the same time enables innovation to occur is important.One of the things that we need to understand here in New Zealand is that we rely on the rest of the world incredibly so. Eighty-five percent of what we make we export and so it is very important for us to have understanding around international treaties. A lot of people emailed and said we were bowing to Big Brother whoever that might have been but we understand that these international treaties enable us to reach out into the world with our products. They protect our interests and very much so.A lot of good debate has taken place this afternoon around the issues of the Patents Bill which is before us. It is good to see that we are making progress and today we shall complete this third reading and enact this law. I want to thank all the members of the Commerce Committee. I am now the chair and I want to just acknowledge Lianne Dalziel a former chair and the work she did as well. I acknowledge the Hon Simon Power and I acknowledge the Hon Craig Foss for the great work he has done in bringing this bill to the House. I think we have got it right. Thank you very much.Dr DAVID CLARK (Labour—Dunedin North): It is with some degree of pleasure that I rise to speak on this Patents Bill. It is very nice to be able to support a Government bill.Hon Simon Bridges: How much?Dr DAVID CLARK: I am invigorated if that is what the member is asking. I am invigorated by this opportunity to speak on the bill. It is with some pleasure that I speak because this is a Government as we know with the worst economic record of any Government in the last 50 years and it is not often that we get a chance to actually speak in support of some of the policies that it puts through. So you Mr Speaker and the members of the House will understand how pleased I am to be speaking on this bill as a consequence.The Labour Party believes in the importance of a clean green diversified economy that creates sustainable jobs for New Zealanders. The issue we have is that this Government is not creating that kind of economy more generally. We know for example that in my home district of Otago there is the highest number of unemployed people in 22 years. There are 7800 people unemployed currently and that is not a proud record for this Government. But here we have a genuine attempt I think to diversify the economy.Hon Simon Bridges: You need more mining in Otago. Dig it up.Dr DAVID CLARK: So I compliment the Government on this. The research and development tax credits are an issue. Mr Bridges across there raises the issue of mining and no doubt he is trying to draw attention in this context to the cuts atOceana Gold that have taken place in the last week in Otago under this Government because of its lack of growth generally and because of its poor economic record.But here we have an attempt to genuinely diversify the economy to look at the issue of patents and what the right balance is between the interests of inventors and patent owners and the incentives on them to develop and produce new technologies new ways of doing things and new ideas and the interests of society as whole which we know can result from these new inventions and ideas. We think that this is a good bill because it does attempt to balance those two interests: first allowing innovators to profit from their inventions; and second ensuring the monopoly rights that accompany patents are not unduly exploited. That has got to be recommended to the House.The absolute novelty test—New Zealand will finally catch up with the rest of the world on that. It means that a patent will be invalid if the invention was not new or wasobvious in light of information available anywhere in the world at the application date. So the bill does tighten New Zealand’s overly generous patent law.I want to just pick up briefly on something that the previous speaker Mr Jonathan Young the current chair of our Commerce Committee raised. He raised the issue of Big Brother and tried to frame this debate in terms of international trade and particularly the Big Brother issue. I think though it must be on record that the complaint that New Zealanders have about the process with the passing of the Government Communications Security Bureau Amendment Bill was that it was not properly investigated. The previous illegal spying acts had not been investigated Mr Young. The Henry report the leaking of theKitteridge report and the various issues and bungles by the Government were not exposed to transparency and not even to an independent investigation. New Zealanders want to know that their spy agencies are acting in their interests and not in some other interests. It would have been good process for the Government to appoint an independent inquiry to sort out those matters before the law was changed to make illegal what was previously legal.I think it needs to be put on record that these two things are not easily likened and pulled under the same banner. Mr Young is drawing a very long bow there. New Zealanders are not happy with the progress of that bill. But here we are protecting ideas and concepts using patents and protecting the intellectual property that will create the kind of economy we need to ensure a prosperous future for our country—a country that is going to prosper from the likes of the ideas of theHamiltonJet theGallaghers of this world the Scott Technologies and so on to make sure that the appropriate protections are in place and the public-good interests are protected in the longer term. Thank you.STEFFAN BROWNING (Green): I rise to speak to the third reading of the Patents Bill. Clearly we are disappointed that the Supplementary Order Papers that take away the ability to patent life or the traits of it and that provide some more support and substance to the committee that would be looking at issues affectingMāori were not agreed to.Because the bill—and we are supporting it—has substantive improvements on the previous Act what is showing up is that the bit that is really missing is around life and around the ability forMāori to actually have a serious meaningful part an assured part in the outcomes. It comes down to that essence of life—right down to the genetic material. I was disappointed to hear that Labour is supporting the bill because it is supporting genetic engineering effectively and that is the significant difference here. The bill is a very very good bill but it has a lack in that it supports genetic engineering in New Zealand and suggests that that might be a way forward for New Zealand and it clearly is not.I think it is time that New Zealand had a serious discussion around that. We have had significant years where all we have had are field trials except for one commercial release of something that has not yet been used—a genetically engineered vaccine for equine influenza that has not been used as far as I know. Everything else has been field trials. Every one of those field trials has had compliance issues and has had issues of contamination. I have brought over Australian farmers who have showed what the issue is when they have gone down the genetic engineering track in Australia and the issues in the community the conflict in the community when neighbour contaminates neighbour and actually degrades the value of their crop and degrades the value of their land.I will be visiting another farmer in Western Australia in a couple of weeks who is actually—Hon Simon Bridges: What’s his name?STEFFAN BROWNING: His name? You have a look. Google it up. You will be right. I will be visiting him. He is appearing in court along with his neighbour supported by Monsanto—David versus Goliath. Why should that farmer have lost the value of his crops just because his neighbour allowed something to drift over on to his place which has devalued the premium that he and his other neighbours were getting? Why should the councils in that area be subject to clean-up costs because this sort of material has got loose?I think that is a real question for New Zealand. We have not gone down that track yet and that is good. We can claim it as a benefit for New Zealand to get a premium for our goods our primary production in this country. The bill would have been extra special if it had effectively banned genetic engineering from being able to be patented here.Hon Simon Bridges: What would the Greens do?STEFFAN BROWNING: We have a very good vision and in New Zealand—remember—we have not got it. We have not got it commercialised in this country now and according to some we are doing just fine.We have got a vision around sustainability of clean agriculture clean primary production and maximising that when we go out to the world with the best possible value and the best possible brand. Genetic modification has no place in that brand. It is not wanted by consumers internationally. More and more information is coming about the negatives in that. We do not need it for biofuels. We do not need it out in our environment at all. We do not need it in our food even more. There is a real issue around the amount that might be in our food but the current Government—in fact the previous Government as well—was remiss in the level of compliance assurance around what was in our food. We have got GE food labelling laws that are soso but they are not even being reinforced by auditing or having a check on them.We have experts in this country and I will talk about Jack Heinemann from Canterbury University who is internationally renowned. He has got a book hereHope Not Hype: The Future of AgricultureGuided by the International Assessment of Agricultural Knowledge Science and Technology for Development. This is a big lump of scientists who have looked deeply into these things to see what is actually sustainable for the future what has gone wrong with this technology in the past and how we can learn from that. We are so lucky that we have not gone down the track that the US and certain South American countries and a few others have gone down. A number of them are pulling back from it and regions are pulling back because they are having very negative effects into their environments. They have also had limitations in public-good science because of the patents on organisms. It has reduced the ability to have the absolute best we could get through medical science because what is considered to be locking up for innovation to give rewards to those corporates ends up being a monopoly a manipulation or a strategic measure to block other research and other users out of what is everybody’s—what is life and what belongs to every one of us.We support the bill for those really positive things and as I say we are very very concerned about the major major gaps in there. They are the ability forMāori to have some genuine influence on things that matter to them—the essence of life in there—and the fact that we can see life patented. New Zealand could have been extra special there. It is great that we have seen the development around software and computer programs. What a fantastic day it is today when we are going to be voting that through and that is very very good. But for the rest of it it is unfortunate. So as I sit down I will still commend the Minister for the positive parts of the bill and the rest of our colleagues who are supporting the bill in its major substance. Thank you.Peseta SAM LOTU-IIGA (National—Maungakiekie): It is a pleasure to speak on this the Patents Bill and to support the Minister of Commerce the Hon Craig Foss and the Commerce Committee which did some fine work on this bill in terms of getting it through the House process.Patents are important. I think we have all said that this afternoon. They are important because they are about innovation and advancement. They are about invention new ideas and new processes. That is the future of New Zealand’s economy and New Zealand business. Patents are important in that respect. Patents are important because it is appropriate to balance research and development and the interests of innovators and inventors with the interests of users of that technology or patented technology and patents. Although patents protect business innovators they are also about providing goods and services for consumers and the people of New Zealand. Patents are important because in a small economy like New Zealand which is becoming increasingly reliant on technology—especially in my electorate of Maungakiekie where there are high-tech manufacturing companies that rely on intellectual property rights—patents are important for our economy and they are important for jobs and opportunities in this country going forward.It is pleasing today that for once this year we have the Labour Party supporting a bill that supports jobs and opportunities and supporting a bill that supports families and communities out there that need legislation to support our economy. It may be indicative that the Labour Party is supporting this bill because it is currently leaderless it is currently rudderless and it is currently in need of some direction.The Patents Act is outdated. We have all acknowledged that fact. Patents are not new. In the 1600s the English Parliament passed a Statute of Monopolies that granted new monopoly rights around manufacturing. Our Act was put in place in 1953 so we can see that we are 60 years in the making in terms of changing and updating this Act. I think we on all sides of the House can take credit for that.The bill is about bringing our patents legislation and making it more closely aligned with our trading partners and the people whom we do business with across the world. In particular it is about looking at a single trans-Tasman patents application and examination regime that will bring down the costs of business and bring down the time delays that are involved in patent applications both here and in Australia. So I support this bill because I know that this bill will make a difference to our economy and will make a difference to our communities and to employers and employees out there who rely on this type of technology.May I finally just acknowledge the Minister and the moves that he made around Supplementary Order Paper 237 which has been talked about. There was wide consultation with the industry and close deliberation and I think we have a solution around computer programming that is workable that is realistic and that will bring positive outcomes for businesses and for inventors alike. So I support this bill because this Government is once again bringing legislation to this House that is promoting the economy promoting jobs and opportunities and leading us into the future. Thank you.Debate interrupted.Amended Answers to Oral QuestionsQuestion No. 4 to MinisterHon STEVEN JOYCE (Minister for Tertiary Education Skills and Employment): I seek leave to correct an answer I gave to question No. 4 in the House this afternoon.Mr DEPUTY SPEAKER: Leave is sought for that purpose. Is there anyone opposed to that course of action? It appears not. Leave is granted.Hon STEVEN JOYCE: This afternoon in the House I said in answer to a supplementary question that an increase in credit achievement from 24.8 credits in 2011 to 37.3 credits a year later was an increase of 66 percent. The correct percentage increase is of course in fact 50 percent.Patents BillThird ReadingDebate resumed.TRACEY MARTIN (NZ First): I rise on behalf of New Zealand First to take a very short call on what is a very very good bill the Patents Bill to come through this Parliament. As has already been mentioned the Patents Act of 1953 needed to move forward with the times. I would like to acknowledge the work throughout the House on creating a workable bill particularly for the development of patents in the IT area. This is going to be a continually moving feast. This is probably the one area where New Zealand First would agree with all other parties that this is where global legislation—the borders of this industry—is almost non-existent. This is going to be a continual movement around how we protect our intellectual property the intellectual property of New Zealanders in this country and the intellectual property of those in other nations who also create the apps and the other computer programmes and technology that we will use in everyday life and have begun to use today.I would like particularly to also support the Minister of Commerce’s acknowledgment of the gentleman who spent 10 years of his life looking at this particular piece of legislation and trying to modernise it so that it is workable and so that New Zealand can as my colleagues have already said lead the way in this particular area. I know that the situation has been of major concern to the IT industry here and I know that it will be pleased to hear this debate. I do however want to acknowledge some of the concerns around genetic modification that my Green Party colleague Steffan Browning raised.New Zealand First agrees in part that the branding of New Zealand which is a niche-market country—we are small and we can never compete on the amount that we produce but we can compete on the quality of what we produce—is an area that we should give severe consideration to. We should have a wide conversation in this country with politics taken out of the game about what is best for us as a nation and the future employment and agricultural outcomes for our country. Again New Zealand First supports this bill and applauds the across-House work that has been done to bring this legislation up to date.A party vote was called for on the questionThat the Patents Bill be now read a third time.Ayes117New Zealand National 59; New Zealand Labour 34; Green Party 14; New Zealand First 7; ACT New Zealand 1; United Future 1; Independent: Horan.Noes4Māori Party 3; Mana 1.Bill read a third time.Financial Markets Conduct BillIn CommitteeParts 1 to 9 schedules 1 to 5 and clauses 1 and 2Hon CRAIG FOSS (Minister of Commerce): The Financial Markets Conduct Bill is a very very large bill with many parts. It is very complex. The tentacles of it go everywhere. It has huge impact on the modernisation the new sophistication of financial markets regulation in New Zealand. I acknowledge the Commerce Committee which originally worked on the bill and of course the consultation that has been going on around this bill out in the finance sector for quite some time to get it to where it is now. Mostly I think without exception the demand of the sector is to know when this bill is to be passed and whether we can get it in place as soon as possible because of course it changes the framework under which all securities banking capital raising reporting you name it must operate within New Zealand. It is well overdue in terms of the need for it. Its journey has taken quite some time but that is a function of constant ongoing consultation and regulatory review with stakeholders and there have been changes to the bill as reported back from the select committee. But the substance of the bill is absolutely unchanged. It is a once-in-a-generation opportunity to upgrade and modernise our financial regulation. This bill goes hand in hand with its companion legislation the Financial Advisers Act which was passed in September 2008 by the previous Labour Government. This bill is the other part the right hand of that left-hand bill or the other way around if you like. It is absolutely crucial to the modernisation of our financial regulatory scheme.The bill has many parts. Members may know that Supplementary Order Paper 220 is something quite different because it is so large. I think there are about 700 pages of it. Actually it is basically a revision-tracked bill incorporating the Supplementary Order Papers to help members work their way through it. Early examples of it have been consulted on widely out there in the financial sector and not just the big end of town either but all stakeholders from shareholder associations banking organisations listed markets you name it—anyone and everyone involved in the commerce sector. As I noted it is part of a suite of legislation that is associated with this bill including the Financial Advisers Act passed in September 2008 under Labour and some of the latter parts in it refer to the Financial Reporting Bill which is before the House at the moment. Hopefully we will be able to progress that pretty soon. The Companies and Limited Partnerships Amendment Bill amongst others is also before the House with one or two yet to be introduced. Each and every single one of those bills is about making the securities the financial regulatory arrangements the framework and platforms within New Zealand not quite leading edge I suppose but as good as you could get anywhere in the world. That is what New Zealanders deserve and that is what they need.These bills are in response to unfortunate activities that happened in the finance sector of New Zealand in the early 2000s—about 2004 to 2008 as the global financial crisis crashed upon us finance companies failed and the courts found some activities to be questionable with prosecutions that pointed to many many gaps in our legislation. This bill is the second completion of this reform. It does take in lessons of the global financial crisis and the collapse of finance companies and it is a response to the Capital Market Development Taskforce work of a few years ago. It will play a key role in continuing to rebuild the trust and the confidence in our financial sector for all New Zealanders. I quite openly admit that for some New Zealanders recent behaviours saw the loss of their savings in various organisations some through investment failure and some as the courts have shown through quite deliberate and even fraudulent actions.We need those Kiwis to trust in our financial sector and we need those who fund New Zealand’s debt to fund our mortgages to trust in our regulatory environment as they send their capital from overseas back into New Zealand. The bill will also enable different ways of raising capital with pathways of capital from the big end of town the NZX-listed organisations right down to unlisted exchanges alternative exchanges which are possible and most importantcrowdfunding and peer-to-peer lending which I am extremely optimistic will be a very positive growth opportunity for New Zealand.Yes it is a bill of considerable technical complexity. It has been the subject of extensive consultation. I would again like to thank all of those who have been engaged from the pre-drafting stage to the select committee to the parallel process that went on at that stage. We have constantly engaged with officials as we have improved the bill to the form it is in now. There are only three Supplementary Order Papers. One was released in May I think. It was considerably large and it was I think the one that had in it some policy changes. But again those changes were in response to consultation and awareness of some issues that were not in the bill as reported back. A Supplementary Order Paper was tabled yesterday or today and that is generally a technical tidy-up in response particularly to the Public Trust changes that Minister Collins brought in recently.I look forward to the debate and discussion on this bill. It is a very organised bill. Different parts deal with distinct parts of the market how capital is processed and managed and how signals are sent around New Zealand from again the smallest participant a KiwiSaver investor a managed funds player a discretionary investment managed scheme and the various permutations around those right up to the large initial public offerings and what a very large company would need to do the form of its prospectus and what it will now need to say and declare in conjunction with Financial Markets Authority directives as it is looking to raise substantial amounts of capital.I look forward to the discussion and the debate in the Committee. I understand that the bill is pretty much widely supported so I hope that continues. Thank you.CLARE CURRAN (Labour—Dunedin South): It is a pleasure to speak in the Committee stage of the Financial Markets Conduct Bill—this bigkahuna of a bill which is what it has been described as. I was just looking at the second reading speeches on this bill. At that stage the bill was 500 pages long and now it appears that it is 700 pages long so in the intervening period an extra 200 pages have been added. I have just been reading the comments made by Minter Ellison Rudd Watts partner LloydKavanagh who was asked whether it was the bigkahuna of financial markets reform and who agreed with that sentiment. He said that it was a complete rewrite of New Zealand’s securities law and replaced the current Securities Act of 1978 which has obviously been around for more than 30 years. So this bill is a back-to-basics fundamental change and indeed it is a bigkahuna of a bill. I actually do not have the whole bill in front of me but I think it has also been described as a doorstopper.This is a one-stop shop for securities law. It has been designed to provide a more coherent structure and it replaces a number of pieces of legislation including the Securities Act the Securities Markets Act the Unit Trusts Act the Superannuation Schemes Act and the non-tax parts of the KiwiSaver Act. It is always important to look at the context of these pieces of legislation and the Minister of Commerce Craig Foss has acknowledged that ultimately this bill follows on from the work that was done in the previous Labour Government through the Capital Market Development Taskforce in 2008 which is more than 5 years ago now. So it has taken a long time for this bill to get to that point and to provide that blueprint and action plan for our financial system. Labour is supporting this bill. We are also supporting Supplementary Order Paper 220 which the Minister referenced which came about after my colleague Clayton Cosgroveproposed a Supplementary Order Paper to the Minister on behalf of the New Zealand Shareholders Association to increase the threshold for wholesale investors from $500000 to $750000 and many other amendments. So I am presuming that that Supplementary Order Paper actually equals the 200 extra pages—around about—that have seen this bigkahuna bill become even bigger.There are many aspects to this bill. There are a lot of things to discuss. There are 11 different parts and I am just going to mention some of those tonight in my first contribution on it. Firstly regulated financial products are going to be categorised as equity securities debt securities managed investment products and derivatives that are based on the economic substance of the financial product and not just its legal form. There is an exceptionally important requirement in this bill for issuers to prepare a prospectus and investment statement. That will be replaced with a requirement to prepare a single product disclosure statement tailored to retail investors and I would just like to highlight this as one of the single most important outcomes of this process.That means that for retail investors—these are the ordinary investors and this is one of the reasons that we have gone through this process—the document that they get will contain all the information that they need to make basic investment decisions. This harks back to the financial collapses and the impact that they have had on ordinary investors in New Zealand right throughout New Zealand and the absolute critical importance of people who are investing in a company having that basic information and being able to trust that information. For analysts and experts they will be looking to an online register which is like a website and that will also be critically important because transparency is a really important factor in this bill. It underpins it. There was an enormous amount of discussion around how to ensure that there could be trust in the system and trust for the ordinary investors the everyday investors out there.The bill also beefs up the Financial Markets Authority’s powers. It has a new role to license fund managers and the providers of discretionary investment management services. It also provides a new liability framework and it introduces criminal law which is reserved for conduct where there is knowing or reckless behaviour and also a greater use of civil remedies. But that criminal law component to this for the knowing and reckless behaviour is providing also an exceptionally important criminal aspect. This means that in respect of the people who have rorted the system in the past have put up prospectuses that have told people to invest in companies that have not been able to be proved trustworthy and who have put up celebrity endorsements around those prospectuses and sucked in those ordinary everyday investors—that behaviour will no longer be tolerated where that is knowing or reckless and there will be significant criminal penalties as a result. The Companies Act 1993 will be amended to introduce a new criminal offence in relation to the serious breaches of duty of directors to act in good faith and in the best interests of the company and the duty relating to reckless trading. As I said there will be additional powers granted to the Financial Markets Authority such as the power to designate financial products and make no action statements and the current regulatory regime for exchanges will be replaced with a licensing regime for significant non-wholesale markets.Labour started that financial markets reform process. We are very pleased to see that the Government is continuing that good work. I do want to acknowledge Lianne Dalziel who set up the Capital Market Development Taskforce in 2008 to develop a blueprint and action plan for the development of New Zealand’s financial system. This is an important part of her soon-to-be legacy in this Parliament and it is something that we should acknowledge. We are pleased that the Government is starting to act on the recommendations in the task force’s report one of which was having a single market regulator. This work has taken up the time of the Commerce Committee for some yearsnow on and off. There has been an enormous amount of work that went into it by officials. I want to acknowledge the officials in the Chamber tonight—very impressive and all respect to you. There is going to be a lot to talk about on this bill tonight and I look forward to taking another call.Dr DAVID CLARK (Labour—Dunedin North): It is a pleasure to rise to speak on this bill the Financial Markets Conduct Bill. Labour will be supporting this bill. It is a bipartisan approach that has been taken and that is important because it is actually about the security and stability of our markets. It is a process that has played out over time as other members have alluded to. I want to start with the main purposes of the bill because I think it is important that we start at the beginning for those who are at home who may not have yet had a chance to familiarise themselves with this document. The bill is a 700-page document. It is a weighty tome. This is double-sided for those at home who have not had a chance to have a copy in their hands.Hon Ruth Dyson: Printed on each page.Dr DAVID CLARK: And printed on each side indeed Ms Dyson—double-sided.Hon Maryan Street: Thank goodness.Dr DAVID CLARK: The environment spokesperson next to me says “My goodness.”Hon Maryan Street: Thank goodness.Dr DAVID CLARK: Thankfully—a smart move printing it on both sides. I am sure it is available electronically as well for those who are that way inclined.The purposes of the bill are to “promote the confident and informed participation of businesses investors and consumers in the financial markets;”—that is (a)—and “(b) promote and facilitate the development of fair efficient and transparent financial markets.” Those two short sentences explain these 700 pages. That is what this bill is trying to achieve and it is good to boil it down to that because those are then the criteria by which we judge the success of the bill over time to see whether it really plays out in terms of its own purposes.Of course those of us who accept and believe that markets can work well—I personally believe that markets that are well regulated make excellent servants; they find efficient outcomes. But I have a deep concern when I see poorly regulated markets or markets that are not regulated at all because more often than not they produce terrible outcomes and they make terrible masters. So this is an attempt to make sure that our financial markets are properly regulated. It is the proper business of this House to make sure that they are working in the interests of all of our economy so that it grows over time and we can support the kinds of social services health services and education services that we want for New Zealanders.There are many other aspects of this Government’s economic performance that I could comment on that I am less satisfied with but this is one where there has been a bipartisan approach where common solutions and agreements have been found in order to ensure that we have a solid foundation for our markets to exchange information to provide confidence to investors and to ensure that capital flows toward its best use. Ultimately that is what markets are all about. They are all about signalling to investors where capital is most efficiently used for the best returns if markets are functioning properly and in the interests of consumers and society as a whole.I have not had much to do with the early stages of this bill but as it has gone on I have engaged with the Supplementary Order Papers that have been put forward and have been very pleased with the way in which as far as I am concerned that process has played out. Supplementary Order Paper 220 which has been put forward to increase the investment threshold for deeming an investor to be a wholesale investor from $500000 to $750000 is there along with a number of other amendments intended toensure that the protections of the bill are extended appropriately. That is something that we commend on this side of the Committee and will be supporting.I do also want to commend the efforts of Lianne Dalziel who set up the Capital Market Development Taskforce in 2008 from which this bill is ultimately derived. That was set up to develop a blueprint and an action plan for the development of New Zealand’s financial system. We are pleased the Government is starting to act on the recommendations in the task force’s report one of which was a single market regulator. The Labour Government of course took a number of measures aimed at strengthening our financial markets and this process was accelerated by the global financial crisis and the spate of finance company collapses.I want to speak briefly to the Crown Retail Deposit Guarantee Scheme because that was one of the things that really triggered a hurry-up of work in this area. There was an extreme failure of monitoring in that case and possibly $100 million—we do not know exactly because it has never been properly investigated—of taxpayer money went astray effectively due to poor monitoring by the incoming Minister of Finance Bill English. We know that the Crown Retail Deposit Guarantee Scheme was kicked off by the Labour Government in response to the global financial crisis. It was put in place with 24 hours’ notice from our Australian counterparts in order to ensure that there was not capital flight from banks. The scheme itself was fundamentally sound in its initial stage. There was incredibly quick movement by officials to cover off that risk and to act in the interests of greater New Zealand. The Ministers at the time with great wisdom put that into place very quickly so that the banking system did not fall over which would have seen no doubt some terrible social consequences for New Zealand.So it was put in place well but unfortunately we now know that the Minister of Finance did not follow up adequately and demand the reports necessary to show just how wrong that scheme was going. The unintended consequences of that piece of legislation playing out over time without adequate monitoring are well known to New Zealanders. If I just cite some of them though the South Canterbury Finance collapse has taken the tally of depositors’ money at risk to over $8 billion. That alone was worth $1.6 billion of taxpayer funds. There were 61 finance companies that failed and the guarantee of taxpayer money that followed has been a kind of corporate bailout the likes of which we seldom see in this country. There was a failure of monitoring. The risks grew and grew and grew because the Minister of Finance did not keep a lid on it. The high rate of return attracted investors and the guarantee of the Crown meant that the deposits were safe for those who put the money in.Hon Trevor Mallard: Outrageous.Dr DAVID CLARK: It is an absolute outrage as my colleague the Hon Trevor Mallard says. Now there are a host of other things the Government cannot afford—or claims it cannot afford. If we had saved those billions through effective monitoring—or at least the several hundred million that could have been avoided through effective monitoring—by the Minister of Finance and if he had been across his portfolio properly at the time there are many things that we could have afforded now without getting the country into debt at the rate that this Government has been getting it into debt. So that particular example is another example of why it is important to have really good financial markets regulation.This bill in its attempt to make sure that we have clear and transparent reporting requirements will mean that ma and pa investors see the changes through offer documents. That is the kind of thing that they will see. Prospectuses and investment statements will change. We will have things that are much easier to read much more accessible and there will be things kept in the online register. All of this will make it a market that functions more clearly and where retail investors are protected but theCrown is not putting taxpayer money at risk in the same way and not having to bail out companies for the failures either of the Government to regulate properly or of lending that was not signalled appropriately in terms of its risk.It is a substantial bill. As I said at the outset it has 700 pages. It is aptly described I think as a new one-stop shop for securities law. It is designed to provide a more coherent structure. The Ministry of Economic Development says that it will bring us closer to Australian law in some places and that is in this case no bad thing. As I said the process has been good and the engagement has been good. The changes that have come through to raise that threshold for retail investors were first put forward by the Hon Clayton Cosgrove and were in substance adapted by the Minister of Commerce and added to. The result is a bill that can be accepted across the Committee. It is a bill that takes us forward and that updates Acts that were sorely in need of updating.Unfortunately here we are in urgency passing something that has been on the books for 5 years and it was the same with the last bill that we had go through the Patents Bill. I was out running during the meal break with a friend of mine who is involved in patent law who saw it as somewhat ironic that this had all been rushed through under the cover of urgency when it had been in the system for 5 years. Again here we are rushing a bill through under the cover of urgency—albeit a worthy bill and worthy of support but it shows poor management of the House I think. That is sad and requires parliamentarians—Hon TREVOR MALLARD (Labour—Hutt South): I seek leave of the Committee for this part and the remaining parts of this bill to be considered as one question. Just to make it clear I would expect you to restate the question so the clock starts for speeches so that people could still get their full set of speeches.The CHAIRPERSON (H V Ross Robertson): Thank you very much. Given the nature of the motion the question now before the Committee is that—Hon Trevor Mallard: You’ve got to put the leave first.The CHAIRPERSON (H V Ross Robertson): Is there any objection to that course of action being taken? There is none.The CHAIRPERSON (H V Ross Robertson): The question before the Committee is that Parts 1 to 9 schedules 1 to 5 and clauses 1 and 2 stand part. Those in favour please say Aye—the Hon Trevor Mallard.Hon TREVOR MALLARD (Labour—Hutt South): I was not really suggesting that you put the question because I thought one or two of my colleagues might want to take a call on the Financial Markets Conduct Bill.The CHAIRPERSON (H V Ross Robertson): I did try Mr Mallard.Hon TREVOR MALLARD: I am just checking that my colleagues are in fact prepared to do that. If that is the case I am very happy to defer to them.Hon DAVID PARKER (Labour): Sometimes people are unseemly in their haste but thank you Mr Mallard. I have a question for the Minister of Commerce. I agree that we need to update the forms of disclosure that are made when people have public offerings be they debt participatory securities or equity securities. I agree that the old distinction that we had between investment statements and prospectuses was not working and that anyone who was knowledgable would want to see the prospectus rather than the investment statement. I also believe that prospectuses had become so long and unwieldy listing all manner of risks in a way that was confusing for investors. When faced with a question as to whether they should invest they had a long list of risks that was so long it was hard to discern which were the important risks and which were the less significant risks.So I am pleased that we are updating the forms of disclosure that are to be made but I want the Minister of Commerce to assure me that we are going to be replacing thesetwo documents one of which was too brief and imprecise and the other was too long and overly detailed with a document that strikes the balance in the middle. I was in the practice of law for a long time and used to do quite a bit of prospectus work—Hon Ruth Dyson: You got quite good at it after practising for a while.Hon DAVID PARKER: Yes I did practise enough so that occasionally I did something right thanks Ruth. I started doing work way back when on prospectuses for what was then the Otago Savings Bank or Trust Bank Otago and I did prospectus work for a number of other public companies and also a number of public issuers. I was lucky enough to work with people who had been in the practice doing this sort of practice even longer and they showed me the original offer documents for Radio Otago a matter that my firm had acted in and the people whom I worked with had been promoters of it.The original offer documents in respect of Radio Otago could be read by a layperson or an expert. They properly described the nature of the investment which was an ordinary capital raising. They were open as to the inability to make accurate financial projections because it was a new venture and therefore was a bit of a punt. They informed people that it was a bit of a punt and that you could lose your investment but you could not be liable for anything more. Those documents could be prepared without the firms that were involved in preparation of those documents becoming what one of my subsequent business partners used to call non - risk-taking profit-sharing partners in capital raisings because rules became so complex and expensive to comply with that the professionals made as much money out of it or had to charge a lot to meet the compliance costs of what was being required. But in those old days people had a fair understanding of what it was they were investing in they had the opportunity to invest or not the company was able to access public capital markets rather than being reliant on a smaller pool of investors being professional investors who met professional investment exemptions and I think overall it was actually better back then.I want to have some assurance that these rules here are going to fix the very real problem that we have in respect of ordinary capital raisings in New Zealand. I am not talking about debt securities and finance companies masquerading as being safe when they are unsafe but in respect of an ordinary capital raising which is always risk capital I want New Zealand’s small companies to grow into big companies and in those small companies—and we are a country of small companies partly because we are a small population—I do not want to prevent the people in those businesses from accessing capital to grow.At the moment the first round of capital is the people themselves. The second round is often a mortgage over the house though obviously there are limits to the amount of capital you can raise through that. The third layer of money for those small companies growing is often family members and friends and again we should not be preventing that from happening through securities law. But they do need to be able to expand beyond that. We know that for the lenders to these companies it is very hard to borrow money for those companies if you have not got land-based securities so they are not going to get the money from debt markets or from banks. Effectively they are reliant on ordinary capital raisings and I think they should be able to do that from the public rather than just from rich people both for reasons of lowering their cost of capital and also because I think everyone should have the opportunity to invest in profitable ventures not just wealthy people. So I would like the Minister to address that issue.I would also like the Minister to address the issue as to whether we are dealing with the additional layers of risk and cost that we have created for directors. The certificates and increasing legal risk that directors face if they become directors of issuer companies have become onerous. That is becoming counter-productive because we want experienced directors to be willing to offer a hand to small companies that are trying togrow without them having to take on too much personal liability in the event that the company for which ordinary capital has been raised fails. It does happens sometimes and in respect of that that is why we do have limited liability companies—to protect directors from some of that risk if they are not acting inappropriately. If we so load the duties on directors that they effectively become guarantors of ventures that go wrong then we do not get good directors who are experienced and willing to lend a hand and help these small companies grow into big companies for our mutual prosperity.The third issue I would like the Minister to address is whether this fixes the problem of issuer audits being required post issuing to members of the public. At the moment because of a prior bill that this Parliament has passed in the last 5 years if you are a public issuer—after you have been a public issuer you have to have a special issuer audit of the company that assesses performance against prospectus in a way that increases audit costs. Again that is an inhibition because it increases costs relative to other companies and therefore increases the effective cost of capital and makes it harder for the small businesses to invest.The last question I would like the Minister to answer is what we are doing about and whether we address through this bill the Financial Markets Conduct Bill the very small capital raisings which are at the moment theoretically illegal throughcrowdsource funding. It is a really interesting thing that has started to happen through the internet where small amounts of capital—actually sometimes they are not small amounts of capital because lots of people put in fifty bucks and if 100000 people put in fifty bucks you have raised $5 million. So these small offerings which can be effected through the internet now and it is calledcrowdsource funding ought to be facilitated.I have absolutely no problem with that. I understand that this bill is meant to facilitate that and I want an assurance aboutcrowdsource funding. I would like to know what the limit is per person. I do not think there should be any limit of the total amount that is being raised. I would like to know what the limit is per person and if there is any limit on the total I would like to know because I do not think it is appropriate. I think that if we had an appropriate limit of say—I do not know—a couple of hundred bucks that people can take a punt on if we let them waste that much money on Lotto every weekend why would we not let them invest that throughcrowdsource funding in something that could grow the prosperity of our country and bring the jobs and innovations that we need to prosper as an economy and to create job opportunities for the young people? I will leave it at that and I would like to hear from the Minister in respect of those issues.Hon MARYAN STREET (Labour): I do not often rise to talk about bills such as this but I think this is a particularly significant bill the Financial Markets Conduct Bill and it is because of the human experience of some people I know that I am moved to speak on it.It certainly has been a long time in the making. It started clearly with LianneDalziel’s efforts as Minister of Commerce when she set up the Capital Market Development Taskforce in 2008. I think that was a significant move at that time because the purpose of it was to design a blueprint an action plan for the development of New Zealand’s financial system and we on this side of the House are pleased that the National Government has started to act on those recommendations. As one of my colleagues said earlier acting on the recommendations of the task force’s report is something of which we approve. One of those recommendations was a single market regulator and I might come back to that a little later. It seems to me that even with that work being done in 2008 and the task force being set up there was a great deal of consultation to do and a lot of people to talk to if this really were to be what it nowclaims to be and that is using the oft-used term a once-in-a-generation opportunity to get our financial markets right.In 2011 on 12 October of that year the Minister of Commerce at that time Simon Power introduced a large bill of some 560 pages which progressed the work that Lianne Dalziel had done and the task force had undertaken during those 3 years. Obviously Simon Power’s aims were the same as ours and those were to regulate and modernise our financial markets. But obviously there was more to do because there was a large three-part report that recommended that it be passed by Parliament’s Commerce Committee. What we have in front of us tonight is an additional Supplementary Order Paper 220 which Labour supports and which has now taken the bill out to nearly 700 pages.I want to focus on some of those things that are going to be of most importance to the people whom I know and I will draw on my experience in Nelson in particular for this. This is a substantial bill and before I begin to go into some of its effects I have acknowledged Lianne Dalziel I have acknowledged the Hon Simon Power and I would like to also acknowledge the Hon Craig Foss and the work he has done to bring this forward. As I say it has been a long time coming. I also want to pay tribute to officials who have engaged in what—although I have not been part of it—I understand has been a very substantial consultation process. All of that is required if we are going to regulate our financial markets in a way that makes them fair efficient and transparent. That is one of the purposes of this bill—to set up and regulate fair efficient and transparent financial markets. The bill has taken the financial markets from the ground up and rebuilt a framework that can regulate monitor and scrutinise the operation of our financial markets. It has been a back-to-basics reform and I think that it is overdue but none the less I welcome it for all that.We are all familiar with stories of people particularly retired people whose savings went up in smoke when various financial houses collapsed over the last few years. Those stories without exception have been tragic. One of the things that I consider to be a really important benefit of this bill is the effect it is going to have on what we commonly call ma and pa retail investors. They are ordinary regular New Zealanders who think that in their retirement in particular savings they have put away over a long period of time—over decades of a working life and perhaps after the sale of one large property and moving into a smaller property—will have released funding to them that they are now able to invest. Unscrupulous or incompetent finance houses have taken advantage of people who have seen much of their savings go up in smoke.One of the key changes that will make a difference to these people in the future is offer documents which are currently known as prospectuses and investment statements. What we will have is a product disclosure statement. The requirements are to simplify the product disclosure statement to a couple of pages that set out and explain the basics of what is on offer and what the risks are of investment and then to set out a whole lot of questions and those questions can be established in regulations. Those questions can be answered in clear concise and effective language. If people who have no particular skills in the operation of financial markets are to have any confidence that the remainder of their savings is not to go up in smoke this will be one of the devices that gives them confidence and starts to build that confidence that is required if New Zealand is going to deepen its wafer-thin domestic capital that is available particularly for new businesses that need investment.We have a prospect of new businesses developing particularly in clean technology. If our exciting inventors and their businesses can be accompanied by a clear regulated product disclosure statement then people who may wish to invest a small amount or a large amount of money will be able to do so with clarity and with certainty about whatthey are doing and the risks that are attached to their investment. They can proceed with some trust and confidence. This is the trouble now: there is very little confidence and trust in financial markets. We have seen some extraordinary cases come before the courts in recent times of people whom none of us would ever have dreamt would appear in the courts on charges relating to misconduct in financial markets. What we desperately need to do because of those events and because of the collapse of financial houses is to invest ironically some confidence back in the operation and most important the regulation of financial markets.So the fairness the efficiency and the transparency of financial markets comprise one of the two driving purposes of this bill. On our side of the House we are pleased that we started it and we are pleased that this Government is finishing it. I commend it to the Committee. Thanks.Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): I am very happy to take a call on this bill the Financial Markets Conduct Bill. If you have a look at it it might look like a doorstop but actually reading through it I feel that it is more like a finger in the dyke of the financial challenges facing the world at the moment. Labour does support it because it is necessary but when I go through and read that the bill does not adjust current legislation in regard to insider trading market manipulation security holder disclosure and continuous disclosure provisions I am concerned that perhaps it does not go far enough. But it is a step in the right direction.I have to acknowledge the Hon Lianne Dalziel a predecessor of the Hon Craig Foss who initiated this process. The Capital Market Development Taskforce in 2008 which gave rise to this legislation was necessary because there has been a lack of faith in the capital markets in this country for very good reason. Small investors have quite frankly been ripped off time and time again. This legislation is necessary. It makes a huge number of changes but I point out to the Minister in the chair the Minister of Commerce that I am concerned that some key provisions in commerce law and disclosure requirements have been omitted from major change and improvement. In a small country like New Zealand that may continue to provide uncertainty and a lack of trust although as I say the bill goes a long way.I would just like to ask the Minister something. I guess we can as politicians make judgment in this area. We are next to car salesmen and I guess financial advisers in terms of reputation and so we can look at one another very very critically and ask why we are not doing better. If I go to clause 19 “False or misleading representations” set out on Supplementary Order Paper 220 I have to say that it is really concerning that we have people or we have had people I guess—we are making changes—who were able to get away with this for so long. But we are making changes.One of the things that I question is how bank employees will be treated under clause 19 in terms of products that have any “sponsorship approval endorsement performance characteristics accessories uses or benefits”. Look it is well known in the banking sector that there are bonuses for people. One particular area that I am pursuing and that the Commerce Commission is currently looking at is that of swap loans. They are financial products that have been offered not as we have often referred to here in taking people’s money for investment but actually providing capital in a similar way though and I presume they will be under this umbrella and under this legislation.Firstly if the Commerce Commission does indeed identify some false or misleading activity will those banks or the individuals involved be challenged through this legislation or the previous legislation? There are issues of timing there that I think are quite important. I think that having disclosed—perhaps at the end of this year early next year—there is the question of what process will then follow in respect of banksthat in my view have indeed engaged in false and misleading information in the sale of swap loans to a large number of farmers some small-business people and some horticulturalists across this country.I await the outcome of the Commerce Commission investigations with some enthusiasm because unless we get on top of those products and unless we pass this legislation which is indeed why Labour is supporting it we will continue to have small investors who lose their life savings and people who use financial products that are unsuitable.My question—and I go back to it for the Minister—asks why we have not perhaps improved the areas of disclosure insider trading and market manipulation. We indeed have a small country. The objective of getting I guess more trades on to the capital markets is a good idea initiated by my colleague. I do not think she intended it to go so far as the current Government has gone.Hon DAVID CUNLIFFE (Labour—New Lynn): I rise to take a short call in support of the Financial Markets Conduct Bill having enjoyed working with colleagues on it at the Commerce Committee. The bill is a fundamental rewrite of our securities law. It will change what the public sees about every investment that they make. The current investment statement will be replaced by a simplified and shortened product disclosure statement backed up by more extensive information which will be placed and made available on websites. It brings into the net of securities law a number of products be they housing-related schemes or schemes by the acronym of “DIMS” which I will not be spelling out in the Chamber so that previous carve-outs which allowed certain subsets of schemes to run along different standards will be brought within the general net.This is a doorstop full of paper. It is almost as big as the Income Tax Act and it is every bit as complex. This is one of those jobs where we poor mortal politicians recognise the limitations of our expertise and our reliance upon the excellent advice that we traditionally get from our professional advisers. More than that it is incumbent upon the Committee to note the broad thrust of this and to be able to deal with issues of detail as they are surfaced by the advice process.The reason we are doing this is operations like South Canterbury Finance which burnt nearly $1.5 billion of the public’s money and the Government’s money. Hanover FinanceBridgecorp Ross Asset Management Blue Chip andCynotech Holdings are all examples of companies that have—shall we say—met an unfortunate financial end and taken with them the life-savings of thousands of New Zealanders. That shall not be repeated. It is incumbent on this Committee to make sure that the laws we are working on tonight are such that they are up to the job of keeping our financial markets safe.The reason why the gentlemen and ladies in blue on the far side and the gentlemen and women in red here are joining together to pass this bill is that there is a common principle here which is that we understand that having integrity visibility and regulatory frameworks around our financial markets creates a win-win for both sides of the market. If markets are transparent if they are well regulated and if they are fair that is better not only for consumers and investors but also for business owners. The interests of capital and the interests of investors are actually aligned around good strong clear financial markets regulation. That is what this doorstop this brick of legislation that we are putting on the Table today is designed to do.It would be remiss of me however to note the passage of this bill without also noting the global financial crisis. The biggest change since the mid-1970s oil shock has been the fact that there has been a fundamental revision of the literature of economics of the public policy framework around financial markets and in particular—and it is a big part of this bill—of our attitude towards derivatives. Do you know that a dog couldhave got a home mortgage in the US 5 years ago before the global financial crisis? A family pet could get a mortgage. Do you know what—Hon Trevor Mallard: They’ve got traffic tickets in New Zealand. Bob Jones’ dog got a traffic ticket—a parking fine.Hon DAVID CUNLIFFE: That was probably because he drove him home. We have got an opportunity here to update our legislation to take account of the shifting sense of global financial markets. That is not a small change; that is a big change. They have failed investors they have failed consumers and they have failed savers. So much of what used to be taken for granted by the blue team in particular is now down the toilet. The assumption that markets work perfectly the assumption of rationality and the assumption of self-regulation have been blown out of the water by the fact that a dog could get a home mortgage in the United States.CLARE CURRAN (Labour—Dunedin South): I would like to speak to a particular part of the Financial Markets Conduct Bill that I focused on a lot when I sat on the Commerce Committee over all of those months and over all of those years. We heard evidence from everyday investors who came before our committee who told us about losing their life-savings and who cried in front of our committee. We heard those stories and saw those people up front and face to face which is something that every select committee should try to do. They should meet with and hear from the people who are affected by lapses in law and gaps in law.It was an important critical part of this bill that we address the criminal liability. I acknowledge the comments of my colleague David Parker earlier around the job that we had on that select committee not only to ensure balance as select committees often do but to ensure that there was not a chilling effect occurring for directors of companies. We had to ensure that they would not be put off because they would think that they might end up before the courts or even in jail for the issuing of material that was not fully correct. But the fact was that over the period of years when these financial companies collapsed and we know that that effect was escalated into our communities and affected so many people there had to be significant measures put in place that would be a deterrent to that kind of behaviour—to the reckless and knowing behaviour of unscrupulous people who were essentially ripping off ordinary New Zealanders.We have argued throughout this process that perhaps it has not gone far enough as in this country people who are convicted of offences like burglary can be treated more harshly than those who destroy huge amounts of wealth through reckless and dishonest business practices but I would like to say that there is a key change in this bill. It is that the issuer and the director are criminally liable for misstatements in their disclosure documents but only if the Crown proves a subjective fault element and that is the reckless knowing behaviour—they had to know what they were doing and it was not a mistake. If it was a mistake there is still liability but it comes into the civil area. It does reduce the scope of criminal exposure but the maximum punishment has increased to 10 years’ imprisonment and a $1 million fine for an individual and a $5 million fine for a body corporate.Promoters—this was an issue that I particularly focused on. People who invest and make decisions to invest as everyday investors do so often because they trust the person telling them that they should invest. Often those promoters have been celebrities—people whom New Zealanders have trusted. There have been countless examples of that. We were told by almost all of the submitters including those ordinary everyday New Zealanders who appeared before us that they trusted those people and that they felt ripped off. The promoters of statements are also criminally liable and I think that that is right. I think that if you are a celebrity and you stand up and go on television or whatever and have your face all over the place saying “Trust me.” and telling people toinvest in such and such company then you should know what you are doing and you should take responsibility. This bill ensures that they will take responsibility and I think that is right.At the same time though there is an important set of principles underpinned in the criminal liability area. They are that the regime should not discourage capable prudent people from becoming directors through overly punitive sanctions; that companies should be able to attract directors with a diversity of skills and backgrounds; that the directors should be able to focus mainly on business strategy and supervising management rather than on compliance and minimising liability; that directors should supervise capital raising and exercise due diligence in relation to offer documents; that they should be liable for civil pecuniary penalties and should compensate investors who lose money if they fail to perform their duties; and that they should not be liable to imprisonment where there is a no-fault element. Those principles as I understand it have remained in the bill.They are important principles because they are the principles that protect directors from that chilling effect—from the fear that if they slip up or if there is a mistake made they might end up in the clink. It is important that they do not but it is also important that the ones who are reckless the ones who are dishonest and the ones who know that what they are doing is wrong are accountable and that they end up in the clink. I would like to see that happening. I would like New Zealanders to be able to be reassured that if they invest their money in a company that is dodgy and tells them lies then it will be held accountable. If there is one thing that I think is in this tome of a bill it is the mechanism to ensure that that happens.Hon TREVOR MALLARD (Labour—Hutt South): I want to make just a few brief comments on the Financial Markets Conduct Bill—really I have got just a couple of points to make. The first is—and again it is probably a generational sign—that I regret that we are in an age now where it is less easy to take people’s word than it used to be when I was younger when especially in the financial markets people’s words were bonds. I think that most members know I had some pretty extensive experience with a familysharebroking firm. For the vast majority of that time people’s deals which were worth probably hundreds of thousands of pounds or hundreds of thousands of dollars were done on someone’s word and there was not even a handshake—you know it was done down the phone. I think it was a different age. Unfortunately what we have seen over a period of time has been some changes where it is less easy to rely on people’s word and therefore there is a need for this sort of regulatory measure.The other point I would like to make is really in support of comments made earlier by my colleague David Parker and that is that I think we do need to keep looking towards opportunities for relatively easy capital raising within New Zealand. It is my view that there is quite a lot of interest in this. I am going to again go back just a decade or so and use the example of the old Industrial Research Ltd which is now part of Callaghan Innovation. In one of its earlier lives it made a scientific discovery to do with immunity. Because it was not given the money to develop the discovery or maybe it got too big for it it ended up selling the discovery off to an American farmer and a company calledBioCryst.A lot of the locals in the Hutt and particularly inWainuiōmata—because as many people knowWainuiōmata has one of the highest proportions of scientists and PhDs in the country—knew that this thing had a chance of being a seriously good investment because of the way that the sharemarket worked and the ability to invest relatively small amounts in the US market even a decade or so ago. A number of people—dozens of people sometimes forming clubs and sometimes just as individuals—were investingthrough a local company in this company which I think is calledBioCryst which was listed in the United States.What it showed to me was that there were people around who were actually prepared to save up their TAB money or save up their Lotto money accumulate a few hundred dollars and invest it in something that they thought had a real opportunity of making a difference. The point that I have made to my colleagues in the past and certainly to people involved in the development of this legislation—people like Simon Allen who was involved at the earlier stages—is that I think there is a place for much easier backing of Kiwi ideas than most of us give credit for. I think that there is a role through this sort of legislation for what is now described ascrowdfunding. Of course 5 or 6 years ago we had not heard that term but I think it is a good way of putting money together.The other point that I would make is that we also have to look to our institutions in New Zealand to keep on providing information to the market. I refer in particular to the Superannuation Fund and the ACC which do quite a lot of research into relatively small organisations. I think one of the faults that we have in our system is that a lot of people who could be investors—either as individuals or as syndicates or other groups or through other investment vehicles—do not get the information that is available within the system because somehow the Superannuation Fund or the ACC get scared that they might be considered investment advisers by publishing the information that they have collated. I think it is a question that we need to look at because my view is that markets could be better informed. We have got to make sure that that can happen.If that happens people like those inWainuiōmata who invested inBioCryst can in fact pick up the other good ideas that are developed in New Zealand. A lot of these ideas would of course have to go offshore because the funding involved just has to be massive. But my view is that the longer you can hold them and the bigger the proportion of New Zealand investment then the better off as a country we will be. We have seen it in Australia with their superannuation funds and the way that that works. They are a lot wealthier as a result of being able to do investment in their own country and now of course in our country and as a people they are much wealthier as a result. I think we are poorer as a result of not having a financial system that works in an adequate manner.The question was put that the amendments set out on Supplementary Order Paper 337 in the name of the Hon Craig Foss to the proposed amendments set out on Supplementary Order Paper 220 in his name be agreed to.Amendments agreed to.The question was put that the amendments as amended set out on Supplementary Order Paper 220 in the name of the Hon Craig Foss be agreed to.Amendments as amended agreed to.Parts 1 to 9 as amended schedules 1 to 5 as amended and clauses 1 and 2 as amended agreed to.The Committee divided the bill into the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill pursuant to Supplementary Order Paper 338.Bill reported with amendment.Report adopted.Financial Markets Conduct BillFinancial Markets (Repeals and Amendments) BillThird ReadingsHon CRAIG FOSS (Minister of Commerce): I moveThat the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill be now read a third time. The legislation is a major milestone in the reform of New Zealand’s capital market regulation. It modernises and makes substantial changes to New Zealand’s securities laws. These set many of the rules for how financial products and financial services are offered to the public and how they are governed and operated.The legislation has two main purposes. It aims to promote the confident and informed participation of businesses investors and consumers in the financial markets and it aims to promote and facilitate the development of fair efficient and transparent financial markets. These are vital outcomes for New Zealand businesses vital to have access to the capital they need to grow and they are critical for investors to benefit from financial markets.The current securities laws are not fit for purpose. The main law this legislation replaces the Securities Act 1978 is 35 years old. The legislation consolidates five other pieces of legislation. As well as responding to the massive changes that we have seen in the financial markets over recent decades this legislation is informed by more recent lessons of the global financial crisis and our experiences with the collapse of the finance companies. It implements many of the recommendations of the industry-led Capital Market Development Taskforce.I will mention some of the main changes this legislation makes to financial markets regulation. The legislation replaces the requirement for issuers of financial products to prepare a prospectus and an investment statement. Issuers will now prepare a single product disclosure statement which will set out the key information that retail investors need to know before they invest. The legislation proposes a system of escalating liability from infringement notices for minor breaches through to civil pecuniary penalties of up to $1 million for individuals and $5 million for companies. There are criminal penalties of up to 10 years’ imprisonment for the most egregious conduct. A new licensing regime is established for specific financial sector participants. These include fund managers discretionary investment management services and derivative issuers. The legislation also overhauls the regulation of managed investment schemes such as KiwiSaver schemes by providing a consistent set of duties on fund managers and supervisors and stronger governance requirements. These are vital steps to bring retail investors back into the markets and make more capital available to growing firms whatever their size.The legislation makes a number of changes to make it easier and cheaper to raise capital. It enables the introduction of new forms of capital raising such as peer-to-peer lending andcrowdfunding and it provides new exemptions for small offers and employee share schemes which will be of particular benefit to small growing companies. The legislation introduces a new system for the regulation of securities exchanges. This will include allowing the development of low-cost exchanges that support capital raising by small and medium sized enterprises.In summary this legislation aims to strike a balance that works for both issuers and investors. Only by providing the right kind and degree of regulation will we see our financial markets make their full contribution to the New Zealand economy. I commend this legislation to the House.Hon DAVID PARKER (Labour): Can I begin by saying that I think we agree on all sides of the House to a response to some of the terrible behaviour that we saw in respectof debt securities where finance companies pretended to be safe when they were not. They pretended that they were secure investments when often the debt security that was being offered was a secondary security with a first mortgage security lying ahead of the effective security that investors had when investing in finance companies. There were often earlier debentures and earlier mortgages over the properties that the finance company lending was itself secured over when the finance company lent out the money that the people invested. After those problems we had to do something.Some of the problems that we had in respect of finance companies were in breach of the existing securities law and were just poor practice under that. We had related party loans that were not properly disclosed. We had misrepresentations. We had false prospectuses being signed off by directors and some of that has had criminal and civil consequences for some of the errant directors involved. We had poor audit practice at some times and some of the statutory supervisors who oversee finance companies under the existing regime did not cover themselves with glory either. Having said all of that it was also obvious that we needed to strengthen the law in respect of debt security offerings. We also needed to update the law relating to ordinary capital raisings.There are a couple of issues that have been raised in the Committee stage that I should comment on. One is a reference to Ross Asset Management. My understanding is that the essential problem in respect of Ross Asset Management is still not fixed. I do not think this legislation addresses it. This is no criticism of the Minister of Commerce. But the essential problem with Ross Asset Management is that we had one person who was effectively acting as a manager for lots of different people and he did not have any requirement to have any board structure or other people overseeing his decisions. He was effectively sitting there as an agent for these people and giving them individual advice. When you have lots of money effectively under management tens of millions of dollars—Hon Craig Foss: He was also custodian.Hon DAVID PARKER: He was also a custodian?Hon Craig Foss: That’s in here.Hon DAVID PARKER: So he might be caught as a custodial trustee but my understanding is that there is no obligation for someone who has got management of lots of different people’s moneys—and it could be all of their life-savings—to have some sort of decision-making structure that would involve a board. There is no prospectus involved because he is not offering securities to the public or whatever the new offer document equivalent is—Hon Craig Foss: Changes to the DIMS regulations which affect that.Hon DAVID PARKER: Sorry there are changes to?Hon Craig Foss: DIMS regulations which affect—there are—Hon DAVID PARKER: Discretionary investment management services regulations partially affect that. I have been contacted by a member of the financial services sector who is saying that this is still an area that needs further reform because notwithstanding those changes the Ross Asset Management debacle could actually occur again and not be prevented by the legislation that we are about to pass. It is not a criticism of the Government or the prior people who started this work which was started by Labour. You cannot think of everything. You cannot deal with everything in respect of one bill. But I do not think that we should pretend that the Ross Asset Management injustice that has been caused is completely fixed by this legislation.In respect of getting the balance right between properly protecting unsophisticated investors and debt securities you have to at the same time not be over-regulating ordinary capital raisings. I have heard the response in respect to my question as to what the position is in respect ofcrowdsource funding was. I have been referred to clause 388of the Financial Markets Conduct Bill which then refers to clause 6 of schedule 1 of the bill saying that through that route there is an ability to exempt some forms ofcrowdsource funding from some of the requirements of ordinary capital raising.I would say with respect that I think we actually will in the future have to revisit that because I do not even see why you should have to run that gauntlet in respect of raising from members of the public small amounts of money not much more than some people waste at Lotto shops in the weekend. I do not see why people should have to crawl through and obtain exemptions and show that they come within those exemptions rather than just having a statutory exemption that sayscrowdsource funding—somehow defined—of $100 or $200 per investor is not caught by these regulations. That would be a really simple way to carve out that. So maybe we should come back to that. Again this is no criticism of the Government because effectivelycrowdsource funding is just something that has sprung up as a consequence of the internet in the last year or two. I did not know that it existed until about a year ago.Hon Craig Foss: A lot of that’s in theregs.Hon DAVID PARKER: A lot of that is in the regulations. So the regulations might actually be able to do that in a simple way. It would be really good. Thank you Minister for that intervention. It might be that the regulations can actually have a very simple solution that just completely exempts that sort of capital raising for ordinary capital for small amounts without any regulatory burden. That would be fantastic.Hon Craig Foss: There’s some but not as nearly as heavy.Hon DAVID PARKER: Right. The Minister says some. I am not sure that there is a need for any in respect of that. I certainly do not want them to have to have issuer audits going into the future or higher director duties than would apply to companies that had not raised money from the public.As you will hear from my interventions now and earlier I have a real concern that in a country of small businesses we do not over-regulate ordinary capital raising and that includes at all levels of the capital raising. With those comments I congratulate the Minister of Commerce and the prior Ministers from both sides who have been involved in bringing this to fruition. I hope that as a consequence New Zealand investors in debt securities can have more confidence that they are not going to lose their life-savings if they invest in debt securities and that we facilitate the prosperous expansion of the New Zealand economy through appropriately regulated—but not over-regulated—capital raisings.JONATHAN YOUNG (National—New Plymouth): I am very happy to stand and speak on the third readings of the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. They are certainly significant—not only in their size but in their importance in terms of legislation for this country. We know that the backdrop to this was the collapse of the financial markets and the global financial crisis that happened in 2008 and 2009. The fact is that many New Zealanders not only lost their savings but lost their confidence in the markets and also in investment and it dried money up certainly during that period of time. I guess in many regards people returned to bricks and mortar and sought to invest in areas where they had some sense of security which I suppose contributes to some of the housing affordability issues that we face.This legislation has taken what has been termed a once-in-a-generation opportunity to rewrite our securities laws. I believe that we have come up with a very coherent and comprehensive set of laws that will be supported I believe by regulation that will work well in the market place. That is so important because we want the market place to be free to be accountable and also to have the effect of being able to attract and release investment from people but into companies.The Financial Markets Conduct Bill is a key pillar in the Government’s Business Growth Agenda. It helps to achieve one of the Government’s keys to building a more competitive and productive economy. It is a very important part of that. This bill—this law when it comes to pass—will promote informed participation of businesses investors and consumers in our financial markets. It will foster fair efficient and transparent financial systems that are crucial to our future prosperity as a country. It is good to see that we have progressed so quickly tonight through these stages—the Committee stage and now the third reading.It is crucial that we ensure that this legislation strikes the right balance between holding people to account while encouraging businesses to come to market. Vibrant financial markets must work for all participants and that has been one of the driving factors behind this legislation. Key proposals in the Financial Markets Conduct Bill have included in Part 2 an introduction of prohibitions on misleading and deceptive conduct generally in financial markets. I think New Zealanders out there generally would say it is a good thing that we have that and would welcome those changes.Part 3 replaces a requirement for issuers to prepare a prospectus and investment statement with a requirement to prepare a single product disclosure statement tailored to retail investors and prohibits false and misleading statements in product disclosure statements. That is very important. It is important that people out there can get something concise but also very informative about the product they are going to invest in. There is nothing like receiving 150 pages and thinking: “That is just so intimidating. I am not going to be able to read through it so I will not try.” There is nothing like receiving a document that is full of jargon and abbreviation as well to confuse people. So these product disclosure statements will be concise clear and coherent to retail investors. I am sure that there will be sophisticated professional investors out there who will not need that level and who will be very happy to proceed with perhaps even what they have been used to. But certainly we want to make information accessible to retail investors.Part 4 strengthens the governance of regulated products. It introduces stricter requirements for managed investment schemes including new duties on fund managers and supervisors and stronger governance requirements.I believe that there is much that can be said and will be said by different speakers in this debate but by and large the Commerce Committee worked on this not only with officials—and I say thank you to them; they did a tremendous amount of work—but also with people in the market place with investors and also with issuers and professionals. There was a tremendous sense of working together to try to find the right solution in this particular area. I believe that we have done a good job that will serve New Zealand well in times to come. Thank you.Dr DAVID CLARK (Labour—Dunedin North): I too want to congratulate those who have worked on the Financial Markets Conduct Bill following on from that contribution from the chair of the Commerce Committee Jonathan Young. I identified with his comments about 150 pages of jargon. It sounds like our select committee papers that we get on a Thursday morning. No one wants to wade through that if they do not have to it is fair to say.This legislation is an attempt to make sure that retail investors and ordinary folk who do wish to get into this space have the kinds of protections that they ought to be offered. It is about transparency and the efficient functioning of markets. So I want to congratulate Ms Dalziel Ms Curran and others who have worked on this over a period of time and the Minister of Commerce Mr Foss for guiding this through the House. There is a huge amount of detail in these bills the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill and in the legislation relating tosecurities law—over 700 pages as many have pointed out—here in this pamphlet that we have before us.The purposes of the bill are commendable being to promote the confident and informed participation of businesses investors and consumers in the financial markets. That cannot be argued against. Nor can the other main purpose which is to promote and facilitate the development of fair efficient and transparent financial markets. Markets are after all a source of information to guide capital flows so that capital flows to its most efficient point. That underpins good economic development so we commend the purposes of these bills. The way it flows out means that Labour will be supporting these bills through their third readings.Of course there are plenty of other areas that the Government is neglecting. This is a part of the economic picture. The markets and the effective functioning of markets are the starting point for many but there are other policies that guide the economy as a whole that are not contained within this legislation.It has taken 5 years to get this particular legislation to the House and it is strange that we are passing it under urgency. That perhaps speaks to some poor House management as with the previous bill the Patents Bill. Nevertheless we commend the actual material within it.Peseta Sam Lotu-Iiga: You said that last speech. Say something different.Dr DAVID CLARK: Mr Lotu-Iiga is right. I need to raise this new material about the general direction of Government policy which does not deal with the bigger issues of monetary policy reform. It does not really shape an export-led recovery and it does not deal with savings and the capital depth issue. We are talking about transparency here—where capital flows to—but the actual capital depth problem that we have as a country where we do not have the savings that other countries have to support an export-led recovery is a concern that this Government seems to sidestep time after time after time.Likewise with pro-growth tax reform we know—a capital gains tax—that the OECD the IMF every other Western country a former Treasury head and so on all say that New Zealand should have that kind of pro-growth tax reform. It should have a capital gains tax and it should have research and development tax credits. But this Government has its head in the sand. At least it is sorting out these nuts and bolts and for that I want to commend this Government’s work.Of course it was started by a Labour Government and let us not forget that. Labour started the financial markets reform process and we are pleased that the Government is continuing our good work. Of course Lianne Dalziel set up the Capital Market Development Taskforce. This will be something of her legacy as she leaves this place. That was set up in 2008 to develop a blueprint and an action plan for the development of New Zealand’s financial system. So we are pleased that the Government is acting on this and acting on the recommendations of the task force’s report one of which was a single market regulator.The Labour-led Government of course took a number of measures in the wake of the financial crisis and the spate of finance company collapses which accelerated these measures. The Crown Retail Deposit Guarantee Scheme is of course still fresh in people’s minds as the Government bailed out South Canterbury Finance to the tune of $1.6 billion in taxpayers’ funds. That was largely due to poor monitoring. We do not know the extent that that was due to poor monitoring. We do know that the company’s dodgy loan book increased 25 percent in 4 months at one stage and that the Minister of Finance did not have oversight of that and did not request the appropriate briefings although he could have got them through Treasury and from the Reserve Bank about thestate of those dodgy loan books and the kind of risky lending that was being done against the blank cheque of the Government.So we know taxpayers have forked out hundreds of millions of dollars unnecessarily in the case of the Crown Retail Deposit Guarantee Scheme. Of course Labour put in the scheme. Let us not forget that Labour put it in in a 24-hour period to address the issue of a run on banks. The basic premise was sound. We know that but it was not monitored and it is the failure of monitoring by this Government that has cost the taxpayer hundreds of millions of dollars.Unfortunately the Government was too afraid to investigate it. It did not really want the light of day on that poor monitoring because it would have reflected badly on the current Government and I think it owes New Zealanders an apology on that front. It really does owe New Zealanders an apology on that. I hope that some member from the National benches will apologise for the hundreds of millions of taxpayer dollars that have been lost unnecessarily through that Crown Retail Deposit Guarantee Scheme and particularly through the failure of monitoring of the Minister of Finance.Peseta Sam Lotu-Iiga: I’ll apologise for Cullen. Cullen brought it in.Dr DAVID CLARK: No no Mr Lotu-Iiga. It is the failure of monitoring that is the problem not the scheme itself. Of course this Government did not remove the scheme because it knew it was a good scheme. But it did fail to watch it closely. Of course I do not say this on my lonesome. This is something that the Auditor-General Lyn Provost drew attention to in her report. That begs many questions and it has just been swept under the carpet. This poor poor oversight of the scheme has been swept under the carpet by this Government because it knows it would be incredibly embarrassing to see exposed to sunlight those hundreds of millions of taxpayer dollars that went away without any real investigation.Of course the Finance and Expenditure Committee did request that Treasury come before it to explain what had happened in that failure of monitoring after the Auditor-General’s report revealed the extent of the issue. The then chairman was very keen to sweep it under the table. I expect we may get an apology out of him later in the piece. I am certainly hopeful as I look across the floor.Hon Todd McClay: I’m sorry for the speech. A sorry speech.Dr DAVID CLARK: He says that he is sorry for the speech. That tells you that this is a Government that does not really care about these bigger issues about where taxpayer money goes. I say Government members should hang their heads in shame and I can see many of them there at the back hanging their heads in shame at the behaviour of this Government around this scheme.But back to the legislation itself—not what is not in it not the things that are not in it and that ought to be—and in its 700 pages it does implement a new one-stop shop for securities law. These are good steps forward. It is about time obviously 5 years after Labour kicked the process off that we had these things in. The regulations in the area of derivatives have been inefficient and Labour does welcome these measures and initiatives by the Government to address the problems. Derivatives have been brought within the framework of the four financial products which include debt equity and managed investment schemes.So I think we can claim that this is a success and a bipartisan approach. It is a shame that some of the earlier bills we debated yesterday were not subjected to the same test—the ones that look at where we go from here about responsible fiscal management—and were not developed in a bipartisan way. No doubt they will not stand the test of time in the same fashion. That is a shame because generally in this area we like to have a bipartisan approach. It is one of those great moments when we can celebrate across the House the value of transparency of appropriate regulation and of seeing that those whoinvest—retail investors—do not have the wool pulled over their eyes and that documentation can be clear and that capital can then flow to its best use for the long-term productivity of our country.So I commend the Government for bringing this legislation to the House. I commend it for getting it through. I would have liked to have seen it come a little earlier but transparency accountability and consequences are important in this legislation as they are elsewhere. They are important for the efficient functioning of markets so that markets become good and effective servants and not the terrible masters we know they can be if they are not properly regulated. Thank you.Dr RUSSEL NORMAN (Co-Leader—Green): I rise on behalf of the Green Party to speak to the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. There is a lot in this legislation. It has perhaps a number of points of departure but clearly one of the essential ones is the failure of the finance companies. The failure of the finance companies really stands behind this legislation though it is about more than that.I think it is important for us to remind ourselves of the scale. There were about 67 finance companies that ended up in the deep freeze. Some of them got out again but not very many. There was about $9 billion worth of deposits that was put at risk as a result. There were about 242000 or about a quarter of a million New Zealand investors whose deposits were threatened as a result of the failure of the finance companies. Some of these investors got all their money back some of them got some of it back and some of them did not get much back at all.So these finance companies which proliferated in an unregulated environment caused tremendous damage to the New Zealand economy and caused tremendous damage to those individuals. On top of that after the global financial crisis the taxpayer got involved in this as well and ended up losing hundreds of millions of dollars probably—we have not got the final number—through the Crown Retail Deposit Guarantee Scheme particularly associated with South Canterbury Finance.Essentially in some respects you could argue that the disaster of the finance companies was a failure of the Clerk-Cullen Government to regulate the sector. We saw the sector emerging through the early 2000s as a completely unregulated sector and one clearly in need of regulation but I think it is probably fair to say that the Clerk-Cullen Government was not willing to challenge many of the fundamentals of the neo-liberal economic order and simply let the finance sector get out of control. You could say the same thing about the housing market. I would note that the current Labour Party has learnt the lesson of the global financial crisis which I think is great. It is a pity that Clark and Cullen did not learn it earlier as we could have avoided the disaster that the finance companies became.On top of that we had the South Canterbury Finance bailout debacle. This was the fault of the current Government essentially. When those people who were close to the scene understood what was going on they realised that South Canterbury Finance was still making dodgy loans and still providing very high rates of return and it was entirely Government guaranteed so they rushed to put their money into South Canterbury Finance to get the high-interest payments that were being paid there that were entirely Government guaranteed. Unfortunately the Minister of Finance at the time did not intervene to close down deposits into South Canterbury Finance which is clearly what needed to happen so the taxpayer ended up paying far more in terms of the bailout there than they needed to.The question that I guess needs to be asked in relation to the finance companies then is: does the legislation before us makes it harder or easier to make those peoplewho were responsible for things like the finance company collapse accountable for their actions? I think that is one of the key questions that we need to face.If we are going to answer the question of whether this legislation makes it easier or harder we need to look at what the existing situation was. In this regard there are many points of departure but you could look at the Serious Fraud Office investigation into Hanover Finance which was one of the companies involved. The Serious Fraud Office investigated Hanover Finance over 32 months I think it was. It was a massive investigation—100000 pages of evidence—and at the end of the day it came to the conclusion that it could not prosecute. This was in spite of the other conclusions that it came to.I want to read from the Serious Fraud Office statement of April this year about the Hanover Finance investigation. It said: “SFO believes that serious questions arise as to: The consistency between the overall view of the nature and financial condition of the companies disclosed to investors in the period from December 2007 and the actual position of the companies;”—so what Hanover Finance told the market and what was the reality of the market. Secondly: “The solvency of the companies at the times that dividends were paid during the six months immediately prior to the suspension of payments to depositors in July 2008;”—so were these companies solvent? Thirdly: “The propriety of a number of transactions entered into in the three months immediately prior to the suspension of payments to depositors that appear to have provided little or no benefit to the companies while conferring some significant benefits on the related parties;”. This is of course the problem where related parties can benefit at the expense of the everyday depositor who ends up losing money. And fourthly: “The accuracy of the valuation of the companies’ assets in the financial statements supporting the Debt Repayment Proposal put to investors in November 2008.” Of course the accuracy of a statement with regard to the company’s assets is one of the key responsibilities of a director of one of these companies and so for the Serious Fraud Office to say that it has serious questions about it is significant.So those were the questions that the Serious Fraud Office asked and believed that it had serious concerns about. The report went on to say: “However in order for criminal charges to be successful it is necessary not only to prove beyond reasonable doubt that these circumstances occurred and that they breached the companies’ legal obligations but that identified individuals in control of the companies had both knowledge of the circumstances and caused them to occur with dishonest intent. ‘Recent decisions relating to other failed finance companies have highlighted how difficult it is to satisfy this demand’ said SimonMcArley.”The reason why this is significant is that that was the situation under the existing law before this financial markets conduct legislation appeared and what the Serious Fraud Office was saying was that it was pretty difficult to get prosecutions under that existing law. Then the Serious Fraud Office went on to talk about the Solicitor-General’s prosecution guidelines which led it to the conclusion that it was highly unlikely that it would get a successful prosecution with regard to the Hanover Finance case.The reason why this is important is that we need to ask ourselves: will the new law—which is very likely to be passed tonight on its third reading—make it easier or harder for those responsible for these kinds of activities to be prosecuted or not? I think what is pretty clear is that it will be harder to get a criminal conviction as a result of the new law. For those quarter of a million New Zealanders who lost money in the finance company disaster it is highly significant that Parliament will be passing laws that make it harder to get a criminal conviction under this new law in a similar circumstance than it was under the old law. I think that those quarter of a million New Zealanders who lost money in the finance companies would be surprised to learn that it is the intent ofParliament to pass a law to make it harder to get a criminal prosecution over the line under the new law. I find it surprising as well.Under the new legislation essentially there is a separate criminal liability for a director. So there is an element of criminal liability possible and that is where there is a disclosure defect as it is called—like a false statement in a prospectus for example—that is materially adverse from the investor’s point of view. So if there is a false statement made in a prospectus that has a negative consequence for investors then there is the possibility of criminal liability for the director of such a company. “The offence would be committed if the offer took place with the director’s authority permission or consent and the director knew of or was reckless as to whether there was a defect.” So that is the criminal provision. Basically the Crown would have to prove a guilty mind in order to get a successful prosecution.I think it is pretty clear that under the new legislation it will be harder to get a prosecution and a conviction over the line than it was under the old legislation and I think that the nearly quarter of a million New Zealanders who were stung by the finance companies would be surprised by that. Essentially what is clear is that under the new legislation the primary remedy for wrongdoing for things like inadequate disclosure is the civil regime rather than the criminal one so that civil claim is for cash. But even there there are some pretty strongdefences that directors will have if any civil proceedings are made against them so it is not at all clear to me that this legislation progresses the plight of those 250000 investors in terms of whether those who commit these acts such as misleading investors will be more liable for a criminal offence. I think it is clear that they will not be and that it will be harder to get a criminal prosecutionbut even a civil cash penalty will have its challenges as well. So I think those people would be scratching their heads as to why this Parliament will be passing this legislation tonight.I would also make the point as David Parker did about whether this legislation will actually make it easier for smaller companies to access capital to grow. I think that is a very valid point. It is very hard to see that it will but maybe it will; I could be proved wrong.Because of that particular problem with the legislation even though there are elements of it that we support—and we support significant elements of it—we will not be supporting it at this time. We hope that we get proved wrong and that the legislation actually turns out to have more positive effects but we shall see. Thank you.Peseta SAM LOTU-IIGA (National—Maungakiekie): It is a pleasure to speak on this legislation the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. As has already been stated tonight this is a significant step forward in terms of our securities markets. I want to thank the Minister of Commerce the Hon Craig Foss for getting it through the House tonight and also the chair of the Commerce Committee Jonathan Young and members from the National side Kanwaljit Bakshi Jian Yang and Mr Mark Mitchell who joined me and other members who deliberated on this bill. I also want to thank the Capital Market Development Taskforce because it did some great research on this area as did former Minister of Commerce the Hon Lianne Dalziel. I wish her well in her mayoral campaign and I just want to acknowledge her work on this legislation too.This legislation is important because capital markets legislation especially capital markets and securities legislation needs updating. It is 35 years since the legislation was first passed. Since then not only have the ways of raising capital changed across the board basically from phone to more electronic forms but also the products that are available for transacting in our capital markets have changed where we have various derivative products the number of market participants in our country has developedand now capital flows in and out of the country in terms of our capital markets. We need reforming of that legislation.This legislation actually adds to what has already been done under this Government. The Financial Markets Authority Act brought together a single entity to oversee the transactions in our markets. That was one of the recommendations of the Capital Market Development Taskforce and we took that on board. The Financial Service Providers (Registration and Dispute Resolution) Amendment Act and the Financial Advisers Amendment Act we enacted 2 years ago and again they regulate those who participate in the market who give advice and service provision in financial markets and with financial products. We again had to clean up the mess that was left by the last Labour Government in passing the Financial Advisers Act in 2008.I heard members opposite say that we are passing this under urgency. Well we are passing only the Committee stage and third reading under urgency. What members opposite do forget is that in 2008 they passed the financial advisers legislation which needed to be repealed in many ways under urgency under the Clark-Cullen Government. So I ask members to just think when they make such comments in the House and to look at their own house and get their own house in order.This legislation is about rebuilding confidence in the markets. We know that when the global financial crisis hit numbers of companies failed but those companies started failing as Mr Norman correctly said—and I do not agree with much of what Mr Norman says—under the last Labour Government. They failed in 2005 right up to 2008 and we have had to clean up the mess brought about by a lack of regulation in this area. I am glad that those members have come on board though. I am glad that they have joined us in regulating markets properly.This is about balancing between disclosure and reporting requirements under the legislation whilst also enabling our companies and organisations to get on with raising capital—both debt and equity capital—in our markets. Why? Because by gaining capital they invest in assets and resources—and Mr Jones knows this because he is in favour of these types of policies of investing in jobs in resources. They provide jobs and opportunities and that allows our families and our communities to look after themselves through job opportunities. What it does by having better trust in the markets is give investors confidence. It gives them the trust and confidence that they can with a fair degree of certainty make investments in the markets and understand what those products stand for. There is still risk and as the last Minister of Commerce stated during the legislating of other commerce bills we cannot in this Parliament regulate for risk. What we can do is provide a framework within which investment products can be better assessed for risk and better assessed for the pricing of those products.So I turn now to the Financial Markets Conduct Bill. Various parts of the bill are important and I want to touch on just two. Part 3 replaces a requirement for issuers to prepare a prospectus and investment statement with a requirement to prepare a single product disclosure statement. This is tailored to retail investors—mum and dad investors—whom we are trying to protect whom we are trying to promote. The partial floats of our State-owned enterprises promote the access and the ability of those investors to get into the market and invest in our companies.The final thing I want to just touch on is that this legislation—and Mr Norman touched on it—touches and modifies the liability framework for breaches of securities law. That is important because those who transgress our laws—and these securities laws are particularly important—have got to know that serious breaches of these laws will be enforced and criminal penalties will be imposed on those transgressors. It will be 10 years’ imprisonment and fines of up to $1 million for individuals and $5 million for companies for egregious behaviour. That is a Government that is acting on the wishes ofsubmitters that is a Government that is listening to mum and dad investors and the public and that is a Government that is promoting economic growth in our communities.Finally I say that we promote this legislation. It is a bit of a massive piece of legislation to have undertaken but we did it and it took a bit of time because consultation with the industry and consultation with the regulators the stakeholders the investors and the consumers was really important. I think given what we have gone through in the process here that we have come up with legislation that will work in future and will deliver for New Zealanders and deliver jobs opportunities and growth.ANDREW WILLIAMS (NZ First): I take a call on behalf of New Zealand First in the third reading of the Financial Markets Conduct Bill and related legislation. Can I firstly start by saying that it is a great disappointment this evening that we have not heard one single apology from the Government for taking 5 years to get to this point. It has not apologised to the 250000 New Zealand investors who lost their money many of whom lost their life-savings through the shonky markets the shonky financial institutions and the shonky governance that was in place in this country under this National Government for the last 5 years. Not one of the National members has stood up and made any form of apology to the many many hard-working people around New Zealand who have lost a great deal of money. They must be asking why it has taken so long for it to get to this point while other legislation under this Government has been rammed through with urgency.We have seen legislation for the likes of charter schools for the sale of State assets for the Government Communications Security Bureau spy bill for ripping the Local Government Act apart and for the Resource Management Act again being ripped apart. All sorts of other good legislation in this country has been pulled apart ripped apart and decimated while this legislation which had full support across the House from most parties apart from the Green Party to properly overhaul the financial markets in this country and turn a cowboy situation into a proper 21st century financial situation with our financial markets has been left by the Government to wallow for 5 years. This legislation was brought in by a Labour Government with the support of New Zealand First back in 2007-08. This was brought before this Parliament a long long time ago and it has taken 5 years to finally get to these third readings. And now we are doing it under what we call urgency. Well is it not just absolutely ironic that it has taken 5 years and now under urgency this Government wants to put it through this evening?New Zealand First is supporting this legislation because as we have always said good policy that is for the benefit of New Zealanders for the benefit of the New Zealand economy and for the good of all New Zealanders is what New Zealand First is all about and we thoroughly support this. We support the fact that it will ensure that fund managers and supervisors of schemes such as KiwiSaver will have tighter controls and regulations. And with so many people now investing in the likes of KiwiSaver it is increasingly important that the likes of this legislation is in place to ensure that the controls are there.We like the fact that directors and those who might be found to be wanting in this area and who may not wish to maintain the laws of this country could if they are found to be at fault be subject to up to $1 million in fines as individuals or $5 million as companies. Again it sends a strong message to many of these past perpetrators that this sort of activity and this way of acting in our financial markets will not be tolerated. It aims to strike a better balance between issuers and investors and the improvements in the controls and regulations will give greater confidence to our capital markets. It is most important at this time that our capital markets have greater confidence. Around theworld there is some level of uncertainty in many countries. In New Zealand we have been very fortunate because we are such a strong agricultural-based economy—we are a very strong export economy based on our rural agricultural history—and we have been sitting under the shadow of the Australian economy which has been very strong through this whole period. It is very fortunate that our big brother across the Tasman has weathered the global financial crisis in a reasonably sound manner and New Zealand has benefited as a result from that. It is very fortunate that we are in a position where we certainly have not come out at the end of the global financial crisis in a much worse state.But the 250000 New Zealand investors who lost a lot of money must still be wondering how it all happened—how it occurred that the likes of South Canterbury Finance ended up $1.6 billion in the red owing so much money and how it was that over a period of the last 6 months of that institution it was allowed to continue taking deposits and continue taking money off innocent investors while our authorities our Reserve Bank and our Treasury were completely blind to the whole situation and while the Government itself was also not aware of what was going on. More innocent investment money was lost as a result of people simply taking their eye off the ball and allowing these sorts of shonky cowboy financial activities to continue in New Zealand.The Financial Markets Conduct Bill is a weighty document. It is hundreds and hundreds of pages. I do commend all those who have been involved in putting it together. It has been a very good exercise in how it has been constructed. I congratulate the former Minister of Commerce Lianne Dalziel on doing this. I wish her well in her mayoral campaign in Christchurch and I do thank her for what she did in terms of getting this bill under way under the Labour Government. I also congratulate the current Minister of Commerce Craig Foss who is a recent Minister and who has seen fit to keep it moving and get this through.Once again I would repeat that this is the sort of thing where this Parliament does let itself down. There should be no excuse and this Government has no excuse for allowing this particular legislation to take 5 years to get to this point. We have known for years now that there were some significant problems in our financial markets and that we had in excess of 60 companies go belly up in the financial industry. As a result that should have been setting off huge alarm bells a long long time ago to get this legislation pushed through far sooner than the likes of charter schools State-owned assets and spying on New Zealanders. Thank you.CLARE CURRAN (Labour—Dunedin South): I acknowledge the work done by the members of the Commerce Committee who are sitting on the other side of the House on the original bill the Financial Markets Conduct Bill and in particular the chair Jonathan Young. I think it is important to show the respect that we have for each other when working on this sort of legislation. I would also like to acknowledge the sensible comments of Andrew Williams about the time that it has taken to get to this point.When a bill comes back to the House after a prolonged select committee process you have to ask yourself how it can sit on the Order Paper for another year before it gets to this point. That is a problem in this House particularly with legislation that is needed to put in place a regulatory regime to basically deal with the situation that saw 61 finance companies—12 months ago it was 61—fail in 4 years. Andrew Williams mentioned the 250000 investors. This was a very serious issue and it has taken another year for the legislation to get to this stage.I think it is also important that we look at this and we think that although this is dealing with the shortcomings of our regulatory system which was partly responsible for at least these financial company failures—no single entity took responsibility for theproblem—the fact is that it is not enough. This legislation ensures that the Financial Markets Authority has broad oversight of the sector and it ensures that Kiwi investors do not face this sort of disaster again. However as I said it is not enough and there should be other pieces of work going through this House right now. I say this with reference to the member on the select committee Sam Lotu-Iiga who has as I understand it a loan sharks bill that is sitting languishing at No. 40-something on the Order Paper. That bill is supposedly something that this Government made a big fanfare about more than a year ago—and it is not being progressed. The bill deals with our most vulnerable members of society and the way that they are being exploited. It is a key piece of legislation that should be being dealt with. It was introduced in April this year and it has still not progressed any further.The other thing that should be being progressed through this House right now is the issue of tax fraud. In respect of tax fraud and tax evasion this Government—that Government on that side of the House—should actually be bringing before us measures to address the issue of the $1.2 billion a year estimated by the Inland Revenue Department in tax discrepancies and the $140 million in actual tax fraud. Instead what we see is a focus on welfare fraud which is estimated at around $20 million a year in relationship fraud. The discrepancies and the prioritisation are extraordinary and I think that that Government should be held to account for its lack of attention to those two key pieces of work that it should be focusing on.I would like to make some comments about the Greens’ position on this bill. It disturbs me that I have heard them speaking in the second reading debate after the bill came back from the select committee and again tonight about opposing the legislation. They say they do not believe that the criminal sanctions in this legislation are actually going to be able to be implemented. I would like to acknowledge the officials who worked on this legislation. There was a lot of really hard work and they were put under the spotlight on measures such as whether or not those criminal sanctions would actually have an effect and I would like to make a couple of comments on that.The Commerce Committee received a number of submissions on the appropriate mental or fault element for criminal liability and the main issue that the submitters focused on was whether knowledge or recklessness was an appropriate threshold for the serious criminal offences in the legislation. A lot of submitters actually told us that they thought that was far too strict and that we should not be going there or that it was too low or too uncertain. Submitters either preferred knowledge alone noting that it included wilful blindness or suggested that there should be proof of dishonesty. We were told that the meaning of recklessness is not unclear. It has a standard element of criminal intent in criminal law. Its meaning is clear and well-established which is that there must be foresight of dangerous consequences that could well happen with an intention to continue the course of conduct regardless.The legislation does not criminalise reckless conduct or risk taking generally but what it does is impose criminal consequences only where a person is reckless as to a particular circumstance that attracts liability. This was very carefully thought through. The advice that we were given was very strong and clear. In the end the committee determined that this was the right approach to take. I think we are going to see an outcome with this legislation and to vote against it purely on that basis has I think an element of recklessness in it given the amount of work. Yes it has taken far too long to get to this point but given the amount of work that has gone into it the amount of thought that has gone into it I think that it is worthy of giving it the benefit of the doubt.The principal policy objective behind this legislation as you have all heard is to facilitate capital market activity in order to help businesses fund growth and to help individuals reach their financial goals but it is also about working for investors becauseinvestors must have confidence in the integrity of the financial markets. This weighty tome of legislation—a doorstopper the bigkahuna or whatever you want to call it—actually represents integrity in our system. It was begun under a Labour Government in the work that Lianne Dalziel did in the Capital Market Development Taskforce. It is ultimately about ensuring that investors particularly those everyday investors can be reassured that there is a system in place that brings all of those parts of the system together that there is accountability that there is responsibility and that ultimately there are sanctions in place if things go wrong. That is the objective of this legislation.I also want to acknowledge the work of Clayton Cosgrove in the development of the significant and substantial amendment that he produced. I would also like to acknowledge the work of the Minister of Commerce in pushing this legislation through. Yes it has been pushed through its Committee stage and the subsequent third readings under urgency but it has taken too long to get to the House. I do hope that the Government will pay attention to the priorities that it needs to focus on next.Hon SHANE JONES (Labour): Ā kia oraanōtatou e nohoneii rotoitōtātou Whareitēneipō.[And so greetings once again to us seated in our House tonight.]I rise to support the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. I should note the contributions made by the current Minister of Commerce the predecessor Simon Power—who is somewhere up in Westpac’s parlour counting all the money—and also Clayton Cosgrove and Lianne Dalziel. It seems so long ago since this issue first came on to the horizon. There probably was a lot more that should have been done a lot earlier. We were constantly receiving accounts in 2003 2004 2005 2006 2007 and 2008 that people were promising extraordinarily high interest rates but there was an absence of sophistication from the owners of the savings and the providers of the capital to the various schemes of the time. I remember saying to one or three of them myself: “Look if someone is offering you that level of interest return rest assured great risk will be involved.”But the machinery of the State at that time to deal with that kind of problem—i.e. sucking money from retirees and from a host of other savers into the various schemes that turned to custard—really has been a blight. I know of many people who approached me who have had to sell their properties—in Kerikeri for example where there is a host of retirees who have fled from the super-city up to the temperate climes of Tai Tokerau. They have had to completely downgrade the quality of their lives because—if I could just focus for a moment on the finance companies—what money they had disappeared into the ether once those companies turned to custard. In fact I recall Dover Samuels bumping into a MrPetricevic one night in a restaurant in Parnell. He approached MrPetricevic and acquainted him with the fact that Dover had been an investor in one of those schemes. I think the night ended with the police almost having to be called to restrain one of those investors from Kerikeri orMatauri Bay who made his point in a pretty fulsome way as you would expect from our former colleague.All New Zealand has an investment capital deficit. We actually import so much of the money we use and recycle into mortgage housing or we rely on international investors in Christchurch for example although there are billions of dollars that the insurance industry has paid out. Without a doubt a lot of dough going into Christchurch is going to be sourced internationally.So when we go and promote our credentials internationally in order to overcome this deficit it is good that this legislation contributes to the enhancement of our reputation and that there is a regulatory framework in which people can have trust as they should given the favoured status that we have sought and currently enjoy in terms of OECD rankings. We have a stable Westminster parliamentary democracy contract law thatcan be enforced and a judicial system that remains utterly independent and neutral from the executive but hopefully with the efforts of the current Attorney-General and David Parker a judiciary that knows that the sovereignty of Parliament in our system cannot be eclipsed. That is another issue and it is something that I know has consumed the mind the time and the imagination of the President of the Supreme Court. But at the pith of our system this is where law is made that is where law is interpreted and No. 1 The Terrace Treasury is where law is executed. That is the importance of the hierarchy. So that is one of the credentials that we should burnish.This system allows new immigrants Kiwi citizens residents and overseas investors to trust that when a document is produced what that document promises to deliver on is actually enforceable. So what we have now with the supercharged Financial Markets Authority is no ambiguity that the organisation is empowered to make a call. It has the necessary powers of discretion to determine whether future innovations are in or out of the regime.I do think there should be some flexibility and I am glad that the Commerce Committee did address the importance of flexibility. The last thing we really want to do is stunt or impede the ability of the providers of opportunity and the providers of capital to come together but we cannot go back to the bleak times when thousands of Kiwi retirees families and others were fleeced. In fact some of those schemes had a Nigerian-like quality about them. I happen to know about some of those schemes given that I know some of the people who went to jail for putting the money ofMāori trusts into such schemes. So it is something that has swept—the member for Rotorua Todd McClay nods in acknowledgment. However having done the crime served the time hoki mai get on with life. That is my approach to these matters.Having said that this piece of legislation should command support from both sides of the House. Without capital there is no ability to grow our economy. Without trust—not so much in the executives but in the quality of the document and its ability to be enforced with criminally based punitive actions. That will gain the attention of those who have been prepared to take a risk and suffer civil consequences. The sobering prospect of ending up with the Mongrel Mob next door in theNgāwhā prison for breaking these laws I am quite sure will focus the minds of those folks who live in the leafy suburbs of RemueraKohimārama and other such places. It is not a pleasant experience to go to theNgāwhāhīnaki or prison. I am quite sure that those senior graduates in accountancy finance and legal studies will get a lifetime’s education in the event that they arrive there. I am only saddened that this did not actually come in earlier. I am also saddened that this was not around in the times when the last bout of the Wild West was acted out. But now that it is here I think it is important that the institution implementing it has a very effective education programme because many of the professionals will certainly search for ways to circumvent it.There is an important principle when dealing in these kinds of areas: execute figuratively one or three and educate a thousand. Rest assured once a couple of shonky characters caught under this regime go away and do a bit of time for 2 or 3 years the others in the Wellington club and the Auckland club will be suitably focused on the importance of adhering to these new rules. It sounds a bit rough the way I described it but it was actually rougher for the people who lost all their dough. It was rougher for the grandmothers the grandfathers and the parents who lost the majority of their savings when they unwisely trusted the quality of the commentary in the offer documents or they felt they could trust the lawyers the accountants and the financial planners giving them advice.This time round they will find that trust is not an emotional concept. Trust is something that once you violate it you go to jail and do your time. That surely mustimprove the prospect of investors gathering lots more confidence and people providing opportunity for investment capital owning their own obligations. We support the bills.Hon TREVOR MALLARD (Labour—Hutt South): I raise a point of order Mr Speaker. You did indicate that the next person who used one of the rating cards would be expelled from the House. Jonathan Young just did.Mr SPEAKER: I did indicate during question time yesterday that I would take a very dim view if I saw any member continuing to use those cards. Does the member want to make a contribution to this debate?Hon Trevor Mallard: Yes certainly Mr Speaker. I thought I had the call.Mr SPEAKER: I call the Hon Trevor Mallard.Hon TREVOR MALLARD (Labour—Hutt South): I am pleased to make a contribution in this debate on the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill. There are a couple points that I do want to make in relation to this legislation but first of all I want to do some thankyous. Lianne Dalziel did a lot of work on this. Clayton Cosgrove did as well. I was lucky enough to meet with the Capital Market Development Taskforce on I think four or five occasions when I had a variety of associate finance and economic development - type roles. There was a very firm view amongst people on our side of the House and I think it was shared on the other side as well that it was important that we develop a system of capital raising in New Zealand that reminded us a bit less of the Wild West. I think that those of us of our generation will remember some of the problems in the late 1980s—in particular in 1987—around the crash there when fortunes were made and lost with almost no relationship to the underlying value of shares in the market. Certainly what happened in the 1980s caused a massive migration of investors out of the stock market because essentially there was a lack of trust in the vehicles that were being used at the time.There is a view that it is important for New Zealand to have a variety of arrangements where people can put their money—whether it is shares whether it is bonds whether it is a variety of savings arrangements—and they can have a clear indication of the level of security involved. I have had some considerable experience over most of my life in the sharemarket. One thing that is very important is that people are aware that whenever they invest especially in anything that does not carry a substantive guarantee there is a possibility of losing part or all of their money. What I hope this legislation does is get us to a point where risks are clearer because again as all of us know if there is real money to be made then there will be a risk that sits in behind that as well. The more transparent that risk the better.I have related to the House in the Committee stage the experience of a number of my constituents who live inWainuiōmata. I pointed out that because of its proximity toIndustrial Research Ltd the fact that land prices and house prices are relatively cheap and the fact thatWainuiōmata is surrounded by bush that has been regenerating for well over about 25 years and it has the coast and the forest park it is a place where a lot of the scientists and technical people from the old Industrial Research Ltd which is nowCallaghan Innovation tend to live. There is a very high proportion—one would not expect it in a decile 4 community—of PhDs because they know that it is a great place to live.What is also interesting is that when you have a community of about 17000 people when people start talking about investments quite a big proportion of the community finds out about it. The case I related was a case ofBioCryst Pharmaceuticals which is a Nasdaq-listed company and which has I am not saying a significant proportion of the shareholders or the shareowners but a disproportionate number coming fromWainuiōmata compared with most Nasdaq-listed companies. The reason that they come from there is that the underlying intellectual property that is owned byBioCrystPharmaceuticals was developed at Industrial Research Ltd. It was sold by Industrial Research Ltd—and I cannot remember the amount—for $10 million or $20 million or $30 million. It was significant. It made a big difference to Industrial Research Ltd.My view is that it is a pity that it could not have formed some sort of financial arrangement to retain some of the value and to have the possibility of some of the upside but that did not happen. But because people inWainuiōmata knew of the potential of this intellectual property and because a number of their friends and neighbours had been working on it or worked with people who had worked on it it created quite a sense of excitement. You had people going to the local brokerage houses. Back in the day there used to be minimum brokerage fees which meant that making investments of $200 or $300 was not really economic but these days a lot of it is much more on a percentage term and therefore people can make relatively small investments. So the community ofWainuiōmata was involved—and I understand is still involved—in investing in this Nasdaq-listed company.What that led me to think was that there are probably lots of other things that are developed or invented in New Zealand where local communities if they had the right vehicles would like to put some of their money. I just want to make it clear that I am not promotingBioCryst Pharmaceuticals. I just want to say to people investing on the Nasdaq that it is slightly safer than the TAB but not much and I do not want to be seen to be doing a promotion. But what it does say to me is would it not be better than putting money into a casino or putting it into the TAB or even—and I say this with some reluctance as a member of the Lottery Grants Board—putting it into Lotto if there can be arrangements where relatively small amounts can be wagered or even one might like to say invested in vehicles that mean that good New Zealand ideas have the ability to be developed? That was part of the objectives of the legislation.I want to say that I have not dealt with the current Minister of Commerce on this legislation but I certainly dealt with the Hon Simon Power over a period of time. I think it is fair to say that he had some reasonable vision in that area and it has been continued through into this legislation.But the point I will come back to is that it is important especially for these New Zealand - based investments that there is transparency that people are told what they are about that the risks are set out clearly and that this is done in plain language so that people know what they are getting into. I think it is useful if we can do as I indicated earliercrowdfunding—thecrowdsourcing of funding using the internet using Facebook or using a number of different vehicles for getting money in. Again the evidence that I know of is that for bands who want to produce what I would have called records in the old days and who want to produce and share music quite a lot of the funding of the studio and other production arrangements is now done through thatcrowdfunding. Well that is good for bands but I would like to see it being done more and more for areas that are likely to create jobs and wealth for New Zealanders and I think that this legislation has the potential to do that.A party vote was called for on the questionThat the Financial Markets Conduct Bill and the Financial Markets (Repeals and Amendments) Bill be now read a third time.Ayes104New Zealand National 59; New Zealand Labour 34; New Zealand First 7;Māori Party 2; ACT New Zealand 1; United Future 1.Noes16Green Party 14; Mana 1; Independent: Horan.Bills read a third time.Student Loan Scheme Amendment Bill (No 3)First ReadingHon TODDMcCLAY (Minister of Revenue): I moveThat the Student Loan Scheme Amendment Bill (No 3) be now read a first time. I nominate the Finance and Expenditure Committee to consider the Student Loan Scheme Amendment Bill (No 3).This bill continues the Government’s focus on providing proper governance over this multimillion-dollar taxpayer-funded scheme by making borrowers aware of their personal obligations to repay their loans and the consequences they will face when they choose to ignore them. I should add at this point that the overwhelming majority of borrowers do the right thing and take their repayments seriously. However there remains a small group of mainly overseas-based borrowers who consistently renege on their loan repayments. As at 30 June this year this group was responsible for 80 percent of all overdue loan repayments. This lack of personal responsibility is clearly unfair to the borrowers who do honour their repayment obligations. The main purpose in this bill is therefore targeted at the small group of overseas-based borrowers who in spite of the Inland Revenue Department’s best efforts to encourage their compliance continue to ignore their responsibilities despite having the ability to recognise them.The proposed changes which were signalled by the Government in the Budget earlier this year will give the Inland Revenue Department greater powers to deal with this group of individuals. The proposals in this bill build on measures introduced last year that allow for an information match between the Inland Revenue Department and the New Zealand Customs Service to identify borrowers at the border who are in serious default on their loan repayments and to forward their contact details to the Inland Revenue Department for follow-up. This was the first step towards identifying individuals at the border who failed to respond to the Inland Revenue Department’s best efforts to encourage them to make repayments on their loans. The principal measure proposed in this bill strengthens this provision by allowing the Inland Revenue Department to request an arrest warrant for borrowers with the most serious history of non-compliance who are attempting to leave the country after visiting New Zealand.I would like to stress at this point that this action would be taken only when dealing with the most serious cases of non-compliance. This means that action would be taken only when all other efforts by the Inland Revenue Department to persuade the borrower to make repayments have failed and only for borrowers who can clearly afford to pay. It is however intended to send a clear message to all borrowers that a student loan carries the same responsibilities as a commercial loan and that it must be repaid irrespective of where the borrower may choose to live.The other major proposals in the bill are also based on promoting personal responsibility for loan repayments and greater fairness across the student loan scheme. The principal proposal of these provisions is to bring overseas-based borrowers’ repayment obligations more into line with their New Zealand - based counterparts. Under the current rules an overseas-based borrower’s repayment obligation is based on their loan balance. For New Zealand - based borrowers however their repayment levels are based on their level of income.The effect of this difference is that the repayment obligations for an overseas-based borrower decrease as the person’s loan balance falls whilst a New Zealand - based borrower’s repayment obligation increases as their personal income rises. In the interests of greater fairness the bill proposes to fix repayment obligations for overseas-based borrowers based on their loan balance. Overseas borrowers with a loan balance over $45000 will also have their repayments rates increased. The effect of these proposed changes will be to reduce the current repayment time and the amount ofinterest these borrowers will ultimately have to pay on their loans. This will result in a fairer more efficient outcome for all concerned in the student loan scheme.The remaining measures proposed in the bill are largely remedial in nature. Their purpose is to ensure that the student loan scheme operates as intended and that it delivers value for money to the Government for the taxpayer and for borrowers. It is therefore with great pleasure that I commend this bill to the House.Hon DAVID CUNLIFFE (Labour—New Lynn): I rise in the first reading of the Student Loan Scheme Amendment Bill (No 3) to say that Labour fundamentally and categorically opposes this bill.Tracey Martin: Hooray!Hon DAVID CUNLIFFE: Thank you very much—thank you Tracey. The interest-free student loan scheme was one of the great achievements of the Clark Labour Government. It was actively supported and developed by my colleague Trevor Mallard who is sitting to my right—Hon Trevor Mallard: Ably assisted by Grant Robertson.Hon DAVID CUNLIFFE: —and was ably assisted by Grant Robertson in a backroom capacity. I am not sure that he sits as far to my right as Mr Mallard but that is a different matter.Removing punitive and unsustainable interest charges from student loans de-fanged what had been an increasingly impractical andgenerationally unfair system for funding tertiary education. Generations of students built up a mountain of debt and if they got behind in their payments the debt mountain grew with interest and penalties. It became like a lead collar—like a lead collar that would bow them down when they wanted to hold their heads up and get a decent start in life. It was like graduating with a mortgage before you had a home.Labour is very proud that in its last Government it was able to provide a pathway to the future for our young people by taking the interest component off student loans. National knows that it cannot repeal this policy because it is wildly popular with middle New Zealand as well as providing a ladder up for all young New Zealand students. It is the kind of ladder that people like I do not know Paula Bennett or John Key might have enjoyed in their youth—the kind of ladder that National MPs seem to have a habit of pulling up after they have climbed it to make the climb harder for others.David Bennett: Change the line.Hon DAVID CUNLIFFE: The member at the back may not like it but that is the honest truth of what we are seeing here.It is not just a little bit of fiscal nip and tuck. Like the Government did with the odious Government Communications Security Bureau legislation just a couple of short weeks ago this bill crosses the line. It crosses the line from prudent financial management to an erosion of civil liberties because it imposes criminal sanctions on young New Zealanders trapped in the Kiwidiaspora who might want to come home and start a family. But what the National Party is saying is: “Sonny Jim you step your foot inside our territory you come back through that airport and we’re going to slap an arrest warrant on you for criminal sanctions because you haven’t kept up with your student loan payments.” That is not only morally wrong but also brain-dead. It is brain-dead.“Glossy” there might be smirking away. He will be smirking on the other side of his pate very soon because the Labour Party is coming after National’s majority. The Labour Party is coming after this tired useless National Government and the Labour members are going to be claiming back those Treasury benches in just 1 year’s time from now. When we do the students of New Zealand will know that we are not going to criminalise them if they get behind in student loan payments. It is as simple as that.We all know the situation of people who have gone overseas to seek a bit of experience or on an OE. Sometimes you go through hard times while you are away. You cannot always get continuous employment. You get behind and the old debt repayments mount up because the student loan interest-free remission does not apply when you are overseas. To be hit with a criminal penalty is reprehensible.This bill is overly punitive. It turns a civil matter into a criminal matter by introducing arrest warrants. The Tertiary Education Union says it is a poor alternative to making tertiary education more affordable and accessible. Instead of providing an easier pathway up a gentler slope what the Government is doing is putting a rock at the top and if you slip you get crushed by it. It is so very National with due respect Mr Speaker because of course you have graduated to impartiality in your current form.Hon Trevor Mallard: I don’t know about that.Hon DAVID CUNLIFFE: I find myself tempted to agree with my learned colleague from time to time but not too much on this occasion perhaps because it would be against the Standing Orders and I am the one who is going to get booted out. So let us not go there but thanks Trevor for the suggestion on that one.The other thing about this bill diving down into the grubby details is that Treasury’s analysis is very poor. Treasury’s analysis is very poor. It claims that overseas repayment obligations reduce the percentage of borrowers whose obligation does not cover their interest from 14 percent to 3.5 percent. That takes no account of the fact that interest rates are at historic lows just because the current Government could not manage economic growth out of a wet paper bag. So the interest rates are artificially low and the analysis is skewed but Treasury makes no allowance for it.There are thousands of Kiwis who are currently overseas who are keeping up with their loan repayments but how many of those repayment obligations are increased dramatically and arbitrarily by this Minister of Revenue who appears to have nothing but contempt for young New Zealanders? There is no means testing here. There is no acknowledgment of circumstances just a Government that cannot and will not listen.A better approach would be to create more opportunities for young New Zealanders to stay in the country and earn decent wages. [Interruption] Mr Bennett knows that in a 30-year time series of data mapped against different Governments economic growth is higher under Labour Governments than National ones. Business confidence can sometimes be lower but economic growth is higher which is why it is kind of ironic that the Government has the Minister for Economic Development having that title. He should be more like the “Minister for Economic Stagnation”. That would be a more apt title for him. That is right. There he is trying to sniff the breeze in the National caucus to work out which way Judith Collins is going to come at him from. [Interruption] John Hayes says it is coming from him. There we are. That is wonderful. That is wonderful.The interest-free student loan scheme was one of the most important means of social mobility introduced by the last Labour Government. It meant that young people from modest backgrounds could take on the debt they needed to get a tertiary education without having to worry that the interest component of their repayments would snowball to the point where they could not repay. We agree with the fact that when you are offshore that particular subsidy should be suspended but we do not agree that the failure to keep up—often through circumstances beyond anybody’s control—should give rise to criminal sanctions. Just like in the Government Communications and Security Bureau Amendment legislation where in the name of protecting New Zealanders from foreign espionage we have stripped them of their civil liberties here we are crossing the line from the prudent management of public debt to the incursion into New Zealanders’ civil rights.This Government does not really care about young people getting ahead. This Government does not really care about climbing up the ladder of advantage. If it did it would not be pulling the ladder up in front of a generation of young Kiwis who have yet to make the grade. It would not have stood by when the Reserve Bank introduced loan-to-value ratios without an exemption for first-home buyers. It would not have passed in this very House today the stages of a bill which once again concede what ought to be the right of Government to the same Reserve Bank this time prostituting fiscal policy at the altar of Milton Friedman and giving the Governor of the Reserve Bank effective control over the Minister’s portfolio.Is it because that Minister does not want to govern for economic growth? Is it because he thinks his department is so inferior to the Reserve Bank? Is it because he has lost hope in the future of our country? If that Minister has lost hope colleagues why do we not give him a rest? Why do we not give him some time to recover his energy? The members on this side of the House are full of energy. We are ready to give it a go are we not colleagues? The members on this side of the House think it is time for a change and so does New Zealand. And guess what fellers? A change is coming very soon. A change is coming very soon. We are coming after the Treasury benches and you lot can be very afraid. Thank you.DAVID BENNETT (National—Hamilton East): “A change is coming”—a change is coming to the Labour Party all right. Obama used those words not Cunliffe not at quarter to ten at night to do your speech to be leader of the Labour Party. How pathetic is that? Nobody is listening nobody is watching no union officials are here watching and no members of the Labour Party are here—if there are any members left—and poor old David Cunliffe has to come to this House and use the Student Loan Scheme Amendment Bill (No 3) first reading to do his leadership speech. That is a shame David but it is good to see that you are surrounded by loyal people like Trevor Mallard—people whom you can depend on to be beside you. Sue Moroney is there. Sue Moroney is a definite supporter of David Cunliffe. Sue has gone out there and said she is supporting David Cunliffe.The ASSISTANT SPEAKER (Lindsay Tisch): Order!DAVID BENNETT: Sue Moroney has never got anything right so supporting David Cunliffe is a really good start. Iain Lees-Galloway the man behind is looking at coming up a few pegs or two if Mr Cunliffe gets in. The Labour Party members are playing a game. It is a great game for us to watch and see but it is disgraceful that they have to come and take advantage of the Student Loan Scheme Amendment Bill (No 3) to play their game.This bill is important. This bill is needed because we need to send the right signals to people who borrow and use Government funding—the funding that is the ladder that gives people that step up in life. It is not about taking the ladder away as some people say. It is about actually making sure there is fairness and equity in respect of those people who take advantage of the ladder that the Government gives. That fairness and equity is recognising that you have a debt and paying that debt back. That is the important thing. When we look at some of the statistics—have a look at these.Tracey Martin: Oh here we go!DAVID BENNETT: Yes have a look at these—New Zealand First Party—facts are important. When your leader comes back he will tell you what facts are. If you look at the overseas borrowers there are 64 percent who are in default compared with 36 percent of borrowers in New Zealand. If you look at the amount in default it is $93.4 million for New Zealand borrowers who are here and $536.1 million in default for overseas borrowers. That is 15 percent of the amount in default is owed by New Zealand borrowers and 85 percent of the defaulting loans are owed by borrowersoverseas. Those are New Zealanders who have taken the ladder to get themselves up and have not repaid that ladder. That ladder requires some repayments so that the next generation of New Zealanders can have that ladder so they have got that opportunity. It is a pity how the Labour Party a party that is supposed to be there supporting people in their time of need comes in here and makes political advantage out of something that is there for the good of those people who want to be supported and to be given a start in life. So shame on the Labour Party. It is a disgrace to the values of a real Labour Party. David Shearer stood for a real Labour Party. We are not going to see that out of any of the three monkeys who are trying to stand now. Thank you.Dr MEGAN WOODS (Labour—Wigram): It is my pleasure to take a call on the Student Loan Scheme Amendment Bill (No 3). I think that as one of the few members in this House who lists a student loan on her pecuniary interests I would actually like to talk about the generational politics of student support. In the late 1980s and the late 1990s something happened for a generation of young New Zealanders and I and a number of my colleagues on this side of this House had their politics born at this time. My colleagues Andrew Little and Grant Robertson first spoke to your predecessor Mr Speaker Dr The Rt Hon Lockwood Smith down megaphones on university campuses in New Zealand in the late 1990s. It was around this very issue of paying for our education and how we were going to fund that.It is fair to say that for politicians of my generation on this side of the House student loans and student politics have been defining factors for us. What we have in this Student Loan Scheme Amendment Bill (No 3)—Hon Trevor Mallard: It was for me.Dr MEGAN WOODS: No it was not Mr Mallard. I could talk about the free education that your generation got—a nice part of our history. Mr Mallard will have the right of rebuttal in his speech when he comes to that. But one of the things that we have to think very carefully about is what is actually being done in this piece of legislation. This piece of legislation that we have before us is nothing but a gimmick. It is a headline-grabbing gimmick from a National Government that wants to appear hard on criminals only in this case those criminals are student loan borrowers who might be trying to sneak back into their country through the secret passages of airport terminals. It is going to set up very good border security. Get the beagles out—those criminals might be trying to sneak back in.Let us actually have a look at the kind of advice that the former Minister of Revenue got in regard to this measure when he suggested it as one of his big flagship items in Budget 2013. Well he was told that the police had advised him that very little could be achieved without photos in the crowded area of airports that it would be difficult and that it would be time-consuming. So the very people who are going to be called on to monitor this legislation to enforce this legislation told the Minister who introduced it that it was going to be difficult to do. The officials went on to tell the Minister that the proposal would have cost implications for the courts and that although the number of expected arrest warrants was low and the exact number was unknown the cost to the courts had not been estimated. The full cost of doing this has not even been calculated. Its sole purpose was to create a big headline about how something big was going to be done to create what is in the grand scheme of the student loan scheme a minor problem.Should student loan borrowers who are living overseas be making their repayments? Absolutely. We are not disputing that. But what we are saying is that this is a big gimmick where actually what we could have are far more effective measures to achieve the desired outcome of making it easier for overseas-based borrowers to make their repayments. I will give some credit to this Government. I think this Government has putin place several measures to make the repayment of student loans for those overseas much more simple. I have talked to numerous friends of mine who live overseas who have student loans who are no longer having to try to figure out how through a bank to do a bank transfer. There are much more seamless and integrated ways to do this and this is to be congratulated.But then on the other hand this Government has made it much harder for student loan borrowers who are living overseas. It has reduced the repayment holiday for those who are going out to seek their adventure in the world to gain the experience that we know will make New Zealand a great place. That experience is to be celebrated but by truncating the amount of time you can be overseas without making repayments we are restricting the opportunities of so many of our young people. This is something that we should not be doing. This is not to the benefit of us as a country. This is not what we envision when we think about what our education system can deliver for our 21st century New Zealand. It is just not on.Over the last few months I have had a reasonably steady stream of emails from student loan borrowers who are living overseas who now face really real consequences to their lives. I implore this Government to put in place some more carrots to make it possible for these people. Sometimes life intervenes and people have got themselves into a predicament where they now are so far behind in their student loan repayments they live overseas and the prospect of coming forward is just too daunting. It is not that they do not want to start making their repayments. They are happy to start making repayments and making them regularly but what is absolutely frightening them is the prospect of the size of the back payment they may have to stump up with. Some of these people are in their late 30s and early 40s now if they are like me and they started university in the very first years of the student loan scheme. They have bought a house they have got on with their lives and they are living in fear for their security—that they are going to have to sell their house in order to make these repayments. Why can we not have some period of amnesty where people can come forward they can start their repayment schedule but they are not going to have to rip apart the fabric of their lives in order for them to get their house in order as it were?I urge the Minister to think about this and for members opposite to think about this—that we are not going to destroy the lives of New Zealanders who are living overseas or we are not going to make New Zealanders living overseas make a decision of “Well I’m just not ever going to go back to New Zealand. That’s it. I can’t. We’re not going to darken its doors again because it is just too difficult.” Let us actually make it more easy. Let us take away the difficulties for these people to put everything in place. We know that this works. When Labour was in power it introduced an amnesty for student loan borrowers when Dr Cullen was the Minister of Finance and it was very successful. Thousands and thousands and thousands of people came forward and we actually did see real results. Why is it that we would not think about a measure such as that in relation to this? Members of my generation face very different prospects for their future from those of their predecessors—the people who have gone before them.Another measure—not only is there the big headline “Arrest them at the border.” that was introduced in this bill but also there were measures to speed up the repayments from compliant overseas-based borrowers. One of the important facts to remember is that the rates for student loan borrowers are based on the level of their loan and not their income. So if you have gone to live overseas and you are working as a waitress your repayments are going to be the same as if you were a lawyer. This is not a repayment schedule that is based on income. This is not a progressive repayment schedule. It is based on the balance of your loan. These repayments are going to be increased through this piece of legislation and an even more regressive system is going to be put in place.It is going to make it even more difficult for overseas borrowers and run the risk of more people getting into the situation where it is simply too difficult and they are not compliant with their repayments. This is from a Government that does not believe in fairness. It is from a Government that does not believe in equality. It does not believe in giving young New Zealanders every chance to get ahead and that is what we need to see.I would like to see so many changes to this legislation. Labour is opposing this legislation but we know that it will make its way to the select committee. I implore members opposite to actually have an open mind. Think about what this is doing to a generation of New Zealanders because it is not fair and it is not equitable. Thank you.HOLLY WALKER (Green): Well there has been another Budget back in May and now we have in front of us in the House another series of bad student loan amendment changes. For a Government that loves to deal in stereotypes lazy privileged students are a favourite. So without fail every year you can predict in every Budget there will be some kind of punitive change to student loans and allowances and then a few months later as we are here tonight we will be here in Parliament debating the legislation to give effect to them. This time it is the lazy loan-defaulting overseas borrowers who of course in fact are not actually students at all but are graduates and who are unlikely enough as it is to ever come home to New Zealand to contribute to our economy and society without slapping them with the measures in this bill the Student Loan Scheme Amendment Bill (No 3). The fact of the matter is that those stereotypes that the Government loves to peddle are hardly ever accurate. Later in my contribution I will give you a real-life example of the types of people likely to be impacted by these changes.But first of all let us have a look at what the bill actually does. As we have heard from previous speakers the headline provision of this bill is that it allows the Inland Revenue Department to request an arrest warrant for student loan borrowers who “persistently default on their student loan obligations.” The first thing I would point out here is that this is hardly a proportionate policy response to the amount of debt that overseas borrowers owe in default. At the time of the Budget we saw some great headlines from the Government about how overseas borrowers owed $427 million of debt in default which sounds like a lot. But when you put it in the context of the $13 billion of total student debt it is a drop in the bucket. It is in fact 3.2 percent of the total student debt. It is not a proportionate response from the Government to target that 3.2 percent of total student debt with measures like that proposed in the bill. It makes it a criminal offence for overseas borrowers to knowingly fail or refuse to make efforts to pay. They have to make it a criminal offence because you need to be committing some kind of criminal offence in order to be able to grant an arrest warrant.Let us just think about this for a minute. Having lived and studied overseas for a number of years I can confirm that it is very easy to get behind on your student loan repayments while you are overseas. Notwithstanding some recent changes that have made it slightly easier it is still difficult. Information is hard to come by. It is complicated to make voluntary repayments. Communicating withStudyLink from overseas is difficult. Negotiating a repayment holiday or an interest exemption is unnecessarily complicated as I found when I tried to convince the New Zealand Qualifications Authority that my Master’s degree from the University of Oxford was equivalent to a level 7 qualification in New Zealand which apparently it did not believe. Many New Zealanders living or studying overseas simply give up and they resolve to deal with the problem when they get back to New Zealand. Is that the right thing to do? Probably not but it is the reality. When it is that complicated and difficult it is not surprising that that is the attitude many graduates take.What this bill does is make it much more difficult for people who do this to come home and sort it out. It whacks them with a massive disincentive to ever come home because they will now face potential arrest and criminal conviction. It is madness I would contend for New Zealand to be introducing laws and policies that make it less likely for our tertiary graduates living overseas to come home when in fact we have record numbers of New Zealanders leaving every year and not coming back. We need policies that encourage them to come home like the opportunity of a debt write-off scheme for staying in and contributing to New Zealand not policies like this that scare them off from ever returning.Not only is the threat of arrest and a criminal record a major deterrent against returning to New Zealand for borrowers but also it poses major enforcement challenges. As noted in the regulatory impact statement and by the previous speaker Megan Woods there are some difficulties around enforcement powers in airports. It will be up to the police to decide whether to exercise these arrest powers. I put it to the House as to whether it is really the best use of police time at our airports to have the police running around after student loan defaulters and trying to make a judgment call about whether their bags are already on the plane and whether they have children with them and therefore whether it is worth actually arresting them. I do not think so because I think the police at our airports have a far more important job to do which is actually providing airport security. So enforcement is a joke.The second major change that this bill makes is increasing the repayment obligations for overseas borrowers and that is specifically for borrowers with balances greater than $45000. Those with a balance between $45000 and $60000 will now have to pay back $4000 a year on their loan regardless of their income and those with a balance of over $60000 will have to pay back $5000 a year on their loan. The major flaw with these new repayment obligations is that they are in no way means tested so a graduate living overseas could have a very low income or indeed no income at all and still be required to pay $5000 a year off their student loan. If they do not because it is simply impossible for them to do so because they do not have an income that allows them to do that then they face the punitive arrest powers granted by the bill. So it becomes a vicious cycle.The changes in the bill very much depend on that threat of an arrest warrant actually working as an incentive to start repaying. If that threat does not work if it does the opposite and simply makes a person throw up their hands and say “Well I’m not even going to try.”—and the officials note in their advice that they do not expect this threat to be particularly effective—then all that this change will do is increase the rate of growth of default by increasing the repayment obligation and that is noted for the Minister of Revenue in the regulatory impact statement. Clearly he chose to ignore it. This really begs the question of whether the Government is actually interested in pursuing practical legislative change or just interested in trying to be seen to crack down on those lazy students and graduates. But as I said at the outset of my contribution I think we all know which of those it is.In addition the bill inexplicably changes the repayment rules for overseas borrowers so that their repayment obligation does not decrease as their loan balance decreases. I cannot for the life of me figure out why this has been included and what it achieves. It is manifestly unfair because it creates an inequity where two overseas borrowers who owe the same amount today could have very different repayment obligations based on what their loans were when they left New Zealand some time ago not based on what they have repaid since and not based on their income. Again this puts in place another disincentive to them to actually meet their repayment obligations since there is noreward for them doing so in the form of a decreasing obligation. I cannot see what is achieved in the Government’s view by including that in this bill.At this point I want to place on record before the House a real-life example of how the new repayment obligations would affect a New Zealand family living overseas. This family wrote to us at the time that the changes were announced in May in Budget 2013. This is their situation. The husband has a postdoctoral fellowship in the United States worth $41000. The wife is currently being examined for her PhD but she is otherwise unemployed. They have a toddler and a second baby on the way. Combined their minimum compulsory repayment threshold has now just increased from $6000 a year to $9000 a year which as far as they can tell—and they are correct in this—has no means testing or anything that takes into account their income the fact that they have only one income and the fact that they have two dependants; only the fact that they are now living overseas. At the current exchange rate for where they live that roughly calculates to 18.6 percent of their household income.They chose to leave New Zealand to do a postdoctoral job because it is how that father can establish his international career but they have a strong intention of returning to New Zealand and fully intend to pay off their loans. Indeed they are currently fully compliant with their loan repayment obligations. But they cannot do it in a way that will stretch them so financially when they have children so young. Are these lazy privileged obligation-dodging students—the stereotype the Government likes to peddle in? No they are not. They are hard-working New Zealanders.Hon Trevor Mallard: John Hayes says “Yes.”HOLLY WALKER: John Hayes says “Yes.”Hon Annette King: He got a free education.HOLLY WALKER: Yeah good on you Mr Hayes; I will let them know that you said that. They are actually hard-working New Zealanders who are building their careers overseas and starting their family and are currently fully compliant with all of their obligations. What on earth is achieved by sucking out nearly 20 percent of their income on to their student loan repayments back home at a time when they only have one income and two small children? It is beyond me. Perhaps John Hayes would like to take a call and elaborate on that. So this is a dangerous and unnecessarily punitive policy that is based on the Government wanting to be seen to do something on a populist problem and not based at all on facts or real-life evidence.Hon KATE WILKINSON (National—Waimakariri): It is a pleasure for me to stand and take a call on the first reading of the Student Loan Scheme Amendment Bill (No 3). New Zealand has one of the most generous student loan schemes in the world but I think it is important to realise that it is a loan scheme. It is not a gift. It is not a bequest. It is a loan. The very nature of a loan is that it is repaid. It is a very simple premise. Loans are by their very nature to be repaid. This bill is about people who owe money to taxpayers and it is expecting them to pay it back. That is all it is. This bill is about expecting them to pay back taxpayers’ money and it is expecting them to take personal responsibility.My colleague the honourable David Bennett has already mentioned some of the quite alarming statistics where overseas borrowers make up 15 percent of the number of borrowers but they make up 64 percent of those in default and they owe 85 percent of the total debt. In fact they owe something like $536 million compared with $93 million for New Zealand borrowers. So this is actually incentivising overseas-based borrowers who are letting the side down with their slow repayments and their high level of loan defaults and it is actually impressing upon them the importance that it is a debt it needs to be repaid it is too high and we expect them to abide by and comply with their side of the bargain.The loan scheme does represent a major financial commitment by the Government and by taxpayers to support people in tertiary education. We certainly want to support students in tertiary education but it is important that students do take personal responsibility for repaying their loans. Loan borrowers need to keep up their end of the deal. They need to repay their loans promptly particularly those borrowers from overseas. This bill is a good bill and I commend it to the House.TRACEY MARTIN (NZ First): Kia ora Mr Speaker. I had hoped to start my contribution with the things that New Zealand First agrees with but unfortunately I am going to have to get sidetracked a bit and correct some of the anomalies in the information provided by Government members. This is what happens when you pass speech notes between each other—the same wrong information gets repeated.I am not sure whether Government members have bothered to read the student loan scheme report that their own officials put together for 2012. If they would like to go and have a look on page 35 I think they will find that what we are talking about is debt that has been unpaid for a period of over 5 years. It values at $284 million. There are 33000 New Zealanders whom we are talking about and 3000 of them are currently still residing in New Zealand so that gives us 30000 New Zealanders who are based overseas. Fourteen percent of that outstanding amount is to borrowers who took out their loans in 1992. So if we just put some real facts and figures on the table—and I could always get a copy of the report for Government members if they would like to read the facts—Maggie Barry: The logic remains the same.TRACEY MARTIN: Of course Ms Barry would not want to read the facts. The other thing too that we need to correct is that Minister Todd McClay said that these powers would be used only when all other methods are exhausted.If I take the Student Loan Scheme Amendment Bill (No 3) and turn to page 6 new section 162B(3) inserted by clause 8 in Part 1 states: “To avoid doubt the court may make an order under subsection (2) even if the Commissioner is able to recover the debt by other means.” So in other words it specifically says that an arrest warrant can be sought even if there are other means to gain this debt to secure this debt. Let us just put that on the record for the Minister. I can send him a copy of that highlighted as well.One other little thing before I get on to New Zealand First’s major contribution is that there is nothing as annoying as an arrogant Government that decides that legislation will be passed prior to it even having its first reading. This is an excerpt fromStudyLink today. It says: “Going overseas? ... From 1 April 2014: Inland Revenue will be able to request an arrest warrant for borrowers who knowingly defaulted on their overseas-based repayment obligation and are about to leave New Zealand.” Why on earth would we bother with democracy I would ask you if you can tell your Government department before a bill even has a reading in this House to put up the legislation that you are going to push through regardless of any submission and regardless of any common sense that might be placed in front of you?So back to the beginning—there are some things inside this legislation that New Zealand First agrees with although it is very interesting that since the introduction of the student loan scheme in 1992 there have been 15 major amendments to this Act. So I do not think it is any wonder that New Zealand citizens sometimes get a bit confused about the process by which they are able to pay back and fulfil their payment responsibilities.New Zealand First has no issue with the small amendment proposed to section 110 of the Student Loan Scheme Act that retains a constant amount of loan repayment as opposed to the current decreasing loan repayment amount. Unlike my colleague Ms Walker having previously been a debt collector and credit controller I can see that thereis actually a win-win situation out of this where the borrower has the early removal of a burden of debt and the lender has faster access to those funds for re-lending.New Zealand First also has no issue with the sharing of contact details between the Department of Internal Affairs and the Commissioner of Inland Revenue. In fact again I would have to say that if this ability had been placed inside legislation a lot earlier we would not be looking at 30000 people overseas because we would have actually been interacting with them earlier. We would not have allowed 5 years to pass before we even decided to start talking to these people appropriately and we would not have $284 million worth of defaulted debt right now.New Zealand First agrees that if you have a debt—a fair reasonable and legitimate debt—then the responsible action is to repay that debt. But one cannot get blood out of a stone. It is with great sadness that New Zealand First will be unable to support this bill at its first reading because of the inclusion of what is an incredibly blunt instrument that would allow New Zealand students graduates and citizens—because not all people with a debt who have gone overseas particularly in this economic environment are actually graduates. Not all of them are university students. Many of them have been to a polytech. They have got aStudyLink loan and they have had to leave the country for other reasons.This is a Dickensian step and it is appropriate to mention Dickens because his father was sent to a debtors’ prison back in the day prior to the Debtors Act of 1869. Imprisonment for debt was then abolished and replaced by bankruptcy law. No one could argue that our citizens were not able to travel as much as they can now to avoid debt. But I would counter that argument with the fact that with the invention of the internet credit ratings can also travel.New Zealand First can see no practical sense in waiting for the defaulting borrower to return home one day from foreign shores and hope that they have $30000 or $40000 or $50000 on them when they get to the exit gate or we are going to send them to jail—especially when there are so many other options available to the Government. There are more modern sophisticated ways of affecting a defaulter’s life no matter where they are in the world. We refer to the listing of these individuals on to international credit rating agencies so that no matter where they are in the world when they go to purchase a car or buy a home or get a store card their account will be tagged that they owe the New Zealand Government. Over a certain material threshold this will affect their ability to borrow and to purchase which is a more immediate incentive to pay off or come to an arrangement so that that tag can be removed.New Zealand First also points to the other methods already available to the Government. An example would be the provisions that are currently available in the Customs and Excise Act 1996. If one looks at section 280D(4)(h) the Customs Service and the department—and this could include the Inland Revenue Department—can facilitate the exchange of information on the date on which the person arrives in New Zealand just as they can upon the departure of that individual. Would it not be smarter to intercept the defaulter on their way into the country so as to have a greater opportunity to set in place a payment structure prior to them wishing to depart? This is supposed to be about helping our citizens meet their obligations. There is an obligation on the lender just as there is on the borrower to make sure that a relationship is created that is easy and that works for both sides without disadvantaging both sides.These are New Zealanders and they are not criminals. Today these people are students who have been driven overseas by the lack of opportunity offered for employment in their own nation. At the very worst these citizens are guilty of breaking a contract to repay. So if we are going to allow these citizens to be arrested for breaking a contract about debt will we allow banks to imprison mortgagee defaulters? Whatabout the Farmers’ Trading Co. or GE Money? Are we looking at a future where our last debtors’ prison in Dunedin which was shut in the 1860s needs to be reopened to house all those who find themselves unable to pay?It would appear that part of the motivation for this Draconian step is the idea that all these students are living in the lap of luxury laughing as they rip off the New Zealand taxpayer. I can find no documentation to support this. Perhaps this group of people is hanging out with the children of millionaires in our universities which is the reason Michael Woodhouse recently gave to all our students having to gain a debt to learn. Or perhaps they are related to the millionaireSuperGold card holders who ride for free on the Waiheke Island ferry which is another myth that this Government likes to put out to justify charging our citizens.In reality according to theStudent Loan Scheme Annual Report 2012 on page 32 compliance by overseas borrowers around payment has increased by 20.5 percent since the amendments made to this legislation in 2012 and the increase in the number of overseas borrowers with a repayment obligation rose from 42 percent to 64 percent in the 2010-11 year due to a large number of borrowers having come to the end of their repayment holiday. The Government needs to look at its figures.JOHN HAYES (National—Wairarapa): That was a particularly interesting intervention from the member Tracey Martin from the New Zealand First Party. Her leader was at most of the meetings of the Finance and Expenditure Committee where issues around student loans have been discussed over the last 18 months and not one of the ideas that she brought up and aired in the House this evening was ever expressed to the committee by her leader who had ample opportunity to do so over the last 2 years. It is quite astonishing really.As I listened to the debate in the House this evening there is a disconnect between the views of those in the Labour Party those in the Green Party and those in New Zealand First and reality. The reality is this: we are not dealing here with the Government’s money and that seems to underpin most of the comments I have heard tonight. We are dealing with money that has been taken out of taxpayers’ pockets. I am thinking ofLachie the calf-feeder in Greytown who gets paid $20 an hour for his work starting at about 4 in the morning and going through the day. The money comes from his taxes. I think of Lindsay the builder who is working on my own house at the moment for $20 a year. He has never had a rise in 6 years. That money has come out of his—[Interruption] He works for a contractor and this money is coming out of their pockets. They are paying the taxes for people like you to fund your own education and you come into this House and you have not paid your loan back to those people. You still declare it as a pecuniary interest because it is better for you to have an interest-free loan than to pay the money back.Dr Megan Woods: I raise a point of order Mr Speaker. I was not aware that you had a loan that you declared as your pecuniary interest.The ASSISTANT SPEAKER (Lindsay Tisch): Thank you. I just caution the member to be very careful about what he is saying.JOHN HAYES: Well I am being quite straightforward about this. This money came out of taxpayer pockets and the hypocrisy on that side of the House—The ASSISTANT SPEAKER (Lindsay Tisch): Order! The member will withdraw that comment. You cannot say that word in this House. Withdraw the comment.JOHN HAYES: I withdraw the comment. What I find is the disconnect and I cannot build an association between those people who on the one hand profess to help the downtrodden and take money out of their pockets put it into their own pockets take the loans come in here on $140000 or $150000 a year and pay nothing back. It is outrageous—absolutely outrageous. Our interest-free student loan scheme is the mostgenerous in the Western World and we want to keep it that way. The student loan scheme represents a huge financial commitment by taxpayers—by ordinary people. This is not the Government’s money; this is community money which comes out of people’s pockets.We want to support students in tertiary education but it is really important for students to take personal responsibility for repaying their loans particularly when they are on a good salary. It should be done more quickly. Overseas borrowers are continuing to let the side down with slow repayments and high levels of loan defaults compared with those who stay in New Zealand and pay off their loans. As the New Zealand First member pointed out since 1992 14 percent of students have not paid back their loans after 21 years. I think that is unacceptable.Although the Government has made some progress with these overseas-based borrowers it is time to up the ante. If left to my own devices I would cancel their passports. I would not renew them until the loans have been paid. This bill does not go that far but it goes some way to encourage the money to be paid back and we need that to happen to keep faith with ordinary taxpayers. Thank you.GRANT ROBERTSON (Deputy Leader—Labour): I just want to make sure the people of New Zealand know that John Hayes wants to cancel your passport. That is what he just said. He said that if you are someone who has borrowed from the student loan scheme and you might be having some trouble paying it back John Hayes is going to cancel your passport. And while he is at it he is going to pay his builder 20 bucks a year—$20 a year is what he said. We are debating the Student Loan Scheme Amendment Bill (No 3) and what Mr Hayes does not understand is that the whole point of supporting tertiary education is so that the children of John Hayes’ builder can go on and get a degree become an astrophysicist and earn a lot more than 20 bucks a year from John Hayes. That is why we support people in tertiary education Mr Hayes. It is to give them opportunity. We want to see all New Zealanders get that chance.What we have got today is the first ever tertiary education Minister who has made it his business to take away opportunity from New Zealanders. The very first thing Steven Joyce said when he became tertiary education Minister was that his goal was to dampen demand for tertiary education. He said he wanted to dampen demand. In real people’s language that means taking away opportunity from young New Zealanders. Step by step little by little Mr Joyce is taking away opportunity from young New Zealanders. That is because he does not want to face up to the fact that he hates the interest-free student loan scheme. He does not want the interest-free student loan scheme to exist.In that he is consistent with his leader John Key who stood up in this House when Labour brought in the interest-free student loan scheme and he said: “I will oppose this bill with every bone in my body.” Well the Prime Minister—or as he shall now be known the jellyfish—has failed to oppose it at all. He decided that he had better grab it because it was popular but his party and Steven Joyce his Minister have never supported an interest-free student loan scheme. What has National done in the time it has been in office? It has systematically undermined New Zealand students’ access to education taking away postgraduate student allowances and preventing people aged 55 years and over—this is for you Mr Mallard—from borrowing under the student loan scheme.I have had in my office someone laid off from the Public Service; a single woman who knows that she will be in the workforce for at least another 10 or 12 years. She wants to go back and retrain but Mr Joyce Mr Key and the National Party say that that person is not worthy of that opportunity and that she is not going to be supported to take that on. That is wrong. And then in this Budget the Government said that it was going to lower that down. It was not satisfied just with taking to people in Mr Mallard’s agegroup. The National Government said that people over the age of 40 are limited to 3 years of allowances—that is it. They are not allowed to go on and retrain and go on to postgraduate study. Far be it from us to have more people in postgraduate study. This Government’s small-minded taking away of opportunity for New Zealanders is shameful.And then we come to the student loan scheme. We come to the student loan scheme where just to make sure that the Government could reach another few people it increased the repayment rate from 10c in the dollar to 12c in the dollar. That might not seem like much to Mr Joyce but if you are a young couple starting out both with loans trying to set yourself into your first home that extra payment—Hon Trevor Mallard: With kids.GRANT ROBERTSON: —with kids—limits your opportunities. That is the problem for Mr Joyce. He is taking away from young families the opportunity to get ahead in life so he comes to this House—or Todd McClay on his behalf—with a bill that is just purely and simply a gimmick. That is all it is. The police have asked how on earth they are going to look after this. Kris Faafoi the police spokesperson for the Labour Party has brought up in this House time and time again the fact that under AnneTolley’s watch the number of police on the beat is going down. Well here are Steven Joyce and Todd McClay saying that we should have police at the airport chasing people who have not paid their student loan. Is that the best use of police resources Mr Joyce? No it is not. It is not the best use of police resources and the police themselves have told the Government that it is not the best use of their resources.Nobody has costed out what this measure will mean in terms of cost to the courts because this bill is just a gimmick. It is quite simply a gimmick from a Government that does not want young New Zealanders to get the opportunities they should have. The Government simply wants to make sure that tertiary education stays as the preserve of the privileged over there. John Hayes stood up in this House tonight. Did he get a free education? Was the taxpayer paying for John Hayes to go to Lincoln University? Was the taxpayer paying for that? He is very quiet. He is very quiet because he knows that he is taking from a future generation what he had. He is not offering to this generation the opportunity that he had and that is wrong.We need to invest in tertiary education. We need to make sure that all New Zealanders who are able and capable can take on a tertiary qualification. That might be at a university or it might be in a trade or it might be in a polytech or it might be in awānanga but this National Party has said that only those who can really afford it are the ones who should go there. Well we on the Labour Party side of the House say that tertiary education is an investment. The student loan scheme is interest-free because of Labour and we will not support a bill that is quite simply just a gimmick. We want to see legislation that means that all young people are supported into tertiary education that those who need to retrain are given that opportunity and that we invest in postgraduate study to get the scientists and to get the researchers who are going to lift our economy. This Government has no vision for tertiary education. This bill is a weak weak gimmick and we on this side of the House will strongly oppose it.MAGGIE BARRY (National—North Shore): Well hard on the heels of Grant Robertson’s “weak weak gimmick” which would be the epitaph of contender No. 2—or is he No. 3; where is the smart money these days—I would have to say that the smart money when it comes to the Student Loan Scheme Amendment Bill (No 3) is on people repaying their debts. Pay it back. I too have had letters. The Greens were talking a little earlier about how they had had elaborate letters from people who felt they were under extreme hardship and who had taken choices to have a family to get higher education or to move overseas and then they complained about paying back their debt. Well Ihave also had a lot of letters from people who are unhappy about the student loan repayment scheme because they are students who have repaid their debt and they are not at all happy with the bludgers as they call them and thewelchers. It is a debt; it is not a gift. It is something that they have to give back.Simon O’Connor: Not a bribe from the Labour Party.MAGGIE BARRY: It is not a bribe from the Labour Party—good thought. It has been in the past. No no we have put that on the straight and narrow. It is an important matter of principle and I am not surprised that the buffoons on the other side of the Chamber do not understand this principle. It is about entering into an obligation and then fulfilling that obligation.As a nation we need students. They are special they need to be cultivated and they need to get a good education. They also need to take personal responsibility own up to the agreement that they made and pay their debts back. That is fair. That is why we gave the loans to them. If they do not do that why should they get special treatment? Why should they not be treated in the same way as all other tax defaulters are? They need to be held accountable and that is what we are suggesting in this bill.I think others have gone through the numbers. They have talked about the amount of money that people particularly overseas have paid. One of the interesting things I heard—because I did sit through the select committee on this unlike a lot of the speakers on the opposing side—Tracey Martin: It hasn’t been to select committee yet.MAGGIE BARRY: —when I listened carefully to some of the submitters the Inland Revenue Department for example was that it had some really interesting points to make. And if the yap yap yap of thechihuahua could just stay silent she might learn something to her advantage—namely that the Inland Revenue Department’s experience showed that 70 percent—Hon Trevor Mallard: I raise a point of order Mr Speaker. Two points: I think we are on the first reading of this bill and I think that is relatively important but more important although I am a person who appreciates and likes animals the description of one of my colleagues from New Zealand First in those terms is just not acceptable.The ASSISTANT SPEAKER (Lindsay Tisch): Well I am sorry I did not hear that comment but I just caution the member. And we are on a first reading.MAGGIE BARRY: Speaking to the point of order I did not mention a New Zealand First member. That was that member’s one plus one makes two. The maths Mr Mallard is not correct so your point of order is wasted on most of us if not you.Hon Trevor Mallard: Point of order Mr Speaker—The ASSISTANT SPEAKER (Lindsay Tisch): Order! No I will deal with this. [Interruption] Order! Look when I have ruled on a matter that is the end of it and we do not enter into any further comments on the Speaker’s ruling.MAGGIE BARRY: As I was saying as I was about to wrap up my call the Inland Revenue Department talked about the success that it has had with contacting the families of overseas-based borrowers whereby those borrowers actually do pay back their loans at a high rate and that is because the parents are ashamed. The parents get the call and they go: “This is awful. We’re not going to put up with this.” They ring their children and put on quite a lot of pressure and it actually works.So too will these measures. Arrest at the border is an extreme measure that might be brought into position. It might be put into use if it is absolutely essential. These are measures that we have to take very reluctantly in order to bring a small number of defaulters back into line. And a student loan is exactly that. It needs to be paid back because it is not a gift. That is a very good position and that is why I commend this bill to the House very happily. Thank you.The ASSISTANT SPEAKER (Lindsay Tisch): I understand that the next call is a split call.CHRIS HIPKINS (Labour—Rimutaka): I think perhaps next time before Maggie Barry decides to give us a great spiel about what happened at a select committee she might want to check whether in fact the select committee meetings had even taken place. This is the first reading of the Student Loan Scheme Amendment Bill (No 3) so in order for Maggie Barry to reflect on all of the things that happened at the select committee she might want to check to make sure that the select committee had actually happened. I do not know of any bill that has been in this House for a first reading that has gone to a select committee before it has even been read in the House for a first time. I think that only in the parallel universe that Maggie Barry inhabits—Hon Trevor Mallard: Delirious.CHRIS HIPKINS: —the delirious parallel universe that Maggie Barry inhabits—would a bill go to a select committee before it has had even a first reading in the House.This bill says an awful lot about the National Government which is quite happy to pick on people who find themselves on hard times and who do make some mistakes and who do for whatever reason find themselves in default on their student loans. Yes people who borrow with student loans should pay them back but many times people find themselves in a difficult position because they go overseas or for other reasons.Of course other people find themselves in a difficult position. The owners ofMediaWorks found themselves in a difficult position and Steven Joyce was only too happy to help them out with their loan. There was no problem in helping them out with their loan. But when it comes to a student or a recent graduate who gets into a bit of trouble with their loan Steven Joyce wants to whack handcuffs on them. Why does he not have the same standard for the people who are in receipt of corporate welfare under this Government? It seems that we have one standard for those whom the National Government thinks should receive corporate welfare and another standard for the genuinely needy New Zealanders who through no fault of their own find themselves in need of a little bit of assistance.I am very proud to stand here as a Labour member of Parliament because I think that in the 9 years that Labour was last in Government we did a number of incredibly good things with the student loan scheme that were designed to ensure that no New Zealander was prevented from participating in tertiary education by the cost of it. Yet Steven Joyce has openly said that his intention is the opposite. His intention is to dampen the demand for tertiary education by making it more difficult to get into and by making it more expensive. He has basically said that some people are just too old for tertiary education and that once they get to a certain age they should not be able to access tertiary education any more. That is Steven Joyce’s view. Steven Joyce also does not think that we should offer full levels of student support to people who are doing postgraduate study.Well I have news for Steven Joyce who is also the Minister for Economic Development. If we are genuinely committed to economic development perhaps we might want to focus on supporting the people who are doing advanced qualifications and might actually have some ideas about how we can get the boat to go faster. But no not Steven Joyce. He wants to dampen demand for tertiary education.Of course tertiary education is not just about universities. Student loans are not accessed only by people who go to university. They are accessed by many many people who go into other professions including the trades and Steven Joyce is just as intent to pick on those as he is to pick on university students. We should not ever allow this to be an elitist argument because actually student loans apply to all forms of tertiaryeducation. Steven Joyce should not be pulling up the ladder on those people who want to get ahead. That is exactly what this Government is doing.I can say that the previous Labour Government was working incredibly hard to make sure that tertiary education was more affordable by making sure that fees were frozen by making sure that student loans were interest free and by increasing eligibility for allowances. All of those things are being undone by the Government. Fees are going up again at a phenomenal rate like they used to do. Access to allowances is being cut and we are seeing the Government reintroducing costs on student loans. So although Government members may say they want interest-free student loans they introduce an administration fee here they cut eligibility there and they do all sorts of other things because fundamentally they do not like interest-free student loans.I believed John Key when he said he thought interest-free student loans were communism by stealth or whatever—no that might have been Working for Families. But he was going to fight it with every bone in his body and I tell you what—he has not given up on that. They may say that they are going to keep interest-free student loans but they fundamentally do not believe in it.Hon TREVOR MALLARD (Labour—Hutt South): I seek leave to table a document prepared by the Parliamentary Service which is a flow chart of legislation that indicates that the select committees on which members sit and at which submissions are heard follows the first reading of bills.The ASSISTANT SPEAKER (Lindsay Tisch): No that information is readily available to any member.Hon TREVOR MALLARD (Labour—Hutt South): I raise a point of order Mr Speaker. If it was freely available to members one would think that members such as Maggie Barry would obtain it and read it.The ASSISTANT SPEAKER (Lindsay Tisch): Order! That is not a point of order.DAVID CLENDON (Green): I am pleased to join with my Green colleague and indeed my Labour and New Zealand First colleagues to take a brief call to speak in opposition to this very ill-conceived piece of legislation the Student Loan Scheme Amendment Bill (No 3). It is not unusual for the Greens to oppose Government legislation but occasionally I think it is incumbent on us just to retain some perspective and to ask the question: what is this Government good at? It must have some talents some abilities. One can pose the question and get quite a long silence while one waits for an answer. But it has to be said—and it has been proven a number of times just in the last few days—that this Government has an absolute talent for creating legislative sledgehammers for cracking very small nuts. It is a skill it seems to portray at every opportunity.It is indicative to me of the fact that Government members have never quite got their heads around the old saying that goes something like this: for every complex problem there is a simple clear answer and it is always wrong. This bill represents a very simple clear—and one could even say simplistic—approach to an issue that does need to be dealt with and it is a patently wrong approach. It is clear that this fondness—and again we have seen it characterised in a number of the pieces of legislation that have gone through just in the last few days—for meddling around the margins trying to tweak and meddle represents a lack of vision a lack of a strategy and a lack of an overall understanding. The world is quite a complex place and there are many reasons for people’s behaviours and simple punitive measures are seldom going to present a workable and viable solution to that.There are no doubt many reasons why individuals fail to meet their obligations to repay loans and yes loans are loans and there is an obligation on people who take them to pay them back in time. But simply criminalising New Zealand citizens some ofour best and brightest is hardly a creative approach. It does reflect a lack of imagination and a lack of ability to think through a problem and to come up with a positive solution that can actually resolve the problem. It is unlikely even to be an effective solution. One could forgive the lack of shall we say sensibility but it is very unlikely to be an effective solution. Again it is creating a great big legislative hammer that will not solve any problems that it is targeted at.The amount of money in default attributed to overseas former students we are told at 31 March was around $427 million. That is not an insignificant amount of money but again we need to put it in the context of $13 billion of accumulated loans over the years since the loan scheme was put in place. The perverse thing is that that $13 billion actually sits on the Government’s balance sheet as an asset. We have loaded $13 billion worth of debt on to some of our youngest and our not so young and some of our best and brightest and that appears on the books as an asset. That is a very peculiar form of economics in my view.It would seem to me that the Minister of Revenue has not really read very closely the regulatory impact statement because had he done so I suspect that this bill would never have seen the light of day. There are some really interesting points in it which it seems the Government has not really taken into account. One of those is the provision in the bill that raises the repayment obligation of borrowers with loan balances greater than $45000. I would like to quote from the regulatory impact statement. It says: “The impact of this policy”—the raising of the obligation at that $45000 level—“on the compliance of overseas-based borrowers is uncertain.” There is absolutely no guarantee it will have any positive effect. Indeed the regulatory impact statement goes on to say: “There is risk that some previously compliant borrowers with balances greater than $45000 will simply stop repaying or repay less than their obligation because of the higher repayment.” It is creating a very perverse incentive. It is making it easier for people to make the decision to go into default rather than continue to be compliant with their loans.I will not have time to work through all that is wrong with this bill but I would like as others have to reflect on the position that it puts the police in. The police will become debt collectors for the tax department. I look forward to critiquing this bill in future readings. Thank you.Debate interrupted.Amended Answers to Oral QuestionsQuestion No. 1 to MinisterHon BILL ENGLISH (Minister of Finance): I seek leave to make a personal explanation.The ASSISTANT SPEAKER (Lindsay Tisch): Leave is sought to make a personal—Hon Trevor Mallard: I raise a point of order Mr Speaker. The area is always indicated before—Hon Annette King: What’s it about?Hon BILL ENGLISH: Oh correcting an answer.The ASSISTANT SPEAKER (Lindsay Tisch): Leave is sought to correct an answer to oral questions today. Leave is sought for that purpose. Is there any objection? There is no objection.Hon BILL ENGLISH: In answer to an oral question today although not directly answering the member’s question I made a statement that I had seen an estimate of thebenefit of the Opposition’s power policy to New Zealand Aluminium Smelters that was $150 million per year. That is not actually correct. The $150 million was a net present value figure and the likely correct figure would have been $15 million per year not $150 million.Student Loan Scheme Amendment Bill (No 3)First ReadingDebate resumed.JAMI-LEE ROSS (National—Botany): It is an interesting night in the House because the Opposition is really getting fired up over this piece of legislation the Student Loan Scheme Amendment Bill (No 3). You would think it was the worst thing in the world that we are trying to pass here but actually it is eminently sensible. The Opposition does not think so. It has sent down its leadership contenders to have a go at this legislation. First we saw Cunliffe and then we saw Robertson. He gave it a go as well. We have not seen Shane Jones yet. But what we are doing is pretty sensible. Effectively all we are saying with this piece of legislation is that if someone is in default and they are trying to go overseas for the express purpose of trying to get away from paying their student loan obligations then we are going to take some actions. All we are saying is that repaying your student loan debt—meeting your obligations which every New Zealander is obliged to meet if they have a student loan—is important and if they are in default then we will be taking action.This Government has spent a lot of time in its time in Government working on getting the student loan scheme under control and fixing up the mess that Labour left us with after it was in Government. It had almost no rules in place and no restrictions in place in the student loan scheme at all. We saw the debt significantly ramp up and we saw the number of people who were not meeting their obligations significantly increase as well. The Opposition might not care but there is approximately half a billion dollars of student loan scheme money where overseas borrowers are in default. We know that overseas-based borrowers are a significant problem because 59 percent of borrowers who are overseas are currently in default.Tracey Martin: No you’ve got the wrong numbers.JAMI-LEE ROSS: The Opposition and Tracey Martin might not care about that. They might not care about the good hard-working Kiwis who are paying their obligations on a very regular basis. They might not care about them. They might not care that those people are doing things right but overseas-based borrowers are getting away in a large degree of cases. We are taking some action. Yes sure the arrest capability that would be inserted in this bill might seem extreme; it would only be used in the most extreme of circumstances. If someone is absolutely flouting the law if someone is saying to the New Zealand taxpayer that they do not care about meeting their obligations then I think the New Zealand taxpayer expects us to take some action.It is sensible it is good law and it is absolutely in line with what we have been doing as a Government in the student loan scheme area. It is absolutely in line with what we went to the public in an election to talk about and do. They support it. The Opposition is on the wrong side in this debate. It is a good thing that this is going to the Finance and Expenditure Committee so that it can be heard by the committee and people can make submissions on it.A party vote was called for on the questionThat the Student Loan Scheme Amendment Bill (No 3) be now read a first time.Ayes61New Zealand National 59; ACT New Zealand 1; United Future 1.Noes59New Zealand Labour 34; Green Party 14; New Zealand First 7;Māori Party 2; Mana 1; Independent: Horan.Bill read a first time.The question was put that the Student Loan Scheme Amendment Bill (No 3) be referred to the Finance and Expenditure Committee.A party vote was called for on the questionThat the question be agreed to.Ayes63New Zealand National 59;Māori Party 2; ACT New Zealand 1; United Future 1.Noes57New Zealand Labour 34; Green Party 14; New Zealand First 7; Mana 1; Independent: Horan.Question agreed to.Land Transport and Road User Charges Legislation Amendment BillFirst ReadingHon SIMON BRIDGES (Minister of Energy and Resources) on behalf of theMinister of Transport: I moveThat the Land Transport and Road User Charges Legislation Amendment Bill be now read a first time. I nominate the Transport and Industrial Relations Committee to consider the bill. The bill will amend the Road User Charges Act 2012 and the Land Transport Act 1998. The Road User Charges Act 2012 provides for the regulation and administration of the collection of road-user charges for the use of roads and road wear caused by vehicles subject to road-user charges or RUC. The Land Transport Act 1998 provides for a range of functions relating to land transport including the registration and licensing of vehicles. The main purpose of this bill is to address an anomaly for some road-user charge vehicle owners who are required to purchase road-user charges for their vehicle but are unable to do so because their vehicle is not registered and not legally required to be. Its secondary purpose is to enable annual charges in lieu of road-user charges to be collected through registration and licensing processes for vehicles exempt from road-user charges. The bill also makes other minor changes to the Road User Charges Act 2012.Unregistered road-user charge vehicles that are exempt from registration are not required to be registered or are operated under a trade plate in an unregistered state are subject to road-user charges unless they belong to a class of vehicle that makes them specifically exempt. However it is not possible to issue road-user charge licences to these vehicles because road-user charge licences are linked to a vehicle’s registration number. These kinds of unregistered vehicles make only limited use of roads and it is not cost-effective to try to collect road-user charges for them. The Road User Charges Act 2012 will be amended to allow regulations that exempt unregistered vehicles from road-user charges.Vehicles are exempt from road-user charges primarily because it is uneconomic to collect road-user charges for these vehicles. Most of the vehicles that are exempt fromroad-user charges do very little travel on roads. However some exempt vehicles such as fast tractors do a sufficient amount of travel on roads to cause road wear so it is fair that the owners of these vehicles should make a contribution towards the cost that they impose. This bill allows for the collection of an annual charge in lieu of road-user charges for these kinds of vehicles. By doing so it allows for the fair and practical application of road-user charges where collecting them through the normal process would be impractical and uneconomic. This bill also amends the Road User Charges Act 2012 to add offence provisions where light vehicles conditionally exempted from road-user charges are operated in breach of those conditions.Finally the bill contains amendments of a technical nature which support the policy aims behind road-user charges and rationalise enforcement activity. These clarify that a person who has entered into an arrangement to pay overdue fees by instalment will not be subject to additional penalties allow the road-user charges collector to set a licence fee for one-off vehicles that are not covered by prescribed road-user charges types and make minor amendments that allow the effective functioning of the road-user charges system. In closing the proposed changes allow for the fair and practical application of road-user charges in a range of unusual circumstances. This is a great bill and I commend it to the House.Hon TREVOR MALLARD (Labour—Hutt South): I raise a point of order Mr Speaker. We have had this a few times before and there has been a change of Ministers on occasion. The question is that this Minister did not move the bill on behalf of another Minister; does that mean that the bill is now in his name? There has been no indication to us that that is the case.The ASSISTANT SPEAKER (Lindsay Tisch): No that is not the case at all.IAIN LEES-GALLOWAY (Labour—Palmerston North): It is a pleasure to speak this evening on the Land Transport and Road User Charges Legislation Amendment Bill. Here we are at the first reading—just to make sure all members are clear about this—which comes before the select committee phase. As a member of the Transport and Industrial Relations Committee I am looking forward to getting the opportunity to consider this legislation.Darien Fenton: No you’re not—how could you be?IAIN LEES-GALLOWAY: I am—I am. I am looking forward to this Darien Fenton because I am sick and tired of the employment legislation that we are considering at the moment. I am enjoying the submissions that we are getting from various submitters telling us what an appalling piece of legislation that is and how it is going to depress wages and how it is going to make workers more vulnerable but I have to say it is a pretty depressing situation all round. That is why—you are quite right Mr Assistant Speaker—I want to come back to this bill and that is why I am looking forward to the opportunity to consider this piece of legislation which is somewhat more innocuous than that awful piece of employment legislation.It is appropriate that Simon Bridges read the first reading of this bill. We are not entirely sure whether it means it is now in Simon Bridges’ name. If it is now in Simon Bridges’ name that would be even more appropriate. The reason for that is that this is essentially a piece of legislation to tidy up mistakes made in the last road-user charges legislation that this Government passed. Of course the reason why it is appropriate that Simon Bridges is in charge of this legislation is that when he passed the Crown Minerals Amendment Act just 6 weeks later we were back in the House considering a raft of amendments because that Minister could not pass the legislation without stuffing it up and getting it all wrong. So again here we are tidying up legislation that the Government got wrong the first time round.Darien Fenton: Yes what a waste of time.IAIN LEES-GALLOWAY: It is a waste of time. I think the public would be far more appreciative if the Government could just do its homework and get its legislation right the first time round.The other thing of course that we are tidying up here is not one but two inquiries or two reports that the Regulations Review Committee had to carry out into the regulations that were made by the Governor-General as a result of that initial piece of legislation. Of course some of those regulations ended up being disallowed and then some of them were reinstated by the Minister. The Regulations Review Committee carried out another inquiry and produced another report and finally the Government has got round to doing what the Regulations Review Committee suggested which was to put these changes into legislation. My colleague the Hon Maryan Street who is the chair of the Regulations Review Committee will go into that in more detail later on this evening.What does the bill do? Well essentially it does four things. It provides for a new regulation-making power to exempt from road-user charges vehicles that are not required to be registered; it allows for a new annual charge in the place of road-user charges for some vehicles that are exempt from road-user charges; it creates new offence provisions in relation to exemptions granted under section 40 of the Road User Charges Act; and it contains seven “minor technical amendments”.So what does each of those things do? Well it is interesting actually because what they do is allow for some vehicles that are used for the most part by farmers to be exempt from road-user charges and the reason which is a fair reason is that for the most part these vehicles are used off-road. They are used on the farm but sometimes they need to go along the road up the road to the next lot of paddocks and back on to the farm again. The amount of time that they actually spend on the road is really quite insignificant and there is very little need to be collecting road-user charges. But because the law was not drafted properly in the first place in many instances those vehicles are actually in breach of the current law. It seems unusual for the National Party to put its farmers—its supporting farmers—at risk but it is true that that is what it did. That is what it did and now it has had to come back and tidy this up.So in general unregistered vehicles are not allowed to be used on the road but this of course does not apply to vehicles that are exempt from registration or are not required to be registered under the Land Transport (Motor Vehicle Registration and Licensing) Regulations 2011—Hon Tau Henare: What jobs are up for discussion? Ibetcha Mallard’s going after today’s performance—what a grump.IAIN LEES-GALLOWAY: —Tau Henare—or to unregistered vehicles operated under trade plates.Under the Road User Charges Act unregistered road-user charges vehicles are subject to road-user charges unless they belong to a class of vehicle that is defined as being exempt under the Road User Charges Act. It is not possible to issue road-user charge distance licences for unregistered road-user charge vehicles because distance licences are issued against a vehicle’s registration number. Operators of unregistered road-user charge vehicles cannot be compliant—Hon Tau Henare: What are you going to do for theMāoris?IAIN LEES-GALLOWAY: —cannot be compliant Tau Henare—with the Road User Charges Act when travelling on roads. So the Government has basically made criminals out of every farmer in the country and now it has had to come back and tidy it up. There is a new annual charge involved here. For those vehicles that do spend a bit more time on the road there is a very sensible provision to allow for an annual fee which they can pay in lieu of the road-user charges that they would ordinarily pay.It seems interesting to me that this legislation is being passed to ensure that a small group of people do not have to pay their road-user charges and they do not have to pay into the National Land Transport Fund when the last piece of legislation the Government passed that related to the National Land Transport Fund actually put up road-user charges through fuel excise tax for every single New Zealander. This is a Government that says it wants to cut taxes—and sure it cuts taxes for a few. It cut income tax for the top 10 percent and it is cutting road-user charges for a handful of farmers but it puts taxes up for everybody else—everybody else who drives their car drives their kids to school drives to work. All those people have to pay more—have to pay more—under this Government when the farmers get to pay less. That is what this Government means when it says it is cutting taxes. It is cutting taxes for its mates and it is putting taxes up for everybody else. That is what National means when it says it is going to cut taxes.This is a fairly technical amendment. It is designed to do one thing really and one thing only: tidy up the mistakes that National made the first time round. So we on the Labour side of the House are quite happy to help the Government tidy up its mistakes. We are quite happy to help the Government tidy up its mistakes. We will see this bill go to the select committee. I look forward to the raft of submissions that will come in on this bill—probably slightly fewer than we have had on the Employment Relations Act amendments that we are considering right now. But in the interests of helping this Government tidy up its mistakes Labour will support this bill going to the select committee.DAVID BENNETT (National—Hamilton East): It gives me great pleasure to speak on the first reading of the Land Transport and Road User Charges Legislation Amendment Bill. Is it not a pleasure to see a new member like Iain Lees-Galloway try to do a 10-minute speech? He tried to do 10 minutes could not stick to the bill and had to go on about other things. He could not stick to the bill. He is the silent partner of the Transport and Industrial Relations Committee. He sits there meekly day after day followed by unionists either side of him not allowed to say a word. He sits on that committee and does not say a word.Hon Simon Bridges: They wouldn’t let the King’s boy speak?DAVID BENNETT: No exactly—silver spoon. But he is going in. He is best mates with another silver spoon Mr Herne Bay 1984. Those two together are going to be the new team for the Labour Party—Herne Bay and Palmerston North. I will look forward to seeing that happening.Hon Trevor Mallard: I raise a point of order Mr Speaker. [Interruption]The ASSISTANT SPEAKER (Lindsay Tisch): Look a point of order is heard in silence.Hon Trevor Mallard: Members are to be referred to by their names or by their electorates and that member knows that he is breaching that.The ASSISTANT SPEAKER (Lindsay Tisch): Yes I have had to rule on this earlier today. There is Speakers’ ruling 28/1: members will refer to members by their names.DAVID BENNETT: Thank you Mr Assistant Speaker. Well Iain Lees-Galloway is going to be the spokesperson we can see from the Labour Party on this bill.Hon Tau Henare: It’s Iain Lees-Galloway.DAVID BENNETT: Pardon? What did you say?Hon Tau Henare: Iain Lees-Galloway. He went to King’s. He’s got two names.DAVID BENNETT: Oh that is right. That is right. He probably needs three names if he is going with David Cunliffe. Then you have got “Tricky Trevor” there. He is going to be there as well.This bill is important. It is good to finish this bill off. If the members there want to have a fight let them go for it outside. This bill is in the best interests of the New Zealand transport sector. It is important when you see a Government that is actually doing something in transport and building things like the Waikato Expressway. Louise Upston and I are very proud of the Government’s achievements in the Waikato unlike what Labour did for our region. This is actually part of that process where we are continuing to work on these rules to make sure we get the best things and the best approach for the New Zealand transport sector.This bill will pass and it is good to see the Labour Party supporting it. We look forward to the New Zealand First Party supporting it as well. There are no conspiracies involved so the New Zealand First Party has got no reason to vote against it. The Green Party members should also be voting for it but I am sure that they will bring in their magical electric trains so that they cannot vote for it in the end. Thank you. I look forward to this bill passing.DARIEN FENTON (Labour): How long was that speech?Dr Rajen Prasad: Two minutes.DARIEN FENTON: Two minutes? OK 2 minutes from the chair of the Transport and Industrial Relations Committee—Hon Trevor Mallard: That’s quite a long one for Bennett.DARIEN FENTON: It is quite a long one really. I think he needs to be really careful about showing his commitment to what he said was a very important bill in this House the Land Transport and Road User Charges Legislation Amendment Bill. The truth about this bill is that it would not be in the House if the National Government had not stuffed it up in the first place. That is the truth about the Land Transport and Road User Charges Legislation Amendment Bill. That is the truth and I agree with my colleague Iain Lees-Galloway who said that it is entirely appropriate that the Minister Simon Bridges was introducing this first reading on behalf of Gerry Brownlee—Hon Trevor Mallard: He didn’t say that though.DARIEN FENTON: No I know he did not say that and that is a problem too actually. That is a problem. He introduced it—this is not a man known for attention to detail. This is not a man known for attention to detail. This is a Minister who has already had to come back to the House on several bills and make corrections and drive through changes at the last possible minute.What happened with this bill was that this was a very very controversial bill at the time that it went through the Transport and Industrial Relations Committee—Hon Tau Henare: Not even.DARIEN FENTON: Well Tau Henare was not there. It was a controversial bill and in fact there were a number of transport providers who were very very upset about what the Government was doing. There was even a little bit of a campaign online as I recall. What happened with the bill was that the Government was given advice by its friends in the trucking industry and it ignored it. It ignored it. It was given advice by its friends in the agriculture industry and it ignored that advice as well. So what happened? The bill got referred to the Regulations Review Committee and my colleague Maryan Street will talk with great erudition about exactly what happened at the Regulations Review Committee. But the truth is that it would never have been necessary for this bill to go to the Regulations Review Committee and come back as yet another bill on road-user charges if the Government if the Minister if the Associate Minister and if the National Party members had done their jobs properly in the first place.I will talk just briefly about what the purpose of the bill is. It proposes to amend the Road User Charges Act and we have as I said quite recently in this House actually passed a bill about road-user charges. I want to divert just for a minute to remind theHouse that actually going back Labour was very supportive of measures to reduce road-user charges evasion. Going right back to 2008 remember there was a huge mass protest from the truckies and the then Minister of Transport Annette King was involved in that and then the transport industry after we actually introduced road-user charges or increases. It was used as a political tool by the National Party.Hon Simon Bridges: What year was that?DARIEN FENTON: That was 2008 but we do not forget that. We do not forget that. And I was very pleased when the Road User Charges Bill came into Parliament to see that actually the truckies were just as annoyed with the National Government. In fact there were online petitions and other things. They were just as annoyed with the National Government apart from its friends in the Road Transport Forum which does not represent its members and does not listen to what they are saying.But we on this side of the House were the instigators. We were the people who supported road-user charges and we also supported this bill the original Road User Charges Amendment Bill brought forward by this National Government. We supported that too even though we had concerns and we were supporting the people who were concerned about it at the time. As I said what happened was that the Government did not listen. So here we are in urgency wasting our time on doing a bill that will actually exempt fast tractors. That is what this bill is going to do. It is going to exempt fast tractors—that is tractors operated over 40 kilometres per hour on the road—from road-user charges and subject them to an annual charge. I just find that really interesting that the select committee and the Ministers could not get the definition of a fast tractor right at the time. Actually a fast tractor according to the regulatory impact statement glossary is “a tractor that is operated over 40 kilometres per hour on road (as opposed to being capable of speeds in excess of 40 kilometres per hour).” That is what a fast tractor is. And “For the purposes of the RUC system a tractor is defined as being a motor vehicle designed and constructed and not merely adapted for traction and powering implements.” So that is the substance of this bill. That is what this bill is about. This bill is about fast tractors as opposed to slow tractors.Dr Megan Woods: They’re a menace.DARIEN FENTON: They are a menace? You think they are a menace? Fast tractors are a menace? But anyway that is the purpose of the bill and this bill will amend the Act to provide for fast tractors.I am really looking forward to the select committee process and maybe we will have a demonstration at the select committee of a fast tractor compared with a slow one.Dr Megan Woods: The steps of Parliament.DARIEN FENTON: Oh a tractor coming up the steps of Parliament—that is right. We could have that as well. In fact it might be a tractor coming up the steps of Parliament opposing this bill actually opposing the National Government. That would be very interesting.Apparently there are seven minor technical amendments to the Road User Charges Act that will improve operation of the road-user charges system. What I do know about this bill and the original bill is that there is still a residue of resentment about this from trucking operators. They still do not believe that the original Road User Charges Amendment Bill which this Government brought in was fair. They are still not convinced by it and I think it is a demonstration of the fact that the Government did not do its job properly in the first place. It is a demonstration by having to have this bill back in Parliament. According to the explanatory note “Most aspects of the new system are working well but there is a need to correct some minor anomalies with the RUC Act that affect a small number of vehicles and their owners.” Why could we not do the job in the select committee of correcting some minor anomalies with the Road UserCharges Act that affect a small number of vehicles and their owners? Why could that work not be done? As I say it is due to a lack of attention to detail from this Government and from the new Minister Simon Bridges who has picked up from and is following his elders his more senior Ministers. He is following their tradition of not doing the job properly of not paying attention to detail of not listening to people of just being lazy and of sitting in select committees and taking the advice of people instead of listening to the people on the ground just as he is doing with the Employment Relations Amendment Bill actually—just as he is doing with that just as David Bennett is doing too and just as the other members on the select committee are doing.Actually we do not need this work in the select committee. The Transport and Industrial Relations Committee is very very busy. It has 15000 submissions to take note of on the Employment Relations Amendment Bill. It also has the Health and Safety (Pike River Implementation) Bill. It has major health and safety legislation in front of it. We do not need this. This did not need to happen—this did not need to happen. If only the Ministers and the chair of the Transport and Industrial Relations Committee had done their jobs properly we would not be rushing through in urgency the first reading of the Land Transport and Road User Charges Legislation Amendment Bill which is going to be dealing with fast tractors. Thank you.JULIE ANNE GENTER (Green): I rise to speak on behalf of the Green Party on the Land Transport and Road User Charges Legislation Amendment Bill. The Green Party sees no reason to oppose the bill at this time. It is pretty minor. I am looking at the regulatory impact statement now. One of the two key proposals in this bill which has already been explained by other members in the House tonight is to exempt fast tractors from road-user charges and subject them to an annual charge instead. The other major proposal in this bill is to exempt all unregistered vehicles from road-user charges—[Interruption]The ASSISTANT SPEAKER (Lindsay Tisch): Order! [Interruption] Order! I am sorry. I would actually like to hear what the member is saying.JULIE ANNE GENTER: Thank you Mr Assistant Speaker. As I was saying the other major proposal in this bill is to exempt all unregistered vehicles from road-user charges and instead apply an annual charge. There are six other proposals which are supposedly going to improve the functioning of the road-user charges system. They are minor in nature and impact and there is very limited information available so it was difficult for the officials to provide a very thorough analysis in the regulatory impact statement.I think it is worth saying that although the Green Party has no reason to oppose this bill it is a bit of a missed opportunity to get much better outcomes from the entire road-user charges system. It is my understanding that there are highly highly efficient light diesel vehicles which are currently probably paying far more than their fair share with the changes that were introduced by this Government to the road-user charges system and really the entire vehicle licensing registration road-user charges and petrol tax systems—all of these systems that we have for raising revenue—are also an opportunity to use economic instruments to clean up our fleet and to get more efficient and safer vehicles on the road. That opportunity has been missed.So here we are after 11 p.m. on a Wednesday night debating this minor change which is primarily going to benefit a few farmers. That is fine—I mean they do not use the road so much with their fast tractors. I suppose that it is entirely fair but it does say something about the priorities of this Government that it is not taking the opportunity with the transport portfolio to reduce the transport costs and the burden on households and businesses in New Zealand which is probably a major drag on our economic development at this point in time.It has been about 6 or 7 years since we have seen any increase in vehicle kilometres travelled on our roads so households and businesses are not travelling as much—well they are not travelling more even though there are more people; the population has increased—and that is because oil prices have been high. That has impacted on economic development. So here is an opportunity to reduce the burden of transport costs and that is going to get more economically efficient outcomes for the country. Yet the National Government is apparently completely unaware of the fact that New Zealanders are having to spend three or four times more than the Government just to use the infrastructure that is being provided by their tax money.I think it is important to explain this. I am not sure that everyone in the House is aware of this. Of course road-user charges contribute to the National Land Transport Fund as do petrol taxes. Petrol taxes by the way have increased significantly in the past 5 years. Their contribution to the National Land Transport Fund has increased 92 percent since 2007-08. The light road-user charges’ contribution to the National Land Transport Fund has increased 37 percent so by much less. The heavy road-user charges’ contribution to the National Land Transport Fund increased by only 20 percent.So the changes that the National Government introduced to the road-user charges system did not result in a commensurate increase in the amount that truck drivers and heavy vehicle commercial users were paying for the roads compared with your average Kiwi family. Kiwi families are having to pay much more and yet the infrastructure being provided by the Government—75 percent of the budget for new infrastructure—is going on just a few State highways that primarily benefit freight and actually accommodate only about 4 percent of daily vehicle trips. Surely that is not a logical allocation of resources and it is certainly not the best way to get better economic outcomes from our transport investment.As I was saying before the National Land Transport Fund—which is now contributed to much more by petrol taxes paid by average Kiwi households and partially funded by road-user charges paid by heavy vehicles and light diesel vehicles—is about $3 billion a year. About $3 billion a year is spent by central government on transport infrastructure. It is not true that roads are entirely paid for by road users because there is another $1 billion that is spent on transport infrastructure that comes from your rates. Local government contributes about $1 billion to transport infrastructure. All of that comes from property owners ratepayers and even renters because renters pay rates through their rent.So we have got $1 billion a quarter of the transport infrastructure cost paid for by rates not by road users. We have got another $3 billion that is paid for by road users in some way but not in a direct way—not in the way that you pay a toll to use a road the vast majority of the time. Even when one does pay to use a toll road like for example at the Northern Gateway the amount raised by that toll does not even cover the cost of collection or it barely covers the cost of collection. So it does not contribute to the building of the infrastructure.Anyway the Government is taking $4 billion off ratepayers and taxpayers and spending it on transport infrastructure the vast majority of which is roads and a huge proportion of which are a few new State highways that have terrible business cases and that carry only 4 percent of daily vehicle trips yet Kiwi households and businesses have to spend four times more than this just to use that infrastructure. Last year we spent $8 billion importing oil. We are not importing any more than we did 5 years ago but we are spending twice as much on it. We spent $8 billion.Hon Simon Bridges: We need to drill more.JULIE ANNE GENTER: I would have thought that the Minister of Energy and Resources would know that we do not use the oil produced offshore in New Zealand in our cars and trucks. We do not even have the capacity to refine it. Even if we did have a big find off the shore of New Zealand the Minister should know that that would not affect the amount that New Zealanders pay at the pump because we pay the international price of oil. So we are going to be paying the same amount for oil whether or not it is produced here and whether or not it is spilt and destroys our shores. It is not going to benefit Kiwi households. But of course the Minister would not know something like that. Why would he know that? The real question—[Interruption]The ASSISTANT SPEAKER (Lindsay Tisch): Order! Order please. [Interruption] Order! I cannot hear and if I cannot hear it is not fair on the speaker. I ask that you give the speaker a fair go.JULIE ANNE GENTER: New Zealand households and businesses are spending—well last year they spent $3 billion on vehicles. Three plus eight for those who cannot do math on the National Government’s side of the House is $11 billion. That is slightly more than our current account deficit. Our transport system is highly inefficient because it forces us to spend $11 billion at least just to use the infrastructure being built with our tax dollars. That is the major oversight that unfortunately the National Government has not grasped—that it has the opportunity to invest in more choice. That does mean better buses and trains which I know New Zealanders want and safer walking and cycling which I know New Zealanders want. That will not only save them money and provide cleaner healthier communities but also actually free up the roads for those people who still need to drive. That is smart green transport and unfortunately this Government has not seen the light. It appears it never will. Thank you.MIKE SABIN (National—Northland): That was a valiant contribution from Julie Anne Genter. I suggest that the old “take down the leader” approach might be happening in the Green Party because that speech was so technical and confusing it almost sounded like Russel Norman. I think she might actually be making a play for Russel Norman’s space there.It is ironic that we are talking about being off the beaten track and off the trail as are many of the vehicles that the Land Transport and Road User Charges Legislation Amendment Bill relates to because many of the Opposition members of course are off that beaten track and up the garden path seeking a nomination from and seeking the support of their fellow party members and the like. Well I would suggest that where they are actually heading is the big old road to nowhere—the big old road to nowhere.The big disappointment for me and for my colleagues on this side of the House is that any good Government actually relies on having a good Opposition. Is that not true? A good Government relies on having a good Opposition. The New Zealand public relies on having a good Opposition to hold the Government to account not to hold the snapper in the House for a bit of show-and-tell. That did not go down so well did it? That gutted that particular member’s leadership opportunities.However there is a vacuum and it is quickly going to be filled by one of the three or possibly Russel Norman because I think actually that when we are talking about the Leader of the Opposition are we not talking about Russel Norman? I think we are. I think he has done an outstanding job. Now he has got Julie Anne Genter on his tail—Hon Simon Bridges: No one’s as good as Cunliffe though.MIKE SABIN: No absolutely and he makes a stunning portrait does Mr Cunliffe.This bill which I am sure will enjoy support from across the House is really about—Darien Fenton laughs about tractors that can do over 40 kilometres an hour. The member would not do that if she was standing in front of a John Deere coming down the road at 41 kilometres an hour. That is pretty much the reaction I am sure she would getif she talked to farmers about the importance of this sort of thing. Although it is a technical bill and although it is quite narrow it actually has relevance to a lot of people who are out there actually earning this country’s way in the world.Although the Opposition can trifle about the nature of this bill and the anomalies that need to be rectified when the Road User Charges Act 2012 the amendment to the road-user charges was done it was quite clear that it was a very complex piece of legislation that went back to 1978. So remedying here the anomalies that although quite narrow are quite significant is actually very pragmatic. Although the union stalwarts over there will laugh and gibe about it the farmers around this country know just how important it is. Yet again they can rely on National actually doing for them what they were—Hon Annette King: He belonged to the best union of all the Police Association.MIKE SABIN: Sorry what was that Annette King?Hon Annette King: You were a union member.MIKE SABIN: I still am. I still am a member of the Police Association. What is wrong with that? I actually know how to drive a tractor at more than 40 kilometres an hour as well. How about that? I can use a front-end loader and the digger bucket—not too bad not too bad. But that is what you have on this side of the House—you have people who are practical and who are about doing. On that side of the House you have people who are interested in doing what is in the best interests of themselves and that is exactly what we are seeing as the numbers are starting to line up over there. It is a very interesting and fascinating contest.This is a good bill. I commend it to the House.The ASSISTANT SPEAKER (Lindsay Tisch): I call—[Interruption] Order! The member has not even spoken yet. I am calling Denis O’Rourke.DENIS O’ROURKE (NZ First): We are told that there is a need to correct some minor anomalies—minor anomalies—with the new Road User Charges Act 2012 that affect a small number of vehicles and their owners by way of this omnibus bill the Land Transport and Road User Charges Legislation Amendment Bill. Perhaps it should be called the “Land Transport Charges Stuff-ups Correction Bill” because that is actually what it is. It is really necessary too because of all the stuff-ups that have been made by this Government on this matter over recent times especially with the 2012 Act. I have been contacted by a number of people over this legislation—irate people people who are frustrated at Government ineptitude over these things and people who have had to pay much more than they should have—and they will of course now face huge fuel tax increases as well from this grasping Government. So the Government cannot be proud of this bill. This bill is nothing more than a stuff-ups correction bill.Having said that New Zealand First has no objection to the changes to be made by the bill most of which are of only a technical nature. Firstly there is to be a new regulation-making power to exempt vehicles that are not required to be registered from road-user charges. Under the Act unregistered vehicles are subject to road-user charges unless they belong to a class of vehicle that is defined as being exempt. It is not possible to issue road-user charge distance licences for these unregistered vehicles because those licences are issued against a vehicle’s registration number—it is not rocket science. Operators of unregistered road-user charge vehicles cannot therefore be compliant with the Act when travelling on roads. The amount of road-user charge revenue that would be collected for these vehicles is low so the bill would amend the Act to enable regulations to be made exempting vehicles that are not required to be registered from road-user charges. That is sensible and acceptable but I am amazed that the current law has been allowed to subsist until now in that state.Secondly there is to be a new annual charge in lieu of road-user charges for some vehicles that are exempt from road-user charges. These are vehicles that make very littleuse of roads and make a sufficient contribution to the costs they impose on the road network through the standard vehicle licence of about $43. However some vehicles exempt from road-user charges are likely to impose higher costs on the road network than are covered by this. A good example is tractors—presumably driven by National boy racers—operated at over 40 kilometres an hour on the road. The proposal is that these would incur an additional annual charge by amending the principal Act to enable an annual charge in lieu of road-user charges to be collected through the registration system. That is of course just fair and appropriate but it has been a long time coming. Again why was it not done years ago?Thirdly there will be new offences to support enforcement of conditions on exemptions under section 40 of the Act. Owners of light vehicles that are operated almost exclusively off road can apply for an exemption from road-user charges under section 40 but these are subject to conditions prescribed by regulations. For example an exempt light vehicle can be operated no further than 10 kilometres from the nearest boundary of the property where the vehicle is normally kept. Clearly there has been a glaring stuff-up here in that there are no offence provisions for breach of these incredibly important conditions. The bill will add suitable offence provisions commensurate with penalties for similar offences under the Act. It is obviously necessary. It is another stuff-up. It has to be corrected.The remaining amendments are only minor in nature and are also unobjectionable so New Zealand First will vote for the bill to go to the appropriate select committee.CHRIS AUCHINVOLE (National): When New Zealand First stood up we thought “What’s this going to be?”. But no it was Denis—Denis the dyspeptic the dismayed the disconsolate the disgraceful the derogatory the destructive. But worst of all it was Denis the dismal. I live for the day when New Zealand First says “So we will vote for it and we like it.” But no it did not say it this time. He did say—it squeezed out—and his last words were “So we will vote for this.” Denis congratulations and you are looking happy. Did it make you feel good?Denis O’Rourke: Well even we want to help you to correct stuff-ups.CHRIS AUCHINVOLE: Here we go! I had prepared my speech with this final line: “This is a constructive non-controversial bill whose changes affect only a small number of vehicles and owners but which will be received positively by these people and by all parties in the House.” I have never heard such a controversial delivery on such a simple little bill as this the Land Transport and Road User Charges Legislation Amendment Bill.I do not know how many people have driven tractors. I have driven a tractor. Paul has driven a tractor. David has driven a tractor. Would members on the other side like to indicate whether they have driven tractors? Lots of people have driven tractors. Oh there you are. We are all one on this bill—we are all one. And the Assistant Speaker has driven a tractor. Without engaging the Speaker in the debate I suppose one could speculate on what sort of tractor it was. I would suggest aLanz. ALanz tractor would be the one. [Interruption] No not aLanz. Ferguson 28?The ASSISTANT SPEAKER (Lindsay Tisch): John Deere.CHRIS AUCHINVOLE: John Deere? Oh John Deere. I am old enough to remember when they were introduced to this country—the green tractors.Hon Annette King: Are you that old?CHRIS AUCHINVOLE: Oh yes. We had a lot of fun on tractors in those days but my goodness me we used to take a little bit of risk—Simon O’Connor: At 40 kilometres an hour.CHRIS AUCHINVOLE: —at 40 kilometres an hour. But I am glad now that we have much safer procedures for tractors.Have they not done a lot for the country? I think it was Mike Sabin who said that it is the people on tractors who earn this country’s living. I think it is a good opportunity just to take note of the fact that we have the Minister for Primary Industries with us. Minister we believe in tractors. We believe in the people who drive them. We believe in the work they do.This bill will bring about a correction to—[Interruption]. As I said I do not know what it is about tractors but it has certainly livened up the Opposition members. It has certainly livened them up. They are having a bit of a race over there towards the leadership and it is a tractor race because it is not exactly moving that fast is it?These minor improvements that this bill introduces are positive steps and they play a part in this Government’s efforts to simplify and modernise New Zealand’s transport operation and to make it effective efficient and fair for all users. And this is the standpoint. This is the procedure that you see. For those members who have come along to the Transport and Industrial Relations Committee just to see how a meeting should be chaired—just to see how a meeting is properly chaired by my colleague David Bennett—it is an unforgettable experience. David Bennett and I have been sitting together in Parliament for 7 years now and it has not made any difference to either of us. I commend this bill to the House.Hon MARYAN STREET (Labour): It gives me great pleasure to rise to speak to the Land Transport and Road User Charges Legislation Amendment Bill—Hon Annette King: Really?Hon MARYAN STREET: It does and I am probably the only member in the House who is absolutely delighted that this piece of legislation has finally come before the House under urgency. Let me explain because it is not immediately obvious why anybody would be so pleased that we would be debating tractors at quarter to midnight on a Wednesday. But I am personally delighted that this piece of legislation has finally seen the light of day. I happen to chair the Regulations Review Committee and people will know by the attached information that is available on this piece of legislation that this has now been the subject of two reports from the Regulations Review Committee. Why should it cause such fuss? Well let me try to encapsulate that as briefly as I can.Last year the Ministry of Transport brought in a regulation—regulation 8—to continue the existing exemption for farmers who operate light road-user charge vehicles for agricultural operations so light vehicles such as tractors with limited on-road use. This is the bit that is really interesting. The ministry decided to introduce this regulation “pending outstanding policy decisions on how best to manage” these exemptions. In other words the Government had not done it in the legislation. In the road-user charge legislation it had not done it. The ministry officials read the minds of Cabinet and said “We’re going to put in a regulation that says we’ll just roll this exemption over because it’s all going to come to an end on 30 June 2013 anyway.”I am sorry; officials do not have that power. They do not have that power. A regulation was made that was never brought to the Regulations Review Committee except afterwards. This regulation was made in anticipation of the policy position the Government was going to take. I am sorry; that is not how it works. The Government intends a policy position it states that position then it enacts it in legislation if it is a competent Government. But this Government is not so it left this bit out. It meant that these guys with these mainly off-road vehicles carried on paying a swathe of money—a swathe of money—in road-user charge contributions and the regulation was completely out of order. So my predecessor Charles Chauvel moved that it be disallowed.At 1 August 2012 when the Road User Charges Act came into force decisions on whether and how to implement an exemption for light road-user charge vehicles had not been made. The decision had not been made so the officials stepped into the gap andtried to fill it in. I am sorry but that is not the way it goes. So they just thought that they would roll over this existing exemption and it has used transitional regulations rather than saying “Minister you need to go back.” I understand that Minister Simon Bridges has introduced this tonight but it is in the name of Gerry Brownlee. Perhaps between them they could get half an idea right but at the moment all this is doing is correcting something that should have been done by 1 August 2012—1 August 2012. Here we are a year and several weeks late—a year and several weeks late.So what did they do? The officials put in a regulation. Charles Chauvel got up in the House with the agreement of the Regulations Review Committee three of whose members are National members. It is unconstitutionally in my view stacked because it has always been a bipartisan committee before now but it now has three National members and two Labour members.Anyway the three National members whose names are signed to this report agreed that it should be disallowed. So Charles Chauvel went ahead and moved the disallowance motion. Then the Minister did not allocate House time to debate the disallowance motion. Therefore the regulation was disallowed. In other words it was overturned. It ceased to exist. It went up in a puff of smoke. The reason however that the Minister Gerry Brownlee gave in front of the Regulations Review Committee doing the second report on this regulation was that he did not want to allocate House time to debating MrChauvel’s motion because he believed that given the infrequency of using the disallowance procedure it would not be a good precedent for the Government to use its majority to vote down a disallowance procedure. I am sorry; that is what it is for. If the Government does not want its regulations disallowed it should make some time get up in the House and say: “This shouldn’t be disallowed because we were the plonkers who put the inadequate legislation in to start with and we are too embarrassed to correct the legislation so we’re just going to let this go on.”What happened after the disallowance of the regulation? The Minister reinstated it. It was not any better the second time—it was not any better. So we have a complete litany of ineptitude—a complete litany of ineptitude. The Minister introduced it a second time with no improvement. He should have amended the legislation for goodness’ sake but did not. So I moved another disallowance motion because it was not any better than the first time—it was not any better than the first time.Can I just say that I withdrew my disallowance motion. On 11 June this year I withdrew my disallowance motion on the understanding that this legislation was going to be brought forward to correct the matter in time for 1 August—1 August of this year. Here we are in parliamentary time on 27 August putting up for first reading for goodness’ sake—for first reading—a piece of legislation that should have been in place in order to correct the mistakes previously. It should have been in place in time for 1 August for the start of the legislation after the regulation would have been rescinded or overtaken. But no they still could not get it right—they still could not get it right.This is just an extraordinary list of ineptitude of one mistake after another which the Minister could have fixed last year. I do not know whether it is Simon Bridges’ bailiwick now. I feel sorry for him. He does not understand this stuff to start with so how can he possibly amend it? How can he possibly fix it? Being such a limited person in this respect it is very difficult to imagine how he might ever fix it. Here we have the legislation wrong in the first place a regulation put in place that was not allowable the regulation was disallowed the Government did not put aside time to debate it it then reinstated a regulation that had been disallowed and by the time that it expired on 30 June this year the Government was still not ready with legislation to correct it. This would be farcical if it were not serious for the poor old farmers. This would just be hilarious if it were not for the poor old farmers. So try to get it right this time please.Dr CAM CALDER (National): This will not be a speech of persiflage. There might be a little bit ofbavardage. There will certainly be nochaponage. I was about to make a short panegyric to the road users of New Zealand—the road users of New Zealand. I have however been given my instructions by the whip to make it a short speech so I will commend the Land Transport and Road User Charges Legislation Amendment Bill to the House.The ASSISTANT SPEAKER (Lindsay Tisch): I understand that the next call is a split call.SUE MORONEY (Labour): Yes it is. Well what a shambles. What an absolute shambles. Quite frankly with friends like those who needs enemies? The poor old farmers have been paying through the nose because of that Government’s ineptitude—that Government’s complete ineptitude. Not once not twice but three times it has got this wrong. It is just a simple thing. It is just a simple matter of deciding what road-user charge applies to tractors for goodness’ sake. It ain’t rocket science Mr Bridges. It ain’t rocket science Mr Bridges. It is quite simple but everything that Minister touches seems to turn to—well I cannot say that word even at 5 to 12 on a Wednesday night. But we all know what it is that everything turns to when Simon Bridges gets his hands on it and here we go again.Hon Member: Turns to dust.SUE MORONEY: It turns to dust. That is what I will say—it turns to dust. This is in a long line of road-user charges petrol taxes and those types of things being completely misused by this Government.It was not that long ago in urgency—and I object by the way to urgency being used to fix up that Minister’s messes again. We seem to be in urgency quite a lot fixing up Simon Bridges’ messes but here we go again. Not long ago we were in urgency and we were passing a petrol tax through—passing an increased petrol tax through. It is 3c every year for the next 3 years. That is the increase in petrol tax and that was done under urgency as well. Why was that done? It was done so that that Government can pretend that it has got to a surplus in the Budget next year. Every time New Zealanders pull up at the service station and fill up the car or the tractor or whatever it might be that they are filling up they need to remember every single New Zealander needs to remember that they are paying through the petrol pump through the nose for that Government’s promised surplus.I raise a point of order Mr Speaker. There was a ruling by the Speaker at question time yesterday that the next person to hold up a scorecard in this House would be ejected from the House and I request that you uphold that ruling.The ASSISTANT SPEAKER (Lindsay Tisch): No I am not going to do that. I did not see it because I was focusing my attention on the speaker at the time so I did not pick that up. [Interruption] The presiding officer at the time makes those deliberations and I am certainly not asking someone to leave the House at 2 minutes to 12.SUE MORONEY: Thank you Mr Assistant Speaker. I can understand why you were fixated on the speaker because what I was saying is so important to New Zealanders. They are paying through the nose every time they fill up their cars for that Government’s promises and that Government’s failure to achieve surplus through economic growth. I know that David Bennett thinks it is funny. He thinks it is so funny that this Government has sucked in the New Zealand public and that the Government has the New Zealand public paying for its surplus because it has failed to get economic growth. The Government is not going to reach surplus next year because of economic growth but it will reach surplus next year because it has hiked up petrol taxes for every New Zealander every time they pull into the service station.Chris Auchinvole: You’ve got 1 minute. Come on cheer up.SUE MORONEY: Yes Mr Auchinvole. All of your constituents are paying for your failure to actually get economic growth going on the West Coast. All of David Bennett’s constituents are paying for his Government’s failure to lift economic growth in the Waikato. I could name every single member’s area because that in fact is the truth of the matter. New Zealanders do not want to be paying for this Government’s failure but they have through the petrol pump. Farmers have paid for the failure of Simon Bridges to get this right not once not twice but three times despite this side of the House giving the Government all the support that we could possibly give it pointing this out to it time and time again and my colleague Maryan Street doing absolutely the right thing. The Government is failing at its job.Sitting suspended from 12 midnight to 9 a.m. (Thursday)